Get Ready For Another Round Of Toilet Paper Panic

months into this pandemic. Now, we got disappointing data for Halloween in terms of retail sales. What's the one thing that really jumps out at you at the moment as to where we are where the consumer is consumer? Based on the US Department of Commerce reports today, VANNI disappointing retail numbers, especially clothing and department stores. What really stands out is the big box retailer's Walmart, Costco, BJ's Target

all doing really well. And the other key thing for Bloomberg team members and listeners is stopped at the store today this week, this weekend to load up on COVID supplies. We're seeing the worst levels of inventory even worse than March, April and COVID in terms of paper supplies, paper towels, bathroom tissue, disinfectant liquids, soaps, disinfectant, sprays, and wipes. It's a real panic situations because the brand suppliers are doing a pathetic job supplying the retailers, and the out of

stocks are reaching unprecedented proportions. So what are the retailers telling you about how bad that aspect of their business could get? Uh, Paul, it's it's it's gonna get really bad because companies like Clorox had moved to single site manufacturing for the total US. My alma mater Proctor Gamble UH called the number of plants with Booz Allen and Mackensey studies they have insufficient UH plants too far away

from population center. So as bad as it is, it's going to get worse, and especially going to get worse, Paul. And urban areas where you have smaller stores often supplied by voluntary wholesalers. So the big change have the procurement power to get what little inventory there is, and then they're smart retailers Walmart, Lowe's, BJ's Costle are investing extra

working capital and inventory. But for the big change that ernests well capitalized that can't buy extra inventory up froad, it's gonna be a real crisis for consumers as well as and then they've retype change. But Birds, we've had eight months to solve this. How is it going wrong all of a sudden or how is it continuing to go wrong? Why can't Clarok solve this supply chain problem?

And and Bonny it's it's it's Clorox, It's P and G, It's Kimberly Clark, it's Coldgate, it's uh Record, ben Kaiser, etcetera. Because they went to the Asian system of justin time deliberate. So when COVID started, they didn't have the raw materials, they didn't have the bottles, they didn't have the cases, they didn't have the truck drivers, they didn't have the warehouses, they didn't have extra inventory. Sort of put put it out mathematically. Walmart has a hundred and fifty six major

distribution centers, including six crisis distribution centers. Corox, to proct and Gamble only have one a few to five on the supply apply the US. That's completely inexcusable and as one of my mentors, Phil Robinson, who was director manufacturing for P and G, cautioned the company about doing this,

but it really got got to be greed. And by cutting working capital and uh cutting cutting capex for manufacturing and distribution, they created a crisis which exacerbates public safety crisis too because in New York City literally some of the retailers are telling me that, uh see years they have to go to five to ten chains a day to try to get safe safety related disinfectants and paper products, and no matter what store they go to, it's double os or out of stock. All right, so we'll certainly

monitor that situation. Burt. We've had a lot of the big retailers report this week and today. What are some of the takeaways here? The big takeaway is when when you pay more, you get more productivity per person, you get higher shop of satisfaction. There's uh the old adage from my uncle Dave, you pay peanuts, uh and uh you don't get good results. Costco which pays very well. Walmart, which went from being the worst in terms of pay to the one of the better ones ahead of Target.

They have higher retention and so uh Walmart is able to deliver the ninety of the US Internet sales up seventy and percent same stores stacked between the Walmart stores and Stam's Club up approximately seven percent, and a lot of that retention, A lot of that's investing in working capital and trying to evolve. From a Bloomberg cover story co authored by Shannon Petty Peace and David vorriez UH saying UH Walt Walmart had an out of control of

crime problem. There was a nightmare for the police departments across America, and Walmart didn't have sufficient security, hence UH the El Paso tragic loss of life where dozens of people were gunned down UH in the Walmart store in El Paso, and Shannon and David reported UH throughout two

hundred violent crimes a year. So Walmart's taking corrective action to correct the mistakes that the family made from security et cetera, UH to professional management and Walmart's checked aiding and gaining on Amazon, and from our field work and

