Surveillance: Fed Messaging With Porcelli

dot Com, and of course on the Bloomberg Terminal. Just got the right guests right now, with the right questions, we could really spend a good amount of time on wage dynamics and labor dynamics in America with Thomas Porcelli, RBC Capital Markets Chief US Economists, and he joins us on radio and television this morning. Tom Porcelli, I'm gonna cut to the chase of the asymmetry of any labor report, and it's one part about well people maybe not getting

job growth as much or losing jobs faster. There's two dynamics always in a labor re porn. Is this economy about the inability to form jobs? No? I think yes, there's a that is a challenge. I think we know that we can see that in the job openings data. I mean, you know, we have a staggering amount of job openings. Um you know, sort of roughly equal to the number of of unemployed, and we just can't find those matches. So yeah, I do. I think that there's

some element of of truth to that. Look, I know, people are you know, my my inbox is already filling up with Hey, you know, what does this mean for the recovery and etcetera. It's one it's it's it's one report that missed the mark. Um, you know, and it's a report that hasn't done a really good job of telling us what it's going to happen with private NFP, which we'll get on Friday. I mean, yeah, it did a great job last month. Um, you know, the numbers

were nearly on top of one another. But you know, other than that, the misses have been staggering, right. I mean it's missed by between four and five undred thousands. So I wouldn't take much much away from this report is related to this coming Friday. I mean, we're still looking for seven hundred thousand private jobs. That feels like a pretty good estimate. In fact, if anything, there's a really favorable seasonal factor in in play for this coming month,

So I think we feel comfortable about this. I think part of the challenge though, is you know, fed govinor Waller put put I think really put a sort of a bulls eye on on this report, you know, in his speech the other day. Um, So I think, you know, maybe expectations are going to be very elevated with with regard to this report, but I think it'll probably want coming out and at a minimum meeting expectations. And Tom Purcella.

A single sense this morning for me was Paul Donovan, always brilliant over at UBS and Paul Donovan said, Wait, are we counting jobs correctly in the modern economy? Are we counting digital jobs, TikTok jobs and all the rest of it? Do you actually believe the data? Now? Are we in some new paradigm? Yeah, I think that it's a I think it's a thing for all of us to sort of really dig into. I don't think there's

any question about that. Um. But I think the problem is this, Um, you know, if if we are in the midst of a shifting paradigm, uh, you know, the reality is people are going to be very slow to sort of wake up to the reality of the new paradigm, which means that you're left with having to deal with you know, sort of all of the data that we have been using prior, um, you know, as it relates

to FED policy. You know, I would love for them to sort of drill in and and sort of understand, you know, different labor dynamics beyond us, you know, the payroll report and what some alternative data are telling us. But that's not something that's gonna happen on the fly, particularly not right now. So for the FED as relates to the sort of the fate of policy, it's going

to be entirely about what happens with these payroll reports. Um, you know, even if you know sort of behind the scenes, uh, there are actually uh you know, the the labor backdrop is showing more strength. That's not gonna equate for for this FED with regard to what their decision to taper or the decision of hyprates now the gate they FED speak Vice Chair Clarida A. Tenniston, what kind of a

provice she you're looking for? Yeah, I look, you know, we we we like uh Clarida a lot in terms of you know, sort of being a guide post for what the conversation that's happening with within the FED. I mean, I think again, I think while I really gave us

a good sense for that the other day. Um. And and in fairness, you know, to be totally fair to all of these FED officials, I mean they all speak with such regularity now, I think we get a really good sense for what's happening behind the scenes as relates to these conversations. So you know, Clarida has has done I think the dutiful thing um in his time as vice chair, which is to say, you know, more or less representing what the chair um uh is saying and thinking. UM.

So you know, does he break new ground here today? Frankly, I would love for him to break new ground. I would love for him to be more aligned with what Whilla was saying earlier in the week, because I think that is I think directionally, I think that is where we're going. I think Pale is probably gonna be the one that's late to the party on that. And in fairness, and I've said this to you all before, I think he probably has to be a little bit late to

to to the party. I don't I don't think anyone wants him, you know, basing what is going to happen on policy, on what his forecast is I think that they want him to sort of, you know, just hit it down the middle, um, as as much as he can every time. But again, as I think it relates to sort of the changing and the weaving dynamics of

the economy. UM, I think that the other officials, including Clarida, think that they're usually better at giving us a sort of a sense for what they're thinking about these changing and weaving dynamics. So I'm looking forward to his speech. But it again, UM, I have to say, like, my my new favorite FED official is Governor Waller. Just to move things along, I'm not surprised, Tom. Some people might say that Chairman Pounds merely reflecting what the vice chair

is thinking. But we'll leave that for another day. Let's talk about the sacencing you're looking for. We've had two outlacker calls on this program in the last couple of days. We've had one who thinks we can get a June right hike June of next year, and another from the ticks. Is you said no rate heights through the whole of this presidential administration, Tom, what are you looking for the kind of sequencing your base case at the moment. Yeah,

