Jobs Shock Sends Stocks Higher — Open Interest 8/7/2026

[00:00:00] Speaker 1: Happy Jobs Friday. 30 minutes to go until the start of your cash trade. Stocks move higher. I'm Danny Berger. And I'm Michael McKee. Happy Jobs Friday. [00:00:08] Speaker 2: Sad job Friday. Bloomberg Open Interest starts right now. [00:00:13] Speaker 1: Coming up is Mike was so rightly putting it. Maybe not a happy day. A surprise setback for the labor market. Employers unexpectedly cut jobs in July. Meanwhile, prospects for a lasting agreement to reopen the street of Hormuz remain elusive and earning season winds down with a mixed picture from corporate America. Let's look at the reaction thus far that we are getting in these markets because of the jobs number a surprise contraction stocks move higher up about half of 1% Nasdaq that outperforms considering this is a longer duration asset class. Two year yields come in by seven basis points. Should this hold this would be the biggest move down in front end yields since June 11th when the president said the war in Iran was coming to an end. And gold, the asset class du jour up nearly 3% trading above 4,300. Mike, let's go over these numbers. [00:01:15] Speaker 2: Surprise contraction for the month. Surprise contraction. I mean, some people have been waiting for it given some of the trends in the labor market, but nobody was expecting a negative number. And we did get a negative number. And we did get a negative number 23,000 down. And we saw 103,000 jobs removed in the revisions over the prior two months. That chart isn't wrong there. It's negative 23,000. But the unemployment rate falls to 4.1%. The labor force falls by 264,000. And that's why we saw the drop in the unemployment rate. The average hourly earnings also dropped. They were up only a tenth of a percent during the month. So 3.2% on an annual basis. Now, what moved? Local education. Now, that's a bit of a surprise because those people tend to fall off the payrolls in May and June, not July. So they've made a seasonal correction here that shows 49,000, almost 50,000 jobs lost in local government education. Construction jobs were up 22,000. And almost all of those were in the groups that put together things like the AI data centers, not housing construction. Health and social services is always a big number. It's the strongest hiring category, but it slipped a little bit. 22,600. That's slower than the pace that we have seen. Retail jobs is something to worry about. Maybe 19,000 jobs lost. And leisure and hospitality. A loss of 40,000 jobs. A loss was kind of expected because the World Cup was over. And so maybe that plays a lot into it. But I think what the bottom line of all of this is going to be is all of the economists are going to be going in and doing their MRIs and X-rays on this. And this may not be as bad as it looks. It isn't great news. It clearly shows hiring slowing down. Right. And fewer people looking for jobs. Okay. [00:03:06] Speaker 1: Forgive my ignorance here. And this is not to attack the economists of the world, but something like local education. You said it was a quirk. But isn't that a quirk that we could have foreseen and maybe the estimates could have been more accurate if this had to do with summer schools. Well, it depends on what the seasonals actually were. [00:03:23] Speaker 2: And I haven't looked into the background, but usually the seasonals would take away jobs. Technically, they'd add back jobs into June because that's when everybody goes off the payroll. So I'm not sure why it was delayed to July, but it does seem to have had an effect on the overall number. Well, let's continue the conversation and bring in Bloomberg macro strategist Michael Ball. [00:03:44] Speaker 1: Michael, is this exactly the market reaction you'd expect yields down, gold up, stocks marginally higher? Yeah, exactly. And I think we saw basically September odds now drop to 40 percent from 50. [00:03:55] Michael Ball: So that actually was a little surprising. You would have thought maybe more. But then it's been sort of a fluid situation. We're all waiting for Jackson Hole there to get more clarity. But exactly what you'd expect. Two years really where you want them to be now dropping, taking out cuts for next year. And effectively, kind of everyone now on pause to Mike's point, trying to understand the revisions are actually quite sizeable as well. That adds to the complexity of the debate now. But when we look at things like Beige Book or NFIB and then we just went through the earnings season, none of this was really echoed on sort of the company level or smaller business level. So this kind of caught people off guard, as you guys just noted. But the overall price reaction so far is what you would expect, but it's not out of size to what we just received. Yeah, I think what we're seeing here is the slower labor market. [00:04:35] Speaker 2: But the question that the markets are going to try to guess at, even though he doesn't want them to, Kevin Warsh doesn't want them to, is how's the Fed going to react to this? [00:04:43] Michael Ball: I think no hire, no fire. If this is kind of what we're seeing now, if that continues, then they can still be patient. But again, we just don't know. And this is the big, the big crux since July F1C. What is his reaction function? Not that we need forward guidance, but we need clarity on what he's actually thinking about doing if we get XYZ in the data or so something like comes out of the blue again with oil or some other shock comes to the system. [00:05:06] Speaker 1: How is he going to think about it? And we just don't have that. And that's been the biggest gripe and why it was sort of a missed opportunity in July. I mean, he hasn't talked about the labor market much at all, except maybe we know he doesn't really believe in the Phillips curve. But because he's been so concentrated on inflation, is the right move really to price out rate hikes? If that is what he's concentrated on and who knows what we get next week for CPI? Well, it's hard to say that, like, obviously, we're going to have two prints and we'll see what we get next week and how that feeds into core PC. [00:05:33] Michael Ball: But it's hard to say the conditions then weren't there in July if you're that focused and you're that worried about this gap that has persisted. But then he's also muddying the water by saying he wants to look at a broader set of inflation kind of metrics, which is why he has the task force. Now, as we know, the task force doesn't get done the next spring. They're going to have to deliberate among the committee for a couple months. So we're looking at only next summer when we start to actually see the results for task force probably explained properly from the chair himself. So there's a long period of uncertainty still, as we know, we'll add volatility. But then again, this is the opposite of that. This is not volatility driven market right now. We are one that again risked on. We'll see you in Jackson Hole basically. I was going to say it's very simple. He cares about PCE until he doesn't anymore at some [00:06:12] Speaker 1: defined point in time with it when the various tax task forces come back. Mike, thank you so much for joining us. Michael Ball from our macro team. Let's now get to the D.C. reaction. Joining us now is Bloomberg White House correspondent Jeff Mason. Jeff, a lot on the White House's mind, not least of the latest in the Iranian war. But let's start with this jobs picture because we know that this is a Fed chair who has been communicating with the president. Do we know at all if monetary policy has been discussed or what the reaction might be given this weaker jobs report? [00:06:43] Speaker 4: Well, no reaction yet, Danny, but I think we'll be hearing from administration officials in the coming hour with reaction. And my guess is they'll put a positive spin on this contraction in the labor market. What I would want to say as a sort of fact check, both for the labor aspect, but also inflation that we've been talking about is I do hear some Republicans still trying to blame President Biden for the increase in inflation. And of course, that was a huge weakness coming out of his administration. But this is very definitely definitively President Trump's economy. He's had the tariffs. He's had the war in Iran. And so those impacts are the impacts from those policy measures are certainly having an influence on this economy now. [00:07:28] Speaker 2: And having an influence on inflation, of course. And we get the inflation report next Wednesday. The president, in his latest comments, suggests there isn't much change in where we are with Iran right now. [00:07:38] Speaker 4: Right. And that is sort of the state of play right now. We've spent the whole week hearing that there is progress, anticipating that perhaps there's a deal about to be arranged. The latest details that we are reporting is that the Iranian parliament is looking at essentially a draft agreement. And there are some aspects that are being proposed by lawmakers that I suspect would not go over well here at the White House, including charging a fee for what are considered hostile countries by Iran and also putting some limitations or an overall limitation on cargo that would be going to Israel. So that's probably not this type of the type of factors that President Trump is expecting or wanting to hear. That said, he has also been flagging that the U.S. The U.S. is involved in these negotiations and indicating that the deal could be close. [00:08:31] Speaker 1: Jeff, elsewhere in Washington, D.C., we've all been tracking the nomination of Todd Blanche's attorney general. The latest development this morning, Senator Lisa Murkowski posting on X that she will not be supporting his nomination. Jeff, why the change? And what does this mean for his road ahead? [00:08:48] Speaker 4: Well, first of all, it's not necessarily a change. We were waiting to hear from Senator Murkowski about what she was going to do. And she was still a question mark. And that question has now been answered with her saying that she is not going to vote for the acting attorney general. That is certainly a blow to his chances of becoming the confirmed attorney general and to this White House's desire to make him the permanent attorney general. It doesn't mean it's over. It just means it's really, really, really, really close right now. He can only afford it. He can only afford to lose one additional Republican. And the remaining question mark right now in the Senate is Senator Cassidy. And he has expressed similar concerns to what Senator Murkowski has said with regard to the politicization of the Department of Justice and the acting attorney general's involvement in the IRS deal for President Trump that also created this fund to help pay back people who may have been involved in the January 6th. And also anyone else who feels they've been unfairly treated or unfairly treated, I should say, by the previous administration. So that's hanging over this. And the Murkowski news is really a big blow to this White House and also very interesting coming from her right now. [00:10:04] Speaker 2: When do they anticipate a vote very quickly here? Because they want to leave town today. [00:10:11] Speaker 4: They do want to leave town. And there was an expectation that there would be a vote before they left town. I think the answer now to your question is TBD, whether or not they pull that vote because of this latest development from Senator Murkowski. Whether they get clarity from Senator Cassidy, it's probably unlikely that they hold the vote. And when I say they, I mean Republicans now, unless they know that they're going to be able to get a yes. [00:10:38] Speaker 1: Jeff, really appreciate it. That's Bloomberg's Jeff Mason in Washington, D.C. At 10:00 a.m., we're going to hear from Kevin Hassett, director of the White House's National Economic Council. We'll get his reaction on the jobs report and other White House goings. Let's get a check on your markets this morning. Again, it is in reaction to that negative 23,000 payrolls print that we had. It means that bonds and equities and gold are all rallying this