Examining The Markets, Berkshire Earnings, And Retail

we've had in the data to come. Marcus, starting with the jobs report, what do you make of the you know, strong numbers, but still we I guess relatively percip participation. UM, I'm out there. Uh, thanks for having me. Um. And you know, I thought the jobs number Friday was was was encouraging. Um. You definitely saw the beginning of you know, people coming back when not from a participation standpoint, but

the hiring and taking place. UM. These A fifty three thousand probably tell you when cap thousands jobs added, UM two thirty five thousand and upper revisions. Very strong wage growth four point nine percent over the last year. I think that's up from anything we've seen over the last ten years prior UM and so there were some good things in the jobs report, um, I think to your point, one of the things that is somewhat discouraging is that

the participation rate has stayed relatively flat. Um. And then, and one of the things we think about as we think about these jobs numbers is the role of the FED. And you saw minority underrepresented minority employment lag relative to the larger index, and so that for us causes the question in terms of like where the Fed is willing to step in, right, because obviously they've already acknowledged and pal did so last week that inflation is gonna run

hotter for longer, even longer than they initially anticipated. But um, his their focus has really been on this underrepresented minority UM employment and if you look at the jobs report they came out Friday, there's still a ways to go there. Instead of the question I think that's on the top of our minds is just how long and what does the FED need to see before that full unemployment test

has been met? Because I think throughout they can easily say that the unemployment test will be made in terms of the met in terms of their ability to raise rate mark. As you mentioned the wage data, I think something like five gain year on year, and you know, wage inflation is kind of representative of stickiness in inflation, right.

But at the same time, you have the FED betting that we see this mass return to employment that will help ease inflation in the wrong run, because the supply side of the economy comes back on is the is the FED reading this data right in the interpretation of in the context of inflation. I think, again, there's so much noise, and I mean I think I do not envy the job j Pal has right now on the FED,

largely because so much of big picture. I think they're right when they tried to say transitorial, because you know, we parted the word transitory five in a different ways. But what they're really trying to say is their inflation factors that are just abnormal. And if you think about it, we started with a complete shutdown of the economy when the pandemic hit. The federal government provided significant amount of stimulus. Um the FED has provided significant amount of monetary stimulus

to businesses. And then when there was when we reopened, everyone had pens of demand. You know, everyone had been sitting in the house for anywhere from six months, you know, a year, not traveling, not having access to the goods and services that they're used to. And so you took a supply chain that you know was starting from zero, but the demand curve that was, you know, well beyond where we would have you know, started um where we would have ended before the pandemic, because there was so

much pent up demand. And so the FED understands that a lot of the inflation we're seeing is simply that there is relation to this really strong demand, you know, matching up with basically the restarting of supply chains, throwing the fact that you've seen additional disruption overseas and in the US as virus cases have spiked the delta varian et cetera. And so there's an element of the FED

that sitting there saying a lot of this inflation isn't real. Now, yes, I do think that the wage inflation that you're seeing is going to be a real element that is going to continue on. But there's still parts of this that the FED wants to part out to figure out, like what's real, what's fake. And I do think once you get supply chains fully online you will start to see some of those pressures ease, but again that could be well into two and wage the demand picture and wages

aren't keeping up right. Um, right, what do you what's your view on the markets? Then when we look at right now all time high, doesn't seem like there's a lot of room left to run. Ed was talking about Goldman tacts. They think we're only going to by the

end of next year. UB says we're only going to five thousand by the three What do you think, Um, you know, over the last few weeks, Uh, we had zeal I've been kind of bouncing around this idea of peak everything right, and it just feels that everything is at a peak. You've got wage growth at a peak that we've seen over the last team years. You've got the stock market at a peak. You've got inflation at peaks we haven't seen in a really long time. Um.

It's a challenging market. And but you also have a backdrop in which you know companies are going to You know, to date, I think the S and P five hundred has generated higher earnings on a year over year basis, And even if you go back to three to nineteen before the pandemic. I think you're up about sixteen seventeen percent, which is of solid growth rate. So I mean there's a lot of competing forces in the market right now.

The more the focus I think is on the bead that is basically said, we're watching inflation, but we're not worried, and then you have this strong earnings growth, so you are seeing these kind of record highs. But I think you know, our focus is the really has been on what are the risk of the downside, And I think the biggest risk of the downside is continued inflation, continue to supply, chain disruption, higher interest races we run and fixed them, come portfolio and so those are the things

that we keep have been saying very mindful of. And you know, as we look at companies, one of the things we'd like to do is, as we've talked about this very tight wage environment, we've been looking at companies and how they historically have treated their employees, because I think in this environment, those companies that have historically paid their employees well, treated them well, and they had a high level of route has a significant competitive advantage going forward.

All right, Marcus, thanks so much for joining us. Marcus Moore there from Zero Capital Advisors. This is Bloomberg. Let shift gears a little, mat Miller, let's talk about the retail sector and bringing Murray shaw seni XT analyst at Columbia fred Need to Investments. And this is interesting because what I hear is a lot of abolitionists on the street about the retail sector. And yeah, these are the same companies, the same industry that are kind of faring

the brunt of these higher input costs. So first question, Marshal, what's the good news for wool Street about retail this week this coming week? Well, the good news is that overall sentiment from the companies remains very positive heading into the holidays. And I think we have to remember that these companies have been living with supply chain disruption for the past year and a half and they have been planning well for it, and the companies have proven to

be quite resilient. And I think, um from the investor standpoint, we really need to give both the companies and the consumer the benefit of the doubt. So the consumer has UH saved up a lot during the pandemic, spent off some of that, but still has a ton of savings relative to you know the historical average um. There won't be any shortage of demand, will there or cash this holiday season? Absolutely not. We still feel really positive about

the overall health of the consumer. Of course, at the lower end, we've seen stimulus that has driven um increase savings and now the return to work and higher minimum wages is a positive for that consumer. At the hire income level, the wealth effect has been very significant, and that plus still a very strong job market and income potential is really driving strengths across the board at all levels for the consumer. Very quickly. We're thinking about names

the next ten days, like Walmart, like Target. There's all these reports out there about the pull forward of e commerce spending because of the pandemic. How well positioned to those companies in about thirty seconds to take advantage going into the holiday season. We feel really good about the companies that can use their scale to manage better through

the current situation. And we've seen incredible share gains from both Target and Walmart throughout the pandemic, and we do think that those share gains will stick on the other side of it, especially as they are able to leverage their omni channel capabilities and their penetration across different categories, and so especially now as companies are dealing with UM increased distruction in the supply chain, we feel really good about companies like Target and Walmart being able to leverage

their scale. All right, you gonna bear with me here, Uh, what's omni channel mean? Again? Omni channel is really the ability of the retailers to service the customer both in store and online. And if you look at what UM, some of the will really all retailers. But I would use Target as an example what they've done with their drive up and pick up in store that has been UM a huge competitive advantage for them throughout the pandemic. We kind of touched on this, but I want to

dig into the psychology of the consumer. You know, yeah, okay, everyone's flush with cash, but we have all these higher input costs. What is the pain threshold for the consumer in your view, to absorb those higher costs, to accept the level that these companies will pass on the costs to the consumer. I think it really varies by category. I think there are certain categories like food where the

prices are highly visible to the consumers. Think about things like milk and bananas that you're buying weekend and week out. You see when the price increases, and it's very easy to substitute and potentially trade down in the food category,

but in more discretionary categories. I'm very confident in the company's ability to pass through higher pricing UM And the truth is that they have been a lot less promotional throughout the pandemic UM and that and the consumer has still been buying the goods, especially where they're strong brand and strong product innovation to UM to support the higher price. But the companies are all being very strategic and selective

about the price increases that they do pass through. And and just by being less promotional, they're also in effect taking pricing. And again this is not something new, this is something that the companies have been doing for the past year or so, and I think that that's giving them the confidence to continue to UM selectively take pricing for some time to come, given that some of these cost pressures they're seeing now are transitory, but others like

wage pressure that they're seeing are more structural. And well, you don't see those prices reverting back either, do you write? As soon as they get increases, even in milk or bread UM, those stick absolutely I think at some point we will see promotions start to normalize a little bit, especially when the supply comes back online, so you will

