Welcome to the Bloomberg Markets Podcast.
I'm Paul Sweeney alongside my co host Matt Miller. Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news. Find the Bloomberg Markets Podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast.
We are going to pivot a little bit to go more macro.
Here.
We've got our very own Michael McKee, international economics and Policy correspondent. In our guest note for you, McKee, I'm learning so much. You're a White House correspondent. Oh yeah, I didn't know about that years ago. To me, you're just literally the fed person and you came out of the womb covering the fest.
I did politics for twenty years and it's spent nine years at the White House, and I got bored and they said.
Okay, you can word at the White House.
It's not as much fun as people think.
From twenty sixteen.
It's great to do the big stories of the day, but you can't go anywhere. You can't you can only talk to people on the phone, and when you travel with the White House you travel in a giant cavalcade like a circus. You fly to a city, you get on a bus, you go to a hotel meeting room, and then you get on the bus and go back again. There. You can do a lot more on other.
Beats well, and as you've proven on the FED beat, So talk to me about what you're looking at when it comes to next week. It's kind of foregone conclusion that we're going to see a hike. What is your question going to be when it comes to speaking in the FED meeting afterwards? What are you looking to hear from Powell?
Well, we're going to fly to Washington and get in a taxi and go to a meeting room and wait for j.
Powell.
Very far, the thing that everybody wants to know is what's next. There's a ninety five percent chance priced in the market that they're going to raise rates, and that's basically one hundred percent given the complexity of that calculation.
And so do they go another time? Given the data suggests they don't have to at the moment, but there are reasons to think the data might turn around, and so that's going to be kind of a question that overhangs everything in the FED meeting, do they go again, and if they then are going to go again, do they wait until November and do another skip in September.
Do you anticipate them saying anything in that FED meeting next week that will indicate what they're going to do next? Or is it going to be we're open the totality.
Of the data where Yeah, I think the latter, because they don't want to lock themselves into something, because we're.
Going to have a lot of data.
Between now and say November, if they wanted to sort of program a skip in there, you'll have a number of employment reports and CPI reports and PCE reports, So the whole character of the debate could change very easily.
Yeah, And we have a slew of economic data coming out next week as well. You know, if you were to pick kind of one data point that you're most focused on given following the FED, what would it be.
Well, Friday's pc report will tell us a couple of things. One is in their favorite inflation indicator, it's expected to drop the way CPI did, maybe not as much, but to show progress on inflation, but also spending, our consumers holding up. Are they still spending but at a lower rate, which is kind of what the Fed wants to see. They want to see demand come down a little bit. So those are going to be perhaps the most interesting things of the week that tell us something about what's
happening going forward. The GDP report will also give us some idea of how the economy is holding up, and it's according to all the now casting ahead of time, it's holding up much better than people thought, and that may change some minds about in terms of economists forecasts
for what's going to happen. And if it comes in strong, especially consumer spending, you could see an equity rally on that basis, although you always have to discount the fact that then the markets think, oh, they're going to raise rates more. It would show that people are still spending money.
Yeah, and that personal consumption piece of the GDP last time coming in quite you know, quite strong, holding up the overall number, and then revisions coming in higher as well.
I mean.
When you think about consumer spending, I mean the kind of notes we've been getting from earnings calls are like, hey, we're seeing a wall, we're hitting a wall, and yet the data seems to come in, you know, continually more positive than anticipating.
Yeah, it all depends on the categories, the sectors that people are spending money in, and how you define a wall. If you had been seeing sales grow out of four or five percent rate and then they drop down to two because the Fed's rate interest rates are higher, or
because the economy slows a little bit, that's okay. If a wall means zero, and then of course what we've got is a lot of retailers reporting and retail sales numbers that have come out that are are weak or weaker, but we don't know what's bending in services has been like. And you know, you don't get earning supports from the corner dry cleaner, So that's what we're going to be looking for.
How much is the FED looking at those earnings results?
They look at them, but the market isn't their primary concern. As long as the market as long as trades can happen, then their views stocks go up, stocks go down. So obviously earnings impact asset values, and asset values are all part of inflation as well, So it's something they keep an eye on, but it's not something that drives their decision making.
Yeah, we were just talking with Alexandra about you know, one of our top headlines today, US recession becomes a closer call. As economists rethink forecasts, has the FED rethought its take on whether we do need to see thoroughly indicators move negative at least a shallow recession. Are you getting any signals?
No, they've been pretty consistent. FED officials have all said they don't think we need to have a recession, and of course Chris Waller way out in front saying a year ago that we could get by without a recession and without seeing unemployment rise significantly. The FED staff has consistently at the last three meetings forecast recession at the
end of the year. It will be interesting to see when we get the minutes of the meeting next week three more weeks for that, whether the FED staff is still in the recession mode.
Yeah, okay, final question for you, McKee. We've got about thirty seconds. Jeopardy here, final jeopardy here. How many data points do you think the FED needs to see that look like last week with CPI and on farm payrolls to justify an end.
Probably one or two more, depending on how much the numbers move. Yeah, if you've got a big drop. Then maybe they start to feel good after one, but I think they want to see two at least to give them the idea that this is not going to turn around immediately.
Yeah.
Yeah, A lot to monitor for them, because it's very confusing. How much is going on out there with employment looking great GDP stains drawn, and then you've got on the other side of things, consumer spending starting to buckle a little bit when it comes to the earnings picture. Michael McKee, thank you so much as always.
You know, I love to see you got to go out and spend so that we can save the acaus.
Oh I'm spending. Don't worry, it's summer exactly, all right, guys, Thank you so much. Michael McKee. With us there.
You're listening to the teenth Kenser Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
We are going to cover some mildly breaking news from this morning. We got the trial date for Donald Trump's classified documents trial, that date being May twentieth of twenty twenty four, So we have a fantastic guest in the studio with us. If Paul were here, he'd say, you get extra credit. Wendy. This is Wendy Schiller. She is a professor at Brown University and can talk all things politics with us. So, Wendy, thanks for coming in this
May twentieth date. It feels to me like this is bad news for the Justice Department, who wanted December, and bad news for the Trump camp, who wanted it to be after the November election. So how are you digesting that date and is it good news for anyone?
Well, I'm not sure the judge split the difference, but if both parties are unhappy, that probably is a good thing in terms of how the decision was made. The primary season will be essentially settled by then. You know, the primary calendar is out now, with some states unsettled New Hampshire for the Democrats, for example. But nonetheless, you know, we'll know whether Trump is likely to be the nominee
by May of twenty twenty four. It will shape the campaign itself because if the nominee is decided, we think it's probably gonna be Biden and we think it may be Trump, then the American public's attention is on this trial, and so it will galvanize Trump supporters, but it might also continue to give independent voters who are absolutely crucial in twenty twenty four more pause about voting for the
Republican nominee from president. And so that's how do the Republicans get around that they're gonna want to mobilize their based for congressional elections and the presidential election. But how do you actually get those voters who have rejected Trump for three elections in a row now to.
Come back in the middle of a trial.
Yeah, how do the Republican challengers, the Ron DeSantis, the Nicki Haleys of the world, how do they play this? Considering that you know the primary season is going to be largely over.
Well, I think they have to worry about August twenty third, tom more, you know, the first debate. You know, if Trump shows up, then they get to attack him directly, and we've seen them to be reluctant to do that.
They're dancing around it.
But Trump showed in twenty sixteen that if you take your opponent's head on and you show no mercy, you will do better. With the Republican primary voting base, So they have to worry about how to get attention from now until December, and then if Trump is not on that debate stage, who's going to watch it? So I think their problem is momentum. And the other thing is, of course the January sixth trial shoe, When does that drop?
And how do we manage in terms of our justice system these two very important federal trials.
Yeah, certainly a race for all these trials moving forward, which one gets the most attention first? But I mean, you know you say that, you know, Trump showed the success of going out there being very fourth right, But criticizing Trump has been a negative for lots of politicians over the past several years. Is there any signs that that's starting to change.
Well, a very famous now long gone Clark Clifford political advisor, started out with Harry Truman said, you can't beat somebody with nobody. You have to actually present the alternatives, say this guy can't win, I can win. Don't you want to be a winner? Trump has sold himself on being a winner, and the problem is now he has tagged Ron DeSantis, I think his closest best funded challenger as a loser, even though I got re elected by massive
numbers in Florida and supposedly so popular there. So Trump is just winning the pr war exactly someone as you say, And if you're not Chris Christie, who just doesn't care and is going.
After him, you lose that war. Before you get on the stage, you have to show Republican voters you're willing to fight.
One of the things that keeps these voters loyal to Trump is that he has always been willing to fight theoretically for them, but also for himself. And that's a trait that seems to have really resonated and is sticking with them. So if you can't show that you're willing to do that on a debate stage with not that much to lose, I'm not sure how you ever pull like the nine percent of that Trump base they're going to need to win the primers.
Well, and you mentioned desand this as well. Why is he struggling so much at the start of his campaign?
You think Massin that is you know political observer question.
If we were talking six months ago, a year ago, it was that this guy is clearly at one.
Hundred and ten million dollars.
Yeah, he's a lovely family, really, you know, no scandals that we can think of, you know, young he would be the ready made candidate, and he's just stumbled and stumbled.