So our our base cases that they tee up tapering. Uh, perhaps as early as the November meeting. Again, I would love for September to be right, I don't think I think that's way too early. So we think that it could happen as early as November. But again I have to be frank, where's November December. That's a that's a distinction without a difference in my humble opinion. Um. But again, so it's November December they teed up. They start either

in sort of December or in January. Uh, and then they tied up by the middle of the year, and then shortly thereafter they're raising rate. So we have one hight built in for next year. But again, Jonathan, I think you're asking the right question. I mean, let's let's let's all be clear on this. I think it's a

really important point. If you think about this, this new flexible average inflation targeting framework, you can easily make the case that maybe fate has the f a I T has been has been achieved already, and and and Loretta Mester has has effectively said that idea. We agree with her on that, and then think about next year, think about the FETs forecast for the unemployment rate next year's three point eight percent. Um. I know people think that

I'm like this big, you know, economic bull out there. Um, okay, but the bull is then aligned with the FED because that's pretty much my forecast, I mean, at three point five percent on the unemployment rate by the end of next year. Yet, are you gonna tell me that three and a half percent, which is three point percent using FENS number, which is below their long ERWN estimate of funds and fate having been achieved, equates to no hikes

in twenty two. I mean that that that is inconsistent. Um, And so I think people are looking for catalyst to get the market to move. I'll give you a catalyst that I think could be very interesting. Um. I don't think it's econ data. I don't think I think even if Perils blows it that, I don't think that's what's gonna do it. I think the September Peril I think the September FMC meeting I think could be very interesting.

As I think everyone you shase there's seven FEDE officials looking for a hiking twenty two, it only takes two more officials moving off to zero lower bound to get that medium to move. I wouldn't be the least bit surprised if something like that happens. In fact, I would say that that's the area that's right for continued movement within the within the step in general. That's such a good point, such a good final point, Tompo Selli of

OURBC Tom great catch ups as always. Tobias Lefkovitch joins US now from City, the chief US equity strategist, and Tobias is looking for four thousand year end on the SMP five hundred all time highs. Did a close yesterday to Bias. Walk me through the work that you and a team Robert Buckland over in Europe is doing with his team over at City and why you're just a little bit more cautious on US equities together. Sure, so let's start with the you know, the discussion you guys

are having before about the modern market. Monules have had enormous impact on how you think about cyclicles versus growth versus you know, defenses versus growth versus value. And this has been what's really changed in the past three months as you've seen the bond you'll do it now again.

There's been a lot of discussion around what the impact is, source and etcetera of the FED has been but keep in mind central banks globally have been keeping sup frustrates since really two thousand and eight, and what that suggests that they don't have confidence in kind of long term, sustainable, durable growth. So as a result, risk premiums are higher, which something people don't talk about when they talk about

negative fields for example, UM. And it is important evaluation markets in an environment today, and I think it's like

a really critical thing to understand. In two thousand eight, in our last recession, was comprised of in terms of market cap, weight was comprised of deep cyclical industrial materials, energy, and was secular growth including I T including media entertainment, UM including digital retailing if you don't think of it that way, and healthcare, which is growing as simply because of demographics today that numbers like fifty five versus fifteen in favor of growth. So the US is a heavy

growth market. And if you believe bond yields are going to edge higher, then growth socks are going to take a little bit on the chin. And that's why you'd probably want to be in more value orging terriers, which is what Robbed Bupplin, our global chief clistrategist, was suggesting with his note. One last point to Bosmi, who is our great strategist, looking at that two percent number, really pointed out very significantly that because tax collections really stepped

up meaningfully in June. Remember we distorted the timeframe for collecting it. Instead of April fifteen, who was June sixteenth. The treasury was flush with cash going into July and only issued billion dollars worth of bonds eighty billion loans just picked up by the Fed. So you left fourteen billion of new issues for the rest of the world. That's going to have impact on that one yield, and it's another one of those distortions that are sitting in

market on a nominal tenure yield. You guys are looking for that move back towards two. So Tobias for an international story, you understand from Robert Buckland Japan UK deep value, I've got all that from a US perspective to bus can you just want me through the sector preference right now for you and the team. So we're a little bit mixed on that. We We do like capital goods, We do like consumer discretionary, but very specifically within retailing

consumer services. We're not chasing consumer durables in the power, We're not chasing autos. I think those are probably not interesting to us. And then and then we like financials. We like banks, we like insurance, more neutral underspie financials today UM, and those are excuse me, those are more value cyclical oriented groups. So from that perspective, UM, we are there. We're not totally out of growth. We're not saying run like hell because tach hardware equipment. We're still

in overweight on UM. We do have a down grade watch there, but we're still in overweight because we think it's part of the capital spending cycle. These glide pests to bias to the city group outcome. Can they be affected with stability or do you see significant volatility where along the path we enjoy VIX thirty or even worser? Is that a word worser? UM, let's see UM, but let's let's kind of go through this process. I'm not actually worried if the VIX is at thirty, and I'm

not actually worried of the vixes of fifteen. Where I get very worried is between twenty and thirty, because that tends to be the problem area for the market historically. Um you have about if the vix was at fifteen or thirty five, you both in both instances, you have about an eighty eight percent probability that the markets will be higher twelve months later. So it's not those edges, it's it's crossing over in that range that you need to be a little bit more worried. And I do

think you have some potential for volatility. There are four catalysts that are disconcerting, if you like, for us that possibly could all coalesce around September. Tapering, inflation being a little bit more persistent, Profit margin pressures because costs go up because the supply change challenges for example, and you can't is easily make it up on pricing. And then

lastly is something nobody's talking about, which is taxation. We're going to see corporate taxes going up and it's going to pack estimates for the street, and that has been the real driver for the market has been really strong earnings. Problem is the guidance isn't that good anymore. Revision transferred historic peaks and it is unlikely to be you know, continuing to rise at this pace, and that will worry some people, especially when centiment is so bullish. Haarp panicy

for he's been in for it for a while. Um. The complacency out there when we talk to investors, you know, on a qualitative basis, is very palpable. There's a lot of potential headwinds, and yet it doesn't seem to be coming together in some sort of big swoon as a lot of fun managers would like to see so they

can go ahead and buy that dip. And I do wonder whether this just means we've brought forward so many of the returns and that going forward over the next five to ten years, returns on the headline SMP five hundred are going to be pretty muted. What's your expectation there? It's a really good questionally. So one of these we've been showing people is that if you look at the household sectors, equity exposure as a percent of their financial assets is around or so right now. That's a fifty

year high. And if you go back in time and you look at heavy exposure, you've actually done exactly what you just suggested is brought forward a lot of the return. If you look at that today, it's talking about kind of a zero percent return compounded annually over the next ten years. And that shouldn't shock people when they hear that, because remember when you hit your highs and two thousand, you didn't get back to that level until two thousand seven.

So we do have periods, and I'm relatively certain about this that over the next ten years we will have a recession. And when that happens, earnings often dropped and so to market. So to say, over the next ten years you might not get any returning equities on the s. Isn't that crazy even though it sounds crazy, um, but it means that you probably have to be much more of an active investor than passive. Vehicles may become less interesting to investors over the next decade. We had a

recession over the last decade. It lasted a couple of weeks. It's unbelievable of us going to catch up sets of us Leftovich City chief US sequity strategist right now our Jersey where this is Bloomberg Intelligence of the bun where I could Eira, we really wanted to do a one hour interview where you will compress it right down. What

matters to you in this new low yield environment. Well, well, really, realistically, the only thing that matters is the outlook for COVID and the effect that it's going to have on the economy.

And I think that that's really what's been driving the market for the last couple of months, the delta variant, how pervasive it's been in other parts of the world, and then now it's feeding into uh, the US psyche a little bit here um fears about lockdowns and and that's really what's going on with the with the bond market right now. You know, I'm sympathetic to that Morgan Stanley call that you mentioned about yields being hired by year end, and I do hope that that's going to

be the case. But this is all about fear right now, and the bond market is benefiting from flight to quality. That was a city group called John Why don't you pick it up and frame it around that the magnitude of that city group called Stanley looking for move back towards six days? Are you looking for a move back to two? I do want to the degree to which there is some asymmetric risk around where real yields are

right now negative one twent one this morning, Gyra. Do you speak to anyone that thinks they can go much lower than this? Yeah, so so everyone that I talked to him on the institutional side doesn't like it. But I think that there's two big factors that continue to push real yields lower and lower. One of those is you look at flows into tipsy tfs and mutual funds, and they're just insatiable. There's a lot of people who

want inflation protection. They're worried that inflation is going to be higher, maybe there's going to be more supply chain disruptions, and you're going to see CPI prints that are a bit higher than what we've had in the recent paths, or at least that they will persist longer even if they don't go much higher from here um. And the second is the Federal Reserve still is buying a lot of the tips market. Remember they're there. They only own

seven percent of the tips market in February. Now they own almost so you know, they they've significantly increased their ownership. So liquidity in that market wasn't like it was a nominal treasuries in the first place. And then you add to that these flows into from retail investors into e t f s and and UH and mutual funds, and suddenly you have a recipe for lower and lower real yields.

So you know, I think that there's a big risk to really yields where if really yields do back up fifty seventy basis points, there's going to be a lot of negatives on people's statements and maybe they'll rethink those investments, which could push real yields even higher. But we're not there yet because, like I mentioned, fear is still gripping

these marks worried about the opposite. I think this is so important, together with the fact that the Federal Reserve ohone is almost a third of this market now, people buying tips with conviction or as insurance, because if you don't own insurance for inflation in the year ahead, haven't you got a degree of career risk? Isn't that in the mix of thing now for pms? I think here's part of part of the issue is that you there's

other ways to take inflation risk. That the problem I have with owning tips outright, and most of these mutual funds take a lot of interest rate exposure and a lot of interest rate risk where let's say that inflation does go up to five or six percent and stays there persistently, you're not likely to see, really ye'll stay where they are. Those are likely to rise up from negative and twenty basis points to maybe negative fifty or zero, and if that happens, you wind up actually losing three

or four percent on a mark to market basis. So it really depends on who you are. Like tips are a great investment and a great inflation hedge if you hold the individual bonds and you hold them to maturity. But owning mutual funds and other other rappers like that mean that you're you're always taking interest rate risk that maybe you don't really want to be taking. Um. So, so I really worry that there's a lot of people buying these products that don't really understand the underlying risks

that that are inherent in that market. I or, just to put a bowl of this idea of ownership of the TIPS market by the Federal Reserve, has a TIPS market ever been more divorced from giving a true indication of inflation expectation that it is right now? Well, that's a good question, because you know, at two point three percent, which is where ten year tips or pricing inflation at the moment, it's not obvious that that that's going to

be wrong. So I think that the inflation component may be actually um, suggesting that that the market is going to be right and you're gonna have two wish plus or minus twenty five basis points of inflation um. The The question is, is really yields being so low keeping

nominal yields lower than they should be. You know, you look at a lot of our fair value models based on where fundamentals are, and we are twenty five to forty five basis points too low on on actual yield, So closer to one fifty seems to be a more fair value. But I think it's these flight to quality and some of these technical aspects of the of the both the tips market and the nominal market that's keeping yields as low as they are now, and those can

take a long time to go away. So this isn't something that necessarily gonna snap back in the next two or three weeks. Over the course of three or four months, potentially we can get back into that range which is much closer to our estimation. Of fair value for the market. All right, right to have you on Tommy Conversation of flint bag in saligence. Thank you sir. Right now, David Weston knows Lyric is spelled with a queue. That's an electronic vehicle that General Motors will give us here in

a month or so. And David Weston the three hundred mile range that gets you halfway to Detroit. I've driven that drive, Mary times. Thanks so much time and leave it to you to really know how Lyric has spelled. Good for you. You You know who's gonna be happy about that, Mary Barr. She is the chair and and CEO of General Motives and she joins us now live from her headquarters in Detroit. Mary, thank you so much for being

back with us. I know you're gonna say, and you're gonna be right that the second quarter is just one piece of a longer arc for GM. But to take that one piece, you did very well on revenues, better than people expected. You set a new record on ibada. You fell short of what people expected on earnest per share. How much of that was because of the one billion dollars in costs on a recall? Well, certainly that's going to have an impact. But again, we're always going to

do the right thing for our customers. We prioritize their safety, and so it was the right thing to do. Uh. You know, we've learned from it. We know it's a very unique, uh situation when two manufacturing defects that are quite rare happening in the same cell that that causes the potential for a fire. So we're going to address

it and we'll move forward. I think it's also important to note when we look at our Ultiam platform, that is a whole new battery system and that's what underpins the Hummer EV that will be out yet this year the break break drop products and then of course next year with the lyric. Well, that's what I was going to ask about, how do you make sure that this

doesn't happen. You're making a substantial, substantial investment in electric vehicles, you've actually advanced the time that you're gonna invest some of that money dollars as I recall, how do you make sure you don't have this problem again? Well, of course, any time you know we have an issue, we have an outstanding engineering team and they look to make sure we never repeat that issue, But I also think it's important to note that as we go forward, we've announced

four battery cell plants. Those will be joint ventures. GM brings our manufacturing expertise in our quality processes, and I think that should give people great assurance as well. There's another head wind that you've been facing in that semiconductors,

as all the auto industry has been facing. Give us enough to how many fewer particularly trucks are you gonna make in the third quarter than you otherwise would because of the shortage of semiconductors, Well, I would say, you know, we we UH increased our guidance um for the full year, So I think that shows our confidence that we're going to continue to perform on top of an exceptionally strong H one. But we're gonna world be very fluid right now.

We work UH and it's on a daily for the team that's working on it, but weekly from a leadership team, we're looking and making sure we understand the semiconductor situation, and we're allocating chips to our highest demand to take care of our customers and also the vehicles that are in plan that our capacity constrained, and that is especially our full size trucks and suv so you'll see us continue to do that. You know, there is a lot

of growing uncertainty because of the delta variant. We've seen an impact in Malaysia, UH, and we've mapped it out by in detail, and so you know, we're working to share our safety protocols because we have the experience to say when people follow those protocols, they can be in their their manufacturing operations or whether it's design or R

and D, they can do that safely. So we're going to continue to share that work with our tier ones and all the way down to UM you know, our tier fours, to make sure they have that benefit, and then we'll just keep maximizing production. So, Mary, I'm glad you brought up the delta variant because we're all trying to come to terms with a very uncertain development. Here. Give us a sense of what you think it might mean for general motors. You just mentioned some of conductors

more more broadly in your manufacturing. Well, we did announced to our teams yesterday and it started today that we're reinstituting the mandatory mass policy at all of our fights UH, because we know when people wear masks and follow the appropriate social distancing and the and the sanitizing recommendations, people can be safe at work. And so I think we're in a very different position than we were over a year ago, when really we weren't sure we know the

protocols work. So we're going to be applying those and again as as we all leverage all the learnings we've had over the last fifteen months, I think that's going to put us in a better position for H two. But we are monitoring carefully and you know the team will continue to adjust. So, Mary, we're talking about some

headwinds that you've been facing. What about some possible tail winds, particularly respect to pricing, because there's something of a shortage of vehicles for all sorts of reasons, prices seem to be pretty robust. How much is that lifting your profitability? Well, clearly the strong pricing environment and in the strong demand um is something that is really supporting our strong earnings.

But I would also say when you look at General Motors specifically, we have an incredibly strong product portfolio that we're offering. The customers are responding, and we're also working to be more efficient with with inventory. We've given our dealers tools that they can see what's coming. There's many times a truck arrives at a dealer and most of the vehicles on the on the truck are already sold. We're also helping them order the most popular are the

best configured vehicles for their era. Using data analytics, that's allowing us to move vehicles faster. So, you know, I think because of our portfolio, even though it will come a point when we have more availability that they'll see some moderation in price. I still think we have a strong pricing opportunity. And of course we're going to be more efficient with all the lessons we've learned in this last six months. And finally, mara I mentioned the substantial

investment General Matters is making electric vehicles. What visibility do you have into the demand for those vehicles. I know you're gonna start taking some orders fill Lyric in September, but do you know that there will be the demand there? I know you're going to have the supply. Well, we you know, we do a lot of customer research, and customers are telling us if it's a beautifully styled vehicle with about three miles of range, uh, it's affordable and

then there's a robust charging infrastructure. They're very interested in owning an electric vehicle. So that's why we're working on the ecosystem to make sure as customers buy an electric vehicle, it's a it's a you know, outstanding customer experience, and that's I think what we're going to need to do to drive e V adoption. But I'm confident that we will.

And then when I look at our products that are are coming out, the vehicles, we haven't shared many of them, but you know, when you look at the strong demand for the hummery V and the strong interest in the lyric that will begin to take orders next month, I feel very confident that we're going to see strong EV adoption. Okay, Mary, thank you so much for your time on a very busy day of here. That's Mary bar she's a chairman and president and CEO of General Motors. Tom David Weston,

thank you so much, greatly appreciated. Right now joining us, David Rubinstein most appeared to hear conversations, of course us with Carlisle's chairman and co founder and this year, uh, this week, I should say Mr Rubinstein UH speaks to the gentleman from Duke uh Mr Kopinski of McDonald's David, I look at the challenge here and for me, McDonald's is fascinating because there's two hundred thousand employees, but it's well in excess of one point nine million when you

add in the franchises. Is well, what is his approach to two million bodies? Well, it's a lot of people to manage. But their system has been largely a franchise system. They owned about ten percent in the United States of the McDonald's. They want to be an owner, so they actually know what it's like to own, and they can give directions based on having been an owner. But most of the employees that McDonald's actually are franchise ease employees. Well,

the franchise and employees. But he has a challenge in this pandemic. Did you speak to him in your peer to peer conversation about what do you actually do? Is he going to give out a thousand cheeseburger for everybody who gets vaccinated? Well, they are doing things like that. They are not from vaccination. They're trying to get Their biggest focus right now has been trying to get employees uh to staff the operations because it's harder to get employees.

Employees left after during the COVID period of times. So now they're they're going sending people to come back. They're giving fifty dollars for an interview, and if you're at the company for more than ninety days, I think they give you an iPhone, David. This raises issues for existing employee employees as well because they probably want an iPhone and extra fifty dollars as well. And across the board you're seeing wages increases. Today's CVS raised it's minimum wage

to fifteen dollars an hour. This of course comes in the heels of Amazon and Walmart. How much pressure is there to pay more? In other words, do we have a sense of where the cap is of how much higher these uh, these salaries can go. Well, remember the legislation that was considered in Congress that did not pass, would raise the minimum wage over five years to fifteen dollars. McDonald now beginning wage minimum wage that they start people at eleven dollars the legal minimum wage of seven fifty.

So McDonald's is well above the legal minimum, but they're not quite yet at fifteen though. I suspect that the pressure of such that they probably will have to increase a bit because it's hard to get employees. Young people have many different things they can do now, and it's tough to get people to work at these jobs sometimes

in the beginning at the entry level. David, is this the key issue, just getting the salaries, getting the pay high enough to get people into the workforce, or is there something else that's creating this friction that's kept the great deal of people still on the sidelines. Well, some people are afraid of of working in environments where they might not steal. Everybody that they're working with is vaccinated, so you don't know if everybody coming to McDonald's is

vaccinated for sure. Um So there are lots of issues, but I do think it's largely the case that people have been off of the workforce in some cases for you know, eighteen months, and now getting them to come back it's not easy. The salary is higher than the minimum wage, but not as high as some people. You just suggested that CBS is increasing to fifteen dollars, so I suspect they probably will have to do more than they've already done. Remember, they don't control all the way

just because only ten percent employees are there. Franchisees are the franchise You do take direction from the headquarters. And the principal issue that they're facing as well is is how do you get people back into the to McDonald's. Uh. They've found that they needed to have a lot more drive by or drive in, a lot more digital. It used to be that you went to Mcdonald'sho eight they're called dine in, but now a large part most of their serales sales are really coming by drive in or

drive by and then digital where you're ordering or delivery. Um, so it's much it's much different than it was just a few years ago. David, whether it's your conversation with Jeff Bezo so here with a gentleman from McDonald's, it's about scale, David Rubinstein on scale, Is it overrated? Overplayed? No?

Scale is very important, obviously building a global business. Whine McDonald's has been so successful is it is bigger than everybody else and they can afford to make changes and then they can move it out across the country and around the world. The reason that McDonald's has done so well is that they everything is the same around the world. So when you go to McDonald's in Paris, where the biggest McDonald's in the world is in the Shampton Loose.

Where you go anywhere in the world, you're gonna get largely the same tasting product and people like that consistency, and that's why they've done so well. I did not know that the biggest McDonald's in the world was in Paris. David, thank you for that. Okay, it's in the shamp Lose. There we go. I'll make a visit. David Rubinstein, host of Peer to Peer Conversations and Carlos Group, co chairman and co found it. This is the Bloomberg Surveillance Podcast.

Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom keene In. This is Bloomberg