see that happen. But again, I think the companies have really learned throughout the pandemic that they can do more with last and dry full price selling, and that has resulted in higher sales and gross margins. And that is something because something that the company do not want to give back. As you said, Mary, thanks so much for joining us for a pleasure having your insight today. Mary Shore, their senior equity analyst with Columbia thread Needles. Let's get

over to Matthew Paula Zola right now. He's a senior analyst for property and casually insurance from Bloomberg Intelligence, and he's going to talk to us about Warren Buffett signaling a little bit of a wariness with a soaring stock market as he extends a selling streak. What do we know about Berkshire Hathaway, Matt, Yeah, we know that um Berkshire Hathaway's third quarter results were pretty good. They follow

the trend of the general economy. Things started picking back up at the end of last year and kind of rolled through you know, to higher than average pre pandemic earnings. What I think is kind of a concern for the next couple of quarters is going to be the supply chain's impact on their kind of vast array of businesses going forward. I do want to touch on that, But let's talk about the big issue, the best issue anyone can possibly have. Warren Buffett and bucksh have Away, have

Away have too much money. They have so much money that they don't know what to do with it, and they can't spend it on anything. Walk me through that one. So so yeah, I mean, because of a consequence of these good earnings, they're just piling up cash, right And from the beginning of the pandemic, Warren Buffett struck a very cautious tone on the market about the risk inherent in what's coming up. And they pretty much sat on

the hands at the beginning of the pandemic. And at their last time You're leading, Buffett expressed remorse about doing that. So we should have we should have been more active. But then I feel like they kind of got caught in a little bit of a trap because valuations did nothing but go up since then, and it just makes things less attractive if you look at his um established philosophy. All that said, though, I do think he could ignore valuation and make a best in class business deal if

he sees it. So where do we see those kinds of deals? It's a big size. You can't see these elephants everywhere, can't you. Yeah? No, I mean so their cash is a hundred and forty nine billion dollars, right, so they could pretty much buy almost anything they want. Um. I wouldn't want to speculate on where they're going to go because you know, it could be anything. You know Berkshire's businesses, you know, from owning a ton of apple stock, They make airplane parts, they sell candy, they do pretty

much everything under the sun. And so I wouldn't be surprised to see something come out of left field that maybe no one's ever heard of, you know, for a couple of billion dollars here and there, But to make a huge damp in that cash pile, I don't think it's going to happen anytime soon. So let's go back to what you were discussing earlier. Bugsher Buffett view of the world. Because the conglomerate touches so many parts of the economy, so many different industries and associated supply chains.

What do we learn on that? From the third quarter results were good? I mean, supply chain was mentioned several times in the ten queue. Uh, it's it's affecting all of their businesses. I think what remains to be seen is how much those businesses can pass through costs to the consumer. I think I think generally businesses are able to do that just because of the kind of strong economy that you know, people are willing to pay more

for things UM. But I think because of their their vast the rate of businesses, there's going to be some things that they just can't push along. And they're in they're in home building, and you know, I don't know how much higher those prices can go if their materials, you know, keep going up. And in terms of an end, do we get any signal from Buffett or from Berkshire as to how the supply chain crisis is going? You know, how UM input costs are rising? Is this is this

going to soften anytime soon? You know, they didn't really speculate on the future or the longevity of it. I think I think we can see these issues last easily through through next year. Given all the businesses they're in, then one of the biggest businesses is they make airplane parts, precision airplane parts. And you know that market, even though travel is coming back, uh, you know, the market has yet to rebound. And even if it does, they're having

trouble um sourcing the parts for that business. Precision airplane parts are the best kind, you know, because I hate when people just make rough guesstimates and they're producing pieces for planes. It just doesn't work. Um, precision cast parts,

what do they make? They make that? Those are those are the precision auto parts that they do make and that and that's that's kind of one of those businesses that that frankly you may have never heard of, but has this kind of huge global near monopoly in these kind of And when I say precision, you know it's there probably are parts on the plane that are not exactly precision, right Like if you're talking about just kind of a piece of metal for the wing, maybe that's

not as precision as some of the instruments that go in the cockpit. I know, I was I was just joking around a little bit, but um, yeah, no, I've I've been flying a lot lately. Uh, I guess relative to during the lockdown, and I feel like a lot of it is imprecise. But yes, they don't crash, they don't fall out of the sky very often, so they should be put together pretty well. Matt's thanks so much for joining us. Great to get your inside on Berkshire Hathaway.

Matthew Palazola. There is a senior analysts property and casually insurance, and of course Berkshire Hathaway is still in the insurance business as well as all of the other stuff that they do. Alright, you you mentioned vacation and I want to bring in our next guest right now. Matt Roberts joins us. He's the CEO of a case uh formerly um running open Table, so is he a lot of He has a lot of experience in these businesses. And Matt, I guess, um, the CASA is a portman too? Is

that what it's called portmanteau portman. It's a combination of two words, I guess, vacation and casa. Right, what do you do? Yeah, that's that, that's right. Uh yeah, No, we're your focused on first, thanks for having me on. We are focused on the supply side of the vacation rental equation we both have. You know, we have over

thirty parties, are the largest in the nation. UH. And what we do is we bring online UH nights for people to rent at vacation Rentals and so we then retail that on our own site, but we also do it on verbo Booking, AIRBNBA, et cetera. Matt, you heard. Matt and I are just talking about the great reopening of the Transatlantic route. What is the demand? You know, what are you seeing November eight on wood from Europeans, from Brits that want to come to the United States

for vacation, to visit loved ones, whatever it may be. Yeah, really excited to see the reopening and it's going to, in our opinion, just add to the already incredibly strong demand that we're seeing. Our business is booming, and you know, we just happened to be focusing also on the hottest segment of the entire travel industry right now, which is vacation rentals. You know, what we're seeing is more and more people are going to travel over the holidays, especially

folks with young children. I think that's like six are planning on travel ing. So this incremental demand on top of an already very very healthy market is a welcome to uh, you know, to all of us in this industry. Healthy and changing, right. I mean you mentioned um you do your own business, but you also work through Verbo

and Airbnb. I had a wedding in Valencia last month, and so many guests were poo pooing the you know, uh standard hotel reservation and looking immediately instead for other rentals. So how much has this market changed? I think it's changed quite a bit. It has changed a lot, not just over the pandemic, but really over the last decade. It's grown at two times vacation rentals is two times

the growth rate of traditional accommodations. And now that you're seeing post pandemic or in pandemic changes to the way people are working and traveling, there's more war day weekends available, people can work from anywhere. You know, homes are just the logical joy for that type of flexibility. Can we talk a little bit quickly about the holiday season? You know, it's really interesting. Is there any sort of geographical split

for where the demand is in the United States? Is it literally holiday traffic, holiday season traffic that's driving sales. That's right, again a continuation of the strong demand we had all the way through the summer season. Uh. Travelers are still opting to drive to their destinations. So that part of the of the pandemic is is still really strong. Long way, it's a long way to appen. Yeah, a long way to over the value exactly. But we're also

seeing just in general, confidence level is way up. Uh. And you know, before they said, like there was a spike in in any kind of COVID cases, only said they would change their plans, and that was compared to nearly sev would change your plans before. So there's just such an increased confidence level, not just in the holiday season, but six of Americans said that they would plan to take a trip in twenty two, and eighty two percent of those said they're going to travel more in twenty

two than twenty one. Just people are very much excited to get back to a more normalized travel environment. Everybody wants to get out there. Everybody wants to do a spack merger. You have one of TPG pay solutions. Why do you choose that instead of a traditional IPO. Well, look, the end result is the same. We're gonna be trading on Natic under VP s a H. The approach was really partner based PPG pay Solutions has has just a

great been great business partners for us. And and you know Carl Peterson was the co founder of hot Wire. He's gonna be joining our board. It very much looks like a traditional IPO though, I mean there's really there's no warrants, there's no selling shareholders, relatively low float relative to UH to the overall market cap, so I think it will perform very much like a traditional IPO in

the end. Matt, thanks so much for joining us. Matt Roberts, they're the chief executive officer of a COSA talking to us about appl Ed Ludlow are in trepid and trepid tech reporter joining me this hour. Thank you very much out of San Francisco. This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three

on fal Swoeeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch US worldwide at Bloomberg Radio,