And the problem is that he.
Doesn't seem to be connecting with voters on the campaign trail, voted and primaries are retail politics. So if you don't connect over in a large arena, you don't connect on television or media, and then you don't connect in person, there's no reason to switch your allegiance.
And I think that's his big problem. And how you get over that, that's you know.
You need a lot of pr training. I'm not quite sure. It's whether the Republicans want to win. And there are enough Republicans, by the way, in the Republican primary base that if they all chose to go with somebody else, Donald Trump would not be the nominator.
Well, I guess the idea with the Santas and the appeal for the conservative voting base has been that he's essentially Trump, but he knows how to play the system. And when you look at you know, some of the plans that Trump has come out with recently to target migrants, bureaucrats as well as ramp up his China, his push
back towards some of the policies in China. I mean, a lot of the things specifically on the domestic side that he's suggesting not necessarily going to get past the courts or Congress, etc. Does anyone care on the Republican insider.
Yeah, I mean, you know, first of all, one thing we have to think about is Trump is the incumbent, right. I mean, he's not in office, he is not. He's former President Trump. But to the Republicans who voted for him and loyal to him, he's still the incumbent Kennedy incumbent president. So if you're not voting for him, you're sort of disloyal rights, like voting against Jimmy Carter or George Herbert or her Bush when they were challenging the primaries.
So that's a psychological hit, right, how do you get over that challenge? And the second thing is Trump focuses on things that matter economically to a wide birth of people, Tariffs China, the loss of jobs of the last twenty five years because of our free trade policies, for example. He continues to do that, whereas DeSantis chose really social not narrow but social issues in Florida. So how many people care about sort of what you're reading in a
textbook in Florida? How many people care about what you can do in Florida. Whereas Trump has the opportunity to say I was tough on China internationally, and I'm going after all the things that matter to you in Iowa, into Michigan, into Pennsylvania and Nevada. So this is the advantage Trump has and it's a big one over DeSantis right now. So that's I think the sort of the big gulf between the two of them. No matter what Desanta says about what he does internationally, Trump can say I did.
That right, right.
And it's interesting because I was covering the Desantas campaign for the mid terms down in Miami and went to one of his events, and he doesn't want to shake hands, like it's the most simple things that you have to do on the campaign trail as a candidate that he's not necessarily willing to engage in. And that feels like the thing that Trump is so good at when it comes to engaging with voters.
And Trump is also I mean, Mason, that's a really great point.
And the other thing that Trump has been good at as many people as he alienates.
He also appeals particularly in Florida.
And you can say more about this because you were there, is that there's a bunch of people who are now foreign warm naturalized citizens from a lot, lot of countries in Latin America who are used to strong leaders, who like that type of leadership and may not be as liberal on social policies as the Democrats are used to thinking about particular LATINX voters. So Trump did better in Florida amongst the whole people in Miami Dade, for example,
and Biden did worse. And that's a scary proposition for the Democrats nation. Why I particularly you think about Nevada and to give us some other states that they need to Arizona that they need to really hold. And there's where Trump also understands that people are not monolithic based on whatever their background is.
And DeSantis has nothing to offer.
These voters to say I'll be better or even in my persona that I'm going to remind you of the way it was when there was order instability. Sometimes I have trouble with this idea because if they left their home countries, there must have been something wrong with that, so we have to think about that. But this is a looming issue for the Democrats that I think they're not quite on top of right now.
Yeah, let's turn this to the Democratic side though, because we had the news that an FBI document with purportedly then according to the GOPF evidence of bribes paid by Ukrainian businessmen to President Joe Biden and his son Hunter, well, apparently it's not as clear as Republican lawmakers have portrayed it. Is this the end of this frenzy of headlines and news about this purported issue, these potential bribes.
You know, difficult relatives have been around in American politics for a long time for presidents. I mean, I'm old enough to remember Billy Carter and way before your time. But he caused Jimmy Carter a lot of problems. Hunter Biden in the end of the day may be prosecuted or indicted or alleged to other crimes, and he may, you know, have to, you know, do another plead deal.
We have no idea, but there's no evidence that we can see right now that ties any of this to Joe Biden, And so I think that's a big hill to climb.
For the Republican Party.
People may not love Joe Biden, but I don't think it's a inclination to think that he's super corrupt among independent voters and the Democrats. And so the independent voters are just key in all these swing states.
And if you can't.
Get them over to believe that, they can believe the sun went astray, but to have them believe this is going to take a lot. And if you focus everything on that, I think then the Democrats bring up January sixth over and over and over again, and that's direct allegation against president former President Trump.
Right, We're going to have to bring you back on to talk more about Biden and Biden nomics as well, because I was hoping to get your take on how that's playing with voters. Wendy, thank you so much for joining us today. This is Wendy Schiller. You're hearing a professor at Brown University political expert here. Really great to get your take, so we appreciate it.
You're listening to the Take cans Our Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
Turn back a little bit to the earnings a picture, because we did have Blackstone earnings coming out yesterday, we had Blackrock earnings about a week before, and we want to get the latest on this with Kathy Seaffert. She's the director of research at CFRA. She has it by rating on both of these names. Kathy, let's start with Blackstone. You know, the picture kind of mixed here.
What was your takeaway?
The picture was mixed, But I think we're starting to see signs, encouraging signs. I mean, granted, coming out of the pandemic, most of these companies in the asset management space are going to have some tough comps after a strong post pandemic recovery. But in the case of Blackstone, I mean, the shares are up over forty percent this year because they weakened late in twenty twenty two on news that the company was starting to put a ban
on redemptions in the real estate space. So, I mean, there's a lot of moving parts here, but I think bottom line, I think the stock is poised to outperform, largely because there's still a positive secular growth story here in the demand and for private credit, private equity assets,
assets that are not correlated to the broader market. I think the thing that we need to see, and it'll help a lot of other companies in this sector, is the capital markets activity to improve so that private equity firms can increase realizations, which would help their top line, and that'll also help the ibanks as well.
Do you think private credit is still the big winner for these asset managers?
There is still I also follow the insurance companies, so I sort of see the demand curve for this, and there is still a fair amount of demand for private credit. I think one of the trends to be looking for is kind of the democratization of these products, as private equity firms seek to build out a suite of products aimed at not just the ultra high net worth, but high net worth individual So I think that to a
degree will also help fuel some of the demand. Insurance companies are still increasing their allocation to private credits, so yeah, I do think that the demand curved, they're still fairly attractive.
Yeah.
One of the things overall. I mean, maybe this demand for private credit continues, but Blackstone generally finding it hard to raise new funds. They raise seventeen billion dollars in the second quarter. That was down seventy seven percent on a year on year basis. Maybe that wasn't unexpected, but like, why are they finding it so challenging to raise these funds right now?
Well, I mean this is also coming off, as I said, a really strong fundraising year after the pandemic, So there are tough comparables there, and I think, you know, I think the environment, given the velocity of interest rate changes, you know, brought on by the FED, I think it was difficult for a number of firms to make commitments. So my senses that things will pick up once the
interest rate environment, you know, settles down a little. I think it's also important to remember that if you look across the asset management space, private equity firms and the likes of black Raw continue to grow organically, i e. They continue to bring in new business. There are a lot of asset management firms that don't, and they're bleeding assets. So I think it's also important that, yes, while it's down from a really strong you know, couple of years previously.
It still represents organic growth, which is which is significant because once you get some market performance, you get dual catalysts of organic growth and the tailwind of asset appreciation.
Well, one of the headwinds is the slowdown in deal making, as you know Microsoft activision. Notwithstanding there, how big of a headwind is the challenging deal making market that we're currently in right now for these firms.
Well, I mean, not to make a plumbing analogy, but it's kind of like the pipeline is sort of backed up a little bit, and you know, if you look at sort of the fund inflows and outflows in private equity, at some point you need to start realizing some profits on these assets, particularly as you know, some of these funds have set you know, targeted expiration dates. It's difficult if you're not realizing gains on those assets. I mean, what we're seeing in a lot of the private equity
firms is they are deploying capital. And I think at some point, and John Gray talked about this on the Blackstone call that he's that you know, as the year progresses, the capital markets activity should pick up and that should help the pipeline which ultimately helps top the top line at private equity firms like Blackstone.
Canny talk to me a little bit about Blackrock.
It seems like flows into their long term products widely missed analyst expectations. I mean, is this the same flavor of issue that we were seeing at Blackstone to.
A degree, yes, I mean I still the fact that they continue to have organic growth that's sort of at the top of the heat for traditional asset managers. That's key.
The fact that.
They have a Laddin their technology business, that's key, although quite frankly, Silicon Valley Bank was reported to be in a Laddin client, so that was a little bit of a black eye. We didn't hear anything about that on the call. But again it's a function of some tough comparables coming out of the pandemic. I also see black Rock at a little bit of an inflection point. You know, they dominate in ETFs, they have a strong fixed income franchise.
Where they don't have a big presence is in alternatives, private credit things like that, and so I see them gradually building out that business, likely through acquisitions, although I don't see them making blockbuster deals. I see sort of a bunch of sort of smaller incremental deals. I do still like the franchise, though.
Yeah, I mean, one of the questions has been what happens when Larry Fink kind of steps back. We only have about a minute here. Give me your thoughts. How close are we to even getting a name of a successor?
You know, this is the game that we play with Berkshire Hathaway. I follow Berkshire Hathaway, and this is the game everyone likes to play. Bottom line, I think the bench at Blackrock is deep enough that investors do not need to worry about the future of black Rock after Larry Fink.
Very interesting, He's such a personality, you know, he's I mean that said. Blackrock is a big organization, and folks, you know, we look at Blackstone has been able to move on, have been able to establish a new top dog, even after our founder Steve Swartzman steps away, right.
Right, Yeah, It's really interesting to continue to monitor kind of these big name guys on Wall Street that continued to just have such a huge impact on the overall market and sentiment traders really hanging onto every word that they say, especially given just the volatility and confusing nature of the market that we are currently in simone.
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The outlook in bullish calls. We've got a great guest on here. We've got Gina Bulvin, the president of Bulvin Wealth Management, coming on and Gina had a bullish call in January about fifteen percent rise in the S and P five hundred, one of the only strategists that we were having having on at the time with a bullish call, so really excited to chat with her. Gina, thank you
so much for joining us on this Friday. As we were just talking about with Alex, typically a good first half of the year can lead to a good second half of the year as well. Given the bullish call that you had back in January, are you still bullish for the second half of the year.
So I am, first of all, thanks for having me back on, and you're right.
In January, I came on and I said the market was going to be fifteen percent by the end of the year, although I thought it would take all year to get there. We had thought the second half was going to drive most of the games, and it was really the first half, which goes to why I tell clients that you cannot time the market. We are bullish, however, and we do think that this is a strong, confirmed bull market. However, we think that this young bull market
is due for a pause. You know, we've come so far so fast, and even healthy bowl markets have corrections. An average correction might be twelve to thirteen percent. But we still think twelve months, eighteen months out from now, we think the market will be higher than where we are now.
Yeah, I mean describe to me how that pause happens. What does it look like. Which names are going to be in focus? Is it the tech names that have had this incredible rally and been leading this stock market higher?
Yeah, that's exactly right.
You know, we're expecting our technology to take a pause. And what's going on today at the four o'clock today, the NASDA one hundred is going to rebalance, and we're going to see those top five names microso off to Amazon, Apple, Alphabet and Video. Those waitings are going to be taking from forty three percent to the Nasdaq one hundred down
to thirty eight percent. So that's going to cause some volatility and there's a very high bar to clear because of those stocks and the whole tech tech sector has done so well. But the bet isn't out of the The bet isn't out of the way either.
That's right.
But this options expiration, like, how much of an impact does that have is because it seems sort of an idiosyncratic on some degree. Does that permanently change the mood in any of these big names?
Not not really, you know, you know, we're really looking at you know, where we're going to be more longer term, even twelve months for now, and once a bull market is confirmed, the average return is nineteen percent twelve months out, so we and the average bull market is five years. So we think that this market has legs and it's going to continue. But short short term that could be a pullback. And you know, next week is a big week with the Fed as well. He's expected to raise
rates by a quarter of a point. It'll be interesting to see his comments in how hawkish.
He is.
Well as he usually does, I feel like he leaves himself open to the totality of the data and gives himself a little bit of flexibility there. Having said that, though, I'm really interested in your recession call as it relates to market sentiment. Because the Dow posting nine day winning street twenty five times since nineteen fifty, only three of those streaks happened within a recession year. Where do you
see evidence of a recession? Given the technicals of the market and what we're seeing in the economy.
We actually think that the odds of a soft landing give increased, and the consumer has really you know, the consumer is seventy percent of the economy and the consumer is still spending.
I think earlier in the year, a lot of people.
Predicted that the consumer would you know, rein it in a little bit more because inflation was so high. Many strategists talk about fomo fear of missing out in the market, and I'm really focused on YOLO. The consumer has been underestimated because COVID. COVID has given them that YOLO you only live once mentality, and they are continuing to spend. A recession could be likely, but that doesn't necessarily mean the stock.
Market's going to go down once.
A recession is called or we know we're in a recession, the market usually rallies because the market's forward looking. If we do have a recession, we do think it'll be mild, but it's really going to be based on you know, the labor market as well, and that's something to keep an eye on.
Yeah, and we get data around that as well next week. Okay, So if this bull market is due for a pause, where do you hide out in equities right now?
Well, I don't know that you hide out.
You know, we were a little neutral on technology, we were overweighted. We went from overweight to neutral on tech. And we do like industrials right now, there's a great offshoring trend that looks very attractive. We also like medical devices, and you know, you might want to start looking at small caps and mid cap stocks. I think it's a little early, but they haven't done they haven't done that much. And that's where we're at right now.
When you think about small caps and mid caps, what are you looking at to determine which kind of secondary plays are going to be the most successful and effective.
Well, small cap stocks are very economically sensitive, and as we head out of a recession, they generally tend to lead, So that's something that you would want to keep an eye on.
And in the moment that we're in right now too, I'm curious, do you think that we're about to enter kind of an era of dividend plays? Is that going to be the move moving forward?
Well, that goes more to value stocks, and I do think that growth stocks will continue to do well, and I would tell investors to have a Barbelle approach, to have some growth stocks and some value stocks, some dividend plays.
But also keep in mind that you know, as rates are so high interest rates that this is going to be good for fixed income investors, and now you're going to be able to get a higher yield off money market accounts and bonds could do well, so you could also get how you yields through fixed income with less of a risk than investing in stocks.
Let's turn back to the consumer for a moment, because I've had my eye on a bunch of consumer oriented earnings and we've been talking about how that is such an important piece of the economy. Take me through a we have this potential for just some weakness that we've seen trading down, maybe not buying as much from some
of the you know, consumer packaged goods side. At the same time, we've got travel where Delta and the like are still seeing this enormous demand, especially for international travel. Where is the consumer now. Is this a bifurcated sort of high high income low income situation?
Absolutely, And but you know, and that had set that segues right into inflation. Right the lower end consumer is hit more with inflation, they feel it more.
But we expect and one.
Of the reasons why we continue to be bullish is we expect inflation to be at a three handle by the end of the year and that is really going to help the lower end consumer and that's going to help them spend more. You know, we are starting to see inflation come down. The reason we think it's going to be down by the end of the year is we had a blowout housing number. We are multifamily houses building permits for multi family housings is booming. We haven't
seen this type of activity in decades. When this supply comes to the market at the end of the year, that's going to put a downward pressure on rents and that's the majority of CPI and that's why consumers are going to continue to spend. We're going to see rents coming down, inflation coming down, and they're going to have more money in their wallets. It's also because the job market has been so resilient, right and so strong, and when consumers have jobs, they will continue to spend.
Yeah, we continue to see that strength in both the labor market and with great wages as well. Gina, thank you so much for joining us. That was Gina Bolvin with Bolven Wealth Management.
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Let's first, let's change gears. Get to Evangelos Momios. He's an equity analyst with Bloomberg Intelligence, because we have some big news from the credit card companies today, AMEX American Express revenue missing estimates, card spending growth slowing. Evangelists, what exactly is happening here? Is this all just weakness around the consumer, or is this something more fundamental to American expressesness.
Yes, like you know, the Misston revenue, but revenue expectations where somewhat inflated.
The revenue still grew quarter over quarter, so the US.
Consumer conceits, continues to spend and continues to use his or her credit cards. Delinquencies across the ward, not only for American Express but also for those that cater to lower credit profile customers like Capital One, Discover and so forth.
Delinquency rates have been growing up.
They have been normalizing from very good levels post pandemic. But the big stories are that the growth is still robot albeit a little lower than last year. The linquencies start going up, but in a you know, control sort of fashion, had charge of those are credit losses are also following the same path as the liquids with the delay. So overall, probably more about inflated expectations and less about any huge negative surprise from the credit card.
Lenders to this quarter.
Well, talk to me about those delinquencies specifically, where are we seeing the most pain for consumers there?
Yeah, So the interesting point is that the linquincy rate in the second quarter, as I said, went up, they went up less than they did in the first quarter or what that word. We don't have the exact breakdown by five of stratification, but what they do tell us is that what the companies tell us is that people on the lower end of the five le tiers are being more delinquent in their payments than those at the higher.
Level of the five poor tier.
And that's also evident when one compares the numbers between those that focus again on higher risk profile customers like Synchrony Financial, those that focus on prime super prime customers like American Express.
How long do the executives of American Express and others, how long do they see some of this weakness, especially amongst the lower end consumers. How do they see that lasting.
It's very difficult to predict, but what we can say if we look at longer periods is that generally for delinquencies to continue to increase, you will have to have some deterioration in the employment situation, and unemployment rate remains
very low. So most of those executives on their conference goals, they will tell you that we cannot predict the market, that the economy, that we have to be ready, so they're basically enough reserves ahead of that potential development, but so far the consumer is holding up better than expected, although as I said, it's a situation.
That is normalizing from prior to years.
Well, even though the consumer is holding up better than expected, we're still I mean, it's just it's such a weird vibe right now out there because there's so much good news and bad news all the time, and one of the pieces of bad news is obviously in the commercial real estate space. To what extent do you see in your research that investors are kind of scrutinizing Capital One, other banks and credit companies due to consumer commercial real estate exposure.
Yeah, like you insinuated in your question, this is more of a bad issue and less of a credit card issue. Of the company's focused in credit card lending. Capital One is one that has some commercial real estate exposure, but
it is insignificant compared to that of other banks. To the explain that the commercial real estate pressure reflects some deterioration in economic conditions that could affect the employment situation, then it will be an issue for credit cards, but nobody is making that connection yet, I.
Mean, differentiate between some of these credit card companies. For me, I believe you right that American Express is better position for growth from here on. Is that because of the I guess income level of their consumers or some other rush.
Now, Yeah, so there are two characters reistic the characteristics the one that you just mentioned.
They focus more on super prime consumers. But the other characteristic is that, unlike the other credit card.
Lenders, their revenue comes mostly from purchase activity, unless from interest earned on outstanding balances. So in that respect, they are not that directly impacted by interest state levels. But they're more impacted by how often we use our credit cards and for how large transactions. So when you see people travel more, when you see airfare going up, hotel price is going up, all that is good for American Express, not as good or equally good for someone like Capital or Discovered.
So, just to continue this competition between the names that we're talking about here, is AMEX the best position of those names to benefit from increased consumer spending? What's the kind of hierarchy?
Yeah, in my opinion, although we don't make.
Recommendations on the stocks themselves at BI, what we can say is that the fact that American Express is more focused on prime super prime consumers, it's more sensitive to spending than outstanding balances, they have an international presence. All those characteristics will make it hold up better if there is a recession, a consumer recession, which is the fear right now. So as a result, I think their best position compared to others, although I would reiterate it's not
like others are falling off the cliff. It's just that things are not as great as they were for them a year or two ago. And like you said, it's a very strange environment.
Total about the health of the consumer here. But are there other things, you know, compliance regulation that stand to put these credit card companies to the test.
Yeah, there is an outstanding issue with a limit on late payment fees that is under consideration by regulators and the industry. If it comes into effect, it's going to be sometime next year. We don't know the final form, but it's an issue that would impact disproportionately those companies that sponsor co branded cards, meaning the kind of card you will see from your retailer without knowing exactly who issued it. So those are in order of importance, Synchrony
Financial brand and to a lesser extent, Capital one. So it's something that we keep an eye on that it's not final life yet.
I always wonder exactly who is, you know, behind my credit card whenever I get one of those retailer cards, because it's always such a question mark for me.
Yeah, yeah, and it's always it's I feel like it's a question mark for a lot of consumers. And this is why this space is so interesting to watch as an indicator of consumer health, as you know better than anyone, Simone, so really interesting here. I think we got to leave it there, but thank you so much for joining us in, Simone. I can't wait to continue to hear your take on kind of the consumer health when it comes to some of these names and other ones.
And it's so interesting when you're looking at kind of consumer credit because we are seeing some of these signals about you know, auto loan credit to tier rating, consumer loan credit to terior rating and all of this, of course with interest remains remaining high. So we're gonna have to see exactly how that factors in to the health of the consumer, particularly as we enter week for consumer earnings.
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Netflix and Tesla earnings a bit disappointing. We saw the Nasdaq dropping by the most in five months after those earnings, and this gives us a really good excuse to kind of dig into the EV space after those Tesla earnings. And we've got a great guest joining us to give us a look at not just the EV space, but specifically EV charging, which is a really interesting space to be looking at. We've got Josh Aviv on the line. He is the founder and CEO of Spark Charge. Josh,
great to speak with you. Thanks for joining us here on this Friday. Before we get into kind of the overall charging space, when it comes to EV's, talk to me just about spark Charge specifically. What do you do, what do you provide?
Absolutely so, at spark Charge, we charge electric vehicles in a mobile fashion, so that means we actually deliver and bring the range to the electric vehicle the same way that you would order a pizza on your phone to get delivered to your front door. We bring the charging station to your electric vehicle, whether you be at home, at work, out on the go. We make charging simple, convenient, and easy.
This is one part of your business is to consumers, to people get stuck, and then also to rental companies. I understand, give me a breakdown. Where's most of the revenue come from. I would assume rentals.
Right, absolutely so. Earlier this year we launched our fleet charging business, where we actually now go out and service fleet customers. So you're talking about companies that have, you know, anywhere from as low as five all the way up to close to one thousand vehicles in their fleet, electric vehicles in their fleet. We go out and we service them. We offer a turn key service where basically we can show up and aren't charging every vehicle every single day.
They no longer have to worry about trenching, digging, tunneling, cabling, submitting RFPs where they install the charging stations. We show up with our mobile charging stations. We plug into every single vehicle, We charge every single vehicle, and we make it so that they can grow and scale their fleets almost infinitely, so.
As you know, one of the potential big boons for a name like Tesla is offering its own charging network to other companies like Ford Evs, for example. I wonder does the kind of democratization of Tesla's charging networks is that good news for you guys or bad news?
It's really is good news. I mean when you think about it, you know, the market from its inception was you know, oh, we're gonna go with Chatamo for you know, DC fast charging. Then it moved to CCS as the dominant charging provider, dominant charging plug. Now it's you know, North American Charging Standard is slowly starting to look like it's going to become the dominant plug that you know, e V OEMs will use to charge their vehicles. I think that's really good. I think we need one standard.
I think, you know, trying to juggle three balls in the air and figure out, well, does this car take Chatamo, this one takes CCS, this one take NACS. I think that's very difficult for not only OEMs but charging station manufacturers like ourselves to kind of justify and keep up with. I think if the industry moves with NACS, it's great for everyone. It's a great standard. It's very much develop and tested, so I think it'll be great for the entire industry.
Yeah, and it seems like some of the car makers are getting on board with that certainly. I mean the question I have about mobile charging, what's the outlook, because we do expect to see an infrastructure around these mobile charging stations, grounded mobile charging stations grow substantially over the next couple of years. Can mobile charging really play into that? That's you know, there's ultimately hopefully going to be more infrastructure.
Absolutely, So when you think about it, mobile charging will always be able to scale faster than infrastructure. Right now, if we decided, you know, spark charging, Bloomberg said, hey, we want to put a charging station in the ground, a DC fast charging station in the ground, it's going to take anywhere from eighteen months on the low end to as high as what we're hearing is four to five years on the high end. And that means that if you really want to have infrastructure at scale, the
only real way to do that is through mobile. So mobile will always be able to scale faster, charge more cars, charge more cars in geographical areas that a lot of fixed infrastructure just can't reach. And so as the EV industry continues to grow, it will inevitably have to rely
on mobile charging to do so. The fixed infrastructure will never be able to keep up with the amount of cars that are being sold on a daily basis, and so it's spark charge look at that and we say, okay, well, we're definitely going to install charging stations, but there's going to be applications where installing one or two or five charging stations cannot meet the demand of that area, and mobile charging is the only option that can come in there take over charge those cars on a daily basis
offer a seamless experience that those just fixed charging stations cannot. And we're seeing that right now. We're on track. Over the past six months or basically year to date, we've onboarded more fleets more EV companies than a lot of fixed charging stations have over their five to ten year lifespan in the business. So the industry is definitely moving towards mobile and definitely loving the fact that mobile is seamless and easy, easy to use.
Yeah, all right, so let's say I rent any EV I'm on vacation, I'm taking a road trip for some reason, and I end up in a little bit of a middle of nowhere situation. I'm not near a charger. Do I call a Spark charge person to get access to you? You're on the road? Mobile charging? Is that something that's in the cards for you guys, some like an on demand service to that degree.
Absolutely, In fact, it's already in the works. If you rent a car through Hurts, if you run out, or if you feel as though you're even getting low, they will actually be able to dispatch one of our mobile charging units to you so that we can charge your car if you're sitting outside of the hotel, if you're on the side of the road. So we're already seeing applications like that being put into effect. In fact, that program has been up and running, I believe for the
past couple of months. Yeah, and it's gotten.
But we still have the issue of impatience, like I am never gonna sit on the side of the road for two hours or more while my car is charge even if you had to, I would just I would. I would not want to rent any evy because of that. And maybe that's me being a bad consumer, but that's just the truth. How are you hedging against that issue when it comes to consumer behavior in our final thirty seconds here.
Absolutely, so the good news is that you wouldn't have to wait for those two hours. In fact, in most areas, especially both metro cities and areas that we service, our SLA is actually close to sixty to seventy five minutes. And then we use DC fast chargers, so when we
show up, we're not trickle charging your car. We're DC fast charging your car at a rate of up to one hundred and twenty five sometimes one hundred and fifty kW, so we can actually get you off the side of the road once we show up in under ten minutes, and you're back to enjoying your day. So no two hour wait, no being stuck on the side of the road. We're in, We're out. We're getting you back to enjoying your electric vehicle.
Maddie, could you stand that I still thinking out?
I don't know, I don't know, but it's a really a great look at the space. Josh, Thank you so much. Josh Aviv there with spark Charge.
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller I'm on Twitter at Matt Miller nineteen.
And I'm Paul Sweeney.
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