Markets, Cars, And Ice Cream (Radio)

making investment decisions, deciding on investment strategy. What do you do, Loreen after a nine point one percent cp I print right. It's a shocking number, definitely, and it's got investors nervous. But I think when we think about having a level head, when we look at core inflation has been coming down to hit a peak, and I don't think that the FED will be as aggressive as some people are thinking.

I think they night stick to the basis points. Nonetheless, no matter what it is and whatever it is that we're looking at, we just have to focus on long term investing. And with that, I think that investors are actually probably too uh too worried, too fearful about this and keeping their equity exposure in line with their risk tolerance. So while we've pulled in some cash, not being overly conservative with equity exposure. Loreen, let's talk about this Humiss

data if we can here. It's coming in pretty good actually at a time when consumer sentiment is extremely extremely low. How much stocks should be put in this particular report? Yeah, exactly that the consumer sentiment has been extremely low. Um, but when you look at today and the retail sales number, it shows that consumers are still spending. So there's this disconnect between consumer sentiment and and actually what people are doing. And I think hopefully that holds because we rely on

our economy on the consumer. Two thirds of our GDP is based on the consumer spending. So, uh so we are seeing the consumer spending. Now, what we don't really know is how much of that is just higher prices, So higher prices, but people are actually purchasing less but the prices are higher, so we have to factor that in. But people are spending. The consumer is still strong, and so we think the consumer can weather this, but they're not happy about it. They're not They're not happy that

they're spending extra money on goods. In terms of the FED UM, you know, a hundred basis points has been floated, but it seems like seventy five is pretty much a lock. What do you expect for you know, the the year end rate or the terminal rate from the Federal Reserve. Yeah, I think we're the three and a half more than

the four that might be expected. So you know, we do think the seventy five and then um, you know, we'll see, hopefully there's a breather where the Federal Reserve will take a look at how that's really being priced in with the economy and how the economy is taking it um and so I think that what we're going to see this year is an aggressive fad and next year they might have to completely reverse course and become

much more accommodative based on the economy. So uh so, so I think, you know, consumers as well as investors just ride this out. Looking specifically, what we're doing is looking for companies that are spending on capex, what's going on with share buy backs, you know, what is their strength on cash flow? And those strong companies are what

we're looking for. Well, you're talking about fundamentals here, Can we just have a sentiment for a second, because do people really want to even be in this market when there's this much uncertainty. It's something you're seeing in commodities, for example, that simply open interest in that market is drop because nobody wants to navigate the volatility. Can the same be said for the SMP five Well, you mentioned

a really good point. For sure. Definitely, emotions get involved when it comes to investing, and that's where we have to help our investors keep emotion out of it and really look at that, you know, how to client call the other day saying all I'm hearing is recession, recession, recession, recession. How bad is it? And our feeling is that, you know, one, we're not in a recession yet and to uh, it's probably not going to be as bad as people think

it's going to be. So with that, yes, we could still see some downside from here on equity prices, but when we look at our year in numbers, on our expectations on the SMP, it's higher than what it is right now. So as long as investors can take, you know, and look at it out longer term view, um, it makes more sense to be invested, and like I was saying earlier, the average investor is still as too little

equity exposure. So if I came to you with a million bucks in the three to five year time horizon, what would you do. We have that situation right now. We're investing that money, We're putting it to work. Now, that investor that I'm talking about is a modern investor, So holding to that sixty allocation and of course including including alternatives in the mix, uh would make sense? All right? Loreen,

thanks so much. Lori and Gilbert, their founder and CEO of Wealthwise Financial Services talking to us about the current investment environment. Me and pretty have a bet. Now, we do have a bet. I think that inflation peaked at least in terms of the headline CPI number with the reading that we got what was that Wednesday? Right? Nine nine? Handle yet? So if if we get a higher number than that, I will take you to dinner wherever you like and one of your friends. So it's not a date.

Maybe maybe my wife could come over. Yeah, let's do that. Um, if I'm right and hold on, If I win and inflation is higher and has not, Pete, what do you want? I don't know, if I take you to dinner, and if if I win, you pay for dinner. Exactly, you take me to the Flying j um in in Harrisburg. We're gonna interview the CEO right now, Schamik Konar, CEO of the Pilot Company. I grew up with Pilot and the Flying j I used to drive all the time.

I still kind of do from Grandville, Ohio to New York City and I always stop at um at your what do you call them truck stops? Convenience centers? What do you call the Flying j are the pilots called them travel travel centers? That's right, I always say truck stop people being a cupstomer Matt to be appreciated and hopefully we do a good job for you. No, obviously I love it, or I wouldn't stop there all the time. Um, although it is very convenient, right, they seem to be everywhere,

at least for a Midwest boy like me. How many stores do you have? And and and where are they? Where they focused concentrated? No, we were, Actually we're we're all over the country. So you know, we sell a few a lot of about eight hundred and twenty locations around the country. And and Canada and uh, you know, we're pretty much on every major rangstate and uh and and some of the local roads depending on the amount of amount of traffic there. So you know, it's a

pretty uh, pretty broad network. And so I guess the story is, now you're gonna put e V chargers everywhere? Is that in it? Well? Yes, that is. We are partnering out with General Motors to put EV chargers at at five hundred of locations to start with. Yes, So talk to us a little bit about the transition there went from gas stations to e vs. We had a

guest on almost like yesterday from GMO. From from GM. Yeah, that's what he's talking about, right, I'm aware, thank you, uh talking about well, you know, we're still have this massive infrastructure to build, but I'm curious about the trade off there. You know, the way we pretty the way we look at this is our goal is to provide a great experience for our guests and to be able

to deliver the form of energy that they need. Right, so you know, whether whether whether people need electricity or whether they need gasoline, our goal is to provide whatever form of energy they need. So you know, we view this as a as a bit of the natural transition as we uh you know, move away from fossil fields, which is gonna take a long time in my opinion. But but we are moving to a world where we are going to have to service many kinds of guests

as we call them at our travel centers. And I see a future where, you know, for a period of time, we will be selling so mean diesel. Uh you know, we we currently sell a lot of bio diesel, renewable diesel, ethan al, and we'll be selling electricity and possibly hydrogen and uh, you know, possibly compressed natural gas. So I see this kind of multi few future for us as

we work our way through this transition. I mean, I assume that you also want to make money though, right, So what kind of margins, uh do you expect from or or or maybe even you know, gross revenue do you expect from an electric vehicle customer versus someone who's fueling up a gas or diesel. That my, my, my shareholders will be pleased that you bring that up. But you know, look at this point, it's a little bit

of a complicated question. And the reason I the reason I say that is, uh, you know, uh the electric UH procurement rates are actually fairly complicated around the country, so and this is one of the challenges we're working to figure out. It's based on the rate structures that

are offered by utilities in different states. You can actually have pretty significant variations in the price of electricity and the way electricity is priced because you have these things called demand charges where you have to pay regardless of whether you're whether people are charging at your location or not. And if I have to pass all of that onto our customers or you know, if you have large demand charges, it's gonna be help for us to make money for

some period of time. In all those states where you don't have demand charges, it's gonna be you know, possible for us to UH to make money. But ultimately, the way I think about it is, we have to be competitive with the price of gasoline. So when you think about it on a you know, for a mile basis, for a mile cost of fuel, we have to be competitive with gasoline. So right now, it's it's it's a difficult call to make, but this is something that we're going to have to work through state by state and

work through with our customers as well. From a market's perspective. It feels like President Biden's comments that operators of such facilities as yours have the ability to control the prices at the pump, the prices that consumers are facing from marcus perspective, which which Matt and Night talked about on the daily, that seems like a very challenging thing to do. But I'd like to get your response as the owner

of one of such operators. You know, um, what ends up happening is the factors that drive are pricing are are generally three things, right. First is what the cost of the fuel is. And this is what you guys talk about all the time, right Like double Pi is trading at ninety forty two right now, and you know you've got on letter gasoline trading at two two right, So the cost of the product. Uh And and one of the challenges we do run into is we has

to carry inventory. So the markets move up and now and every day, but we have to carry a fair amount of inventory. So you know, how we price also depends on what the thought stuff that inventory in our tanks place. The second factor that comes into play is what our competitors are doing. Right as you know, this is uh. You know, retail retail fuel is a hyper

competitive industry. I mean I grew up in India. When I came to the US, I was absolutely shocked by the fact that you could have three or four gas stations at one intersection right competing for prices. So competitive behavior comes into play a lot. And these days, uh, you know, with with what's happened in the US uh uh fuel industry, with the fact that our refining capacity has gone down, you know, kind of six six or seven percent over COVID and the fact that we're running

law and inventories. Localized markets have tremendous dislocations and fuel. You can have markets which are or you can have term those which a hundred miles apart, and you see fifty different in the cost of fuel. So you know, what you see on the imax of what you see on the trading in the trading markets every day are not necessarily the cost of fuel that we face in

local markets. So you know, those are the two factors that come into play, and they basically, um, you know, we're in the world right now where we have hurricane level of volatility. Yeah, absolutely, every day Shamik listen if you're in New York City, please stop by. I love to have you in the studio and talk further about this. If you're in Washington, d C. Maybe go to the White House and explain that to them. I'm in my sweet spot right now. My buddy Kevin Tynan just walks into.

I haven't seen you in like six years, dude. It's a real bromance in here. Bloomberg Bloomberg Intelligence. He covers the carmakers and uh Critty, you'll get to know him well. Me and Tretty are starting a car podcast. Yeah, we'll have to have you on it. Um, let's start by talking about the CT four black Wing. No, this is a Cadillac product that Um it's tough to get right now, right, just like every really special vehicle. But I want to hear specifically about this as well. What is it? Well,

what what's beautiful? Is uh? Manual transmission? I think it's close six horsepower something ridiculous like that, but luxury. So what is it? A supercharged six point two lead V eight? Yeah, yeah, it's it's essentially it's the four door z O six more or less. Well, now they have an escalade coming out. It's going to have the same power plant. In terms of getting these cars, it's just impossible. I've you know,

I've thought a Chevy Silverado z R two. I think it's the sweet spot for uh, the sort of off road style commuter trucks, Starbucks trucks. But I'm not gonna get it. I'm worried I won't get it till the end of the year because of this chip shortage. And I just saw this morning a number across the Charmer that was really depressing. Porsche first half, say, ails down five per cent. And you know that the giant empire of Volkswagen should be able to move all of their

chips to their highest margin business. So if they can't even get Porsche sales to rise, we're in trouble. Well. And the other thing that not only are you and customers waiting for product, your at least in this country, you're paying over M S r P, you know, over for just a regular truck YEP. And and it's amazing, right, in all my years of doing this, we've been above M S r P as an industry since October of

last year. I wouldn't think that I would have ever seen that, even maybe for one or two automakers for one month, never mind an entire industry for It'll be a year by the time this this rings out. But I just looked at the chart. Out of the thirty some odd brands in the US, there's six that are still selling below ms RP. Everybody else is above. Wait, what what's below? What's below? Uh there's BMW, Mini, Ram,

Jeep and Alpha Romeo. Oh well, brand, I'm talking to brand brand on average, Kevin, Let's broaden this out for the people like myself who don't know half the words you just said. You and Matt just nerded out about

let's talk about supply chains here, chip shortages. Already. We were just talking to a guest who was saying they're putting more EV charging stations in their their gas trucking stops, transportation centers, whatever, pilot flying j that's the one, um, But I'm curious how much of it is getting ahead of itself. You have a chip shortage, you need more

chips to make evs. That production it almost feels like it's plateauing to some extent, and yet you have this infrastructure that's being built out, and that doesn't even take into account the affordability of EVS, which is more expensive anyway. Right, And we could do a whole podcast on this, but um, look, I am of the belief and you're probably not going to hear this in many places that a lot of this shortages are being orchestrated for those reasons of balancing

supply and demand, getting over ms RP for product. Uh you know, so costs have been rationalized in this industry to the point where automakers don't have to push push push production choked the dealers would supply then throw a ton of incentives at it to to move it out the door. So to put it in context, four million units inventory prior to the pandemic, four million units on the ground in the US rolling every month. We now

have one point two million. There be roughly a good month in the U s would be one point five million sales from one point five million transactions. So we had two and a half times as many units on the ground prior to the pandemic. Now we're nicely imbalance, and you're seeing the effect on margins and on pricing power. So in my mind, the motivation for the automakers is it's not a chip. Yeah, there's a chip otherwise I

want my truck right now. But you're right. I mean between the time that I started shopping for my truck in February and then actually put in the order in April, they raised prices twice on that one specific model, and of course they're raising prices across the industry. The only

thing that makes me doubt and orchestration. I mean maybe there's a mild orchestration, but not like a full blown conspiracy theory is that dealerships are getting the amount over M S R P the A D M if you will, And I think that makes um the and correct me if I'm wrong, the big producers kind of angry. I think this is an excuse for GM and Ford to say, you know what, we're moving to a direct sales model. Well, first of all, I don't think you can scale direct sales, right.

If you're a g MM Ford and you're selling two and a half million units a year in this country, I just don't know how you're going direct. The other thing is, look, you're a manufacturer and and I say this to people all the time as a consumer, where you think that the that the dealership model is is a bad experience what do you think that's going to be like when you try and buy vehicles at retail

from a manufacturer who's never done it? Right, So, so the idea that that process would actually be better going to a company who has never done anything like it and it's hundred plus years of existence, to me makes no sense. But there wouldn't be the a d M, which is, by the way, the additional dealer market. Yeah,

they're sure there would, right. So, so if if a manufacturer sells to a dealer at wholesale, you think they're going to leave that money on the table for you know, they're gonna sell the you and and if there's if there's if you don't want your truck at the price they want you to pay, and there's three people behind you. Good point, right. So, so the idea that the manufacturer is going to do the consumer a favor by selling

directly to them, I think is is just misguided. All right, Well, we'll see if they can maybe break off little pieces of their business to do that, like Ford split, you know, the E VS away from the ice business. Yeah. Well that that tells me two things, right, One is that that either and I don't believe this to be the case that you don't get how things are retailed at scale in this country, or it's not going to be scaled. Kevin. I could do this for hours, obviously, and someday we will.

Nathan Hagar is there to join me because he loves ice cream so much. Mentioned Spider Man back in the day. I used to make the Spider Man Sunday. Have you ever heard of that? No? What's how do you do that? So it's vanilla ice cream and you put chocolate syrup on it in a web pattern. That's all it is. Yeah, not too exciting, but I thought it would be read yeah you would think so. Yeah that actually, Oh my goodness, that sounds pretty nice. Strawberry ice cream with chocolate. Kim

Padal Regwam joins us CEO Dryers Grand ice Cream. Kim, thanks so much for your time. Is it is it National ice Cream Day today? No? Sunday Sunday? Yes, of course it's on Sunday, Matt, I didn't know it was Sunday ice Cream Sunday. It's perfectly positioned on Sunday. Yeah, is it on Sunday? Every years it is on Sunday. Well, there you go. So um how's business right now? I mean, I I imagine I was just looking for milk futures

on the Bloomberg terminal. I imagine those prices have risen along with everything else, you know, So business is very very strong. So our business Dryers, Grand ice Cream, and the brands that we have Hogen, Dass, Dryers, Drumstick, Outshine, they are all performing so well in the marketplace. I mean, if you look so far this year, we're a double digit growth coming off you know, a couple of really

big years as well. Also, we're the We're very proud we're the biggest ice cream manufacturer in America and we have the biggest brand with Hogan Dust. You know, prices on some products and we've seen the inflation like everybody has, and so what we've been trying to do is keep our focus on investing in factory so we are building capacity.

It's all we've been focused on for the last two years because we want to make sure when people go to the store, and you know, it's a tough time right now, right prices are high that we can put a smile on faces with the ice cream that we have, so um, that has been our big agenda to fight all the challenges going on. Yeah, and it is a tough time. And I know when I walk through the ice cream frozen section, I look not just at the

prices but at the size of the cartons. Whether you're gonna have to shrink things just a little bit more to keep the prices where we expect them to be. Is that something that you're thinking about. So we what we have done is we have across all of the brands offered kind of a variety of prices and sizes.

So if you look at our hog Enough Um bars and those are snack items that are on sticks, we have brought to the market mini versions of those, so a six pack of minis in addition to the regular size item to try to get at that price point that anyone can afford if they want to have, you know, a frozen treat um. So right now I think we're well positioned with a big variety in that area. Um, but we're looking at it all the time. You're totally right.

We have a lot of singles items as well. So if you know you're in the market for just one item and you want to have a treat versus buying you know, a multi pack and bringing it home. We've been focused on making sure that as we build up capacity, we're building good capacity in that area with those smaller size items as well. Is there any place to buy UM you know, is there any online business for frozen foods? Because when I go to my local grocer, well any

of them, I can't find exactly what I want. They'll have like drumsticks that are a variety pack, or they'll have the chocolate core, but I only want the caramel filled drumsticks. Uh, And I don't know how to get hold of just a big like a twenty four pack of those twenty We don't have a twenty four pack of the caramel ones only, UM. But we do, back to your question, we do have online business absolutely right.

As we've seen consumers in the last two years, in particular accelerate that shift to grocery shopping UM, you know, from behind their iPad or computer at home. We've seen a rise in ice cream as well. People are buying that way all the time. So UM. We have great relationships with UM you know, the UM standalone UM, you know, Amazon, insta cart companies like that. But also we we sell quite a bit through the e commerce arms of major

grocery retailers. I've had to wrap my head around the idea of ice cream delivery because I'm always worried that it's going to melt on the way. But that's probably try people. That is not people. We don't have that problem, and we tested all of the time ourselves. So I buy it, you know, myself, just to make sure is the consumer experience the one that we would want? Um, but you know, the delivery service is great these days.

Where do you see margins going? I mean I had a bet with pretty Gupta moments ago that we saw inflation peak at the last cp I figure. Um, do you agree? And do you think margins are going to start to widen out towards the end of the year. I think that, you know, all I can really talk to is sort of out what we're trying to do

with our agenda. So what I'd say is my biggest focus is making sure that we continue to invest in the core brands, the quality of the product so that when consumers go to the store, are they're they're willing to pay the price that they see on the shelf for that brand right nothing else. And so we've been focused on that. You know, we are starting to see some um you know that price increases, hit peaks and

slow a little bit. So that's really promising, UM, because we want the category to be affordable for people and the brands to be affordable. But what I you know, can absolutely say is we have not slowed down at all. As I mentioned in the capacity investment, but also the consumer investment. UM, the quality of the rappers, on the packaging,

the print, the flavors, the inclusions that we're using. We're trying to make those better and better, and we have not slowed down on any of those agendas despite you know, cost pressures, because at the end of the day, we believe that's you know, when someone buys the product, if they love it the way you love the drumstick caramel cone, they will come back and buy it again just quickly. What sells really well right now when it's super hot in the middle of July. Do you see, like popsicles

do better than ice cream? What's what's the big flavor? So our brand, Outshine is on fire right now. Um. It is a fruit based brand. So fruit is the first ingredient. UM. We have it in a variety of flavors. My personal favorite is the lime Outshine bar UM. And you know, all of ice cream in the hot weather does very well, but that's in particular. We're we're selling um quite a few outshine bars um strawberry, pineapple, mango.

If you have not tried them, please do. But they're extremely refreshing, and I would say on a really hot day, it's what I would reach for. I gotta go hit the pantry right now, Matt, dude, you get to go. Laurel Maryland, I think is one of the biggest ice cream manufacturing facilities in the world. For dryers. Yeah, I'm gonna have to go there. Greg Jarek can head over to Bakersfield. I mean for a number of reasons, but for the ice cream. That's the hike from San Francisco

though it's probably far, but he can fly. He's got a pie, that's true. M Cam thanks so much for joining us. Always a pleasure're talking about ice cream, especially ahead of National ice Cream Day on Sunday. Nathan Hagar and Matt Miller, 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. Pet On Paul Sweeney, I'm

on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio