Stocks Gain on U.S. Tax Plan; Bitcoin Rallies

When it came to Hurricane Harvey, about forty percent of the people who suffered damages of homeowners were outside of the flood zone and did not have insurance through the National Flood Insurance Program. Here to talk about how to assess your risk of flooding and why it is important to consider private insurance is Mark Aunky Larry uh CEO of Various Analytics and I enjoy us here in our Bloombrick eleven three our studios. So, first of all, what

is Various Analytics. Well, Various Canalytics has some great data which provides our customers, insurers, natural resources area as well as financial services with great insights into the risk and about the decisions they need to make. So how do people determine truly their risk if they are not in a flood zone and they are not on the coasts. I mean, what goes into that? Sure? Well, I mean the first thing you have to understand is long ago

the hundred year plane is really about lenders. Lenders want to make sure that their assets, the mortgage that they're putting on a home, had insurance. So over the course of time, Um, there is a lot of floodplane prone areas that aren't covered by those maps. So you're at risk well outside those maps. And the fact you just provided inside of Harvey of the loss was outside of those traditional floodplanes. So risk is much bigger and much expected.

A lot of consumers have no idea, and at the same time, the actual boundaries of flood are extending every day. So I just have to wonder, when you start to do analytics on this kind of thing, what are you looking for? Are you looking for the elevation, the whether they're hills, whether it's just a flat plane, whether it's covered in concrete, the soil. I mean, what do you look for? So great, great opening almost all those So there's a lot of very advanced models that take a

look at all that. So if you price or understanding homeowner's insurance policy. A lot of those perils are all captured in that. So the models are very effective and understanding both the floodplains. But what they do is they go beyond to understand how rising water will effect an area, whether it's paved or not paved. An example, distance to coast,

distance to you know, the various natural tributaries, tributaries. The elements of risk are beyond just what has been a UH map that's been around for a long time that has been kind of altered for different legislative problems and issues. So how who pays you? I mean do insurance companies basically, So it's basically the insurers who are looking to write

those risks. So I think there's a great opportunity to take some of what is you know, the flood insurance and bring it to the private market so insurers can provide that to consumers. And I think that's a very viable and opportunity. I don't really see how they could do that if they could compete with the National Flood Insurance Program of the U S which is set to

expire later this year. But I'm sure we'll get pasted again because politically it would be unviable for them to say to all the people on the coast of Florida and North Carolina, well, go go fish, go go figure it out for yourselves, and we're not going to insure you anymore. Um. But a lot of people have said that that's not an economically viable program, that there will be much bigger losses than the income that they bring in.

So any private insurance policy would be vastly more expensive. No, So I think the answer is not necessarily to replace uh the n f I paper. I think that needs to continue. I'm not going to get into the politics of that, but the reality is there should it needs to be private insurance to augment it, to provide insurance

to those who are in a floodplaine that have risk. Um. I think what we are looking to do is try to provide the same type of options and flexibility that are available from a homeowner's perspective, trying to provide things that's affordable and available from a private perspective outside those flood zones. And I think, you know, you need to actually have some actual sound rating information so that the pricing is accurate. Your point is valid there, it's been

a little bit subsidized, a little bit subsidized. It's a very very diplomatic way of putting it, compared to some of the language I've heard from other people. Uh, just can you give us a sense of which insurance companies are interested in underwriting this type of policy. So right now, there's a group of very large insurers they're called write your own um. Historically they have been kind of focused on providing is a distribution channel to the n f

I pay um. I think under some of the more recent legislation, they will now be allowed to both uh distribute the n f I P insurance as well as write your own I think many sharers, both on the commercial and personal lines will write the program to get

the proper pricing and rates. And I'm sure that it's not too hard to find investors who want to put up the capital on the other side, because everyone's looking for yields, and you can probably get a good yield for this, right I would agree what kind of yields

are looking at? Well, I think you'd see that from an insurance perspective, r O s IF in the industry have historically been around seven percent, So I think most people who are kind of coming in from an alternative capital are going to look something that would be low sick double digits. All right, thank you so much, low double digits eleven twelve. In a time like this of nine point seven trillion dollars of negative yielding debt, I'm sure they could find some some takers for that mark.

Uncle Larry, thank you so much for joining us chief operating Officer of various Analytics, which takes a look at the risks that are implied when people take out flood insurance. Uh. Of course, if you want to know the truth. I actually bought my apartments specifically because it was an elevation that would not get flooded. But now I'm going to have to go back and this will be another thing that I can worry about later to late at night

when I don't have anything else to worry about. Semi followed Cebo opening up for bitcoin futures trading last night, and the results have been pretty good. They have not seen major hiccups, they have seen the trading volumes that they have been good. All systems seem ago here to put this into perspective and figure out whether this paves the path for more institutional money flying into this cryptocurrency as Ken Fisher, Founder, chairman and co chief investment officer

of Fisher Investments. Ken, thank you so much for joining us. I want to start with I want to start with bitcoin because it seems to be the rage right now, and because it's sort of highlights the degree of desire for volatility and bigger profits than you can get elsewhere. What's your take on it? Are you investing in it? Are you staying away from it? Do you see it as a sign of a bubble? Uh? So I've got to take on it that I haven't had until last week,

which is last week. I'm in Manhattan, and I'm appearing in various places, and I'm commenting on bitcoin, and I was routinely in print, taken out of context and misinterpreted in almost everything that I said by people who seem to have some other goal. And I've never seen that happen before. So I've made a conscious decision as of last week, I'm not talking about bitcoin ever or crypto ever, because it's a crazy world. People just cannot keep themselves

to the facts. The things that I said, which was all actually on TV, are clear because there's a clear record off I didn't do any other interviews, and there's all these other things that appeared online in print saying things that I said, things that I never said. I think that's crazy, and I think that's an awful lot of what goes on with the rest of bitcoin. Oh. You know, I'm to go back that stuff on CNBC and on the street dot com. And you know, basically all that I said was I don't know if the

bubble or not. I hate that term bubble, but the price movement in trading days before and after where we are as of last week is in percentage magnitude bigger than any of the bubbles of history. That doesn't make

it a bubble. It just makes it a big price movement. Uh. The other thing that I've said and that I'll say about bitcoin is it in every long bull cycle, there is some non stock market phenomena or close to stock market phenomena that gives you a kind of a you into a kind of a window pane into the coming

euphoria stocks. Coming back to John Templeton's line, the bull markets are born on pessimism, growing skepticism, ature on optimism, and die of euphoria, and that euphoria, which is normally the end of a bull market unless something governmental comes along and noxious under first is something it's always not clear fully that we're going to get to. But I think the crypto thing is the first real sign we're seeing in this long cycle of the coming of euphoria.

It's the window pane into the coming of euphoria for stocks. So what are you looking for to determine whether that euphoria has started to bleed over? I mean, how do you know that we aren't there yet? Oh, that's easy, that's trivial. Look at all of the nonsense that people worry about that they stop worrying about when you get to euphoria. I mean, I've been doing this stuff, you know,

since the early seventies. And when you get to euphoria, people stop worrying about things like are there too many new highs? Uh? They stop worrying about things like as the markets pe two high, they stop worrying about all of the kinds of things like uh, the next said hike. Because you actually get to that point when there's euphoria where they invert the yel curve and nobody much pays attention or notices because they conclude that it doesn't matter.

It's the worrying stopping about the things that people have worried about over and over and over again wrongly, which ironically is about the time to get worried. But we still have those things. We still have people that have a fear of heights, that think the market has been

too strong, particularly in America. That's true more so than overseas because of the UH you know, if you look overseas Britain, some continental Europe, more the equity returns have been muted by currency strength, and so there's has been so buoyant normally in the late stages of bowl markets. As you move into that eusphoria phase, you get some multiple big years this cycle, and we haven't really had

that normally. The first third of time of a ballmark it's pretty steep, the middle thirds flatish in the back their steep and of the return comes in the first and last the ball market only about the middle third. Before I came on, there was a comment that we've had the most new high since nineteen which is true, um, but also people forget that NT was at seven percent year and still had years ahead of it in the ball market. Uh, an interesting point that I think people

kind of miss in context. We still have a long ways to go unless the government does something stupid, which is so possible. Well, so if that's the case, it sounds like, are you getting more heavily invested in risk your stocks? I mean, is this time the time to go all in if we still have the last third of games to go? The time to get all in was two thousand and nine, and I've been nearly endlessly bullish, but not in what you think of as risk gier stocks.

In the back third of the time of the ball market, the categories of stocks that typically do best are not the ones that people think they will, because the market is a function that works off surprise. The things that do best in the last stage of a ball market are categorically what you could call comfort stocks. They're big, they're reputationally impeccable. There are things that are not thought of as needles in the haystack, but as too obvious

to likely do well. They're perfectly the stocks that the last greater fool who gets into the market that was too afraid to buy a single thing one week before is ready to dip his toe into because their comfort stocks. So this would be big, global, high quality, well branded names. This is why the Fangs are doing so well. Uh. It's classically big pharma for the same reason. The person with money, who is typically older, buys the drugs, knows

his friends would buy the drugs. Big global name, high quality, easy to do. The last people to get into the market to push it up the most. You keep pushing it up even as it's starting to fall. Those people, they were too afraid to buy anything before, so they might buy the stock of the company they worked for. They might buy the stock of the company their spouse works for. They might buy the one that brother works for. And when you get a little beyond that, they buy

big global, safe names. Ken Fisher, thank you so much for joining us. Ken Fisher, Founder, chairman and co chief investment officer of Fisher Investments. Shoppers spent a record seventy seven point five billion dollars online. That's just since November one through yesterday. Every single one of those forty four days has been a billion dollar day. Some shocking statistics, uh from Adobe Sense and I'd love to get some insight on what we can expect in the remaining a

few months and weeks of the year to America. Affney joins us now. She's senior director of Adobe Digital Insights, which has been looking into some of the data from the biggest online retailers and trying to project what we can expect. Tamara, thank you so much for joining us. Good morning. It's great to be here. Good morning. So so let's just get us start with how much can we see online sales accelerate before it becomes a logistics nightmare. Oh,

that's a really great question. We actually are seeing right now about a thirteen point one percent growth in online shopping versus last year. We're expecting that to end up at thirteen point eight percent because the last couple of weeks of of the month actually turned out to be higher growth rate months weeks because of the fact that people can ship later and later, Which brings me to your question, which is how much more can we ship?

And Uh, I think that is we're just lucky that we haven't had any big storms to slow down any of those shipping and delivery services. Well, I mean we've already heard about ups, for example, being worried about some kind of logistic interruption. I'm sure that they're all racing to make sure that their stations are up to speed. We know that UPS and FedEx both are considering having some kind of voluntary pick up at drug stores or local businesses to try to expedite some of the the deliveries.

I'm just wondering, is the infrastructure okay with this growth? At what point will it not be Well? At this point seems to be okay, but you do see the pure play online retailers investing in actual physical store look stations, and part of the reason why they be doing that is to make sure they do have a place to drop off when the event happens that online shopping overcomes

our logistic capacity and trucking just becomes overloaded. Uh. The other thing is going on right now is that the average order value that's how much is put into a cart, is a little bit down, but the amount of orders is up, and that means there are more and more boxes floating around. I was in Manhattan last year and it was a sea of boxes. I'm sure it's like that today. So it's so yes, this is going to be a challenge. But Amazon Whole Foods now, so anywhere

there's a whole Foods. If they want to ship to that location, they might be able to just have people going to pick up stuff. So is the the sales profile? Is it pretty much even across the retailers. Is it mostly Amazon dot Com that's sucking up all the gains here or were also seeing an increase in Walmart and even in same Nordstrom. Well, you know, in my data set, I need to give you more broad answer, so I

can tell you that the law are just retailers. The ones who have a massive shopping catalog where it's a one shop kind of deal are picking up much more than average. The place where small retailers are winning is in the mobile shopping category. They're actually with a more targeted catalog and more specific items that you go there to buy. It's much easier when you're under mobile phone. I don't know about you, but if I want to go find something like a silver bracelet, I don't want

to look at a thousand pages on my phone. So that so there's a place for small retailers. There's obviously the big places for the super large retailers. The middle guys are not doing so hot. What about apparel? Apparel is really interesting It's one of the only categories that continues to see discounts even after Christmas is over. Right now with discounts, we're still seeing some fairly good deals.

TVs are at about fifteen point three percent discount that's coming off of though on Black Friday, So things are starting to get more and more sensitive. But a perilous one of those areas that doesn't get more expensive. It actually gets cheaper as soon as you get into January. Are we seeing tech really still being the hot spot? And if so, is it all concentrated in one area is it pretty much across the board with basically kids across the world seeing what my children do, which is

just they want anything and all things tech. It's true, tech is one of those categories that just keeps growing and growing. In fact, it's almost hard to differentiate a toy from tech at this point. Is the new video game console the PlayStation for Pro with VR is that tech? Or is that a game or toy? What is that now? But yeah, the electronics category is seeing iPads and air pods and Amazon Fire TVs and echo devices flying off the shelves, and those discounts are pretty good right now

as well. Computers, for example, are at about seven percent down. Black Friday saw six discounts, So again all of that it's going to be under the Christmas tree and giving gifts to all those from every category from kids to two dads to moms and and and even grandparents are getting in on the tech tech buying. To Mary Gaffney, thank you so much for joining us to Mary Gaffney

is Senior director of Adobe Digital Insights. There's been a lot of talk about retailers that have slowly been dying for a number of years, and the question has been when are they going to finally kick the bucket? You know? And today I looked at a story at Bonton's Stories to lead a December fifteenth payment on some of its debt. Hasn't a fault yet. They still have a just grace period, but it's sort of eching closer to that sort of

tipping point. Bert Flickinger here with us, managing director at Strategic Resource Group UH Bonton is one of these stores that has been on death watch. Is this the final nil? It could be the final nil, Lisa for three reasons. One, it's primarily a rust belt retailer, and the better economy hasn't gotten to the regions where many of the retail stores are to Uh, the off price retailers from Burlington to t j X Max Marshalls have opened very aggressively

against them, So that's very problematic. And three, they've had a lot of leadership changes. So when when they when they lost a couple of good CEOs back to back. The vendors had been supportive of the Bontan stores, but the Herburger stores have been in recently in North Dakota, Minnesota, upper Midwestern region, Carson's in Chicago. Uh, inventories a little light, the circular pages, the ad pages a little light. Uh So getting the cash in for Christmas, Hanukah, New Year's

is going to be concerning to your important point. Well, I just have to wonder though, also whether we're reaching a point given the increasing pressure from Amazon dot Com, the fact that there have been so many years when these struggling retailers have failed to turn themselves around. Dr J. C. Penney, I'm talking Claire's, I'm talking uh years, I'm talking you know, you're your sort of a list of laggards. I'm just wondering, is next year going to be the one when we

actually start to see the fallout here. Next year is going to be the one. And then uh t TM or trailing twelve months is you You and your team of Bloomberg News have reported well as well as the Bloomberg terminal twenty retail chains of file for either bankruptcy or liquidation this year, so in the last twelve months. And but the key ones to your your key point are going to be in and nineteen and primarily eighteen

where the vendors are seeing price deflation. Ors Tom Keane always says, I want to know, ay, you are average unit retail and the vendors are seeing average unit retailer. The retailers are seeing average unit retail. And if you can't drive higher sales like the well capitalized competitors, the Bonton's, the Sears, the Claire's, all the key concerning change of referenced are are brilliant for tough times. What's the what's the catalyst here? Why now? Or why next year? Why now?