Vonnie's homeland in Ireland, UH Small, Scotland and England. Walmart's learning from the mistakes it made in in UM, the EU and in the UK with ASDA and UH divested, say you this week divested someone's Latin American operations, concentrating online UH and UH concentrating on flip card in Asia

and doing things right. So it's investing. It's investing in growth drives UH, profitable market share growth and profitable sales growth versus the other retailers who are cutting expenses and cutting expenses at the time at Covid as an r X with disaster, many bankruptcies to be seen for the rest of the year. I'm sorry, Vonnie one more time,

please sorry, I have a mask on bankrupt sees. How many do we see between now at the end of the year bankruptcy's We've we've had fifty in the last twenty months, with Francesco's hopefully not but but UH sadly probable, we'll probably see another five by the end of the year and another fifteen to twenty in the upcoming calendar year.

And with the bankruptcys and with with Covid and the shutdowns, the big box operators like Walmart, Costco, BJ's target as well as Amazon and the hard discounts like all the illegal really capitalized, while the independence and their suppliers are still getting squeezed Birt, thanks so much for joining us. As always, we appreciate your thoughts and insight into the retail space. Bert Flickinger, Managing Director, Strategic Resource a Group, joining us again to kind of give us an update,

and it is Vanni. It's just frustrating to see some of those supply chain problems where you can't get some of the basic products again eight months after we started this. Yeah, I mean I personally haven't seen it, but I believe Bert when he says that he's always turning around to you know what. I think that they would have built up inventories throughout the supply chain and anticipation of the second wave, which everyone certainly has been expecting. But we'll

have to see how this plays out. You're listening to Bloomberg Markets with Bonnie Quinn and Paul Sweeney on Bloomberg Radio. Well. One of the fastest growing areas in the investment world over the last couple of years have been exchange traded funds or e t fs. Ben Slaven, global head of et F s and Assets Servicing at B and Y Melon,

joins us here. B and Y Melon has eight hundred and sixty billion dollars in assets, through across t fs globally, and they work with fifty three issuers, so they know what they're talking about when it comes to e t s. Ben, thanks so much for joining us here. How have e t s in general performed over this craziness that we've all been experiencing over the last eight or so months. Good morning, and thanks for having me on the show. UM. E t s have shown remarkable resiliency this year. Investor

appetite for e t s keeps growing. US e t F inflow past four hundred billion dollars this year year to date, which would put us on the second all time pace for the industry, with an outside shot of hitting the all time record. So really, ets have emerged stronger on the other side of the volatility we saw this spring, and the e t F ecosystem to support that growth has also shown remarkable resiliency. Where are they going for the most part, these assets, well, we've seen

strong flows across the board UM this year. Specifically, we've seen an increase in fixed income e t F flow, which are having a very strong year, especially in the run up to the election. UM. In fact, if the mix of assets hold, we will see the first time where fixed income e t F assets have outpaced equities. Commodity specifically gold are also having a very strong year UM. We also saw some you know buying and inflow into those products, especially as the price of gold increased earlier

in the year. So ben what's generally speaking the main attractive point or selling point for an e t F in general, Well, there are several things that are driving the adoption of ets Certainly fees, et f s are

lower cost across the board compared to other structures. Tax efficiency, transparency, and liquidity are all key drivers of investor adoption of e t s. We are also seeing a significant growth in the amount of products that are coming to market UM due to investor appetite UM also due to regulatory changes that are making it easier for issuers to launch.

So what you're seeing is an experience into toolkit. And as the adoption of e t s grow UM and specifically around the liquidity of e t fs have increased, especially over the last few years, you are seeing investors all the way from retail investors all the way up to large institutional players using ETFs to express their views in the market, whether they be strategic or tactical. Then just on a slightly separate note, it's been a very

strange time for custodian banks. Explained to us why why that is why custodian banks have been maybe suffering more than others. Well, I think from a you know, from a custody standpoint, UM, we are a service provider to the E t F industry and you know, again we've seen significant volume on our platform UM based on this increase in e t F adoption, but certainly earlier this year around some of the market volatility where we were seeing very high amount of UH transaction volume come through

our platform. All of that business UM has really UM really been processed in an automated environment UM, which you know, really is kind of demonstrate some of the resiliency we saw UM to be able to handle all that volume,

especially in a work from home environment. So it certainly has put some some strain on the industry to be able to shift their operating models UM and also adopt the technology necessary to really support UH the industry you know, as it's as it's growing UM, and also serve investors UM you know, who are again increasingly looking to use these products to to express their views on the market

so been. You know what I like about the et F space, and when we have an in house expert here at Bloomberg, Eric Beltunas, who keeps us up the speed here, there's so many cool sectors and and really interesting et F structures get put in place to follow specific parts of the market. What are some of the et F sectors that you think you're gonna see some of the most interest uh in the next you know,

year or so well. I think there are several trends we're going to see into Certainly, I mentioned fixed income ETFs which had a great and I expect that trend to continue into especially in a low rate environment where the thirst for yield will certainly continue by investors. I also expect to see an uptick in actively managed ETFs,

both transparent active and non transparent active. We're seeing a significant amount of our clients at b N Y Melon express interest in launching these kinds of products, and we expect to see quite a bit of new launches coming

to market, both equities and fixed income. Also, I think it's worth noting we do see a trend um as we've seen this year in the adoption and interest in thematic ets, specifically retail investors which have been driving flow and DiPT thematic ets this year and they've become quite

popular playing several different types of trends. And also again maybe finally M E. S. G Um, we've seen a record high trend this year, and you know, we think investors are increasingly looking for adding risk factors like climate change, government, socially responsible stewardship as part of their et F portfolio. Ben, thank you so much for joining. You say Evan Slaven his global head of ETF SO noasa's servicing at b n Y Melon and b n Y is abouts globally.

This is Bloomberg Markets with All Sweeney and Bunny Quinn on Bloomberg Radio. All right, we'll we continue our wonderful lineup on them by radio this morning with it as a coupler who is head of global payments for eBay. Elissa, thanks for joining and welcome. How difficult has it been to do your job during coronavirus? Good morning, Thank you. I'm you know, it's definitely led to a tremendous amount

of adaptation. Um. You know, we launched managed payments virtually, which was not how we planned and not how we did our first pilots in the US and in Germany. But UM, you know, we operate a little bit like a startup inside a large our company of eBay, and the team has been incredibly adaptive and UM we've successfully launched and continue to grow. So it's been it's been a good experience, albeit a little bit different than we expected.

Earlier this morning we heard Anna Boutine, the executive chairman of Banco sant and there she had an extraordinary statistic about eighty percent of their transactions in the month of October were digital. Just extraordinary. So for somebody at eBay and you think about your managed payments business, first, just tell us what your managed payments business is and where

you see the growth going forward. Sure. So in Januaren, UM we shared our engined to intermediat or manage payments UM and simply that's driven by creating the best experience for our buyers and sellers UM. Historically, obviously eBay and PayPal we're part of the same company, UM, and we we basically outsourced all payment activities to PayPal, and every seller that came on to list and sell on eBay

needed to establish a relationship with PayPal as well. By managing payments, we bring that all in house and our sellers register with us inclusive of payments and get on their way with selling, and allows us to offer a multitude of forms of payments to our buyers all over the world. And as you noted during COVID, so much

has moved online and digital um. So the convergence of timing for us has been tremendous as we're able to now control the experience end and for our buyers and sellers and ensure that our buyers all over the world are increasingly having the forms of payments that they demand to shop with. So I'll give us more detail on that. What exactly are the platforms that you use and a

lot of buyers seem to prefer these days. Yeah, So historically we were limited by whatever forms of payment were inside the PayPal wallets, and as we move volume into US at EVA managing payments, are buyers have access to not only cards and of course pay Pal as as a form of payment um, but digital wallets like Apple Pay and Google Pay, which is we've seen explosive demand for as more and more not only moves online but

through through mobile applications, particularly with with younger generations, and as we've launched into Germany, for example, there's a lot more bank based UH payments that are out there, and so we've been able to introduce those UM after pay in Australia, a growing trend UH of folks wanting to pay over over time, and as we continue to launch around the world, will be able to introduce those local forms of payments that UH the shoppers expect to use

anywhere they might be in stage Japan or France or Canada. We want our buyers to find those local forms of payments that they are familiar with UH locally across our platform as well. A Lissa, how big is your managed payment business within eBay and kind of what are the growth rates you guys are experiencing. Yes, so we have been limited by an operating agreement from the separation with PayPal for the past five years that just expired in mid July this past summer, as we are limited to

just ten into markets US and Germany. As we crossed UH that transom in July, we launched across five markets and we've been feeling very very rapidly. We're over three and forty thousand sellers as we wrapped to three UM and we are now processing a little over of our global on platform gm g m V on the PLAT form, and we're continuing to add more sellers and more volume every single day. We will expand into France, Italy and Spain at the beginning of next year and continue to

roll around the world throughout. We expect to be largely complete UH at the beginning of two where we will then represent UM two billion in revenue for the company and five million and operating income. So UM we are continuing to charge along very very rapidly, and we're really pleased with our results. That's pretty phenomenal. What are the greatest challenges that you see ahead? What are the challenges

to your business? So there's We're we're in a very dynamic world right now with with COVID and a lot of uncertainty. We are squarely focused on serving our customers. When our customers win, we win. We want to continue

to provide them great experiences. Managing payments is a key pillar UM in a modern manage marketplace, and then our tech lad reimagination sense to continue to innovate on behalf of our buyers and sellers and ensure that our our sellers are having velocity, our buyers are finding what they're looking for, that great deal, that unique find, and they're zipping through checkout and getting on with their day. Hey, listen,

thank you so much for joining us. Just a fascinating story there for eBay unlessa cut right head of Global Payments for eBay. They're based in San Jose, California, And you know, Vanni, just I mean, just extraordinarily good timing, you could argue for really launching a digital fintech business at a time when people are spending more and more time online, transacting more and more online and doing it digitally. Yeah, you'd love to know about the you know, the cutting

up of the pie. So what percentage or portion of percentage per payment does does this business get? And you know how much of a middleman is it? Is it also the middleman where a stripe is a middleman? You know? Yeah, yeah, it's There are different platforms out there, for sure, but

I think the eBay straight at you here. It's obviously to tie in the activity on the eBay platform um with the payments business as well, cut out that third person, get more that revenue let's bring in our professional, Ira Josey Teeth, interest rate strategist for Bloomberg Intelligence. I really let's begin with this morning's retail sales and the impact

it's going to have on the economy. Disappointing Halloween sales. Yeah, so the retail sales numbers certainly weren't good, and in particular what we call the control group, So that's the uh, those are the sectors that actually go directly into GDP. So the fact that, um that that missed pretty big by by four tenths and uh and was also revised down for September, I think just shows you that some of the optimism and some of the you know, initial sorts of any kind of V shape recovery have to

go out the window. Hey, I you know, looking at the tenure treasury here, you know, eighty six basis points roughly seems if you've been in this pretty tight trading range in and around ninety basis points. Any reason to think that that changes in the maybe near to intermediate term.

So I think in a near term, if you get continued risk off move so we get equities moving lower, and um, you know, things like you know, maybe gold prices going up in oil prices, falling that that you might actually see a return down toward the UM down towards the sixty five kind of handle on on tenure yield. So so another twenty basis points. But but basically, broadly, I think we're gonna stay in this range UM for

quite a while. It's what's going to break us. I think above h that ish basis points where where we tested a couple of times last week. UM, I think it has to be a vaccine. I think it has to be that, Hey, we're rolling out of vaccine. Here's the pace and three growth looks like it might be more um. You know, I don't want to say normal, but but certainly better than we're currently the market is

currently anticipating so um. And And the other way is is, you know, we don't get a vaccine right, and we continue to have rolling shutdowns and reopenings, which makes for very uneven economy uh continued you know, very slow um uh slow wage growth, causing inflation expectations to remain very tame. So so I think I think basically the push and pull that that we've had the last couple of months persists at least into the new year. Um, you know a couple of other things that Paul could break us

out of it. For example, if the if the government does get together and and Congress and whoever, the new president is pass a reasonably big fiscal stimulus, I think then there is the possibility that even with without a vaccine, you can wind up seeing yields break break one again on the tenure. I just want to point out some news coming in the Republican Senator to Grassly says he's going to quarantine. He's waiting test results after being exposed

to COVID nineteen. But of course this has implications for the Shelton nomination, which might have happened today. But it looks like now with Grasslely sort of by the wayside, her nomination, which would likely fail, won't happen today. A spokesman has confirmed, and Glassy will not vote today. What's you're thinking on Judy Shelton, IRA and how much of an impact you'll have at the FED? It does It's likely that she will still get nominated at some point,

but it'll probably be in a few weeks time instead. Yeah, so, so you know, obviously, as a member of the FED will have some some say and some input. I you know, one thing that tends to happen is when when a lot of people who seem to be ideologues one way or the other, they get appointed to the Supreme Court or the Federal Reserve, where you don't have to report to the political establishment, they tend to moderate their views

quite a lot. And and also I think you know, given that that shall be part of a committee, right, that it shall be part of both the Board of Governors as well as the UM the Federal Open Market Committee. UM. You know, she has a voice, and maybe she'll be a loud voice, and perhaps she'll dissent occasionally depending on what policies are suggested by the by the majority of the committee. But but she is just one member of

the committee. And it's it's not dissimilar to you know, a chair going in and you might think that the chair was going to be particularly dubish or hawk ish, and you realize that all of a sudden that they're not. And a big part of that is because of the committee aspect of of the Federal Reserve. And I don't think that one member in the Board of Governors is going to change that meaningfully. So there's some talk here of the Fed expending its bond purchases. What are your

thoughts there. So when you say extending it, I take it you mean that they're going to but not buy as much in the front end and buy more, buy more longer term securities. Yeah. So, so that's something that we looked at a couple of a couple of weeks ago, and I think that in the first half of next year, in the first quarter, maybe the Federal Reserve may considered doing that. And in particular, they might do that if

um under two circumstances. One is, if bond yields do go up because you get a big fiscal stimulus, the Federal Reserve won't won't like the fact that you have tenure yells up one and a half percent. They'll be happy that the market is pricing for a rebound in the economy, but they'll be worried that such a large move in bond yields might hamper that growth in the future.

So so they could extend out the maturities um. The the other reason why they might do that is just because they don't want to buy a whole lot more of of security. So right now they're buying eighty billion dollars of treasuries and forty billion dollars months of mortgage

backed securities. You know that that's quite a lot. And and I think that they're worried that, you know, they they worry about their impact a market function, how big their balance sheet gets, they become, you know, worry for some some people in the political establishment, you know, do they do they have such a large balance sheet that they can never ever um, you know, get rid of

it and unwind it. So so I do think that there are limits and and the easiest thing for them to do is just buy more market risk, which means buying more longer term securities. Um so. So my colleague Angela Manolados put out a piece a couple of weeks ago noting that even without any new bonds coming into the market, um that the Fed right now could buy another trillion dollars of long term securities. Hey, Eira, thanks so much for joining us. Really appreciate our Jersey chief

he was interest rate strategist for Bloomberg. Can tell just thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever. Podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio