Barbara and me come to you specifically on the consumer because it's so much at the heart of our economy. We talked to this week
with the chair and CEO of Bank of America Brian Moynihan who said he's looked at the consumer from where he sits. He has a
lot of access in the consumer data. He says it's really very strong. And that will take us through the tightening that we're
looking forward from the Fed. You agree. So I think what I was talking about was what he was saying
currently and this week the market got excited about housing starts. I think those are lagging indicators and you can't
create Alpha if you're driving with the rearview mirror. If you look at how sales to me. That's far more indicative of what is
going on in the S&P homebuilder index. Wouldn't be down 28 percent this year if we didn't have a problem. National home
sales have been down in three of the four last months. So the consumer is not feeling as good as they did this time last year.
And if we just want to look at sales and retail sales 20 21 is an uncomfortable year. That was peak sales for peak sales. Peak
retail sales. Retail sales were up seventeen point two percent in 2021. So
every company is facing really tough comps. And I think the street is extrapolating the strength of the consumer in 2021.
And it's not going to happen. So I look at companies that look like they're on 10 times earnings but on a normalized earnings
number they're more like 30 times. And I can give you multiple examples of that. So just tax late right now given we're
estimates are we are very short. Discretionary consumer. So give us a couple examples. What do you run toward in that world
Barbara and what do you run away from. OK so let's look at Tesla. They had a great great quarter this week and I would say
that's good. They've got purchasing power but that to me is not indicative of what's going on in the auto market. If you look at
a CarMax or a car or an auto leads this morning they've had a terrible time. And so you look at something like CarMax and 50
percent of their profits are from auto sales. So that's a function of commission and volume. Last year they sold eleven
point seven million cars in the great financial crisis. They sold nine and a half. A normalized number is 10 and a half. So I
don't think they're going to do eleven point seven million car sales this year. The other 50 percent of their earnings are from
NASA. And that's a function of spreads and loan loss provisions both of which are below a normalized number. So in my math the
carbon CarMax is over earning by 10 percent on the top line. And it was over earnings finance. And so that's 30 percent over
earning. So on LEAP. Yes. Of five dollars and 15 times multiply it to 75 target and the stock's at 90 today. So this is what I
mean about ISE comparable comps and unrealistic expectations. This is a Rick were you on the consumer right now because it's
so important. I mean when you talk to people like Secretary Yellen she points to the strength in the job market. Is that
going to get us through. So I think it's more complex. Lisa Abramowicz said around the
housing market housing markets it is going through a stagflation very dynamic. There's an affordability problem that is that is
profound. You're seeing mortgage applications drop as a result of that. Homebuilders such as you are saying it's definitely
down. I completely agree with that. I think you're going to see consumption slowing. You are seeing
that because of this dynamic around where fuel prices are where food prices are. So you are seeing some pullback from the
consumer. But I think it's much more complex around. I mean not quite frankly my career. I've never seen a consumer more loaded
loaded for bear than they are than they are today. So with some of the stocks I mean it's two and a half trillion of savings
that the consumer still has. We track this number really closely tuned actually in the still of savings from the fiscal stimulus.
You also as you saw you have a job market that is a legislatively white hot. And you know consumers tend to spend
based on there there. And you're saying by the way the quits rate is really high. And that's when the when the when
individuals are confident in their job prospects. And then the consumer has delivered and actually looked at something today
that first time in 30 years cash on hand is higher than debt for consumers. That is a pretty extort. That's generational change.
So I think I think Barbara is right around. The consumer can wait and be patient when it sees prices that are extremely high
and you compare them to where they were what consumption was last year before these prices were high. I do think you'll see
some pullback of that. But you know I'm pretty far from this is a recession a recession or a construct. When you've got this
sort of firepower by the way sitting on corporate balance sheets as well you've got that sort of firepower. So I'm a bit more
enthusiastic about the consumer can be in good shape and be supportive. But but agree with the fact they can be patient and
pull back when when you see the prices of food escalate so quickly which they will continue to do.
Barbara is the household balance sheet going to protect us from recession.
I hear what Rick saying but when you look at that two and a half trillion and you just look at just what rates are done on a 30
year mortgage for the average homeowner the average mortgage expenses. Five hundred dollars more per month at six thousand
dollars a year. You add that to higher gas prices higher rent higher food and you can see how you can blow through that two to
half trillion extra savings pretty quickly. So I just you know Rick I agree that you know consumers in better
shape than perhaps they were when they had more debt. But I also think the cost of living is just so much higher today that when
real weekly average earnings are down and retail sales are down. Right. That combination of lower spending and lower earnings
over the last 60 years has always meant you're heading into a recession. And that's where we are. Both of those figures are
negative for average weekly earnings. The numbers down negative three point three percent year on year. And retail sales are now
negative one point six percent year on year. So that tells you the consumer isn't feeling healthy. And in addition to that they
no longer have the stimulus checks. So does the consumer have more money. No I don't think they do. It's not incoming anyway.
Rick one last point briefly if we can. We haven't talked at all about China. The shut down in China. Is that gonna have a
substantial thanks in our economy. So is China is is almost 20 percent of the global economy. When
do you when you create a dynamic of a shutdown not only does it impact the economy in terms of consumption in China and the
effect that has on the global economy particularly things like commodities that are building products et cetera it is pretty
significant. And then when you talk about supply chains shut down how big multinational companies have to deal with where
they shut down that it will have an impact. Listen the thing I think you'll have to put into perspective with that is is the
fact that China is putting in a tremendous amount of monetary stimulus. Probably look at the last three days what's happened
to their currency. They're letting their currency weaken. They've been very clear about about the triple R in terms of how
they're going to be accommodative from that perspective. And so there was a twenty four point plan they put in place. So China
joined us pretty extraordinary their ability to address these issues. But in the near term it's a slowdown and it has global
ramifications and it's a multifaceted way.