Is the toys r US bankruptcy really caught the vendor community by surprise. We've met with the vendor community over the summer. They've been fully supportive. UH two toys r US and you could see it in the Toys her US ads that ran last weekend and uh pre and during Black Friday it's only four pages, while Target is putting out a seventy two page full color toy book. And so it is your referencing Amazon shifting the sales,

Target Walmart shifting the sales. The under capitalized retailers aren't getting the extra money to advertise TV, radio, social, digital connective and the key circulars that go to the homes in the in the Sunday papers, and with that it hurts customer count. And Bontan and the others don't benefit from Star Wars setting box office records this weekend. They have the FAO Schwartz toys, not the Star Wars license toys.

So sad. I'm looking at Bonton bonds. I mean, they've been doing terribly for a long time, but they are trading even lower right now. I'm looking uh less thirty one cents on the dollar. I'm looking at. These are the ones that come to one that is not a very encouraging sign. Lowest in trading days. So I guess that there was one lower, but it's it's close to the lowest price on record. But it seems to be uh that there also is a shift in debt markets.

There's a key shift in debt markets. You're referencing that no one other than you and Bloomberg are reporting because you're not able to refinance now the way you would have been able to refinance even a quarter go. So it's beyond toys or US. It's like you said, it's Bonton, it's sears. Pet Smart bonds on the Bloomberg terminal have

traded way down. What happened there, It's it's a it's a combination really good reverse category killing by Walmart and b J's Wholesale Club and Albertson, Safeway, Windco, a number of others because pet and all the way to pet accessories is the fastest growing category and retail. But pet Smart hired a lot of consultants that didn't know what the devil they were doing, didn't know the detail of retail.

Bad releases, bad capex decisions, the new new stores are losing money, and uh, the the stores really aren't aren't built efficiently, so it should be best of times for

pet Smart, But it's dick and esque. It's worst of times to your point on the Bloomberg terminal with the bonds today on pet Smart, well, just to play devil's advocate, I mean, these companies, these stores is have managed to sort of limp along for a while, and perhaps they've closed stores enough, and perhaps they'll close more stores next year. What's not to say, you know, there is a place for brick and mortar. We're seeing Amazon move more into

brick and mortar. You know, they can drag along for a little long there. There they can drag along, and there clearly is a place for brick and mortar. But at the same time, we were going through the bontan Herberger stores in the north central states between the Dakotas and Minnesota, Wisconsin. We were also going through Chuck and Don's super Pet stores, a local entrepreneur one shop now

has dozens of stores. It's just pounding pet smart into the ground with a lot of natural and organic pet food. Fleet Farms now owned by kkr I and Menard's and a number of others are also doing really well with pet and pet smart. By going to the big house consulting firms lost a lot of the great leadership they had that built the company up during the twentieth century until about five six years ago. Uh. And and just real quick, what are you expecting with uh with this

year's holiday sales. I mean, I've heard from some people that it seems like it's pretty strong so far. Would you say that that's what you're hearing? Very strong? We also checked the post office. Is the FedEx deposts and the UPS deposts. I've never seen the shipping deposts so packed, with a record two million parcels to be shipped bet between million between between the big three post office UPS, FedEx, and Bloomberg terminals. Reporting FedEx near a fifty two week

high today. I think, thinking part that should should go higher because the volumes just astounding. But the retail stores with new leaders, good merchants are bouncing back, and Penny On the Bloomberg terminals actually going up in terms of the bonds that prefers and the the equity and sympathy that they'll get. Ship shoppers who see out of stocks at Bonton shift to Penny and seares the shoppers of already safe save Penny during during the last two years too.

Bert Flickinger, thank you so much. The only one I know is they're counting the boxes that are lined up that are ready to get shipped out for the holidays. Burt Flickinger, thank you as always, Managing director at Strategic Resource Group. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm on Twitter at pim Fox. I'm on

Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio