Boo Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and Broyd Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
I'm Alex the alongside Paul Sweeney. This is Bloomberg Intelligence Radio. We bring you all the top news and business, economics and finance. There are lens of our Bloomberg Intelligence analysts. They cover two thousand companies and one hundred and thirty industries worldwide. And one of them that I bug all the time is George Ferguson Bloomberg Intelligence Senior Aerospace, Defense
and Airlines analysts. I stalked him yesterday over Airbus because we have a CEO on TV and I was like, George, I need more questions than just Hey, what's up with space? What's up with Boeing is now the better question for today. So Boeing now appointing Kelly Ortberg as its new chief executive officer of the stock is up by about three and a half percent. He is a retired veteran of the aviation industry. He is an engineer by training. Is this the guy that Boeing needs, George?
Is he?
Not?
So sure? I think it's the guy that Boeing needs for a small period of time, right because he was already retired, right, he has you know, he's a great career in aerospace working at Colins, help him put Collins into RTX, I mean, a great experience. He's sixty four, So my guess is he doesn't have a lot of runway to work at Boeing. I think it'd have been nicer to see a CEO that could have put I
don't know, five seven, ten years into Boeing. But look, I think the job is very difficult, and so I think it's going to take a lot out of the next CEO. And so maybe this is an interim as they continue to develop internal candidates for the job. Maybe it's very pretty difficult to recruit somebody into this job right now. Could be an interim because of that as well.
So again, you know, the strong aerospace background at the component at the you know, parts maker level, but doesn't look like someone's going to be around for the next five seven years, all.
Right, George, All right, So that's the CEO, how about on the fundamentals here and looking at the second quarter negative adjusted free cash slow four point three billion dollars. You can't like that. Talk to us about kind of the cash flow, that dynamics and what they need to do.
So we kind of expected that four point three billion dollars to be Really honest, I'm not totally sure why the stock is up. I don't think it's Kelly because Kelly News started the day out and bowing an anchors up about one so post earnings were up. You know we've done this pop. I mean, you know, we heard from CFO Brian West during the call. He told us Burn was going to be pretty strong in three Q two, and then some the analysts tried to box him in on what Burn was going to be for the year.
One said would be closer to five billion or ten billion. He said he was, and I think his quote somebody, I'm not smart enough to tell you at this time. So there's just a lot of variability right now. Look, Boeing has to keep taking inventory, taking ship sets from their supplier base to keep their supplier base in business while they ramp up builds. And they had some good
commentaries and builds. They talked about the factory kind of putting out twenty ish I think was the number, and I think total deliveries in the thirty ish range for seven thirty sevens rising to thirty eight shutting down those shadow factories. It's the factories that they have, the inventoried airplanes, a lot of seven three sevens, some seven eight sevens in shutting them down by the end of the year.
That was I think great commentary. You know, we got to the commentary about what's going to go on with the union negotiations. Those are coming up in September. Dave Calhoun kind of told us he I think wasn't totally focused on that right now, or didn't have couldn't give us puts and takes there. That's incredibly important. Right, So if we get into a situation where the union shuts this company down in September, the cash burn this year
looks looks horrible. Their back going to capital markets looking for a bond raise, which I think everybody on the bond side is scared to death about because they don't want to see a fall to investment grade. Or they're going to the equity side, which the equity guys don't want to hear about, right, is there? That's called that's dilution,
you know, so I think again. Commentary was good around deliveries and things like that, but a lot of variability coming, you know here around this cash flow burn and it's super important.
All right. George, thanks so much for joining us. We appreciate it as always.
George Ferguson, Senior Aerospace, Defense and Airlines Anols Bloomberg Intelligence from Princeton, New Jersey.
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Alex still here alongside Paul Sweenia and John Tucker. This is Bloomberg Intelligence Radio. We are broadcasting to you live from our Interactive Broker studio right here in Midtown at Manhattan. So it's fed day. Everyone's pumped for it. What is Ja Powell gonna say? Are they going to signal September? What is it gonna look like? We're gonna break it all down? For you with Danielle de Martino, Booth's CEO
and chief strategist for QI Research. She joins us in the radio studio right now, all right, Danielle, what do you think?
Like, what are we gonna get?
I think we're gonna I'm actually gonna go with Anna Wong's kind of take on where this is gonna go. She and I are thinking in a similar act. We get to meet in person tonight. But I think he's still going to couch his dubbishness. I think he's going to signal September. But I think he's gonna signal September softly.
What does that mean? Is he gonna whisper it?
Like?
What is that He's.
Still going to say that they're data dependent. He's still going to say that there is the chance that there is a reacceleration in the CPI in inflation metrics, base effects kick in in the second half of this year. That make it a little bit harder to see continued
declines in the inflation. On the other hand, you know, looking at real time inflation metrics, a bunch of bond traders a long time ago introduce me to true inflation TRU and that hit one point five one percent today, the lowest reading that we've had in the post pandemic era. They gave me the raw data back to twenty twelve. It's got a zero point ninety seven correlation with headline CPI. We see where this is going to me at least.
I think the greatest risk, because there's this huge seven week gulf in between today's meeting and September eighteenth, is that there's a policy err in the making.
So you say the highest odds is that there is a policy error. Is that another way of saying the fits behind the curve They should have already been cutting.
I think that's what we're saying. I think that that's what ADP is saying. I think that's what the Employment Cost Index, the Fed's preferred measure of wage inflation, is saying, we saw a big step down there. Intel Match, nerd Wallet. Those are the three job cuts that were announced yesterday. It seems as if most companies, when they're announcing earnings are continuing to say until we see stronger revenue growth, we're going to keep cutting headcount. So that's disinflationary.
So because you're here, I get ibs from people who are listening to the show, Thank you so much, so well. One of the questions is, and it goes back to the bomb market and we're obviously seeing some steady buying come in, particularly in the back end. Where do you think we end the year when it comes to the tenure? If we're treading right now at four point nine, we're below all the moving averages, like we've had a healthy move to the downside a yields.
We have, And we saw kind of this resistance at four point one four in the tenure for some time, and now we've broken below that and I think that it's it's not a stretch to sit that there's going to be a three handle. The question is is the year end south of three point five percent on the tenure? And again it's going to be a gauge of the magnitude of the Fed's policy error. If they have to come rushing in in September with a half percentage point rate cut, that could easily spook the markets.
So what does the FED do when they start, So let's still say they did they start in September, then what did they do they do it every other That's.
A great question because we saw these kind of unusual pauses.
It's not normal to.
See pauses in a hiking or a cutting cycle, at least in FED history.
Of course we're seeing it.
In other parts of the world. But history tells us that once the Fed gets going, they keep going. And that means two days after election. Right, the November FMC is highly unusual. It's a Wednesday Thursday meeting, so that they're not meeting on Tuesday.
Election day.
But it's very feasible that we see another rate cut two days after the election.
What happens to the curve?
I we will.
Certainly it will be interesting to see if the curve does not fully uninvert before the FED cuts rates, which would be again unusual.
But we don't normally talk about rates are coming down.
Uh, it would be because they're all coming down.
Everything's coming down with the fronts coming down fast. Indeed, even though it still had it's had a pretty chunky move to begin with.
But still but.
Again, if you start to factor in, I remember when they were raising rates that Powell said unusually large rate hikes. That like took me back to the Princess Bride rodents of unusually large size. But it'll be interesting to see if we have unusually large rate cuts.
All right, Danielle, you did some time at the Dallas FED, and I'm looking at.
Something sounds like I did like time at an instag time.
And now you're free.
You used to have something down there called the Dallas FED Manufacturing Uncertainty Index.
That's pretty cool. What does it tell you? What are some of the recent data telling me?
There?
You always come up with data sets that.
I've never We are seeing unprecedented levels of uncertainty. Hats off to Emily Kerr and her team at the Dallas FED. They introduced kind of a National Association of Credit Manager's Index type of question in their most recent survey that came out on Monday. People are not paying their bills. I mean companies are not paying their bills and accounts
receivable are being stretched out. So there these are kind of credit managers signs that hey, there's real distress and it's harder to get credit, which we've been hearing right from from smaller businesses especially.
Is it sector specific in what you're seeing or is it just maybe like how big those companies are.
What was interesting about this, the introduction of these new types of questions is that they ask manufacturers, servicers, and retailers, and it was retailers that were seeing the greatest degree of distress.
All right, So okay, remember.
This is the eighth largest economy in the world and the eighth largest exporting exporting nation in the world.
Texas a Texandalone, it is.
And then to that point, like there's a huge amount of products that get shipped out, right.
Like that's why it's the largest exporting nation, larger than California.
Yeah, and it has a huge like medical department.
Like we we you know, twenty thirty years ago you could say that we were an energy centric economy in Texas. That's no longer the case, very diversified.
But you're staying with us, right the United States? You guys, Yes, okay, good, There is checking everyone.
That's not their grid.
There is secession talk, you know, wants a republic, but I think we're staying with the country.
Is that data set though at all distorted by hurricanes et cetera that you saw, No?
Actually actually no. And that was again what was so fascinating was that it was so broad based across service, across the service sector, across across the manufacturing sector, and across the retail sector, and again that they do some really really good research as well, that that front runs the Senior Loan Officer Survey on a national level, and that's also showing that it's very difficult to access credit right now.
You believe we're actually in a recession? Is that correct?
I do?
I do, and Anna Wanta actually kind of agree. She also thinks that net job cuts began last October. What's fascinating is that when we got the revision out last week from the Buer of Labor Statistics, it's said, in its assumption about business deaths, we know what business births were with the birth death adjustment, we still have yet
to have them report business debts. Their assumption was that small businesses became additive, that fewer small businesses died in the fourth quarter, when actually we saw small business closings rise appreciably from the third to the fourth quarter. The risk is the reason I'm going into these details. The risk is that we see a second quarter of negative
of negativity in job creation, job net job losses. If you see that for six months, because the bearer of has already said we lost one hundred and ninety two thousand jobs in the third quarter of twenty twenty three. If that stretches to being six months in a row, the National Bureau of Economic Research, the Business Cycle Dating Committee, they're going to have a hard time saying six months of job losses doesn't constitute recession.
So when we get the jobs number on Friday, how do I look at that number then? Because obviously, like the headline print is going to be up right, but you're saying that on a net basis, like what am I?
What's not going out again?
I mean, Powell said it himself at the last FMC that payrolls are overstated. And if you get a number that was originally four hundred and ninety four thousand after the revisions that we hear from the BLS, but after the census comes in and gives us actual headcounts from companies, and that four hundred and ninety four with a plus sign in front of it turns into negative one hundred
and ninety two thousand. That's it's a significant amount of download divisions, which my mentor at the Dallas Fed told me, you always see at inflection points.
How long do you think this recession will be?
Because it feels like it's almost a bifurcated economy. A lot of folks will say, I'm not feeling anything.
I know, we have a super I mean it's like super K Yes, super K shaped economy. Okay, I mean, think about how many people at the top of the k or feeling the benefits of having gotten five and a half percent on their cash for this long and yet we're hearing that inflation is becoming more problematic for the lower income earners. And what that is a sign up is again what we saw with the employment cost Index today. It's that wages are increasingly not keeping up with the cost of living.
So it's not just the FED today, you know, most of the Fed. But we got the BOJ finally hiking rates. Indeed, the press are looking back to totally we get the BOE tomorrow.
The ECB's already delivered one cut.
Do you think that how do you think that cycle will all play out in terms of I mean, the majority of them are cutting, right, but they're gonna cut differently in a different times and the boj's hiking.
Has this all play out?
You know, it's interesting that you bring this up because there is so much disparity, right now across the pond, we unexpectedly saw Germany fall back into recession a few days ago. Nobody was expecting that. You know, they're the speaking of exporting nations, the other world's third largest export and it's a reflection of China exactly. So the breadth of the global recession. When you say, okay, Asia's in recession, Okay, Germany's in recession, Okay, the United States is in recession.
That changes how aggressively each individual central bank can behave. And when the FED finally does go on September the eighteenth, then the rest of the world will end.
Up falling in line. Daniel thank you so much for joining us. Really appreciate it.
As always, Danielle di Martino Booth for a little bit extended period here on FED Day. She is the CEO and chief strategistic QI Research based in Dallas, Texas, but we got her here in our Bloomberg and nar Actor Brokers studio today. My stat was, you know, Texas eighth largest exporting and comment's pretty cool.
Yeah, really really cool.
And that's not even counting I mean, Louisiana also is exporting facilities, but that's not counting all the new facilities that trying and build too.
In terms of exports and stuff. Obviously I'm talking Allen.
G and oil exports. But still, oh, no surprise, sir Shacker. I know that's surprising to Paul's.
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Alex Deal Paul Sweeney live here in our Bloomberg Interactive Brokers Studio streaming live.
That's the video thing.
YouTube dot Com search Bloomberg Podcast and that's where you will find us. All right, Kamala Harris has wiped out Donald Trump's lead across seven battleground states as the vice president rides a wave of enthusiasm young, young Black and Hispanic voters. That's according to the latest Bloomberg News Morning Console holds some pretty big news there for on the political front. Here, let's check you in with Lard Davison, Bloomberg Politics editor. She joins us here via zoom Laura.
This seems like a pretty good start in terms of momentum for Vice President Kamala Harris.
What are some of the key takeaways from this pole?
Yeah, so this pole we've been doing since last October in all of the seven swing states that are expected to decide the election, and this is the best that the Democratic challenger to Trump has ever done.
You know, this is the first time we.
Have polled Harris.
It's a statistical tie essentially between the two candidates. She's technically up one percentage point, but that's within the margin of air. The other key takeaway here is that black voters, young voters, Hispanic voters are much more likely to vote now that Harris is on the ticket. So this is, you know, been something that that the Trump campaign has created their strategy around of trying to get you know, pull away at the margins and black voters some Hispanic support.
But this would indicate that perhaps the tides are shifting in Harris's favor on that front.
Well, that was sort of one of my questions too. Are these voters that are switching or are they new voters that are swinging these polls.
So we don't yet know totally what that is based on how the poll works, but what we see is that voters who are unsure if they're going to vote, are now saying they're much more likely that they're going to vote. So these may be people who voted in twenty who were not enthused by either candidate, who are going to stay at home, or people who maybe have never voted. But you know, a turnout election is expected
to help Harris on this front versus Trump. You know, the Trump folks were you know, sort of hoping to pull away, particularly black men, Hispanic men. But you know, we're not hoping to see a big surgeon turnout that you know, really helped Biden in twenty twenty and could potentially help Harris in twenty four.
Or you know, as a former Wall Street person, I tend to follow the money. And Vice President Kamala Harris has had a pretty good run here in the last week or so raising money. Do we know where that money's coming from.
Yeah, so, her campaign says they've raised about two hundred million dollars and that's in the first week or so of the campaign. This is largely from small dollar donors. These are people who are going and giving online and you know, increments of you know, anywhere from you know, just a couple of dollars to you know, up to
a couple thousand dollars. We've also know that her super pac, this is the group that can accept money and unlimited amounts, has gotten one hundred and fifty million in commitments since By has dropped out of the race. These big dollar donors, people who give millions of dollars, had decided to withhold a bunch of contributions, you know, in order to sort
of pressure Biden to get off of the ticket. So now that money is coming back into the fore just for you know, kind of some in comparison here of Harris when she inhibit inherited the Biden campaign accounts that had about one hundred million dollars. Since then, she's raised another two hundred million dollars. So these are really big sums.
How much of this could be also attributed just to momentum, as in, when you have the RNC, the candidate gets a boost, the DNC provides a boost. This is an unprecedented moment in political history, so no doubt the candidate would get a boosted.
Yes, and the timing year is all really interesting because of course Biden just dropped out two days after the RNC, So Trump was expecting to see a big polling boost coming out of that. Of course, just a week prior that had been the assassination attempt leaving the RNC. Republicans were very confident about their chances, and you know, even Republican operatives were saying one of the things they needed to be conscious of is that they weren't over confident.
Of course, that all switched, you know, just a couple of days later. What the Trump team is saying is, look, this is a Harris honeymoon. This is a surgeon momentum that will just be a flash in the pan and won't last until November. That's really what what we'll be
looking for in the next couple weeks. If you know, is she able to maintain both this fundraising edge as well as his polling edge, or do we revert to where you know, the Biden Trump race was just with Harris on the ticket in a couple of weeks.
How about debates?
Are Biden, I'm sorry, Kamala Harris and mister Trump are they get a debate?
And if so, when and how many times?
This is a really big question. So Trump and Biden had agreed to a second debate on September tenth, that was on ABC News. It's very unclear if that is going to happen. Harris has said she wants to do it. Trump has, you know, suggested that he probably will end up debating her, but has thrown a couple wrenches in the system. He says he doesn't really like ABC's called them fake news and said he'd prefer someone like Fox
News to host debate. He's also said he doesn't need to debate because he's already well known and people knows what he stands for, and he doesn't, you know, feel a need to do this. This is going to be an ongoing negotiation. There's also the question of what there'll be a VP debate. Trump and Biden had all also agreed to do one, you know, before the switch up and the race. You know, Harris is still in the process of naming her VP, so we may hear more about that in the coming weeks.
What do we make about the situation in Israel and how that polls, how that is polling for Kamala.
Harris, because clearly there's a huge section.
Of voters that is very unhappy of what's happening in Gaza right that we're maybe not voting in all for President Biden, but are they coming back in now?
Do we know anything along those lines.
Yeah, So, what this.
Poll shows is that people who are very concerned about the Israel Gaza war, and particularly young voters for whom this is a bigger issue, are more likely to vote for Harris. She's taken a softer tone on this. She's been more sympathetic to the human humanitarian situation in Palestine, and is you know, just doesn't have quite the same negatives on this issue that Biden does.
You know.
One of the things, you know, particularly just with the you know, events of the of late of you know, kind of there being more unrest in the Middle East, is you know that the Biden administration is still pushing for a ceasefire. Harris is still pushing for a he's fire. Democrats really want this to be an issue that is working towards a resolution versus, you know, an issue that's flaring up, particularly as students go back to college campuses
in a couple of weeks. They don't want to see the protests that we saw last spring.
Did the Republicans have Buyer's remorse for JD Vance. I'm seeing some reporting all along those lines.
Yes, there's there's a lot of conversations on that, even on a Bloomberg television mc mulvaney, who's a Trump ally, came on earlier this week and said, no, they're not looking to replace JD.
Vance.
But of course if you're being asked about this, this means that this is at least a conversation that is circulating. You know, Dvance has had a rough rollout, you know, just in about the you know, two weeks or so that he's been on the ticket. You know, some past comments he's made, you know, sort of degrading childless cat ladies have come up. He has had had some jokes on the campaign trail that have come across as crass
and haven't really landed. So this is a conversation that's happening on the upon those sort of Republican you know, elite, the mainstream Republican class, but isn't really reaching the Trump campaign. They have continued to say JD is our guy and we're going to stick by him.
Is there an equivalent for single cat ladies for single men?
Like?
Is that single men dog owners?
Like?
I'm actually I'm not trying to be funny. I'm genuinely curious bachelors.
But that's that's a whole different.
But that's okay, Like that's a different vibe.
But like if you're forty five and you have a dog and then live at home and not married, that's still funny.
Maybe a gamer would be the equivalent a gamer.
Okay, okay, so childless cat ladies versus gamers. It gets complicated, all right, Okay, Hey, Laurd, thanks lot, We really appreciate it. The poll was really interesting to kind of comb through there. Lord Davison, a political editor for Bloomberg News joining us from Washington, d C. They also made the great point in the article that a lot of what President Trump
is very good at is putting down opponents. But having that with Kamala Harris is very difficult when you're also trying to draw over women and you're trying to draw over African Americans.
Yep, tough one.
And I don't remember growing up that Swing States literally decided election.
You don't even go to the other found the same thing. But it's back in the day. I thought California manored New York manor Texas. I mean, now, if you're not in those swing states. You're not going to see the candidates.
I don't think yeah, which is also interesting when you talk about the VP and sort of obviously Peepoota Jeedge has the most exposure because he's already in the White House.
But that was interesting.
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It is FED Day. We will hear from the feed at two o'clock. Press conference of two thirty. Bloomberg's coverage begins at one thirty. Tom Keen, Lisa A. Bromwitz, John Farrell Bring it to you. Jeffrey Cleveland joins us here. He's a chief economist a Payden and Regal joining us via La.
Via that Zoom technology thing.
Jeff, what do you expect from the Federal Reserve today? A lot of folks are saying attention to maybe the tone as it relates to September.
What are you looking for?
Well, Paul, Happy fed Day, beautiful day here in Los Angeles.
So excited this guy, I know, yeah, I think.
This is a great day for the Fed to set up for a potential cut in September. They don't need to rush into anything, though. I don't think there's an urgent need to rush rates. We saw very to cut rates. We saw very strong second quarter growth. I think the labor market is still doing pretty well, so there's no urgent need. But you know, if inflation continues to cool like we saw in the PCEE data for the month of June, then it's possible by September we will get
a rate cut. So I think, you know, setting up that possibility, keeping their options open, and then maybe pushing back a little bit on market expectations if you earlier this week, I looked through the end of next year, so the end of twenty twenty five, and there were around seven cuts price did. So that's that's more than a fine tuning operation. That would be you know, more of a rate I would.
Call slashing operation.
So maybe pushing back against the longer term price.
Well to that point, I mean, the two year yield is down forty basis points for this month, a huge move, and I'm betting that a lot of that happened after July eleventh, was when we got that CPI number.
So if J.
Powells sort of becomes a little bit more balanced or tries to have a message that's more balanced, here, what's going to happen in the front end of the bomb market?
You know, we think so we think we're in a soft landing, and that you know, so the scenario we're in, we'll be in the soft landing over the next.
Six to twelve months or so.
So in that environment, I think moderately lower treasury yields makes sense. Two year yields, five year yields, seven tens, what have you. So that makes sense on the short term basis, though I think the market is far too.
Confident over this September cut.
You know, you can be in a soft landing and cuts arrived later, probably in the short term. In your scenario where you know, chair pal pushes back a little bit, we will see some upward pressure on to year yields. Another candidate for some maybe some upward pressure would be Friday's jobs report. We get a decent jobs number, but also, you know, we've been watching the last few months.
The unemployment rate REAP up. It's possible the unemployment.
Rate will tick down this Friday, and you know that will pour some cold.
Water on these sort of bearish calls about the Fed. You know, it needs to do something now.
The economy is weakening and that could have impact on two year treasury yields.
And Jeffery Alex and I had one of those discussions earlier today with Danielle di Martino Booth, who feels like this Yeo's economy is already in a recession if you really take a look at the real time data and that the Fed needs to they're actually behind the curve.
They should have already been cutting.
How do you respond to that when when you hear that amongst investors.
To two, GDP grew two point eight percent quarter to quarter annualized on a year on year basis, it was three percent. The consumer continues to be solid. The unemployment rate as creeped up, it's still below that's four percent.
That's very low.
Historically, initial claims for unemployment insurance layoffs pretty good reliable indicator of whether we're in a recession or not. Very low still, So you know, I, you know, and I've been hearing this story for probably eight quarters. Now, I think since twenty twenty two, people said, you know, if the Fed starts high King, they're going to pull the rug out of the economy, of out from under the economy, Paul, It just hasn't happened.
Right.
The economy keeps going well.
But here's the problem, right, is that it's a case shape economy where the lower and middle income houses are getting continually squeezed and the upper income are enjoying five percent on their treasury bills. So with that, I mean, I know that that's nothing unusual necessarily within the economy, but does that put a little bit more pressure then on the Fed?
Well, I think if you're the Fed, you are looking at inflation. It has moderated, especially in the last two months, similar to what we saw maybe in the second half of last year.
If that continues, you're.
You could very easily alex be back to two point two to two point three percent year on year core PCE sometime next summer, which is close to target.
So that's good.
At the same time, the unemployment rate has crept up, so they don't want to just be restrictive stick at five point fifty for the foreseeable future.
So there.
They are aware of that, and you know, I think that's a good argument for fine tuning the FED funds, Right, you don't need to be at five to fifty If inflation's at two point three and the unemployment rates creeping up, Now, do you need to slash back to two and a half percent or three percent?
Probably not either. It's more of a fine tuning operation.
I might have mentioned it on this show before, but you know, like the mid to late nineties is more of the historical analog, if you will, for what I sort of envision. The Fed did cut a few times in there, but growth continued throughout that period.
Stocks did well, you know, bonds did well well. So it was a good environment.
So overall, in terms of the consumer, how do you feel like the consumers faring out there?
I think, you know, for me, job growth continues, you have more people working, they're still earning wages, although wages have you know, cooled off a little bit to about four percent year on year. With what we're seeing in the ECI data, it's inconsistent what we've been seeing in average hourly earnings. But it's really income growth that drives the consumer and consumer spending and that is that is
still holding up through the latest set of data. We'll get an update on that on Friday, But I think that's really key. Separate from that, Paul, you can think about household net worth still looks pretty good. We still think households have savings. If you look at household debt service as a share of their disposable income, those ratios are still.
Quite low, even though rates have prepped up.
So all in all, I think the consumer is in decent, decent shape. Still all right, let's oh no, no, sorry, gohad.
I was gonna say, before you go, before we let you go, what would be the question you'd ask Jay Powell if you're in the presser?
Well, I would ask him, hey, what you know?
You think?
What do you think about the unemployment rate rise?
We've gone from you know, three point four percent last spring, we're now four point one.
How concerning is that to you?
How much does that wane on you in terms of the decisions you will make. I might also ask him, Hey, the market thinks you're definitely cutting in September.
What would what is the one thing that would really change your view?
Is it?
I think it would be core PCEE you know, coming in month to month, hotter in the next couple of months, choppy inflation.
But I think that's a worthwhile ask.
All right, thanks so much.
We really appreciate it, and I would love it if you went into a press room. It's like, hey, Jay, tell me about this, all right. Jeffrey Cleveland, Chief economist over Opinion regal super appreciate that.
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You're listening to Bloomberg Intelligence, Alex Steel, Paul Swiney live here in our Bloomberg you know, active broadcast studio. All right, here's a company for you. I had not heard about it until recently. Train Technologies. I believe they're based in Ireland, but there are a global climate innovator focused on sustainable solutions for buildings, homes, and transportation. Karen Uberhart from Bloomberg Intelligence. She covers this stock and she's a grizzled veteran she
is not given to praise companies, you know. Unnotably, she says they had a great quarter again, amazing company in a very attractive sector.
So she told me that.
I said, we got to get these guys on Bloomberg and get her talking about see what's going on with this company. Dave Regnery joins us. He is the CEO of Trained Technologies. The tickers tt on your Bloomberg terminal stock hit a fifty two week and actually and I'm going to call it an all time high today on the back of some pretty good numbers, earnings and sales beat on consensus. Dave, thanks so much for joining us here in Lovely David's and North Carolina.
Talk to us about your company.
What's driving the performance of Trained Technologies these days?
Well, first, Paul, thanks for having me on the show. I just got off our earnings call and we reported a very strong second quarter, much like we did in the first quarter. Our organic revenue growth was up thirteen percent, our order rates were up nineteen percent, and our EPs growth was up twenty three percent. So very proud of what we've been able to how we've been able to perform. Look as far as what's driving our growth. You know, I always tell people we have a system of things
that makes Train Technologies a great company. And whether it's the way we we operate our facilities, through our business operating system ways, whether it's the way we innovate our new products, or whether it's our direct salesforce, those are a system of things that make us a great company. And we have a service business that's a third of
our company that's performing extremely well. In the second quarter, our service business was up mid teens from a growth perspective, and we have a culture that's you know, we believe in challenging what's possible and innovating for a sustainable world.
So based on that, it's great to chat with you. By the way, I love love talking to you, because you have such a great read on the residential and commercial businesses. Basically, if a commercial HVAC unit and a near term residential HVAC unit, and of course that's heating, ventiletion, air and cooling, where's the strength, where's the growth, where are the weak points?
Yeah, I'll start with residential. We had a very strong quarter in the second quarter. Our revenue was up mid teens I'm sorry, low teens, but that our residential business. For the prior I'll say, you know, three quarters had really been struggling with a refrigerant change that wasn't clear. That's been clarified. It was really struggling with excess inventory kind of a hangover from the COVID days that was
in the channel. Those both correct it, and we're off to a very warm start to the cooling season, which should have us all concerned for a different reason as the climate continues to increase in temperature. But I would tell you that it's a very strong start of the year, so very strong and residential, our commercial business really broad based growth. You know, certainly the high growth verticals like
data centers. We do very very well in our education or in healthcare, but we had broad based growth in the Americas. We track fourteen different verticals and we were hard pressed to find a vertical that we were not strong in. So it was just it was a very strong quarter for trained Technology. I'm very proud of what the team's been able to accomplish.
Yeah, I'm reading the Bloomberg Intelligence research note on your earnings. North America's sixteen percent organic growth was much greater than the ten percent consensus.
What drove that.
Yeah, really two things. Our residential business perform better. Okay, we thought that was going to be you know, in the beginning of the year, we thought our residential business would below single digits. We came in you know, low teams in the quarter, so we significantly outdrove that. And then our commercial HVAC business just continues to operate at
a very high level. And like I said, services was up in the high teens actually in the Americas, and their equipment business just continues to exceed our customers' expectations. So very strong quarter. You know, I was listening to your show earlier. You were talking about sustainability, and you know, I would tell you that Trained Technologies, our purpose is
built around sustainability. And what people are talking about right now as you're hearing a lot about, you know, how much power is going to have to be generated to meet the demand that's coming. And you'll hear a lot about data centers using a lot of the electricity. What nobody is talking about is the amount of power that's
being generated that's being wasted. And I would tell you we call it demand side management, and we know because we've done hundreds of thousands of energy audits and buildings that most buildings operate about thirty percent inefficiently. So just think if we could solve that problem, and if we can make buildings perform the way they were designed, or
assets performed the way they're designed. Just think about the amount that we could save and the energy that's being produced and which was obviously has a trickle effect to the carbon footprint. So that's what train technology is all about. People always ask me, where do you see the growth coming from. It's going to be on the demand side, management side.
Hey, did we really appreciate it? Definitely come back. I know you got to run, but we appreciate your time today when you're in the city, come in and tell us more about it, you know. And I'm also curious as to those customers are think willing to pay up for it we got last morning to talk about.
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Let's get back to the market Shaw, We just go back to ETFs, talk about it.
Growth business. Jennifer Crancio Joints is here. She's global head of distribution for TCW.
Let's Trust Company of the West, Los Angeles. Space used to be a huge plan of mine.
They loved me. She joins us here in our Bloomberg Interactive Brokers studio.
Jennifer, I mean, the money just keeps flowing to you guys, and it's just unbelievable how your market is growing, the ETF market. Where's some of the money going now? Are folks looking for income? Are they looking for special situations? What are they looking for these days?
Yeah? From a TCW perspective, people know us for fixed income and so we have a developed set of equity ETFs now. But we launched the first fixed income ETF recently. And the ticker because that's you know, that's what we do in ETFs is flex or FLXR. But Flexer and strategies like it are giving you return in the fixed income portfolio, but they're also giving you very consistent income.
And if you think about how to actually construct a portfolio, equities can be volatile market market, money market funds and rates. They will go down eventually, and so we see a lot of investors looking for products that are giving you return, but they're also giving you this consistent income.
This might be a really silly question. Are these actively managed ETFs or are these boring? Not boring, I mean just passive ETFs. We ad TCW.
We have one index CTF, and everything else we do is active. So our view on portfolios right now is there's a lot of uncertainty in the market, and particularly when it comes to fixed income and bonds, we think active management is the way to go. We can make a lot of choices about how to both manage your risk and optimize return and in the case of a product like flexible income, optimize income at the same time. So we think active is the way to go in the current market.
And what's issuing about your met west flexible income It was a mutual fund, so you convert a mutual fund into an ETF.
Why do that?
Advisors like to invest in portfolio managers that have a long track record. They want to know that the team's been around and together and been making these choices on risk and return for a very long time. So at TCW we have an excellent fixed income team. They've managed this particular strategy for six years with very high performance versus peers, and so in this case, it's logical for us to take that great track record and simply flip it into an ETF vehicle.
This might be also silly question, but if the Fed starts cutting rates, does the appeal of an actively managed fixingcome ETF become less because we're no longer going to be at five percent like money market fund rates for example.
Well, I think it's.
We're not going to be at zero either, And so the way that we would think about it is, if you're moving through time for years ahead of us, there really is an opportunity to be active to drive return in the fixed income part of the portfolio. And frankly, from an income perspective, people need to keep up with inflation,
so inflation's down somewhat. But from a price perspective, particularly aging population, if everyone's living till ninety or one hundred years old, there are a lot of portfolios where the regular repeatable income and in the case of flexible income, it's say seven percent yield. So as money markets go down, we're actively able to manage to a higher income target.
All right, you guys in the ETF business. I understood the passive ETFs. I got that whole story in the cost. Then you guys brought in active ETFs. I'm like, wait a minute, I think active. I think managers, analyst overhead costs. So is an active we managed ETFs cheaper than a mutual.
Fund in some cases? In some cases they will be. In some cases maybe they won't be.
So in this case with flexible income, we actually brought the cost down because we see the demand from an ETF perspective, and we think the fund is going to grow, and so we were able to take an active product that is a forty basis point fee, But that forty basis point fee is actually lower than when we were managing it in a mutual fee, and that brings real value to clients.
How about to you guys, Well.
For us, we're building a business and we think that there's real demand for products like the one that we're talking about today, and so as that product grows, it's a great business for us to be able to serve clients with a product that can really scale and grow in assets under management.
Jennifer, before you were at TCW, you were the CEO of Engine Number one. TCW acquired that part of the firm's business back in October of twenty twenty three. I'm an oil nerd, so I think Engine number one and I'm thinking, oh, the really successful shareholder push on Exon to get three members on their board, to really push for climate change.
Can you walk me through all of that.
Yeah. So, from an end to Number one perspective, we saw an opportunity in the market where people were investing in energy transition or transformation, either not investing in holding index funds or investing in private equity. So a lot of what we did at Endine number one was build
a public market products. Exon was a big part of that, still a big holding in one of the funds that came over to TCW, which is another ETF net Z And the idea there is that we are going through an energy transition over many decades to come, and so in the case of working with Exon, helping Exon realize they could optimize their business and capital allocation to not waste money in the out years but take advantage of
what was happening in the next ten years. And that kind of that work has added a lot of value to everybody that has held exon over this period. And at TCW we still manage this Energy Systems Transition Fund, So to that.
Point, I mean that was also when energy transition and green and climate were so the pendulum was swinging very much one way, and the pendulum is swinging back the other way. Are you guys noticing anything not TCW on that.
Well, we're at TCW are probably one of the leaders in looking at companies from an underlying risk and reward perspective across climate and governance for example. So we're a leader in that. That's a big part of our business
in Europe. In the US, people may not want to buy products that are value screened, but we still do the work so that we're doing the work so that if there's a company that's mispriced based on a climate risk or mistakes on the governance side, we understand that and that's information that goes up to our fundamental portfolio managers and it's just another way we're adding alpha for clients.
Interesting, So we're from the ECF business for TCW.
What's next for you guys? Where's the area focus?
Is?
It continued on the fixed income front.
It is for sure continuing on the fixing come front. So we have a set of equity product tool buildt to that over time.
Excuse me.
But on the fixed income side, we've got flexible income out in the market now and we've filed for another four to five products that may be out as soon as the end of the year. Because what we see is people want the best solution in fixed income portfolio construction.
And so what we do is active managers, whether it's in the CLO market, secured bank loans, high yield, we think we can deliver very attractive and more competitive then other people are out there today, return and risk profiles, and so we look forward to launching those ETFs shortly.
Can I go back to climate for a second, Oh, Paul, hate me here. You mentioned that you are helping to judge climate risk. Can you pass it on to the managers? How do you How do you judge climate risk for a company?
It's different for every company I know, and so how do you do it?
Yeah?
I mean so, so the way we the way we do it is look at look at each company at an underlying data level. So if a company is in the energy sector, you know, what are they doing about capital allocation in old world energy? What are they doing to approve or green up in other areas? So we're looking at that, and then across most large companies, we're looking at water use, electrification, the goals that they're setting, and then measuring the progress that they're making against those goals.
So we don't look at it in a carbon footprint only. We look at it as a sort of transformation transition. How are they planning, how will they beat their competitors effectively in doing a better job as we move through time and we move through the transition.
So cool, I don't want.
To how you invest in energy companies, because I would be do I want my companies going green now or just waiting?
Well, that's part of the problem is that if you're a big energy company like or if you're an investor, you really only want to own one because you can't own a bunch for that exact reason, and you can't go to shareholders or your investors and say, hey, I have a boltload of energy companies. So then that begs the question, how do you choose which means bigger is better? And then hence forth the next Sun Chevron kind of thing that's that's what I keep hearing shayby next on
earnings out Friday, So very exciting. This is great, Jennifer, thank you so much. It was wonderful to meet you. A big fan of Katie Kotch also who's the CEO of TCW, so it's great to get you in the studio. Come back anytime at Jennifer Grancio a global head of distribution over at TCW, normally based in La so.
We're very lucky to have her here.
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