morning to your yields up by seven basis points at 41744. The odds of a rate hike go from 58% for September before this report to now 40%, so a less than 50% odd that we will get a hike. S&P Nasdaq futures move higher. We are sitting about 0.3% under an all-time high for your cash session. And gold also gets a bid after this report, up 2.5%. Let's take a look at some of the individual movers. With that this morning is Nora Melinda. Hey, Nora. [00:11:31] Speaker 5: Hey, Danny. Good morning. We're starting with the laggard this morning. Sweet Green having a rough morning. Here's tumbling double digits after the company slashed its outlook. Saying people have been less willing to eat in store during the cyclospora outbreak. And if that wasn't enough, Sweet Green also pulling jalapenos from a supplier tied to a separate salmonella outbreak this week. Not exactly the headlines that you want to see when you are selling salads. Now let's talk gaming. Video game maker Take Two's earnings came up short, but the stock is actually higher after the company maintained its outlook. All eyes are on Grand Theft Auto 6. Take Two thinks it could be the biggest video game launch of all time when it arrives in November. I know gamers have been waiting forever for this one. Shares of Take Two up about 1.5%. And finally, here's a stock absolutely taking off this morning. Doximity is up about 78%. That's after raising its outlook for the year. Analysts saying that's a good sign. It's AI investments are finally starting to pay off. And this is a stock that did need some good news. It's lost more than half its value this year. Those are your morning movers, Danny. [00:12:37] Speaker 1: Noor, thank you very much. We'll catch up with you later in the hour. Coming up, we're going to break down the market moves and jobs data. BlackRock's Rick Reeder will be joining us. This is open interest. Now to high interest, a look at what's making headlines around the world. SK Hynix is planning to spend $38 billion on the expansion of its shipmaking facilities in South Korea. The move is part of the company's efforts to rapidly double its production capacity and ease a global shortage of memory chips. President Trump reiterates his preference for lower interest rates, but acknowledged that it is not Fed Chair Kevin Warsh's decision alone. In an interview with Punchbowl News, Trump said Warsh has a board that's very political. He also said he won't be criticizing Warsh, calling him great. Bank of America's bull and bear reading climbed to the highest level since 2021. Stragers say that investor bullishness has become so extreme that it's time to start reducing exposure to risky assets. They pointed to broadening equity markets and tighter credit spreads as reason behind investor optimism. Speaking of optimism, let's look at the market rally so far this morning. Again, that is off the back of weaker than expected jobs figures, a surprise decline. So S&P futures up 3/10 of 1%. NASDAQ outperforms as yields come in by 5 basis points for your 10-year yield. Joining us now is BlackRock Chief Investment Officer of Global Fixed Income, Rick Reader. So Rick, the unemployment rate goes down, but a surprise contraction in jobs. Last time we spoke for last month, you said the employment picture is stable, broadly unimpressive. Has your assessment of this labor market changed since then with these numbers in hand? [00:14:21] Speaker 6: No, broadly not impressive I think is the right terminology. In fact, I was thinking about it. I think it's actually remarkable how unremarkable the data is. Listen, I think, you know, when you look at, you know, people say, well, gosh, we're not hiring many people because we have a supply issue. And you saw some of that play through today. But that being said, you're not seeing any wage growth. So meaning there's not that demand for labor that you would expect when you've got an economy that's doing as well as it's doing. I mean, we're going to grow. I think you're going to see 6% nominal GDP. You've got corporate top line revenue that's that's strong earnings are strong, but you're seeing operating leverage for companies kick in like you read about. I mean, you look at all these earnings reports, particularly in the tech space. Companies are growing. They're spending immense amounts of capex, but you're actually cutting people in many cases. So anyway, I think we're seeing a productivity revolution and I think we're watching it play out month in and month out. I mean, to have only 20,000 jobs on a three month moving average, you strip out health care, you're having negative job growth on an aggregate. So anyway, I think it's I just think we're going through. I think when they when they summarize this years from now, they're going to be going to witness something that is productivity. People say it's a kicking in. I actually think it's just been a an ethos around companies growing their business and seeing how you can operate without that much employment. [00:15:38] Speaker 2: Well, also, you've got the fall in immigration that is probably contributing to these big declines we're seeing in the labor force. But the people who want jobs are apparently getting jobs. They're apparently getting jobs with unemployment at 4.1 percent. So I assume this tells you as well as the Fed that we don't have a problem with the labor force [00:15:58] Speaker 6: side of the mandate. Yeah, I mean, I think that's right, Mike. I mean, I, you know, you know, I've been pretty adamant. I don't think the Fed needs to hike. And I, I don't think you really will solve the inflation dynamic part of why I think these task forces will be so powerful is you'll get into what are some complex subjects. When you break down inflation and I, you look at the difference between services and goods, you think about what's still sticky and inflation, education, health care, insurance, just moving the overnight funds rate up really do much. How and you get to the point being if you're restrictive on rate and you're driving mortgage rates higher. I just don't see that as really effective trying to bring inflation down. You've got what I would argue is, yeah, maybe it's an OK labor market. But, you know, you still need in particular way of this much debt on the country. You need to grow faster. You need to put more people to work. And I think that to me is the is the philosophy that the Fed has to employ today. Well, on the [00:16:51] Speaker 1: inflation side of things, Rick, I know you've been a big proponent again. The type of inflation we have isn't something that's fixed by hikes, but perhaps by policy, not monetary policy, but fiscal policy. What is the policy you think that could start to eat away at inflation? [00:17:05] Speaker 6: Is it just like ending a war, basically? I mean, listen, the war is a big deal. I mean, obviously, not only do you get higher prices in terms of fuel, but you're you know, there's a transmission effect through that when you talk about obviously trade getting slowed somewhat. So anyway, the war is a big deal, obviously. So that will change. Then the dynamic of people focus on tariffs. You know, the goods inflation, you know, the U.S. economy is not that large of an importer of goods. So yes, and I think people got really worked up about that last year. So what do you do and how do you create fiscal velocity? You know, there's a bunch of things you could do. And I think, quite frankly, deregulation is powerful. I think the idea around how do you help with housing, things like zoning, permitting, et cetera. How do you get like some of the like some of the stuck student loan asset or liabilities on that that young people have? How do you transition some of that? How do you help with some of that? I think there's a whole series of fiscal dynamics that can that can help with inflation. But I don't think moving the overnight funds rate will really do it. And we've seen that before. It doesn't really have that [00:18:07] Speaker 2: much of an impact. I guess I would ask you then in that case because I agree that there's probably not going to be anything happening on the fiscal side because they can't even vote on an attorney general at this point. And the Fed is maybe leading now towards a hold in September. We'll see after the Wednesday CPI report. But that leaves us with an inertial economy. And what do you look at the economy if there's no movement on the fiscal or the monetary side? Mike, I mean, I take you. I mean, you're [00:18:40] Speaker 6: unbelievably good at analyzing this. And I always appreciate the questions you ask at the FMC meeting, et cetera. The other thing I will say is I'm not sure I agree with the inertial concept. I actually think the economy is operating at an amazingly strong level. And if you look at the capex, it's obviously a big driver of that, that from AI that's getting into, you know, straight growth of the economy in so many different forms. And then you look at consumption today. Consumption, you see this, you know, particularly in areas like leisure and hospitality. You see this in some of the transportation dynamics in terms of travel. Listen, the economy is operating. And actually the thing that was pretty amazing to me in the last two months is somebody had a fiscal tailwind. But the actually had lower and middle income that was actually starting to accelerate. And we see that in all of we use a lot of this high frequency data. You actually saw consumption in a pretty good place. So listen, I think the economy is operating an extremely solid level. You know, you would think in the second half of the year you'd start to moderate a bit post the fiscal tailwind. But boy, you know, you see this. I mean, this is this was a pretty amazing quarter of earnings reports that not pervasively across every single company or industry. But boy, I thought it was pretty darn good. And you know, part of what when you look at the equity market having a pretty good run, particularly recently, you're actually looking at multiples that are coming down because these companies are earning so fast. So anyway, I'm pretty enthusiastic about where the [00:20:03] Speaker 1: economy is today. And I'm assuming that that enthusiasm over equities translates into your world of credit. Rick, you have been, of course, a fund that has been outperforming the broader benchmark by a healthy clip for the past few couple of years. I know last time you joined, you expressed skepticism on US IG credit. You like carrying higher income. I think all of this is so interesting time at a time, Rick, where as you point out, so much is happening because of AI, especially in debt with the huge issuance we're seeing from the hyperscalers. We've got another 25 billion that this market easily took up from Google just this week. And at the same time, we're going to get more issuance from the [00:20:39] Speaker 6: Treasury next week. What are you thinking about where you want to place bank just given the sheer amount of issuance that continues to hit this market. You know, Danny, I'll say one thing about, you know, because you've had a backup in rates, you're able to hit your yield targets. I mean, talk about we're hitting almost seven. I mean, six, you know, high sixes in terms of yield. And so a couple of things we've been doing is you actually don't need to go down in credit quality. You don't actually don't need to go that far down in terms of the liquidity in the portfolio. So, you know, we've been keeping it, you know, we've been adding a bit in terms of European fixed income. You know, I think emerging markets are interesting, particularly if you assume the dollar is not going to be not going to be moving aggressively. You made the point, right? I think investment credit, given the amount of supply we're going to see data center hyperscaler, investment credit is not that interesting at all. But in the securitization market, you know, they've securitized assets, both in commercial real estate, ABS, you know, those markets are in pretty good shape. So, you know, we're in an environment where we don't feel like we've got to stretch a lot. You know, these real rates that today give us an amazing ability to keep our yield up without really stretching. We're running bank now with an average rating of A minus. You know, you're hitting high sixes like that. Pretty good today. So I think we're trying to be in bonds. We're trying to be as boring as you could be. And, you know, take the risk in equities, which, you know, have a little bit of volatility. [00:22:01] Speaker 2: A little bit less risk maybe in the bond market. But there's such an appetite, I guess I would say, for debt for the hyperscalers, et cetera. How's that affecting how you can sell all of these bonds? I was really surprised yesterday with the Google Alphabet offering that it was so oversubscribed. [00:22:25] Speaker 6: You know, Michael, we're living through something and so one of the real benefits to all the financing that has to come, data center, hyperscaler, U.S. Treasury, UK, Japan, is we're actually going through a pretty historic demographic that is supporting this demand for yield, insurance companies, life insurance, pension. So it's amazing if you price assets right on the debt side, you can place an awful lot of debt. Now, that being said, I mean, the hyperscalers have clearly widened quite a bit. And so you're getting the levels. I say these real rates, if you're, you know, if you're a pension today and think, gosh, I can defease a good portion of my liability stream at these real rates, it brings a lot of people in, particularly if you get some spread on it and you're watching that play out. Like, I would say one thing, I mean, the supply is not going to stop coming. And, you know, next week we get a lot of Treasury supply. So, you know, in terms of interest rate exposure, we feel like we don't have to be in a rush to add much interest rate exposure. [00:23:26] Speaker 1: Just like clip coupon. All right, Rick, you're going to stick with us. We have to see how this market opens up and would love to get your commentary on a continued market reaction to this jobs report. And just to check on where we are with five minutes, less than five minutes until the opening bell, we continue to see a rally as yields come in now by five basis points. The front end of the curve, as you would expect, outperforms even more. That's down by about seven basis points this morning. Brent crude continues to fall as we await the latest on the Iran war. On the other side of this break, we'll have your opening bell and more with Rick Reader. Two bells to go until your weekend. This is Bloomberg Open Interest. I'm Danny Berger alongside Michael McKee. Matt Miller still off. At the moment, we are seeing a rally both in the S&P and the Nasdaq. The Nasdaq outperforms as this is a longer duration asset class and continues to get so with all the infrastructure the hyperscalers are doing. We are about 0.3%. That's how much we need to gain in the normal cash session to reach a new time high. Loma Negra opening the bell down at the New York Stock Exchange. That's a long time. This is a very long time. It's a very long time. They are down year-to-date despite Michael McKee telling me that apparently cement is the industry is very optimistic that hyperscaler and data center building is going to help them out. Down at the Nasdaq, Latigo is opening the bell. They are a biotech firm and they're IPO-ing. So congratulations to them. Apparently, the CEO and the CEO's daughter is in attendance. And you should always bring your family to the bell ringing because it is very cool. Just some earnings to go through that we got. Airbnb, they boosted their outlook. Global travel demand is strong, particularly in the U.S. and Europe. Those shares move up 8.6%. And the open draft kings, a surprise earnings miss as the sports betting giant deals with growing competition from prediction markets. Shares are still up, though, 1.3%. Take-2 up 2.5%. They also missed earnings. They do have their November release of Grand Theft Auto 6 coming out, which is expected to be the biggest video game game debut of all time. So markets overall are rallying as are this bond market led by the front end as we get rate hikes priced out. We are back with BlackRock Chief Investment Officer of Global Fixed Income, Rick Reader. Rick, OK, so this basically takes, in your view, a hike off the table. I wonder about cuts, though, because when we had spoken about a month ago, you said perhaps we still could get cuts in the back half of [00:26:11] Speaker 6: this year. Do you think that's still a possibility? So, listen, I mean, I, you know, you still have a Fed committee that is, that is generally hawkish. You still have a committee that is more focused on inflation than the labor readings. So, listen, I mean, I think, I think you could, it could still happen. You'd have to see some deceleration in economic conditions. You'd have to see, you know, we think core PCE is going to come into the, into the high twos, down to the high twos. Next year, we think you're going to get in the mid twos. Can you still get it done this year? I think so. But it, listen, I mean, I think you have to, one thing I've learned about investing, it's not what you, it's not what you think they should do. It's what they're going to do. And today, the structure of that committee clearly is in the, we're going to fight inflation and, and use the rate tool to, to be that, that tool to get there. So, listen, I think they still could. I just think hiking doesn't make a lot of sense today. [00:27:08] Speaker 2: Preinterpret Wednesday for me, though, the CPI. We saw a big drop in market expectations, sort of a knee jerk move after the labor report. What's it going to take to move one way or another in the fixed income markets on Wednesday with CPI? Yeah, that's a great question, Mike. So, you know, you've [00:27:25] Speaker 6: gotten a couple of softer prints on inflation recently. You know, we think we're in this mode of getting point twos type of, type of numbers when you look at core. And then, you know, even, you know, I was looking at the numbers for core PCE, maybe a little under the point two monthly reading. So, you know, listen, if you've got something significantly aberrational to that, you know, that would certainly move markets. Listen, if the number came in significantly higher, which would be incongruous to what you've seen over the last couple of months, listen, you know, is the Fed going to be on alert for that? Yes, I think so. You know, you know, it's better than anybody. But I think this, I think this, you know, what the chairman has stated, what chairman Warsh has stated, it's not just one number that he's laser focused on, he's looking at the panoply of readings and our senses inflation is slowly moderating. But, you know, be interesting to see [00:28:17] Speaker 1: those report, like you say, that comes out Wednesday. I do wonder obviously yields are coming in now, but we have had a 30 year yield that has been stubborn and stubbornly moving higher above 5.2 at one point. Now it's obviously below 520. Do you think that this market is at all reflecting its concerns about credibility over the Fed and chair Warsh? You know, I'm a little surprised that the at the concern [00:28:42] Speaker 6: around, you know, whether it was the last FOMC meeting or, you know, you know, some of what I thought was a little bit harsh on credibility. I think, you know, I think reduced forward guidance is not terribly intimidating to from to market participants. So, you know, I don't really think, you know, can we get more from the Fed in terms of the metrics they're looking at in terms of the structure of what is going to be important to them going forward? I think so. And I think we'll get more details around that. Listen, Annie, I think it is we're getting a lot of supply of product. You know, you're pushing real rates up because you're getting a financial transmission that is historic in terms of whether it's fiscal supply that's coming from not just U.S., but obviously, you know, you know, pressures and whether it's U.K., Japan, plus the amazing amount of supply we're getting into the credit market. So I think it's more that than it is anything else. And like you all have said, I mean, we still have some stickier inflation that is keeping these rates up. So anyway, those are where I would put the what's the influences. Hey, Rick, just super quickly, because we're about to talk to our tech reporter at [00:29:46] Speaker 1: Lolo about all the A.I. debt coming in. And we talked about it just a moment ago. You talked about what it does to the I.G. market. Do you think it changes the attractiveness or the pressure on the Treasury market at all getting all that supply from the A.I. [00:29:57] Speaker 6: hyperscalers? I mean, I mean, when you whenever you push that much supply on the market, you think about there's a crowding out effect. I mean, listen, the U.S. Treasury is still the behemoth in terms of issuance. But, you know, you take what's coming in I.G. asset backs on the backside of it through data center. So, yeah, I just think we're getting a lot of supply and all markets, including government bonds, are reflective of that. [00:30:18] Speaker 1: Hey, Rick, we always appreciate your time, especially on a Jobs Friday. Black Rocks, Rick Reeder. And at the top of the hour, Mike and I will discuss the economy with White House director of the National Economic Council. Kevin Hassett, please send us your questions if you have any. Let's now bring in Bloomberg Tech host Ed Ludlow. Ed, this has been a question. We're just speaking with Rick there about A.I. A.I.P. in the U.S. market. But can you walk us through exactly what we've had from Alphabet? Because it seems like the supply, yes, it's [00:30:45] Speaker 7: large, but the demand, it is surely there. Yeah, I mean, the latest round of that is $25 billion in U.S. denominated. I think what's interesting is you now have to stack Alphabet Amazon, not just in their dollar denominated issuance, but they've looked at the European markets and other non-dollar markets as well. Right. And the message from the tech issuers is we won't overwhelm you with supply. But what kind of what Rick was talking about is that supply has exploded. $200 billion in dollar bonds this year versus just I think it was north of 10 billion from high grade tech companies a year ago. So like clearly something's changed. And the main point that maybe I think Rick referenced was that like there's the there's been poor trading after issuance where essentially there's lots of $25 billion bond deals like Amazon, Nvidia, SpaceX or case studies outside of Alphabet that quite quickly fell below issue price. And that's just facts. That's data. How the market feels about it longer term, you know, you just have to wait and let's talk about it in a year from now. Well, you said that the companies have said we're not going to overwhelm you, but they keep [00:31:54] Speaker 2: coming back to market and they keep finding that they need more money. Is it likely to continue? [00:32:01] Speaker 7: They need more money. I mean, like the other thing that has not changed is there's a rationale for needing to raise, not just through debt markets, right? You know, Alphabet's interesting because it also has very big activity in the equity market. And they continue to sort of maintain the idea that demand for compute is running way ahead of their current ability to supply. And that the, you know, capital greases the wheels of building real world infrastructure. But because they have visibility on that demand on a multi-year horizon, they're willing to raise the money now to expedite that build out. And, you know, you know, I mean this with the greatest respect in economy. This is not like the dot com bubble or the financial crisis. These tech companies are completely different beasts to what you were covering in those eras, right? They have balance sheets that you just wouldn't have even heard of at that time. So [00:32:54] Speaker 1: everyone's pretty sanguine about it. Yeah, but sometimes there echoes rhyming pieces of history, even if it's not exactly the same. And, Ed, part of the conversation then had been, you know, all of this issue and just showing something as a top. And I think SpaceX maybe is interesting and constructive in all of this because there were a lot of fears that with the lockup expiring yesterday, 911 million shares eligible to come into the market, that it would mean a huge problem for SpaceX. But, Ed, that's not what we saw. This is a company that rallied 6% yesterday and is up another 3% this morning. Okay. So thank you for showing the [00:33:28] Speaker 7: five-day chart. This is SpaceX this week, up 10 and a half percent. It's his biggest weekly gain since the week that ended Friday, June 19th, the first full week of trading post IPO. Obviously, there have not been many up weeks in the interim, right, if we're saying that that's the size and scope, right? It's the longest weekly gaining streak since the week of July 3rd, which, yeah, it hasn't been going up. There have been many other catalysts, like earnings was a catalyst prior to earning the stock behaved unusually. There was a lot of short, short covering going into the lockup expiration. And if you, you know, there's a chart in the Bloomberg story of what happens with the lockup through the June of next year when Elon Musk's class A shares come in, you know, there's a lot more to come. People are still trying to understand the business model as much as anything beyond the mechanics. And one thing I found really interesting as a final data point is 911 million shares at the market. I think 250 million shares changed hands. So, you know, I think it's just taking time for people to say, you know, for what reason are you buying this stock? And is this a rocket company or do we believe the AI [00:34:38] Speaker 1: mainstay of this week's earnings report? I have to say, like, when I asked my question to you a mere minute ago, it's like SpaceX is up 3%. As we've been talking, it was edging up near 5%. So, a lot of volatility in this thing. Thank you so much for joining us. Looking forward to Bloomberg Tech. That's Bloomberg Tech host Ed Ludlow. We'll catch him in about an hour and 20 minutes time. Let's get a check on your markets. About 20 minutes or 10 minutes, rather, into your trading day with an overall market that is up 3/10 of 1%, despite the fact that there are more stocks that are trading down than are trading up. So, breath isn't fantastic. But Nvidia, Amazon, Broadcom, Microsoft, these giants are trading more heavily to the upside, which is helping us outperform Palantir with their strong earnings this week continues. So, Airbnb, they posted strong results, lots of demand in the U.S. and Europe. So, Airbnb shares up 14%. On the downside, you have energy falling as the price of oil falls. So, Exxon, one of the biggest losers there. Eli Lilly. So, some health care stocks also falling alongside Alphabet, Berkshire Hathaway. So, a little bit of a risk on sort of trade happening now. I think you'll also see that when we look at the sectors, just kind of more of the safety stocks like health care. Let's see, health care, yep, that one's down. And then you have consumer discretionary doing well. That's probably some of the earnings we have. And I mentioned those big heavyweight tech stocks doing well today. So, Infotech up 1%. Coming up, Silaspora concerns weigh on Sweet Green's annual outlook. And now they have to worry about Jalapenos, too. We're going to take a look at the salad chain next. This is Bloomberg. Let's hear from the sell side this morning and get you your top calls. With that is Norma Melinda. Hey, Nora. [00:36:25] Speaker 5: Hey, Dani. First up, SpaceX, you know we can't get enough of it. Argus upgrading the stock to buy. Saying it's cool encouraged by how quickly the company's AI investments are paying off. And it likes the growth ahead. Shares of SpaceX up about 4% this morning. Now from space back down to Earth. Gap sliding down 1.2%. That's after a downgrade to equal weight at Wells Fargo. The firm says it's worried about Old Navy. Saying the brand has some issues with its product mix and isn't giving shoppers enough value. And Wells says there's no quick fix here, which could mean more pressure on earnings ahead. And finally, Sweet Green's still down double digits this morning. Wall Street isn't exactly rushing to defend it either. TD Cowan cut its price target to just $5. Pointing out that sales were already coming in soft before the cyclists were an outbreak. And TD isn't alone. City, Oppenheimer, DA Davidson, and UBS, all cutting their targets on the stock as well. Those are your top calls. Dani? Nora, thank you very much. [00:37:25] Speaker 1: Let's get more on the food industry after those Sweet Green earnings. We're joined by Bloomberg Consumer Reporter Red Brown. I guess, Red, it doesn't really matter whether or not Sweet Green was subject to the outbreak. But the very fact it happened enough has shied people away from ordering salads. Yeah, I mean, I think we all sort of joke about it right now. [00:37:43] Speaker 8: Like, is salad safe? Can I eat this? Right? Like, it's just anything that, you know, as it happens over across the population, that has an effect. And then you have to kind of layer on top of that when it comes to Sweet Green. Like, they were already sort of sliding. The sales were soft. People do not want to spend even for their cheaper options as wraps that they've rolled out, which they were talking quite positively about. But it's still a $15 lunch, right? So it's just a difficult, it's really bad timing for Sweet Green. They were trying to do some things to kind of turn things around. But now we have this sort of just overarching feeling that I don't really want to eat a salad. I'm not sure about a salad. I'm already not sure that I want to spend that much money for something that it just sort of compounds now for Sweet Green. And we're seeing now the impact of that. You know, they basically doubled the slowdown for their sales expectations for the year. So they see that this is going to be a continuing problem for them as well. [00:38:30] Speaker 2: Other loser today, Wendy's, missing and saying they're scrapping their forward guidance. [00:38:37] Speaker 8: Yeah, Wendy's. The new CEO is kind of coming in here and making kind of drastic changes. That's that's been a company kind of in the slide for a while as well. It's interesting to just given the context of Burger King getting really strong results. McDonald's making some moves to get back in the positive direction of the past year. So it's like Wendy's really is this one that's falling behind. It's a shame because with Wendy's like they do have sort of higher quality. They're seen as sort of a higher quality product, but just hasn't been able to kind of translate into an upwards kind of sales trajectory for them. So it seems like they're sharing up the balance sheet to maybe make some bigger moves in the future, which is kind of seems to be the things resonating with customers. We think about Starbucks, think about Chipotle, the two kind of top performers in the restaurant space this quarter. They've both made investments into their kind of physical real estate to get people in the doors. That's what people want to see right now. They want to know they want to go to a nicer restaurant. They want to feel that value when they go when they go in. [00:39:29] Speaker 1: That's kind of where I wanted to go with this red because we're at the tail end of a lot of the restaurant and food and consumer earnings. Is that the takeaway for you that the companies who invest in physical spaces are performing or is there something to like the menus or the value that they're offering consumers to to the ones that outperform. [00:39:45] Speaker 8: I think in general and this is like consumers companies overall, which we've been paying a lot of attention to, but restaurants are really good example of this is listening to your consumers again is really important. I think in the days of the early post pandemic years, everyone had money and it was just easy to kind of spend. Right. It didn't really matter what you were putting on the on the plate in this instance. People were going to are willing to to shop out. Right. But now we're getting into this instance of this moment like where you need to really give people you know intentionally give them what they want. So Starbucks Chipotle are listening to their customers. They're trying to keep their prices in check. They're giving them new things that they want to try new flavors. You know, that's really popular right now. And the companies that don't have this sort of capital to do that. Sweetgreen Wendy's both good instances of that. They're the ones that are going to be kind of falling behind in this moment when people are feeling pinched. [00:40:36] Speaker 1: Thank you. Fantastic work all week this week. That is Bloomberg's Red Brown covering the latest consumer earnings for us. Coming up, leverage ETFs are becoming so-called momentum monsters that are changing how investors trade. That's coming up next. This is Bloomberg Open Interest. [00:40:59] Speaker 9: The leverage ETFs have really created a momentum problem, as I said. Sometimes it's good momentum. Sometimes it's bad momentum. Sometimes it's at the last 30 minutes of the day, and it changes the dynamic of a trading day. [00:41:17] Speaker 1: Bernstein's Alex Shaloff discussing how leverage ETFs are changing how investors trade. James Saifert of Bloomberg Intelligence has been discussing how leverage funds have gone from reflecting stock moves to helping create them. And James joins us now. James, can we get into the structure of this? How is it altered and that these are having such a driving force in this overall market? Yeah, I mean, there's still a small piece of the pie, but [00:41:40] Speaker 10: they're adding on to market moves theoretically. So if you're a levered long product and the market goes up, when they rebalance the end of the day, they have to buy more to get that same sort of exposure. So they are, like you said, you know, contributing to the momentum of the driving of a stock market. And the same happens when it goes down on the long side of the asset of the position. Then you take into account the fact that most of these assets are in long products and the ratio peaked at about 19 to one long to short. So a lot of money isn't on the short side. They were kind of offset that. But again, I come back to the fact that these are still relatively small, at least here in the U.S. There are some areas of single stock ETFs where they are getting large and impacting the underlying market more frequently. But this just comes back to there's leverage in the market. We just saw a hedge fund blow up like this is part of the market and leverage ETFs or guess they're getting bigger. But I don't think they're like completely driving what's happening here. [00:42:31] Speaker 2: Well, another issue in the whole market there is this latest Bitcoin hack. How's that affecting the ETFs? Because this came out of [00:42:43] Speaker 10: a cold storage. Yeah. So this wasn't Bitcoin itself that got hacked for everyone listening. But what ended up happening is a wallet provider, somebody that you would store this Bitcoin with. They had a bug in their software firmware that didn't provide enough randomness, cryptography, any sort of cryptocurrency. You can't back in and guess what somebody's password or secret code might be. In this case, there wasn't enough what they call entropy or randomness to the number that was generated. So we ended up with over $100 million now in hack Bitcoin. And as we predicted, as soon as we wrote a note earlier this week, this was going to cause inflows to the ETFs. Because there's a lot of people that believe, you know, if you want to hold Bitcoin, you need to hold it in a cold storage wallet. And this is just shaking the masses. And we've seen it in the flows. We've seen $750 million come into the ETFs so far this week, which is one of the strongest weeks we've seen so far in the last quarter or so. [00:43:37] Speaker 1: That's really interesting, James, that it has that effect and doesn't make people question the credibility of holding crypto assets themselves. This is just fair to say that there is a base of believers in crypto that they'll just shift the way that they own the asset class versus maybe rethink owning it at all. [00:43:54] Speaker 10: Yeah, I think that's part of it. I mean, the fact of the matter is, this isn't a hack on the cryptography. It's somebody who is selling a product didn't do a good job at the one thing they really should have been doing is what it comes down to. But part of it also could be people just needed to get they had coins on a wallet that could be theoretically compromised and they didn't trust the system they had set up at the time. And they decided we need to get money into the ETFs as a stopgap right now. And then they'll figure out maybe a hardened cold storage solution for themselves. But for the most part, I think, yes, there's a lot of people that still believe in this asset. If you look at the price, it's gone down a little bit. For the most part, we've been trading sideways for a long time now. And this really didn't impact the price, despite what I would say is this is like just as bad as FTX in some regards to some hardcore Bitcoiners. [00:44:39] Speaker 2: This is really shocked the foundation of what some of the people believe. Can you quickly explain to me, though, why people don't take this one step further and say, well, the ETFs have to hold Bitcoin. And with all the hacks going on, that could happen, too. So even if I'm holding not holding the Bitcoin itself but shares of the ETF, I could be vulnerable. [00:44:59] Speaker 10: Yes. I mean, theoretically, you do have a whole bunch of custodians, institutionalized custodians like Coinbase, BitGo, Anchorage Digital, Fidelity, Gemini even. But they have much more hardened protocols around how this Bitcoin is stored. They use what's known as multi-signature storage. So it's not just one key that needs to be guessed. It's multiple that needs to be guessed. So there's all these hardened ways that institutions. But at the end of the day, yes, you're more there's no risk that, you know, your exposure to S&P 500 stocks is going to get hacked out of an ETF. However small that risk is for Bitcoin ETFs, it's still a risk that you have to consider. It's disclosing all the prospectuses. But the process of generating those random numbers, those private keys, is way more intense and way more secure than what happened with the cold card wallets. [00:45:46] Speaker 1: James, appreciate your time this morning. James Saifert from the ETF Bloomberg Intelligence team. And tune into ETF IQ on Mondays at 12:00 p.m. New York Time. Coming up at the top of the next hour, Kevin Hassett will talk about the latest jobs print, Fed inflation, inflation, rather, and the Fed outlook. This is Bloomberg. 30 minutes into your trading day. Welcome to Bloomberg Open Interest. I'm Danny Berger alongside Michael McKee. A rally in bonds, a rally in this equity market just six points away from an all-time high. Coming up, a surprise setback for the labor market. Employers unexpectedly cut jobs in July. Meanwhile, prospects for a lasting agreement to reopen the Strait of Hormuz remain elusive. And earning season winds down with a mixed picture for corporate America. And we begin with the July jobs miss. Mike, it's probably worth just revisiting an hour and a half after that data. Exactly what the data said. So a drop of 23,000. And at the same time, we see unemployment come in, too. [00:46:56] Speaker 2: Unemployment came in, but we saw a big drop in the labor force, 264,000. Last month, it was 720,000. So nobody's looking for a job is one reason that the unemployment rate is going down. The other component of this is that average hourly earnings did not rise significantly. And so at 3.2% last month, we're behind the rate of inflation. At least we know it means that inflation in this in this economy is not coming from the labor market. [00:47:21] Speaker 1: So that's certainly one of the takeaways. We'll see what CPI brings us next week when we get that on Wednesday. At the moment, this market, though, pricing out rate hikes from the Fed. Let's continue the conversation. We want to welcome to our global TV and radio audiences. I'm Danny Berger alongside Michael McKee. U.S. EMPLOYERS UNEXPECTEDLY CUT 23,000 JOBS IN JULY FOLLOWING A DOWNWARD REVISION TO MAY AND JUNE FIGURES. LET'S BRING IN WHITE HOUSE NATIONAL ECONOMIC COUNCIL DIRECTOR KEVIN HASSETT. DIRECTOR HASSETT, GREAT TO SEE YOU THIS MORNING. I KNOW YOU'VE BEEN SAYING POST IN REACTION TO THE SURPRISE LOSS IN JOBS THAT YOU'RE MOSTLY LOOKING AT THE UNEMPLOYMENT FIGURE AND IT FELL. HOWEVER, AS MIKE JUST POINTED OUT, LABOR FORCE PARTICIPATION ALSO FELL, WHICH IS THE REASON THAT OCCURRED. LOOKING AT THE FIGURES IN THE STATE OF THIS JOBS MARKET, ARE THERE ANY AREAS AT ALL THAT YOU ARE CONCERNED ABOUT? [00:48:15] Speaker 11: RIGHT. WELL, FIRST OF ALL, YOU KNOW, I'VE BEEN TALKING ABOUT THESE NUMBERS WITH MIKE FOR HOW MANY YEARS, MIKE? 20 YEARS? AND SO HE REALLY DOES RAISE SOME GOOD POINTS. AND THE THING THAT I WOULD SAY IS THAT BECAUSE OF OUR BORDER POLICY AND BECAUSE OF DEPORTATIONS AND THE RETIREMENT OF THE BABY BOOMERS, THAT LABOR FORCE PARTICIPATION IS KIND OF ON A DOWNWARD TRAJECTORY, WHICH MEANS THAT THE BREAK EVEN JOBS NUMBER, THAT IS THE JOBS NUMBER YOU NEED SO THAT UNEMPLOYMENT RATE DOESN'T GO UP, HAS GONE FROM MAYBE 120, 130,000 A FEW YEARS AGO TO MAYBE ABOUT 40,000 NOW. AND SO WHAT IT MEANS IS THAT WHAT THE MARKET IS USED TO LOOK AT, OH, IT'S LIKE A NORMAL TREAD THE WATER KIND OF JOBS NUMBER IF IT'S AROUND 100, IS NO LONGER TRUE. IF YOU GET A NUMBER LIKE 100, THAT'S REALLY LIKE A GREAT NUMBER AND SHOULD MAKE THE UNEMPLOYMENT RATE GO WAY DOWN. SO THAT'S LIKE THE TECHNICAL BIG PICTURE. DIGGING INTO THE NUMBERS, THERE ARE SOME THINGS THAT REALLY JUMP OUT AT ME. IT WAS LIKE PRIVATE SECTOR JOB CREATION WAS RIGHT ABOUT AT THE BREAK EVEN POSITIVE NUMBER. IT WAS GOVERNMENT EMPLOYMENT THAT WENT DOWN A LOT ABOUT 50 SOMETHING THOUSAND. AND THE OTHER THING IS THAT WE SEE IN THE HOSPITALITY SECTOR, THE END OF THE WORLD CUP IS REALLY CLEARLY IN THE DATA, TOO. IF YOU EXCLUDE THOSE TWO THINGS, YOU HAD ABOUT 100,000 NUMBER. AND THAT'S CONSISTENT WITH ALL THE OTHER INDICATORS, LIKE THE PURCHASING MANAGERS BEING REALLY HIGH, UNEMPLOYMENT INSURANCE CLAIMS BEING ABOUT THE LOWEST THEY'VE BEEN SINCE WORLD WAR II. ALL THESE OTHER INDICATORS SUGGESTED THE MARKET WAS RIGHT WHAT IT EXPECTED AROUND 100. AND GIVEN THAT THERE'S JUST A MINOR CORRECTION THAT GIVES YOU ABOUT 100, I THINK SUGGEST THAT'S WHAT THE TRUTH WILL BE. BUT WE NEED TO SEE, YOU KNOW, FUTURE NUMBERS BEFORE WE CAN MAKE A FINAL JUDGMENT. THAT'S WHY IT'S GREAT TO HAVE A PERSON LIKE MIKE AROUND TO HELP US THINK ABOUT IT. [00:50:06] Speaker 1: I AGREE, KEVIN, FOR WHAT IT'S WORTH. I ABSOLUTELY AGREE. [00:50:09] Speaker 2: WELL, PREDICTIONS ARE HARD, ESPECIALLY ABOUT THE FUTURE, AS Yogi Berra SAID. WE'RE BOTH ECONOMISTS. LET'S GET WONKY HERE. THE POSSIBLE POTENTIAL GROWTH FOR THE UNITED STATES OR ANY COUNTRY IS BASED ON THE SIZE OF THE LABOR FORCE, WHETHER IT KEEPS GROWING, AND PRODUCTIVITY. AND YOU'RE TAKING CREDIT NOW FOR THE SIZE OF THE LABOR FORCE ESSENTIALLY GOING DOWN BECAUSE OF THE IMMIGRATION POLICIES OF THE ADMINISTRATION. SO IS THAT A GOOD THING FOR THE ECONOMY OVERALL? [00:50:36] Speaker 11: YEAH. I MEAN, WHAT'S GOING ON RIGHT NOW IS IF WE DO THE OLD POTENTIAL GDP CALCULATIONS, THEN YOU ADD PRODUCTIVITY PLUS CAPITAL DEEPENING PLUS LABOR FORCE PARTICIPATION OR LABOR'S CONTRIBUTION. I THINK THAT ONE OF THE THINGS YOU SEE IN PRODUCTIVITY IS THAT IT'S PROBABLY RUNNING NORTH OF TWO, TWO AND A HALF PERCENT. CAPITAL SPENDING PROBABLY ADDS AT LEAST ONE PERCENT TO THAT. SO BEFORE YOU GET TO THE LABOR STORY, YOU'RE LOOKING AT THE THREE, THREE AND A HALF PERCENT GDP NUMBER, AND I THINK THE LABOR STORY IS STILL GOING TO BE POSITIVE. I JUST THINK THAT IT'S NOT GOING TO BE AS POSITIVE AS IT TYPICALLY HAS. IF YOU GO BACK OVER 40 YEARS, THE LABOR STORY ADDS ABOUT LIKE ONE OR ONE AND A HALF PERCENT EVERY YEAR TO GDP. I THINK NOW IT'S LIKELY TO BE ABOUT A HALF OF THAT OR A THIRD OF THAT. ESSENTIALLY THAT, BY THE WAY, YOU MENTIONED THE HOURLY EARNINGS. IF YOU LOOK AT THE WEEKLY EARNINGS, THEY'RE ACTUALLY UP RELATIVE TO INFLATION QUITE A BIT, ABOUT $1,000 OVERALL FOR ALL AMERICANS, ABOUT $3,000 FOR MANUFACTURING WORKERS, $4,000 FOR CONSTRUCTION WORKERS. AND SO THERE IS SOMETHING GOING ON, TOO, WHERE PEOPLE ARE -- SOMETHING IN HOURS THAT'S GOING ON THAT'S OFFSETTING THE PARTICIPATION. [00:51:44] Speaker 2: PRESIDENT WATCHING IN THE OVAL OFFICE IS JUST SAYING, YOU GOT YOUR POINT IN, KEVIN. GOOD JOB ABOUT THAT. [00:51:49] Speaker 11: I DON'T KNOW IF HE'S WATCHING, BUT I'LL FIND OUT. [00:51:52] Speaker 2: PEOPLE WE'VE TALKED TO SO FAR TODAY ARE BASICALLY SAYING THIS IS A NON-EVENT, EVEN WITH THE NEGATIVE NUMBER FOR THE FED, BECAUSE IT SHOWS THE LABOR MARKET IS STABLE, IF NOTHING ELSE, AND THEY CAN FOCUS ON INFLATION. I'M WONDERING, THOUGH, WHY THE PRESIDENT IS SAYING THINGS LIKE, KEVIN HAS IT CAN DO WHAT HE NEEDS TO DO. THE LABOR MARKET WAS STABLE UNDER JAY POWELL, AND THE PRESIDENT WAS REALLY MAD AT HIM ALL THE TIME. WHY IS HE GIVING KEVIN WARSH SO MUCH MORE RUNWAY? EVEN THOUGH CONDITIONS HAVEN'T CHANGED ALL THAT MUCH? [00:52:24] Speaker 11: WELL, I CAN SAY THAT THE PRESIDENT -- THERE HAVE BEEN SOME NEWS STORIES THAT THE PRESIDENT IS TALKING TO KEVIN WARSH, AND OF COURSE HE IS. HE TALKED TO JAY POWELL, TOO. BUT THE OTHER THING IS THAT KEVIN WARSH AND THE PRESIDENT HAVE A VERY CLOSE LONG-TERM RELATIONSHIP FROM NEW YORK CITY, FROM FLORIDA, AND THEY TALK ABOUT THE ECONOMY ALL THE TIME, AND I TALK TO KEVIN AS WELL AS TO SCOTT BESSEN. SO THAT'S LIKE NOT REALLY NEWS. THE FACT IS THAT THERE'S SOMEBODY AT THE FED NOW THAT THE PRESIDENT IS 100% SURE IS GOING TO DO WHAT'S RIGHT BASED ON THE NUMBERS AND NOT PLAY PARTISAN GAMES. HEARD ME MENTION SOME OF THE PARTISAN GAMES THAT I THINK THEY PLAYED IN THE PAST. [00:53:03] Speaker 1: APOLOGIES FOR JUMPING, I JUST WANTED TO PICK UP ON THE POINT OF THE CONVERSATION, BECAUSE YOU MENTIONED ABOUT THE ECONOMY. ARE THEY TALKING ABOUT MONETARY POLICY AS WELL OR JUST BROAD ECONOMIC ADVICE? [00:53:12] Speaker 11: I'VE NOT BEEN LISTENING TO THE CONVERSATIONS, BUT I'M SURE THAT THE PRESIDENT DOESN'T SAY, HEY, YOU GOT TO DO THIS OR THAT TO INTEREST RATES. HE RESPECTS THE -- [00:53:19] Speaker 1: GIVEN THAT LINE OF COMMUNICATION IS OPEN, I WONDER IF WE COULD DO A LITTLE BIT OF SCENARIO ANALYSIS. LET'S SAY THAT THIS FED DOES HIKE, THERE WAS AN FT REPORT SAYING THAT PERHAPS THE CHAIR WARSCH MIGHT HIKE IF THE DATA CONTINUES AS IT IS FOR SEPTEMBER. WHAT DO YOU THINK THE PRESIDENT'S CONVERSATION WOULD BE LIKE WITH FED CHAIR WARSCH SHOULD THAT HAPPEN? [00:53:38] Speaker 11: THE PRESIDENT IS GOING TO RESPECT THE INDEPENDENCE OF THE FED. I'M HIGHLY CONFIDENT. AND WHEN -- IT'S VERY, VERY NATURAL FOR THE PRESIDENT TO DO SOMETHING LIKE SAY, HEY, YOU KNOW, CHAIRMAN WARSCH, WHAT DO YOU THINK ABOUT TODAY'S JOB NUMBER? THAT'S A VERY NORMAL THING FOR HIM TO DO. BUT I THINK THAT'S THE WAY YOU SHOULD THINK ABOUT THE BOUNDS OF THE CONVERSATIONS. [00:53:56] Speaker 2: FORGIVE ME FOR ASKING THIS, BUT I'VE BEEN DYING TO ASK YOU THIS QUESTION SINCE YOU BROUGHT THIS UP LAST FRIDAY. YOU SAID THAT THE BIGGEST DANGER TO THE ECONOMY IS THAT SOCIALIST COMMUNIST DEMOCRATS ACTUALLY HAVE A BIG VICTORY IN NOVEMBER. WHAT IS SOCIALISM IN YOUR MIND? [00:54:13] Speaker 11: WELL, YOU KNOW, MIKE, THAT I, AS CEHAR WROTE A CHAPTER ABOUT IT IN THE ECONOMIC REPORT OF THE PRESIDENT, WAS WIDELY CRITICIZED BECAUSE PEOPLE SAID, OH, THERE'S NO WAY THE DEMOCRATS ARE SOCIALIST. I DIDN'T SAY DEMOCRAT ANYWHERE IN THE REPORT. I SAID HERE'S THE RISK OF SOCIALISM. BUT THEN I WROTE A BOOK, THE DRIFT, STOPPING AMERICA'S SLIDE TO SOCIALISM, BECAUSE I BELIEVE SOCIALISM -- WE ARE SLIDING TOWARDS SOCIALISM THROUGH THAT PARTY. SO SOCIALISM IS WHEN THE GOVERNMENT OWNS THE CAPITOL AND THEN HANDS IT OUT TO PEOPLE, IS A VERY SIMPLE DEFINITION. SO LET'S JUST SAY, HYPOTHETICALLY, THE GOVERNMENT DECIDES TO HAVE GROCERY STORES WHERE IT SETS THE PRICES AND TELLS PEOPLE WHEN THEY CAN GET IN AND GET THE CHEAP STUFF. THE HISTORY OF THIS IS THAT THE GROCERY STORES END UP BEING EMPTY, PRICES DON'T MATTER BECAUSE THERE IS NOTHING TO BUY. AND OVER TIME, SOCIALISM LEADS TO PUBLIC DISORDER. YOU SEE IT IN VENEZUELA, CUBA, AND SO ON. SO IT'S A TERRIBLE PATH TO GO. BUT I THINK WHAT PEOPLE UNDERAPPRECIATE IS THAT THE POLICIES THAT HAVE BEEN ADVOCATED BY DEMOCRATS SINCE PRESIDENT TRUMP TOOK OFFICE, WHERE YOU COULD HAVE WEALTH TAXES, YOU COULD HAVE REALLY HIGH TAXES ON INCOME, REALLY HIGH TAXES ON CAPITAL GAVE. THEY'VE BEEN BASICALLY SLIDING TOWARD SOCIALISM FOR A LONG TIME. AND SO WHILE THE NEW PEOPLE ARE A LOT MORE CHARISMATIC THAN THE PEOPLE IN THE SENATE, I THINK THE POLICIES THAT THEY'RE ADVOCATING, MEDICARE FOR ALL, YOU KNOW, LIKE, COME ON, HILLARY CLINTON'S HEALTH CARE POLICY WAS ABOUT THAT, RIGHT? AND SO THAT I THINK THAT'S THE UNCOMFORTABLE THING THAT DEMOCRATS HAVE TO COME TO TERMS WITH IS THAT THESE SOCIALISTS ARE ACTUALLY ADVOCATING THINGS THAT DEMOCRATS HAVE ADVOCATED FOR A LONG TIME. [00:55:50] Speaker 2: AND SOCIALISMATIC THAN SOCIALISMATIC THAN SOCIALISM. AND SOCIALISMATIC THAN SOCIALISMATIC THAN SOCIALISMATIC [00:55:57] Speaker ?: CONTROL. [00:55:57] Speaker 2: WELL, IF GOVERNMENT OWNERSHIP OF MEANS OF PRODUCTION IS PART OF THE DEFINITION THERE, THEN THE TRUMP ADMINISTRATION HAS TAKEN SHARES IN INTEL, MP MATERIALS, TRILOGY, METALS, LITHIUM, AMERICAS. WHY IS THAT NOT SOCIALISM? [00:56:11] Speaker 11: YEAH, BECAUSE IT'S NOT CONTROL. SO, FOR EXAMPLE, THE NORWEGIANS HAVE A SOVEREIGN WEALTH FUND. THEY OWN MAYBE ABOUT 3% OR 4% OF U.S. EQUITIES. THAT'S NOT SOCIALISM. THEY'RE NOT GOING IN AND TELLING THE MANAGEMENT WHAT TO DO AND SO ON. AND SO I THINK THAT ONE OF THE THINGS THAT PRESIDENT TRUMP AND HOWARD LUTNICK HAVE NOTICED IS THAT, IN THE END, THE U.S. WOULD BE WAY BETTER OFF IF WE HAVE SOMETHING LIKE A SOVEREIGN WEALTH FUND. WE'RE CERTAINLY PUTTING UP FIREWALLS TO MAKE SURE THAT THE DOVERNMENT CAN'T COME IN AND MICROMANAGE THOSE FIRST. [00:56:44] Speaker 2: WE JUST HEARD FROM RICK READER OF BLACKROCK. WE NEED TO SEE SOMETHING ON THE FISCAL SIDE TO TRY TO GET THE ECONOMY MOVING AND COMPANIES SPENDING AGAIN. DOES THE PRESIDENT HAVE ANY PLANS TO PROPOSE SOMETHING LIKE THAT OR ARE WE KIND OF STUCK UNTIL AFTER THE MIDTERMS AND OR IF THE DEMOCRATS TAKE CONTROL OF ONE OF THE HOUSES WE'RE STUCK FOR TWO YEARS? [00:57:07] Speaker 11: I THINK RICK'S CALL FOR SOME KIND OF STIBULUS PACKAGE, I GUESS I HAVEN'T SEEN WHAT HE SAID, FEELS COMPLETELY INCONSISTENT WITH ALL THE DATA I'M SEEING RIGHT NOW. AND SO I'D HAVE TO SEE WHAT RICK WAS SAYING. BUT RIGHT NOW THERE ARE -- OBVIOUSLY WE'RE WATCHING CLOSELY THE WELFARE OF THE AMERICAN PEOPLE, BUT WE HAVEN'T HAD MEETINGS WHERE WE TALK ABOUT A STIBULUS BILL. [00:57:25] Speaker 1: DIRECTOR HAS IT, YOU KNOW, IT'S OFTEN THAT GREAT LEADERS NEED TO BE ONES WHO SURROUND THEMSELVES WITH PEOPLE WHO CAN DELIVER THEM HARD TRUTHS. IT'S A STRANGE TIME IN THIS ECONOMY. MANY THINGS ARE CHANGING, BE IT AI OR IMPACT OF HIGHER OIL PRICES. I WONDER WHAT THOSE CONVERSATIONS ARE LIKE. HOW OFTEN ARE YOU COMING TO THE PRESIDENT AND DELIVERING HIM ADVICE THAT'S MAYBE HARD TO TAKE, THAT PARTS OF THIS ECONOMY MAYBE NEED VARIOUS EFFORTS? HOW OFTEN ARE YOU HAVING [00:57:55] Speaker 11: THOSE DIFFICULT CONVERSATIONS? I OBVIOUSLY CAN'T TALK ABOUT SPECIFIC CONVERSATIONS WITH THE PRESIDENT. I WAS IN THE OVAL WITH HIM LAST NIGHT. WE TALKED ABOUT A WIDE RANGE OF ISSUES. HE DOESN'T REALLY HAVE MUCH PATIENCE FOR YES MEN. WE HAVE A WIDE RANGE OF TOPICS AND A WIDE RANGE OF OPINIONS. [00:58:14] Speaker 2: WHAT DO WE THINK IS GOING TO HAPPEN NOW WITH IRAN? THE REASON I ASKED THAT IS BECAUSE EVERYBODY ALSO THAT WE HAVE TALKED TO SAYS THAT, BOY, IT WOULD SURE DO A LOT IF WE GOT THAT WAR OVER WITH AND PRICES CAME DOWN FOR ENERGY. [00:58:31] Speaker 11: AGAIN, I'M NOT INVOLVED IN THE NEGOTIATIONS WITH THE IRANIANS. I DON'T HAVE ANY INSIGHT. I WANT TO TALK ABOUT IT. I WOULD SAY THAT WE HAVE DONE AN ENORMOUSLY GOOD JOB STABILIZING GLOBAL ENERGY MARKETS DESPITE THIS DISRUPTION BY DOING THINGS LIKE INCREASING PRODUCTION THROUGH PIPELINES, GETTING THE JONES ACT WAVE SO THAT AMERICAN ENERGY CAN MOVE TO THE COAST. AND THAT'S ONE REASON WHY, WHILE ENERGY PRICES ARE HIGHER THAN WE WOULD LIKE, THEY DIDN'T GO NEARLY AS HIGH AS A LOT OF THE PEOPLE ON YOUR SHOWS WERE SAYING. PEOPLE WERE SAYING WE'RE GOING TO BE STUCK AT $150 OIL JUST A FEW MONTHS AGO. SO I THINK WHAT THAT MEANS IS THAT ALL OF THESE STEPS THAT WE'VE TAKEN INCREASING ENERGY PRODUCTION, ESPECIALLY IN THE U.S., MEANS THAT WHEN THIS IS RESOLVED, THEN PRICES ARE GOING TO DROP A LOT. I THINK THAT IS SOMETHING THAT IS BEING PRICED INTO FUTURE MARKETS AND IT'S ACTUALLY AFFECTING DECISIONS TODAY. BECAUSE IF YOU BUY OIL TODAY SOMEWHERE, THEN IT USUALLY TAKES ABOUT TWO MONTHS TO BE SHIPPED. SO IT REALLY PUTS A DOWNWARD PRESSURE ON PRICES TODAY. [00:59:38] Speaker 2: I'VE GOT TO PUT YOU ON THE SPOT AGAIN ONE MORE TIME HERE. IN AN AREA THAT YOU DO FOLLOW, AND THAT IS THE BUDGET FOR THE UNITED STATES, THE PRESIDENT'S BUDGET WOULD ADD A LOT MORE TO THE DEBT. THAT MEANS MORE BONDS HAVE TO BE SOLD, AND WE WERE JUST TALKING WITH A LOT OF PEOPLE THIS MORNING ABOUT HOW MUCH PRIVATE DEBT IS COMING TO THE MARKETS, ESPECIALLY FROM THE AI SECTOR. HOW MUCH DO YOU WORRY ABOUT INTEREST RATES GOING UP AND THE COUNTRY HAVING TO PAY A LOT MORE BECAUSE THERE'S A LOT OF DEMAND FOR BONDS RIGHT NOW. A LOT OF DEMAND TO SELL, [01:00:12] Speaker 11: WHAT DO YOU THINK OF THE GOALS? WHAT DO YOU THINK OF THE GOALS? THE POINT IS THAT WHAT THE PRESIDENT HAS DONE IS HE'S PUT OUT A BUDGET THAT GETS THE DEFICIT TO GDP DOWN TO ALMOST NOTHING OVER A TEN-YEAR WINDOW. WE'VE TAKEN SIGNIFICANT STEPS TO ACHIEVE THOSE GOALS BY, FOR EXAMPLE, REDUCING FEDERAL EMPLOYMENT BY MORE THAN THOUSANDS OF THOUSANDS OF WORKERS AND I JUST GOT A BRIEFING ON THE VICE PRESIDENT'S FRAUD TASK FORCE YESTERDAY THAT, YOU KNOW, WHEN YOU SEE, THERE'S GOING TO BE TENS AND TENS OF BILLIONS OF DOLLARS JUST IN A YEAR. SO MULTIPLY THAT BY TEN TO GET THE DEFICIT EFFECT OF A FRAUD THAT WE'VE STOPPED THAT THE VICE PRESIDENT'S TEAM IS STOPPING. SO WE'RE 100% FOCUSED ON THE DEFICIT OF THE DEFICIT, BUT WE ALSO AT TIMES, WHEN WE SPEND LESS MONEY ON INTERNATIONAL ORGANIZATIONS, WE CAN SPEND MORE MONEY ON THE DEFENSE THINGS THAT KEEP US SAFE. SO WE'RE CHANGING THINGS, YOU KNOW, WITHIN THE BUNDLE, BUT WE'RE DEFINITELY SHOOTING FOR LOWER DEFICIT OVER TIME. [01:01:06] Speaker 1: JUST COMBINING THESE TWO IDEAS, DIRECTOR HAS IT OF TAKING ACTION AND WHAT YOU'RE MENTIONING BEFORE WITH HIGHER OIL PRICES, THIS IS A PRESIDENT WHO HAS SIGNALLED OUT BIG OIL, BOTH EXXON AND CHEVRON SPECIFICALLY AMID THIS ONGOING CRISIS. WHAT STEPS IS THIS WHITE HOUSE GOING TO DO? WHAT STEPS ARE GOING TO DO IN ORDER TO ACT ON THE IDEA THAT [01:01:25] Speaker 11: BIG OIL IS CONTRIBUTING TO THE INFLATION WE'RE SEEING IN HIGHER PRICES? I THINK THAT BIG OIL IS HEAVILY CONCENTRATED IN THE U.S., IT'S SOMETHING TO KEEP AN EYE ON, BUT THE BOTTOM LINE IS THE GLOBAL ENERGY PRICE STORY IS A POSITIVE ONE COMPARED TO WHAT PEOPLE THOUGHT, AND I THINK THAT THE THINGS THAT MADE IT POSITIVE ARE GOING TO MAKE [01:01:45] Speaker 1: PRICES DROP VERY, VERY QUICKLY ONCE THIS IS ALL. WHAT DO YOU THINK ABOUT THE ECONOMIST? [01:01:52] Speaker 11: IS IT KIND OF AN ANTITRUST ISSUE YOU THINK? YOU KNOW, AS AN ECONOMIST YOU COULD LOOK AT SOMETHING LIKE THE HERFENDALL INDEX AND JUST THINK ABOUT WHAT SHARE OF THE MARKET DOES ANY BUSINESS HAVE, AND THAT'S SOMETHING THAT IS A SOURCE OF INVESTIGATION FOR PEOPLE AT THE FTC AND THE JUSTICE DEPARTMENT. IT'S NOT SOMETHING THAT'S [01:02:09] Speaker 1: GOING TO BE INVOLVED TO BE INVOLVED TO THE PEOPLE OF THE I.D.C. UNDERSTOOD. THANK YOU VERY MUCH FOR YOUR TIME THIS MORNING. [01:02:17] Speaker 2: THAT'S THE WHITE HOUSE NATIONAL ECONOMIC COUNCIL [01:02:18] Speaker 1: DIRECTOR KEVIN HASSETT. [01:02:19] Speaker 2: WE HAVE KNOWN EACH OTHER FOR YEARS. HOW LONG IS YEARS, MIKE? [01:02:23] Speaker 1: WE'VE BEEN MEASURED IN DECADES NOW. UNDERSTOOD. WHAT A GREAT WAY TO START THE CONVERSATION. MIKE, I KNOW YOU WELL AND I KNOW YOUR COMMENTS WELL. I APPRECIATE ALL OF THOSE. LET'S GET A CHECK ON YOUR MARKETS BECAUSE, MIKE, THEY HAVE BEEN CHANGING OVER THE PAST 15 MINUTES AS WE'VE BEEN SPEAKING. WE ARE LOOKING AT 10-YEAR YIELDS. THEY'RE STILL COMING DOWN, BUT NOT AS RAPIDLY AS THEY WERE. WE'RE DOWN ABOUT 3.5 BASIS POINTS. OIL IS NOW RISING ONLY SLIGHTLY, BUT ABOUT 3/10 OF 1%. AND THE S&P, ITS GAINS ARE ALSO STARTING TO LESSEN, TOO, UP ONLY 2/10 OF 1% AS THE NASDAQ MOVES HIGHER BY A HALF OF A PERCENT. COMING UP, WE'RE GOING TO GET MORE ON PAYROLLS AND BREAK DOWN SOME OF THOSE KEVIN HASSETT COMMENTS. WE'RE GOING TO SPEAK WITH [01:03:08] Speaker ?: JULIA CORNADO OF MACRO POLICY PERSPECTIVES. YOU'RE WATCHING BLOOMBERG OPEN INTEREST. [01:03:20] Speaker 11: BECAUSE OF DEPORTATIONS AND THE RETIREMENT OF THE BABY BOOMERS, THAT LABOR FORCE PARTICIPATION IS KIND OF ON A DOWNWARD TRAJECTORY, WHICH MEANS THAT THE BREAK EVEN JOBS NUMBER, THAT IS THE JOBS NUMBER YOU NEED SO THE UNEMPLOYMENT RATE DOESN'T GO UP, HAS GONE FROM MAYBE 120, 130,000 A FEW YEARS AGO TO MAYBE ABOUT 40,000 NOW. SO WHAT IT MEANS IS THAT WHAT THE MARKET IS USED TO LOOK AT, IT'S LIKE A NORMAL TREAD THE WATER JOBS NUMBER, IF IT'S AROUND 100, IT'S NO LONGER TRUE. IF YOU GET A NUMBER LIKE 100, THAT'S REALLY LIKE A GREAT NUMBER AND SHOULD MAKE THE UNEMPLOYMENT RATE GO WAY DOWN. [01:03:57] Speaker 1: WHITE HOUSE NATIONAL ECONOMIC COUNCIL DIRECTOR KEVIN HASSETT SPEAKING ON THE JOBS FRONT WHICH SURPRISED TO THE DOWNSIDE, A SURPRISED CONTRACTION OF 23,000. JOINING US NOW IS JULIA CORNADO, A FORMER FED ECONOMIST WHO NOW RUNS MACRO POLICY PERSPECTIVES. JULIA PERHAPS IS EXPECTED THIS WHITE HOUSE IS VIEWING IT IN TAKING THE RATE HIKES OFF OF THE TABLE. I'M WONDERING HOW YOU'RE VIEWING THESE FIGURES. IS THERE SIGNAL IN THEM OR IS IT JUST NOISE AND SOMETHING MAYBE TO IGNORE FOR THE MONTH? [01:04:30] Speaker 12: THERE'S ALWAYS SOME SIGNAL AND I THINK THE TREND THAT WE'RE SEEING IS, YES, THERE IS A SHRINKING LABOR FORCE AND THAT REFLECTS BOTH IMMIGRATION AND IT REFLECTS AGING AND IT MAY ALSO REFLECT WEAK DEMAND AND THIS IS WHERE THE SIGNALS GET COMPLICATED. WAGE GROWTH IS VERY WEAK. THERE'S A LOT OF LOW PARTICIPATION NOT JUST AMONGST OLDER WORKERS RETIRING BUT AMONGST YOUNGER WORKERS WHO ARE STAYING IN SCHOOL. THE PART-TIME SHARE IS RISING. CONSUMERS ASSESS VERY WEAK CONDITIONS IN THE CONFERENCE BOARD SURVEY. SO IT'S NOT ALL STRUCTURAL. I THINK THERE IS SOME EVIDENCE THAT, YOU KNOW, THE LABOR MARKET IS BROADLY BALANCED BUT IT'S TILTING A LITTLE BIT TO THE WEAK SIDE, EVEN FACTORING IN ALL OF THOSE STRUCTURAL AND NOISY ELEMENTS. STATE AND LOCAL GOVERNMENTS ARE NOT GOING TO LOSE 50,000 PLUS EVERY MONTH. SO THAT IS NOISE. THE BREAK EVEN RATE, AS KEVIN HASSETT SUGGESTED, IS VERY LOW. WE'RE GOING TO TALK ABOUT WHAT WE'RE GOING TO DO. WE'VE GOT THESE TRENDS TOWARDS DECLINING PARTICIPATION. [01:05:38] Speaker 2: IT'S NOT TIGHTENING UP THE LABOR MARKET. WHAT IS IT DO YOU THINK IS CAUSING THE LACK OF DYNAMISM? WE'VE HEARD FOR QUITE SOME TIME THAT BUSINESSES WERE ON HOLD TARIFF POLICY WAS GOING TO BE BECAUSE THEY DIDN'T KNOW WHAT THE WAR WAS GOING TO PRODUCE. BUT WE'VE KIND OF SEEN THAT NOW. AND WE KIND OF KNOW WHAT THE TARIFFS ARE GOING TO BE. WHY ARE BUSINESSES HOLDING OFF WHEN WE SEE FAIRLY STRONG DEMAND? [01:06:00] Speaker 12: SO, MIKE, I THINK THAT'S A GREAT QUESTION. THERE'S JUST SO MANY SOURCES OF UNCERTAINTY. THERE'S JUST BEEN MASSIVE SHOCKS ACROSS SECTORS FROM TARIFF POLICY, FROM SHIFTS IN REGULATORY POLICY, FROM CHANGES IN THE DRIVERS OF GDP GROWTH. THE WAR IS FAR FROM OVER. THERE'S AN ELECTION COMING UP THAT COULD CHANGE THE POLICY LANDSCAPE. SO, THE UNCERTAINTY IS JUST KIND OF ELEVATED, SEEMINGLY PERMANENTLY, FROM A RANGE OF POLICY SHOCKS AND SHIFTS THAT LEAVE BUSINESSES. NOW, I THINK WHAT WE'VE SEEN IS THAT BUSINESSES HAVE -- YOU KNOW, THEY'RE NOT HUNKERED DOWN IN THE CORNER. THEY'RE MOVING ON WITH THINGS. THEY'RE LEARNING HOW TO NAVIGATE PERMANENTLY ELEVATED UNCERTAINTY AND FRICTIONS. BUT, NONETHELESS, THEY'RE STILL CAUTIOUS WHEN THEY'RE MAKING THESE HIRING DECISIONS. THEY'RE STILL LOOKING TO DO THAT AS MINIMALLY AS POSSIBLE AND THEY'RE STILL LOOKING TO DO THAT AS POSSIBLE. THEY'RE STILL LOOKING TO DO THAT AS POSSIBLE. THEY'RE STILL LOOKING TO KEEP CONTROL OVER THEIR COST BASE. SO, IT'S NOT A VERY GROWTH POSITIVE LABOR MARKET. IT'S A LABOR MARKET WHERE, YES, SOME PEOPLE ARE GETTING HIRED. AND ON NET, WE'RE SEEING JOB GAINS OVER SORT OF THREE, SIX, 12-MONTH AVERAGES. OUTSIDE OF THE KIND OF AI BUILDOUT, THERE'S NOT A LOT OF GROWTH MOMENTUM. [01:07:23] Speaker 1: JUST TO THAT POINT, LOOKING AT THE JOBS FIGURES, INFORMATION ADDS 11,000. MANUFACTURING, 5,000. CONSTRUCTION, 22,000. THESE ARE ALL SECTORS YOU COULD POINT TO, JULIANNE. TO YOUR POINT, SAY, AI IS LARGELY CONTRIBUTING TO THAT. DOES THE CONCENTRATION OF THIS ECONOMY AROUND AI CONCERN YOU AT ALL? OR IS IT A THEME THAT'S JUST SO ROBUST THAT YOU THINK IT CAN CONTINUE TO CARRY US EVEN AS OTHER PARTS OF THIS ECONOMY START TO WEAKEN? [01:07:49] Speaker 12: I MEAN, A LITTLE BIT OF BOTH. I MEAN, I DO THINK THERE'S ENOUGH MOMENTUM, AND THE CAPEX PLANNING IS SO SIGNIFICANT AND, YOU KNOW, STICKY. IT DOESN'T CHANGE ON A DIME, THAT I DO THINK THERE'S ENOUGH MOMENTUM IN THIS SECTOR TO CARRY THE MACRO ECONOMY FOR A BIT, BUT, YES, I'M CONCERNED ABOUT THE NARROW BASE OF GROWTH AND HOW LEVERAGED WE ARE TO THESE VERY, VERY HIGH VALUATIONS AND A LOT OF, YOU KNOW, JUST KIND OF ASSUMING THE BEST IN TERMS OF HOW THIS BUILDOUT WILL, YOU KNOW, WHAT THE ROI WILL BE, WHICH I THINK IS ACTUALLY QUITE UNCERTAIN. AND USUALLY THESE TECHNOLOGY LEAPS, AND I DO THINK IT'S A REAL TECHNOLOGY LEAP, THERE'S NO DOUBT ABOUT THAT. BUT THEY ALWAYS COME WITH SOME MORE KIND OF FRICTION AND VOLATILITY, WINNERS AND LOSERS, YOU KNOW, SORT OF COMPLICATED ADOPTION THAT'S STRETCHED OVER QUARTERS AND YEARS, NOT MONTHS. SO I THINK IT'S FAR FROM CLEAR THAT THAT BEST-CASE SCENARIO IS THE MOST LIKELY. AND SO THEREFORE, YOU KNOW, WE ARE PRETTY VULNERABLE IF THE CONFIDENCE IN THAT BUILDOUT AND THAT ROI IS SHAKEN, THEN WE DON'T HAVE A LOT TO FALL BACK ON. [01:09:05] Speaker 2: LET ME ASK YOU THE QUESTION I ASKED KEVIN HASSED. HE TOOK CREDIT FOR THE LABOR FORCE FALLING BECAUSE OF THEIR IMMIGRATION POLICIES. AND I'M WONDERING WHEN YOU THINK ABOUT POTENTIAL GROWTH GOING FORWARD FOR THE COUNTRY, IF THAT'S SUCH A GOOD THING. [01:09:19] Speaker 12: IT'S, WELL, GENERALLY NOT GOOD FOR GROWTH. IT DEFINITELY LOWERS THE SPEED LIMIT. SO YOU CAN MAKE THE CHOICE TO BE A LOW IMMIGRATION ECONOMY. YOU KNOW, JAPAN MADE THAT CHOICE IN THE PAST AND SAW, YOU KNOW, KIND OF VERY, VERY LOW POTENTIAL GROWTH. EVEN IF YOU FACTOR IN STRONG PRODUCTIVITY, IF YOU'VE GOT A SHRINKING LABOR FORCE, YOUR RUN RATE -- I MEAN, YOU KNOW, THE ADMINISTRATION HAD PROMISED 3% GROWTH. IT'S BEEN, YOU KNOW, BELOW TWO IN THE FIRST HALF OF THE YEAR. WITH A SHRINKING LABOR FORCE, YOU'RE GOING TO STRUGGLE TO GET MUCH ABOVE THAT. SO IF YOU'RE JUDGING YOUR SUCCESS BY THE ABSOLUTE GROWTH, THAT IMMIGRATION POLICY IS BAD FOR GROWTH. AND IN GENERAL, WE'VE ALSO SEEN THERE'S LOTS OF RESEARCH SHOWING THAT IMMIGRANTS ARE ACCRETIVE TO PRODUCTIVITY. SO CAN YOU HAVE PRODUCTIVITY WITHOUT THOSE HIGH-SKILLED IMMIGRANTS IN THE TECH SECTOR, WITHOUT THE MEDICAL SECTOR IMMIGRATION, SO THAT'S STILL AN OPEN QUESTION, I THINK. [01:10:17] Speaker 1: THANK YOU SO MUCH FOR JOINING US. JULIA CORNADO OF MACCO POLICY PERSPECTIVES. THANK YOU SO MUCH FOR JOINING US. THE U.S. UNEXPECTEDLY LOST 23,000 JOBS IN JULY, RAISING FRESH CONCERNS ABOUT THE CONSUMER. BUT SHOPPING CENTER OPERATOR TENURE IS SEEING RESILIENT SPENDING WITH TENANT SALES UP 6%. THANK YOU SO MUCH FOR JOINING US. THANK YOU SO MUCH FOR JOINING US THIS MORNING. MIKE WAS POINTING THIS OUT IN THE BREAK, THAT 19,000 JOBS WERE [01:10:57] Speaker 13: LOST IN RETAIL. ARE YOU SEEING ANYTHING TO THAT DEGREE IN YOUR CENTERS? WE HAVEN'T SEEN THE IMPACT OF THAT YET. WHAT'S INTERESTING, IN OUR BUSINESS, WE ALWAYS SAY THAT THE RETAILERS ARE GOING TO PUT PRODUCT IN THE STORES WHERE THEY SEE THE MOST AMOUNT OF CUSTOMERS. AND I, OVER THE PAST MONTH OR SO, HAVE BEEN OUT IN A NUMBER OF OUR CENTERS. WE TALKED ABOUT LEVIS. WE BOUGHT A NEW CENTER. AND THE STORES ARE PACKED WITH MERCHANDISE. AND I THINK IT'S IN ADVANCE OF THAT VERY IMPORTANT BACK-TO-School SHOPPING SEASON. [01:11:30] Speaker 2: WELL, ARE THEY STILL REACTING TO TARIFFS? WE NOTICED THAT THE INVENTORIES ARE STARTING TO RISE AGAIN. YEAH. [01:11:38] Speaker 13: WELL, LOOK, I THINK THAT TARIFT PRICING IMPACT WAS LAST YEAR. AND I THINK THE CONSUMER ACCEPTED IT. IT WAS ABSORBED. AND SPENDING CONTINUED TO RISE. NOW WHAT WE'RE SEEING IS A RESET IN PRICING, BUT YET IN OUR VALUE CHANNEL, THERE'S STILL A SAVINGS OFF OF THAT NEW HIGH IN PRICE. AND I THINK OUR CUSTOMERS STILL FEEL PRETTY COMFORTABLE THAT THEY'RE GETTING THE BEST POSSIBLE VALUE FOR THEIR MONEY. [01:12:04] Speaker 1: WELL, KIND OF THE BIG MACRO IMPACTS ON THE CONSUMER. ONE, WHAT MIKE MENTIONED WITH THE TARIFFS. AND TWO, IS HIGHER PRICES FOR OIL. AND SOME OF THE EARNINGS THAT WE'VE SEEN SPECIFICALLY AMONG RESTAURANTS, A LOT OF THE COMMENTARY IS LESS TRAFFIC, BUT WHEN THEY'RE COMING IN, THEY'RE SPENDING MORE. AND THAT MIGHT SORT OF RELATE TO PEOPLE MAKING LESS TRIPS. WHAT ABOUT YOUR OUTLETS? ARE PEOPLE MAKING THE TRIP LESS OFTEN BUT DOING ALL THEIR SHOPPING AT ONCE AND BUYING MORE WHEN THEY GO THERE? [01:12:27] Speaker 13: THAT'S NOT WHAT WE'RE SEEING. WHAT'S INTERESTING ABOUT THE OUTLETS, THE OLD NARRATIVE ON OUTLETS WAS, YEAH, IT WAS A SPECIFIC SHOPPING TRIP THAT MAYBE YOU MADE ONCE A SEASON. WE'RE FINDING THAT THE POPULATION SHIFT HAS BROUGHT MORE PEOPLE, PERMANENT POPULATION, TO THE MARKETS WHERE WE HAVE SHOPPING CENTERS. AND IN RESPONSE TO THAT, WE'VE BEEN REMERCHANDIZING THESE CENTERS. WE'VE BEEN ADDING MORE FOOD AND BEVERAGE, MORE ENTERTAINMENT, THINGS THAT ARE GOING TO DRAW THE CUSTOMER, GOING TO HOLD THE CUSTOMER, AND ULTIMATELY GET THAT MULTIPLE VISIT AS OPPOSED TO THAT ONE SEASONAL SPECIFIC VISIT TO THOSE CENTERS. [01:13:01] Speaker 2: WHAT ARE YOUR TENANTS TELLING YOU ABOUT THEIR EXPECTATIONS FOR THE FUTURE? I'M PUTTING THIS IN THE CONTEXT OF WEAK CONSUMER CONFIDENCE, RISING CREDIT CARD DELINQUENCIES, PAY FALLING BEHIND THE LEVEL OF INFLATION AND THE SAVINGS RATE GOING DOWN. IT ALL SEEMS TO BE ADDING UP TO MORE BAD NEWS AHEAD FOR RETAIL. [01:13:23] Speaker 13: LOOK, NRF PREDICTS THAT THIS BACK-TO-SCHOOL SHOPPING SEASON IS GOING TO BE THE BIGGEST OF ALL TIME. AND YOU'RE RIGHT, WE LIVE SEASON TO SEASON IN THE RETAIL BUSINESS. SO THAT HEADWIND THAT WE'RE FACING THAT COULD BE SOMETHING THAT THE CUSTOMER MIGHT ENCOUNTER GOING INTO THE HOLIDAY SELLING SEASON, I THINK WE'LL SEE THE RETAILERS RESPOND WITH BETTER VALUE, BETTER OPPORTUNITY, WHICH IS GOING TO DRIVE THE CUSTOMERS INTO THE STORES AND HOPEFULLY CREATE [01:13:54] Speaker 1: MORE CONVERSION. YOU WERE, I GUESS, IN A LOT OF THE WORLD CUP CITIES, I [01:14:03] Speaker 13: THINK, EIGHT OUT OF THE ELEVEN. DID THAT DRIVE TRAFFIC AT ALL? IT SURE DID. NOT ONLY DID IT DRIVE DOMESTIC TRAFFIC, BUT INTERNATIONAL TRAFFIC. CUSTOMERS, THE COSTOMERS, THE BUCKY'S OR THE CHICK-FIL-A'S OR THE MOVIE THEATERS OR THE BARBECUE, THE THINGS THAT THEY'RE POSTING ON INSTAGRAM. [01:14:30] Speaker 1: DID THEY DRINK THE RESTAURANT ESTABLISHMENTS DRY AS WELL? DID THE SCOTTS COME IN? [01:14:35] Speaker 13: I THINK THE CITY OF KANSAS CITY WAS PRETTY DRY, BUT THEY GOT IT BACK PRETTY QUICK. [01:14:41] Speaker 2: YOU MENTIONED THE HOLIDAY SEASON. IS IT TOO EARLY TO KIND OF PREDICT? WELL, I GUESS IT'S NOT, BECAUSE THE RETAILERS HAVE TO BE ORDERING NOW FOR THE HOLIDAYS. [01:14:52] Speaker 13: YEAH, LOOK, WE ANTICIPATE, AGAIN, PARTICULARLY IN THE OUTLET CHANNEL, IT ALWAYS SEEMS TO US THAT THE CUSTOMER, MACRO ECONOMIC HEADWOOD, NOT WITHSTANDING, WE SEE A LOT OF TRAFFIC FOR THE HOLIDAY SEASON. WE ARE SHOWCASING THE BEST BRANDS IN AMERICA, FROM POLO TO COACH, TO TORY BIRCH, TO NIKE, AT THE BEST POSSIBLE PRICE. SO IF YOU ARE LOOKING TO STRETCH THAT SPEND OVER THE HOLIDAY SEASON, THEY CAN DO -- THE EXECUTION IN AN OUTLET IS PROBABLY THE BEST PLACE WHERE SHOPPERS CAN COME AND GET THE MOST FOR THEIR MONEY. HISTORICALLY, A LANDLORD WOULD PROBABLY JUST BE COLLECTING RET CHECKS. [01:15:29] Speaker 1: BUT THINGS HAVE CHANGED. I KNOW YOU HAVE A PLATFORM YOU ARE OFFERING TOO. WHAT EXACTLY ARE YOU DOING THERE? [01:15:41] Speaker 13: FIRST OF ALL, WE ARE NOT AN AI COMPANY, BUT WE USE AI TO OPTIMIZE OUR BUSINESS. I THINK THAT IS AN IMPORTANT DISTINCTION. THERE ARE SO MANY USE CASES OUT THERE TODAY THAT AI ALLOWS YOU TO OPTIMIZE AND MAKE YOUR PEOPLE SMARTER, MAKE YOUR PEOPLE MORE EFFICIENT, MAKE YOUR PEOPLE BETTER. THE BIGGEST TOUCH POINT FOR US IS REALLY THE MARKETING END. WHAT WE FIND IS THAT CUSTOMERS ARE FAR MORE LIKELY TO OPEN UP OUR SMS MESSAGING, OUR TEXT MESSAGING, OUR E-MAIL MESSAGING WHEN THOSE ADS THAT WE DROP FOR THEM ARE PERSONALIZED. SO AI HAS ALLOWED US TO BECOME FAR MORE PERSONAL. WE UNDERSTAND WHO OUR CUSTOMER IS. IF THEY HAVE OPTED INTO OUR TANGER CLUB PROGRAM AND WE HAVE MILLIONS AND MILLIONS OF PEOPLE IN THAT PROGRAM, WE CAN THEN GO BACK AND WE CAN REWARD THEM FOR THEIR LOYALTY AND WE CAN HIT THEM WITH ADVERTISING WHERE THEY ARE, BUT MORE SPECIFICALLY WITH THE BRANDS THAT THEY WANT. SO WE ARE TRAINING THEM TO OPEN UP THE MESSAGING AS OPPOSED TO JUST DELETING THEM. [01:16:38] Speaker 1: JUST REALLY QUICKLY, BECAUSE THERE IS THIS BIG DEBATE HAPPENING NOW, LIKE DOES IT REPLACE LEGACY SOFTWARE? COULD YOU SEE TANGER MOVING IN A WAY THAT YOU GET MORE NATIVE WITH A.I. AND MAYBE OTHER SERVICES YOU HAVE USED FROM OTHER COMPANIES, ENTERPRISE SERVICES YOU DON'T NEED AND YOU CAN KIND OF BRING IT IN HOUSE WITH THESE TOOLS? [01:16:54] Speaker 13: WELL, WE ARE IN THE EARLY INNINGS OF THAT. SO WE HAVE ALREADY -- WE USE A PROGRAM CALLED YELLOW A.I. TO HANDLE OUR CUSTOMERS SERVICE AT CHAT BOT THAT HANDLES OVER 50% OF THE INTERACTIONS WITH CUSTOMERS IS DONE BY CHAT BOT. NOW, IF A CUSTOMER GETS FRUSTRATED OR HAS FURTHER QUESTIONS, THEY WILL GO TO A PERSON. I THINK WHAT HAPPENS IS THAT A.I. PLATFORM ALLOWS US TO TAKE A LOT OF THAT DAY-TO-DAY REAL QUICK QUESTIONS OFF OUR PLATE AND THEN PUT THEM IN THE HANDS OF THE PROFESSIONALS ONCE THEY GET CHALLENGED TO A PLACE WHERE PEOPLE WANT SOME CUSTOMER SERVICE. FOR US, THAT IS THE FIRST ENTRY POINT INTO IT. WE ARE SEEING SUCH GREAT SUCCESS WITH THAT THAT WE KNOW THE [01:17:42] Speaker 1: FUTURE FOR US IS TO INTERACT FAR MORE THAN WE ARE CURRENTLY. THAT'S THE TANGER CEO, STEPHEN YALOV. LET'S NOW GET A CHECK ON MARKETS OVER AN HOUR INTO YOUR TRADING DAY OFF OF THE HIGHS BUT STILL UP HALF A PERCENT FOR THE S&P. THE NASDAQ HIGHER BY 7/10. THAT IS BEING AIDED BY A SURPRISE DOWNSIDE TO THE JOBS FIGURES WHICH WE HAVE BEEN DISCUSSING. WE ARE SEEING A DIFFERENCE IN THE HIGH SCHOOL. WE ARE SEEING ALLOWING YIELDS TO COME IN FOR YOUR TENURE BY FOUR BASIS POINTS. THE FRONT END OF THE CURVE DROPS EVEN MORE DRAMATICALLY THIS MORNING AS YOU WOULD EXPECT AS WE START TO PRICE OUT RATE HIKES. THAT IS DOWN BY ABOUT SIX BASIS POINTS. [01:18:15] Speaker 5: LET'S LOOK AT THE SINGLE NAME MOVERS. WITH THAT IS NORMAL LINDA. A TOUGH DAY FOR SWEET GREEN, TUMBLING TO ITS LOWEST SINCE APRIL. THAT IS AFTER THE COMPANY SLASHED ITS ANNUAL GUIDE, CUSTOMERS AVOIDING FRESH PREPARED FOODS. WINDY IS TRYING TO GAIN SOME GROUND AFTER WITHDRAWING ITS 2026 OUTLOOK AND CUTTING ITS DIVIDEND FOLLOWING A SALES DECLINE IN THE SECOND QUARTER. THE CEO IS LOOKING FOR FLEXIBILITY TO INVEST IN THE COMPANY'S TURNAROUND PLAN. SHARES UP JUST BELOW 2%. AND FINALLY, DRAFT KINGS CLIMBING DESPITE MISSING EXPECTATIONS WITH GROWING COMPETITION FROM CALCI AND POLY MARKET. THE COMPANY SAYS THE BUSINESS STAYED STRONG EVEN AFTER THE WORLD CUP GIVING THE CEO CONFIDENCE FOR THE REST OF THE YEAR. BE HONEST GUYS, DID YOU GUYS PLACE ANY WORLD CUP BETS? IT SEEMS AS THOUGH A LOT OF PEOPLE WERE. SHARES ARE UP ABOUT 5.9%. THOSE ARE YOUR MORNING MOVERS. DANNY? [01:19:10] Speaker 1: NORAH, THANK YOU VERY MUCH. CAN'T SAY I DID NORMAL INTO THERE WITH YOUR MOVERS. MIKE, ANY SPORTS BETTING? NO, I'M SURE YOU COULD CREATE THAT TRADE BECAUSE YOU CAN LITERALLY GAMBLE ON ANYTHING THESE DAYS. COMING UP, WE'RE GOING TO TALK NOT GAMBLING, ACTIVISM INVESTING, PUSHING FOR MAJOR CHANGES AT ETHAN ALLEN. WE'LL SPEAK TO THE COMPANY CEO THAT'S COMING UP NEXT. THIS IS BLOOMBERG. [01:19:44] Speaker 14: YOU CAN'T ALLOW SALES TO DECLINE EVERY YEAR FOR 20 YEARS. BECAUSE YOU'LL EAT INTO YOUR FIXED COST AND YOU'LL GET NEGATIVE OPERATING LEVERAGE. SO THE BUSINESS IS FUNDAMENTALLY VERY STRONG. THE PRODUCTS ARE GREAT. FRUKE IS CORRECT. THE DOMESTIC MANUFACTURING IS A HUGE ADVANTAGE FOR THE BUSINESS IN A TARIF WORLD. THERE'S BEEN NO ATTENTION PAID TO SALES AND MARKETING AND ESPECIALLY DIGITAL. [01:20:07] Speaker 1: PART OF MY INTERVIEW WITH DGB INVESTMENTS FOUNDER DOUGLAS BERGERON, HE PUSHES FOR CHANGES AT ETHAN ALLEN COMING IN AS AN ACTIVIST INVESTOR. SHARES ARE UP THIS YEAR OF ETHAN ALLEN AND CONTINUE TO REBOUND SINCE HITTING LOWS IN MAY. HERE WITH US NOW IS FAROUK KATHWARI, ETHAN ALLEN CHAIRMAN AND CEO. FAROUK, REALLY GREAT TO SEE YOU THIS MORNING. THANK YOU SO MUCH FOR COMING. I WANT TO JUST GIVE YOU THE PLATFORM AND THE CHANCE TO RESPOND. BERGERON THERE SAYING YOU'RE LIKE A TOBACCO COMPANY. YOU'RE SITTING ON CASH. SALES ARE DROPPING IT. YOU'RE STILL PAYING OUT DIVIDENTS. HE CALLED YOUR COMPANY A MELTING ICE CUBE. WHAT IS YOUR RESPONSE AND YOUR MESSAGE TO THE ACTIVIST INVESTOR? [01:20:45] Speaker 15: FIRST OF ALL, IT'S GOOD TO BE HERE. I HAVE AN OFFICE ABOUT TWO BLOCKS FROM HERE, SO IT'S NOT A LONG DISTANCE. WE HAVE AN ETHAN ALLEN DESIGN CENTER HERE ON 56th AND LEXINGTON. WELL, YOU KNOW, MY PERSPECTIVE IS THAT WE THINK LONG-TERM. WE HAVE BEEN DOING AND ETHAN ALLEN HAS BEEN AROUND FOR 94 YEARS. I'VE BEEN AROUND THERE FOR CLOSE TO 40 YEARS. WE HAVE GIVEN IN THE LAST 20 YEARS A BILLION DOLLARS IN DIVIDENTS. WE HAVE INVESTED A GREAT DEAL IN CAPITAL EXPENDITURES. WE HAVE REPOSITIONED THE COMPANY AND WE CONTINUE TO DO THAT. FOR INSTANCE, YOU KNOW, WE HAVE TODAY OUR DESIGN CENTERS. OUR STORES ARE CALLED DESIGN CENTERS. WE HAVE NOW REDUCED THE SIZE OF OUR DESIGN CENTERS BY 50% FROM ABOUT CLOSE TO 14,000, 15,000 FEET TO AN AVERAGE OF 7,000 OR 8,000 FEET. AND THE REASON, I'LL GIVE THE REASON WHY WE'VE DONE IT. WE ARE A VERTICALLY INTEGRATED COMPANY. WE HAD 20 MANUFACTURING PLANTS ONLY 8 OR 10 YEARS BACK. TODAY, WE ARE FOCUSED IN VERMONT, NORTH CAROLINA, MEXICO, AND HONDURAS. WE HAD ABOUT 15 NATIONAL DISTRIBUTION CENTERS, 100 WEAR HOUSES. TODAY, WE HAVE ONE NATIONAL DISTRIBUTION CENTER. A LOT OF THIS HAS BEEN DONE IN THE LAST SIX OR EIGHT YEARS. NOW, BECAUSE THIS WAS THE TIME OF A LOT OF REINVENTION, A LOT OF FOCUS ON CHANGING THE SIZE OF A DESIGN CENTER. WE HAVE LESS INTERIOR-- WE ARE BUSINESSES INTERIOR DESIGNERS. WE HAVE TODAY ABOUT 30 TO 40% LESS INTERIOR DESIGNERS THAN WE HAD FOUR OR FIVE YEARS BACK, BUT MUCH STRONGER TECHNOLOGY. [01:22:23] Speaker 1: AND FAROUK, YOU KNOW, THAT'S ALL IN WELL AND GOOD, BUT, YOU KNOW, IF I AM CHANNELING DOUGLAS BERGERON, HIS ARGUMENT WOULD BE IT DOESN'T MATTER, BECAUSE TOP-LINE SALES HAVE DECREASED FROM 2007 TO BEING 1 BILLION TO NEARLY HALF OF THAT AMOUNT. SO HIS ARGUMENT IS BASICALLY SOMETHING HAS GONE WRONG. WHY ARE TOP-LINE SALES DECREASING SO MUCH? [01:22:42] Speaker 15: WELL, BECAUSE OF THE FACT THAT WE HAVE FOCUSED ON INTERIOR DESIGN. WE HAVE NOT FOCUSED ON SELLING TO A MASS. NOW, THE INTERIOR DESIGN, THE CUSTOMER THAT WE HAVE, HAS BEEN MORE GREATLY IMPACTED WITH THE ECONOMY, HAS BEEN IMPACTED WITH ALL THE ISSUES THAT ARE FACED WITH. NOW, WE COULD HAVE INCREASED OUR BUSINESS BY EXPANDING OUR REACH REACH AND GOING ALL OVER. WE DIDN'T. THAT IS THE REASON. SO WE FELT IT WAS IMPORTANT FOR US TO MAINTAIN THE CREDIBILITY OF OUR INTERIOR DESIGNERS, MAINTAIN THE CREDIBILITY OF OUR CUSTOMERS. AND THAT HAS EFFECTED. BUT THE GOOD NEWS IS THAT THEY ARE COMING BACK. WE HAVE REDUCED THE SIZE OF OUR INTERIOR DESIGN BY 50%. WE HAVE REDUCED THE SIZE OF OUR INTERIOR DESIGN CENTER BY 50%. SO IF WE HAD DONE, THAT IS, EXPANDED OUR REACH TO GO ALL OVER THE PLACE. THEY SAID, I MEAN, I KNOW THE ARGUMENTS, WE COULD HAVE SOLD A LOT THROUGH DIGITAL MEDIUMS. WE COULD HAVE SOLD THROUGH WAVEFARE AND ALL THOSE THINGS. WE FELT WE COULD HAVE DONE THAT. OUR SALES WOULD HAVE GONE UP. BUT WE FELT THAT WAS NOT THE RIGHT THING TO DO. WE WANTED TO MAKE IN THE CREDIBILITY OF OUR -- WE HAVE ONE OF THE LARGEST INTERIOR DESIGN NETWORK. SO TAKING CARE OF THEM WAS IMPORTANT. AND WE SAID IT'S BETTER FOR US TO REDUCE, TAKE CARE OF THEM, AND THEN GO BACK. AND DURING THAT PERIOD, REPOSITION EVERYTHING. WE HAVE NOW REPOSITIONED OUR DESIGN CENTERS. THEY'RE 50% SMALLER. WE REPOSITION OUR MANUFACTURING, LOGISTIC. AND WE ARE NOW -- AND A LOT OF TECHNOLOGY. I KNOW WE ARE NOT IN TECHNOLOGY. WE HAVE A LOT OF TECHNOLOGY. [01:24:15] Speaker 2: WELL, THAT'S ONE OF THE POINTS THAT BERGERON MAKES. HE ARGUES THAT THE STORES ARE OUTDATED, AND THAT YOU DON'T HAVE A BIG DIGITAL PRESENCE. AND THAT'S WHERE RETAIL IS GOING. [01:24:25] Speaker 15: NO, WE ARE -- ACTUALLY OUR STORES ARE NOT OUTDATED. THEY'RE ACTUALLY MUCH MORE CURRENT THAN THEY'VE EVER BEEN. IN THE LAST FOUR OR FIVE YEARS, WE HAVE REPOSITIONED OUR DESIGN CENTERS, BOTH IN LOCATIONS AND SIZE, AND MAKING THEM LOOK BEAUTIFUL. TWO BLOCKS FROM YOU, YOU TAKE A LOOK AT IT. WE USED TO HAVE, THREE YEARS BACK, ONE ON 30,000 SQUARE FEET, RIGHT ON 59th STREET AND THIRD AVENUE NEXT TO BLOOMINGDALE. WE HAVE REDUCED THE SIZE BECAUSE TODAY, TECHNOLOGY AND INTERIOR DESIGN IS PLAYING A TREMENDOUSLY IMPORTANT -- [01:24:57] Speaker 1: TREMENDOUSLY. ONE OF THE THINGS THAT BERGERON SAID WAS THAT IN YOUR 10K AND YOU'VE HAD KIND OF THIS BOILERPLATE LANGUAGE IN THERE FOR MOST OF YOUR ANNUAL FILING, SAYING THAT IF THERE IS A [01:25:12] Speaker 15: CONSUMER SHIFT INTO ONLINE, IT'S A THREAT FOR ETHAN ALLEN. HE SAYS THAT'S OUTDATED FOR 2026. NO, THAT'S NOT THE CASE. OUR FOCUS HAS BEEN, IN FACT, WHEN OUR CUSTOMERS COME TO OUR WEBSITE, WE ENCOURAGE THEM TO MEET OUR DESIGNERS. IT'S LESS BECAUSE WE WANT THEM TO INTERACT WITH OUR INTERIOR DESIGNERS. WHEN THEY DO THAT, OUR SALE IS THREE TO FIVE TIMES MORE WHEN A CUSTOMER INTERACTS WITH AN INTERIOR DESIGNER. SO, YES, IT IS THE FACT THAT WE ARE NOT DOING A LOT OF BUSINESS ON OUR WEBSITE. WE ALSO DECIDED THAT IT WAS IMPORTANT FOR THE CUSTOMERS TO INTERACT WITH OUR DESIGNERS. SO, ENCOURAGE THAT. RIGHT. [01:25:47] Speaker 1: AND I KNOW THIS HAS BEEN YOUR MODEL, RIGHT? AS YOU'VE BEEN EMPHASIZING, SORT OF INTERIOR DESIGN OVER ONLINE. FAROUK, THERE'S ONE SPECIFIC THING THAT THE ACTIVIST SAID THAT I WANT TO GIVE YOU A CHANCE TO RESPOND TO. BECAUSE HE DIDN'T JUST TALK ABOUT THE COMPANY AS A WHOLE. HE TALKED ABOUT YOU YOURSELF. I THINK IT'S IMPORTANT FOR YOU TO BE ABLE TO RESPOND TO THAT. SO, JUST FOR OUR AUDIENCE, IN CASE THEY DIDN'T SEE, I KNOW YOU SAW THE INTERVIEW. JUST TO SHOW WHAT HE SAID, HERE'S SPECIFICALLY WHAT DOUGLAS BERGERON HAD TO SAY ON THAT. [01:26:13] Speaker 14: FAROUK KATHWARI DESERVES A LOT OF CREDIT FOR THE COMPANY THAT HE'S BEEN RUNNING FOR 38 YEARS, BUT HE'S 82 YEARS OLD. FAROUK HAS MANAGED TO LOSE MARKET SHARE IN GOOD MARKETS, GOOD HOUSING MARKETS, AND IN BAD HOUSING MARKETS. THE PRESS WE'RE GETTING WITH THE PROXY CAMPAIGN WILL, I THINK, ALLOW US TO GO OUT AND FIND A VERY, VERY COMPELLING CEO THAT CAN HELP TRANSFORM THIS BUSINESS. [01:26:34] Speaker 1: I MEAN, HE'S SAYING HE DOESN'T WANT TO JUST REPLACE THE BOARD. FAROUK, HE WANTS TO REPLACE YOU. [01:26:40] Speaker 15: I THINK THAT, YOU KNOW, HIS STATEMENTS ARE VERY, TO ME, AMAZING AND WRONG TO ATTACK PERSONALLY ON AGE. I KNOW THAT I CHECKED HIM OUT. HE'S ABOUT 66, 67 YEARS OLD. AND I COULD SAY HE LOOKS 95. I WON'T SAY THAT. I WON'T SAY THAT. I LOOK MUCH YOUNGER THAN I AM, BECAUSE I AM. I'M A MOUNTAIN CLIMBER. I'M A SPORTS PERSON. I HAVE A BOAT. I HAVE A FARM. SO, YES, THE FACT IS, IF I BELIEVE THAT I DON'T HAVE THE ENERGY OR THE ABILITY OR THE MIND TO RUN A BUSINESS, THEN I SHOULD NOT BE DOING IT. OUR BOARD, EVERYBODY ELSE, HAS NEVER RAISED THIS ISSUE. THEY KNOW THAT I'M MORE ACTIVE THAN SOMEBODY WHO IS 30 YEARS OLD. [01:27:24] Speaker 1: I HAVEN'T CLIMBED ANY MOUNTAINS RECENTLY. JUST TO UNDERSCORE THAT POINT. I HAVE NOT DONE THAT. [01:27:29] Speaker 15: NO, NO. I LIKE HIKING. IN FACT, MY SON JUST BOUGHT A HOUSE IN ASPEN. AND I'M GOING TO GO THERE SO WE CAN CLIMB SOME MOUNTAINS THERE. THAT WILL BE FUN. THAT WILL BE FUN. [01:27:40] Speaker 2: BUT WHERE DOES THIS GO IN THE MEANTIME? NOW, BERJAN HAS A RATHER NUCLEAR KIND OF PROPOSAL ON THE TABLE. AND I ASSUME THAT IS REJECTED OUT OF HAND. IS THERE ANY WAY YOU WORK WITH HIM TO DO ANY CHANGES? [01:27:54] Speaker 15: WELL, LOOK, WE ARE ALWAYS THERE TO TALK TO PEOPLE, TO LISTEN TO PEOPLE. HE HAS TALKED TO ME BEFORE AND I WOULD BE HAPPY TO TALK TO HIM. I THINK THAT OUR BOARD IS A VERY DISTRINGUISHED, KNOWLEDGEABLE BOARD, EXPERIENCED BOARD, AND DIFFERENT AREAS OF EXPERTISE. WE ARE ONE OF THE STRONGEST BOARDS. AND I KNOW THEIR FOCUS IS THAT WE SHOULD DO SOMETHING SHORT-TERM. WE SHOULD BUILD A LOT OF BUSINESS. WE SHOULD DO E-COMMERCE AND EVERYTHING ELSE. WE COULD DO ALL OF THOSE THINGS, BUT WE HAVE NOT DONE IT BECAUSE WE WANT TO CONTINUE THE PROCESS OF HAVING AN INTERIOR DESIGN NETWORK FOCUSED ON GREAT QUALITY, GREAT SERVICE, AND WE BASICALLY THINK OF THIS. WE DELIVER OUR PRODUCTS TO OUR CUSTOMERS AT THE SAME PRICE WHETHER YOU ARE LIVING IN SEATTLE, CHICAGO, MIAMI, NEW YORK. NOW, THAT DOESN'T HAPPEN BY ACCIDENT. IT IS ONE OF THE VERY STRONGEST NETWORK OF LOGISTICS, MANUFACTURING. OUR INTERIOR DESIGN IS VERY, VERY STRONG. YES, IN THE LAST FEW YEARS WE HAVE BEEN IMPACTED WITH ALL WHAT IS TAKING PLACE IN THE MARKETPLACE. NOW, WE COULD HAVE INCREASED OUR BUSINESS BY GOING TO OTHER CHANNELS. I SAID NO. WE ARE GOING TO CONTINUE THE FOCUS ON INTERIOR DESIGN. WE ARE VERY WELL POSITIONED. YOU KNOW, WE GIVE GOOD DIVIDENTS. WE GOT GOOD CASH. WE ARE GOING TO CONTINUE TO DO THAT. [01:29:12] Speaker 1: WE REALLY APPRECIATE YOUR TIME COMING IN AND DISCUSSING THIS WITH US. I KNOW THIS ISN'T YOUR FIRST TIME WITH AN ACTIVIST. SO PERHAPS YOU HAVE SOME PRACTICE GOING DOWN THIS PATH AGAIN. THANK YOU SO MUCH. WE REALLY APPRECIATE IT. THAT IS FARUK KATHWARI OF ETHAN ALLEN. ANY MOUNTAINS COMING UP BESIDES ASPEN? [01:29:27] Speaker 15: WELL, NO, I ALWAYS LIKE IT BECAUSE, YOU KNOW, FIRST OF ALL, AS I SAID, IN HUDSON, NEW YORK, I HAVE THE FARM. I ACTUALLY -- THIS BOOK, YOU SHOULD READ IT. I WROTE A BOOK THAT SAYS TRAILBLAZER, WHICH SAYS FROM THE MOUNTAIN OF KASHMERE TO THE SUMMIT OF GLOBAL BUSINESS AND BEYOND. THAT IS MY FOCUS. I'M A MOUNTAIN CLIMBER. [01:29:46] Speaker 1: AND A GOOD BUZZ MARKETER, TOO. THANK YOU FOR THAT VERY MUCH. [01:29:50] Speaker 15: THERE YOU GO. ALSO, ONE MORE THING I SHOULD SAY, THIS IS OUR CURRENT DIGITAL MAGAZINE. AND GUESS WHAT IS THERE? IT SHOWS ME IN MY FARM. [01:30:00] Speaker 1: PEOPLE PAY MONEY TO GET THIS AD SPACE. SO WE'RE GOING TO HAVE TO GO AND PAY OUR BILLS AND GO TO COMMERCIAL BREAK. THANK YOU AGAIN FOR JOINING US. FAROUK HATHWARI OF ETHAN ALLEN, YOU'RE WATCHING BLOOMBERG TV. IRAN AND OMON ARE MOVING CLOSER TO A DEAL ON THE STRAIGHT OF HORMOUZ. IRANIAN LAWMAKERS ARE STILL DEBATING THE TERMS, INCLUDING POTENTIAL RESTRICTIONS ON U.S. AND ISRAELI LINKED SHIPPING. BLOOMBERG WASHINGT CORRESPONDENT TYLER KENDALL JOINS US NOW FROM CAMP GRAYLING ARMY BASE IN MICHIGAN. AND TYLER, I KNOW YOU'VE BEEN HAVING CONVERSATIONS OVER THERE WITH VARIOUS MILITARY LEADERS. I WONDER TO WHAT DEGREE IT SEEMS LIKE THIS WILL BE A NONSTARTER, A PROPOSAL TO OPEN THE STRAIGHT BUT NOT TO THE U.S. AND ISRAEL AND CHARGE HIGH FEES FOR PEOPLE WHO HAVE ATTACKED IRAN. [01:30:55] Speaker 16: MILK DANNY, IT APPEARS VERY EVIDENT THAT THE U.S. IS NOT GOING TO BE IN FAVOR OF ANY SORT OF RESTRICTIONS, INCLUDING WHEN IT COMES TO POTENTIAL COMPENSATION IN ORDER TO USE THE STRAIGHT OF HORMOUZ, EVEN AS THE U.S. IS PUSHING FOR THAT CRITICAL WATERWAY TO OPEN AS SOON AS POSSIBLE. WE DID HEAR FROM PRESIDENT TRUMP LAST NIGHT TELLING REPORTERS THAT THERE WAS PROGRESS. HE SAID THAT THE TALKS WERE, QUOTE, MOVING ALONG. BUT HE ALSO ANSWERED CRITICALLY WHEN IT COMES TO THE IDEA THAT AS THE CONFLICT KEEPS GOING ON, THE U.S. IS RUNNING LOW ON MUNITIONS. PRESIDENT TRUMP DISPUTED RECENT REPORTING WHEN IT COMES TO OUR U.S. STOCKPILES. BUT I WOULD POINT YOU TO SOME NEW DOCUMENTS PROVIDED TO CONGRESS WHEN IT COMES TO THE FISCAL YEAR SUPPLEMENTAL BUDGET REQUEST RELATED TO THE CONFLICT IN IRAN. $67 BILLION THAT THE ARMY IS ASKING FOR. THAT INCLUDES ABOUT 18.2 TO REPLACE THOSE HIGH-END WEAPONS LIKE THE CONFLICT THAT WE ARE SEEING BEING USED IN THE CONFLICT. I JUST SPOKE TO THE U.S. ARMY SECRETARY ABOUT THIS WHO SAYS THAT THEY ARE TRYING TO RAMP UP PRODUCTION WITH COMPANIES AS QUICKLY AS POSSIBLE. [01:31:59] Speaker 1: TYLER, THANK YOU SO MUCH. WE ARE LOOKING FORWARD TO HEARING THOSE CONVERSATIONS. BLOOMBERG'S TYLER KENDALL AT CAMP GRAYLING IN MICHIGAN. AND ARMY SECRETARY DAN DRISKOL, THE CONVERSATION BETWEEN HIM AND TYLER WILL AIR ON BALANCE OF POWER. THAT IS IT FOR OPEN INTEREST. HAVE A GREAT WEEKEND.