1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:31,200 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. So 7 00:00:31,360 --> 00:00:35,040 Speaker 1: right now, the market action is posing a few questions 8 00:00:35,080 --> 00:00:37,920 Speaker 1: to people. First of all, how much were US stocks 9 00:00:38,120 --> 00:00:42,760 Speaker 1: baking in the likelihood of a pretty substantial tax cuts 10 00:00:42,800 --> 00:00:46,600 Speaker 1: for big corporations. And second, what the response is and 11 00:00:46,640 --> 00:00:50,320 Speaker 1: what the new revised outlook is based on the tax 12 00:00:50,360 --> 00:00:53,680 Speaker 1: plans that we have seen out of the House and Senate. 13 00:00:53,720 --> 00:00:56,800 Speaker 1: Here to answer those questions is Nick Kolas, co founder 14 00:00:56,840 --> 00:01:00,279 Speaker 1: of Data Trek Research in New York City. Uh. Nick, 15 00:01:00,560 --> 00:01:02,080 Speaker 1: we love speaking with you. Thank you so much for 16 00:01:02,160 --> 00:01:04,600 Speaker 1: joining us. You're also a Blomberg profit So at the 17 00:01:05,040 --> 00:01:08,679 Speaker 1: back in September, you noted that there did seem to 18 00:01:08,760 --> 00:01:13,679 Speaker 1: be quite a bit of hope priced into US stocks 19 00:01:13,720 --> 00:01:17,680 Speaker 1: based on a tax plan. What's your sense now, based 20 00:01:17,680 --> 00:01:20,000 Speaker 1: on what we've received, do you think that U S 21 00:01:20,000 --> 00:01:23,200 Speaker 1: docks should fall or should rise? Based on the tax 22 00:01:23,240 --> 00:01:26,280 Speaker 1: plans that we've seen, it's certainly clear that particularly small 23 00:01:26,400 --> 00:01:29,160 Speaker 1: cap stocks, the Russell and the SMP six hundred do 24 00:01:29,319 --> 00:01:32,200 Speaker 1: definitely anticipate some kind of tax relief, and that's the 25 00:01:32,240 --> 00:01:34,680 Speaker 1: segment of the market for which it really matters. Most 26 00:01:35,120 --> 00:01:38,400 Speaker 1: larger companies tend to have some tax shields overseas, the 27 00:01:38,440 --> 00:01:41,240 Speaker 1: smaller ones don't. And right after the election, small caps 28 00:01:42,160 --> 00:01:43,840 Speaker 1: and they haven't given any of that back. So it's 29 00:01:43,880 --> 00:01:47,640 Speaker 1: clear that there is some anticipation for tax relief, particularly 30 00:01:47,640 --> 00:01:51,520 Speaker 1: in the small cap sector. Did they get it, well, 31 00:01:51,560 --> 00:01:53,639 Speaker 1: they get it, They should get it, Yes, there seems 32 00:01:53,640 --> 00:01:56,360 Speaker 1: to be there's no excuse for them not to get it. 33 00:01:56,400 --> 00:01:59,600 Speaker 1: You have Republican House, Senate, and President, and that is 34 00:01:59,640 --> 00:02:02,280 Speaker 1: the part of tax reform, and therefore if they can't 35 00:02:02,320 --> 00:02:04,240 Speaker 1: do it now, they can never. But we we've gotten 36 00:02:04,480 --> 00:02:06,680 Speaker 1: very different plans out of the House in the Senate. 37 00:02:06,920 --> 00:02:10,160 Speaker 1: There's a lot of lack of coherence there with respect 38 00:02:10,200 --> 00:02:13,880 Speaker 1: even when the timing is the implementation. Based on that, 39 00:02:14,040 --> 00:02:15,519 Speaker 1: you still think that we're going to get something and 40 00:02:15,560 --> 00:02:17,600 Speaker 1: it's going to help the small cap stocks enough to 41 00:02:17,600 --> 00:02:20,560 Speaker 1: to prevent a retracement. It does feel that way You're 42 00:02:20,560 --> 00:02:23,280 Speaker 1: absolutely right. This is Washington, and depending on Washington for 43 00:02:23,320 --> 00:02:26,799 Speaker 1: an investment catalyst is an exercise and patience at best. 44 00:02:27,360 --> 00:02:29,360 Speaker 1: And so you should get it where you get it 45 00:02:29,400 --> 00:02:32,600 Speaker 1: by Christmas. I don't know, it's probably fifty fifty, but 46 00:02:32,760 --> 00:02:34,920 Speaker 1: you should get it some time before the midterm elections 47 00:02:34,919 --> 00:02:37,320 Speaker 1: because it is a really critical issue going into mid terms. 48 00:02:38,120 --> 00:02:41,280 Speaker 1: How is this a more critical situation than the national 49 00:02:41,360 --> 00:02:44,400 Speaker 1: debt or the inability of the federal government to balance 50 00:02:44,440 --> 00:02:48,760 Speaker 1: the budget? Wow? Powerful question. Well, because you know, this 51 00:02:48,880 --> 00:02:51,760 Speaker 1: is the big sticking point with many of the Republicans 52 00:02:51,800 --> 00:02:55,040 Speaker 1: that are going to be needed to vote yes on 53 00:02:55,080 --> 00:02:57,920 Speaker 1: this to get this past. And you know, we go 54 00:02:58,000 --> 00:03:01,040 Speaker 1: through these cycles where everybody kind of talks about the 55 00:03:01,080 --> 00:03:05,040 Speaker 1: ominous federal debt and the national debt and then it 56 00:03:05,120 --> 00:03:09,280 Speaker 1: just disappears. And I'm wondering, how, particularly the time when 57 00:03:09,280 --> 00:03:11,600 Speaker 1: the economy maybe not doing great, but it's not doing 58 00:03:11,880 --> 00:03:17,239 Speaker 1: you know, awful, why do we need this? Well, politically, obviously, 59 00:03:17,400 --> 00:03:19,560 Speaker 1: the Congress will feel they need it going into mid 60 00:03:19,680 --> 00:03:22,760 Speaker 1: term elections with a controversial president. They've got to show 61 00:03:22,800 --> 00:03:25,639 Speaker 1: their electorate's a win. And if the wind means lowering 62 00:03:25,639 --> 00:03:28,400 Speaker 1: their taxes, that might matter. More to mid terms than 63 00:03:28,440 --> 00:03:32,160 Speaker 1: the longer term, even more important issues of deficits UH 64 00:03:32,200 --> 00:03:34,760 Speaker 1: and the total deficit as you mentioned. So to me, 65 00:03:34,800 --> 00:03:37,880 Speaker 1: it's a political calculus that basically says, Okay, we have 66 00:03:37,960 --> 00:03:40,040 Speaker 1: some head wins because of the president. We need to 67 00:03:40,040 --> 00:03:43,280 Speaker 1: score a win for our constituents. So let's say no 68 00:03:43,440 --> 00:03:47,120 Speaker 1: tax plan gets passed. How much should small cap stocks 69 00:03:47,720 --> 00:03:51,200 Speaker 1: so off. You know, they already have fairly high valuations 70 00:03:51,200 --> 00:03:54,080 Speaker 1: twenty two to twenty four times next year's earnings versus 71 00:03:54,200 --> 00:03:57,840 Speaker 1: eighteen for the SMP, so they're pretty rich. And even 72 00:03:57,840 --> 00:04:00,480 Speaker 1: if they grow earning fift you still expect to see 73 00:04:00,480 --> 00:04:03,160 Speaker 1: at least a ten percent retracement just to hold their 74 00:04:03,160 --> 00:04:07,280 Speaker 1: pe multiples relatively constant. At these high levels, the offsetting 75 00:04:07,280 --> 00:04:10,320 Speaker 1: factor could be Q four. In two thousand eighteen earnings growth. 76 00:04:10,320 --> 00:04:12,960 Speaker 1: We're looking for ten eleven percent growth in the fourth quarter, 77 00:04:13,320 --> 00:04:16,000 Speaker 1: up from roughly five percent this quarter, So we are 78 00:04:16,080 --> 00:04:18,880 Speaker 1: getting some earnings acceleration, but it's probably not going to 79 00:04:18,960 --> 00:04:21,520 Speaker 1: be enough to offset the day from still having to 80 00:04:21,560 --> 00:04:24,400 Speaker 1: pay the thirty five percent tax rate. Nick, we're getting 81 00:04:24,400 --> 00:04:25,799 Speaker 1: a little bit of a sell off in the bond 82 00:04:25,839 --> 00:04:28,799 Speaker 1: market today, looking at the long end, particularly you're seeing 83 00:04:28,839 --> 00:04:30,920 Speaker 1: the ten year down ten thirty seconds. We've got to 84 00:04:30,960 --> 00:04:33,880 Speaker 1: yield there of two point three seven percent, the long 85 00:04:33,960 --> 00:04:37,000 Speaker 1: bond at two point eight six percent. Let's say this 86 00:04:37,160 --> 00:04:41,159 Speaker 1: tax cut or reform goes through, we get something. What 87 00:04:41,200 --> 00:04:43,560 Speaker 1: do you think that does to the bond market? You know, 88 00:04:43,600 --> 00:04:46,320 Speaker 1: it's a It's fascinating because the sell off yesterday was 89 00:04:46,360 --> 00:04:49,080 Speaker 1: attributed to this delay and the corporate tax rate, and 90 00:04:49,160 --> 00:04:51,839 Speaker 1: yet yields backed up. You wouldn't expect to see that 91 00:04:51,920 --> 00:04:54,720 Speaker 1: yields should go down because lower growth there for lower 92 00:04:54,880 --> 00:04:57,919 Speaker 1: transfer inflation. So I'm somewhat skeptical on the notion that 93 00:04:57,960 --> 00:05:00,600 Speaker 1: the choppiness we're seeing right now in box is even 94 00:05:00,839 --> 00:05:02,600 Speaker 1: related to the tax issue, but as none of the 95 00:05:02,640 --> 00:05:05,960 Speaker 1: other markets confirm it. As far as what will happen 96 00:05:06,040 --> 00:05:07,680 Speaker 1: next year, we're looking for the ten year to go 97 00:05:07,720 --> 00:05:10,960 Speaker 1: to roughly three percent next year and a steepening curve. 98 00:05:11,000 --> 00:05:13,200 Speaker 1: I mean, the Yeld curve right now has been scary. 99 00:05:13,200 --> 00:05:15,800 Speaker 1: It acts like a souffle that got shocked out of 100 00:05:15,800 --> 00:05:19,679 Speaker 1: the oven. It's flattened like an absolute pancake. And that's 101 00:05:19,680 --> 00:05:22,600 Speaker 1: worrisome because the steeper the Yeld curve, the more chance 102 00:05:22,680 --> 00:05:25,720 Speaker 1: we have for the bond market anticipating growth, and right 103 00:05:25,760 --> 00:05:28,040 Speaker 1: now the bond markets saying the short ends going up 104 00:05:28,080 --> 00:05:29,800 Speaker 1: on long ends and not we do need to see 105 00:05:29,800 --> 00:05:33,159 Speaker 1: the back end go up in yield relatively soon to 106 00:05:33,240 --> 00:05:36,560 Speaker 1: confirm all these anticipations for growth and the tax plan. Well, 107 00:05:36,600 --> 00:05:39,080 Speaker 1: I mean, just taking the bond market side for a minute. 108 00:05:39,120 --> 00:05:41,680 Speaker 1: Even the tax plans that have been released so far, 109 00:05:42,000 --> 00:05:45,200 Speaker 1: economists don't think that they're going to that it would 110 00:05:45,320 --> 00:05:49,800 Speaker 1: actually materially boost growth over the short term or the 111 00:05:49,839 --> 00:05:51,919 Speaker 1: long term. Maybe they're talking less than a half a 112 00:05:51,920 --> 00:05:54,920 Speaker 1: percentage point to the GDP. So I'm just wondering, you 113 00:05:54,920 --> 00:05:58,120 Speaker 1: know where you're where you're getting your optimism. Well, the 114 00:05:58,160 --> 00:06:00,720 Speaker 1: trouble with doing the analysis on tax through history is 115 00:06:00,800 --> 00:06:03,480 Speaker 1: we don't have a lot of examples, particularly in the US. 116 00:06:03,520 --> 00:06:06,120 Speaker 1: The last major tax reformers in the nineteen eighties. So 117 00:06:06,160 --> 00:06:08,000 Speaker 1: it's hard to look at a back test of this 118 00:06:08,120 --> 00:06:10,840 Speaker 1: kind of cause and effect and say definitively it does 119 00:06:10,920 --> 00:06:13,040 Speaker 1: or a dozen't. The best math I've seen is it 120 00:06:13,120 --> 00:06:16,760 Speaker 1: may not cause immediate growth, but it does cause a 121 00:06:16,960 --> 00:06:20,200 Speaker 1: pick up an investment because corporations now feel their attack 122 00:06:20,279 --> 00:06:23,480 Speaker 1: situation is more understood, more level and right now, I'm 123 00:06:23,480 --> 00:06:25,800 Speaker 1: worried that this thing drags on so long the corporations 124 00:06:25,839 --> 00:06:28,000 Speaker 1: say let's hold off on hiring, let's hold off on 125 00:06:28,080 --> 00:06:30,839 Speaker 1: investing until the tax plan gets fixed, and that could 126 00:06:30,920 --> 00:06:33,200 Speaker 1: put a damper in particularly key one of next year 127 00:06:33,520 --> 00:06:35,760 Speaker 1: if we don't see that come through. But over the 128 00:06:35,800 --> 00:06:38,240 Speaker 1: medium term it should have even natural rebound effect as 129 00:06:38,279 --> 00:06:40,599 Speaker 1: the issue is settled and corporations know how to plan. 130 00:06:41,240 --> 00:06:43,640 Speaker 1: Thanks very much for coming in. Thank you as always. 131 00:06:43,680 --> 00:06:46,840 Speaker 1: Nicholas is the co founder of Data Trek Research. He's 132 00:06:46,880 --> 00:06:50,080 Speaker 1: also a Bloomberg profit, one of the many that the 133 00:06:50,160 --> 00:06:54,160 Speaker 1: right for Bloomberg and offer actionable ideas about investments. And 134 00:06:54,400 --> 00:06:57,200 Speaker 1: once again, congratulations though on the founding of a Data 135 00:06:57,240 --> 00:07:11,720 Speaker 1: Trek Research. Thank you. So this week we've been getting 136 00:07:11,960 --> 00:07:17,240 Speaker 1: more information about the GOP tax cut plan. Right now 137 00:07:17,320 --> 00:07:20,760 Speaker 1: in focus is the Senate. Here for a quick update 138 00:07:20,840 --> 00:07:23,640 Speaker 1: on what we should be looking for with the Senate 139 00:07:23,680 --> 00:07:26,440 Speaker 1: bill in particular, Laura Davison joins us. She's a Bloomberg 140 00:07:26,480 --> 00:07:29,480 Speaker 1: tax reporter. Laura, is this is this really the most 141 00:07:29,480 --> 00:07:31,360 Speaker 1: important thing to be watching the Senate? And if so, 142 00:07:31,480 --> 00:07:35,120 Speaker 1: what what should we be watching? So history shows that 143 00:07:35,160 --> 00:07:37,440 Speaker 1: any tax bill will probably look more like what the 144 00:07:37,480 --> 00:07:39,400 Speaker 1: Senate puts together than what the houses the wall. The 145 00:07:39,440 --> 00:07:41,040 Speaker 1: House is moving first and is a little bit further 146 00:07:41,040 --> 00:07:43,600 Speaker 1: along in the process. Really, this week watched the Senate 147 00:07:43,640 --> 00:07:45,920 Speaker 1: as they go through the markup where they formally consider. 148 00:07:46,000 --> 00:07:48,080 Speaker 1: See what amendments are added, see what gets taken out. 149 00:07:48,280 --> 00:07:50,239 Speaker 1: That will really give you a sense of the direction 150 00:07:50,280 --> 00:07:52,880 Speaker 1: that the bill might go. Two things that will really 151 00:07:52,880 --> 00:07:56,040 Speaker 1: be under the microscope this week is one the delay 152 00:07:56,080 --> 00:07:58,360 Speaker 1: on this corporate tax rate. Right now, the Senate bill 153 00:07:58,360 --> 00:08:01,920 Speaker 1: has it starting in twenty nineteen going to Uh that's 154 00:08:01,960 --> 00:08:04,040 Speaker 1: sort of a big change of what Republicans have said 155 00:08:04,040 --> 00:08:05,600 Speaker 1: that they want this big tax cut and they want 156 00:08:05,600 --> 00:08:08,080 Speaker 1: it now. Uh. The other thing is for so called 157 00:08:08,120 --> 00:08:12,960 Speaker 1: passed through businesses, So these are lcs, partnerships, u s, corporations, 158 00:08:13,000 --> 00:08:16,960 Speaker 1: and basically business rate that's been talked about that is 159 00:08:17,000 --> 00:08:19,480 Speaker 1: sort of effectively out the window in the in the 160 00:08:19,480 --> 00:08:22,640 Speaker 1: Senate plan. Uh, they basically have sort of this complicated formula. 161 00:08:22,640 --> 00:08:24,520 Speaker 1: You get this deduction and then you tie it to 162 00:08:24,600 --> 00:08:27,240 Speaker 1: what your individual tax rate is. Uh. This is sort 163 00:08:27,240 --> 00:08:29,040 Speaker 1: of a whole new thing that was unveiled and people 164 00:08:29,040 --> 00:08:31,320 Speaker 1: are still kind of combing through and tax lawyers are 165 00:08:31,320 --> 00:08:33,960 Speaker 1: seeing what this would mean. But this is really a 166 00:08:34,000 --> 00:08:36,560 Speaker 1: departure from for what we were thinking that could maybe 167 00:08:36,600 --> 00:08:37,760 Speaker 1: be in the plan, you know, just a couple of 168 00:08:37,800 --> 00:08:40,360 Speaker 1: weeks ago. Laura Davison, thank you so much for joining us, 169 00:08:40,440 --> 00:08:42,880 Speaker 1: and we will be catching up with you again next week. 170 00:08:42,960 --> 00:08:46,480 Speaker 1: Laura Davison, Limerick tax reporter. Coming to us right now 171 00:08:47,000 --> 00:08:49,199 Speaker 1: to weigh in on what we've seen so far is 172 00:08:49,280 --> 00:08:53,280 Speaker 1: Chris Mackie, founder of Solution Nomics based in New York. Chris, 173 00:08:53,360 --> 00:08:56,640 Speaker 1: you spent quite a bit of time on Capitol Hill 174 00:08:56,800 --> 00:09:00,640 Speaker 1: in recent weeks. What's the what's the sort of impression 175 00:09:00,760 --> 00:09:04,199 Speaker 1: from Congressmen who are involved in these negotiations right now? 176 00:09:04,240 --> 00:09:07,079 Speaker 1: Do they feel pretty confident they're gonna get something done? Well, 177 00:09:07,120 --> 00:09:09,160 Speaker 1: it's great to be with you. I don't know if 178 00:09:09,160 --> 00:09:14,440 Speaker 1: i'd call it confidence as much as need bordering on desperation. Um, 179 00:09:14,480 --> 00:09:18,840 Speaker 1: as well know there's been some legi legislative challenges and 180 00:09:18,880 --> 00:09:21,560 Speaker 1: that's creating a real sense of urgency. So I can't 181 00:09:21,600 --> 00:09:26,079 Speaker 1: say it's confidence. Uh, it's definitely more of a need now. Now, 182 00:09:26,120 --> 00:09:29,839 Speaker 1: the issue is you've got a yawning gap between Republican 183 00:09:30,000 --> 00:09:35,839 Speaker 1: optimism about what attacks bill would do and democratic skepticism. 184 00:09:35,920 --> 00:09:38,840 Speaker 1: That's gonna be a fundamental issue that will need to 185 00:09:38,960 --> 00:09:42,400 Speaker 1: be corrected. If we want to get permanent tax cuts, 186 00:09:42,679 --> 00:09:45,600 Speaker 1: they could put something through temporary before permanent. You gotta 187 00:09:45,640 --> 00:09:48,760 Speaker 1: bridge the gap. You know. I'm just trying to put 188 00:09:48,800 --> 00:09:54,840 Speaker 1: this together with the mission of solution omics, because you're 189 00:09:54,840 --> 00:10:01,760 Speaker 1: talking about reality based economic and global trades strategies. Has nothing, 190 00:10:02,000 --> 00:10:04,360 Speaker 1: supposedly nothing to do with politics. You want you you're 191 00:10:04,360 --> 00:10:09,359 Speaker 1: looking for a solution to the issues of economic inefficiency, 192 00:10:10,360 --> 00:10:14,600 Speaker 1: what you describe as a kind of broken tax system. 193 00:10:14,720 --> 00:10:17,920 Speaker 1: What if you got a clean sheet, what would be 194 00:10:17,960 --> 00:10:21,280 Speaker 1: maybe the one or two things that you would like 195 00:10:21,440 --> 00:10:24,280 Speaker 1: to be able to say to the you know, six 196 00:10:24,360 --> 00:10:28,560 Speaker 1: or seven hundred odd people plus their minions, that these 197 00:10:28,600 --> 00:10:32,560 Speaker 1: are the things that are most important in a nonpartisan approach, 198 00:10:33,000 --> 00:10:37,280 Speaker 1: certainly earned corporate tax cuts. The concept of r O 199 00:10:37,480 --> 00:10:40,360 Speaker 1: I I come from the world of business and finance. 200 00:10:40,840 --> 00:10:43,720 Speaker 1: The way you can get something done politically, if there's 201 00:10:43,720 --> 00:10:46,800 Speaker 1: a will by the politicians, is to set aside the 202 00:10:46,840 --> 00:10:50,240 Speaker 1: politics and use an objective metric like return on investment 203 00:10:50,720 --> 00:10:53,920 Speaker 1: instead of having the unconditional tax cuts that we have today, 204 00:10:54,000 --> 00:10:56,880 Speaker 1: which leads the Democrats and the Republicans debating about what 205 00:10:56,920 --> 00:10:59,920 Speaker 1: the results will be, come up with a concept for 206 00:11:00,000 --> 00:11:02,679 Speaker 1: in the world of M and A and earned approach. 207 00:11:02,800 --> 00:11:05,200 Speaker 1: So the earned corporate tax cut, that's the number one 208 00:11:05,280 --> 00:11:07,559 Speaker 1: thing I would do. How would just give an example 209 00:11:07,559 --> 00:11:10,360 Speaker 1: of how that would work with a corporation. Absolutely, so 210 00:11:10,400 --> 00:11:13,720 Speaker 1: the first thing would be corporations that are increasing jobs 211 00:11:13,720 --> 00:11:17,600 Speaker 1: in America, they get a tax cut. Companies that don't won't. 212 00:11:17,760 --> 00:11:20,079 Speaker 1: Now what this does, and this is the exciting part. 213 00:11:20,440 --> 00:11:25,120 Speaker 1: It actually reduces the tax cuts for companies not creating jobs, 214 00:11:25,160 --> 00:11:28,480 Speaker 1: which means more tax cuts for companies creating jobs. So 215 00:11:28,559 --> 00:11:34,520 Speaker 1: you actually increase, you accelerate the incentive of the tax cuts. 216 00:11:34,559 --> 00:11:36,959 Speaker 1: So far, based on what you've seen, and as Laura 217 00:11:37,040 --> 00:11:39,880 Speaker 1: was saying, the Senate bill is the one to really 218 00:11:39,920 --> 00:11:42,000 Speaker 1: watch because history shows that will be closer to what 219 00:11:42,080 --> 00:11:44,440 Speaker 1: it will look like. What do you think it will 220 00:11:44,520 --> 00:11:49,440 Speaker 1: do with respect to growth? Well as as it stands 221 00:11:49,520 --> 00:11:53,240 Speaker 1: right now, if they passed it tomorrow, the only guarantee 222 00:11:53,280 --> 00:11:56,839 Speaker 1: that we have is an increase in the debt. Now, well, 223 00:11:56,880 --> 00:12:00,720 Speaker 1: let's be clear here. Debt isn't necessarily a bad thing 224 00:12:00,840 --> 00:12:03,040 Speaker 1: all the time. It depends on when and what you're 225 00:12:03,040 --> 00:12:06,600 Speaker 1: getting in return. The concern is that we're lacking in 226 00:12:06,679 --> 00:12:10,199 Speaker 1: the debt without the certainty of a return. So again, 227 00:12:10,240 --> 00:12:13,360 Speaker 1: the better approach is to say, look, we're willing to 228 00:12:13,360 --> 00:12:15,600 Speaker 1: take on some of the debt if the country decides 229 00:12:15,600 --> 00:12:17,800 Speaker 1: they're willing to do that, as long as we're getting 230 00:12:17,840 --> 00:12:20,440 Speaker 1: a guarantee of the higher wages and a guarantee of 231 00:12:20,480 --> 00:12:22,880 Speaker 1: the stronger job growth. So that's why you need an 232 00:12:22,880 --> 00:12:26,920 Speaker 1: turnout concept. Well, Chris, do you get an audience when 233 00:12:26,920 --> 00:12:28,800 Speaker 1: you go down to Washington? I mean, do they know, 234 00:12:28,880 --> 00:12:30,760 Speaker 1: let you into the office, they give a cup of coffee, 235 00:12:30,760 --> 00:12:32,560 Speaker 1: and you kind of give your speech, and then they 236 00:12:32,600 --> 00:12:34,360 Speaker 1: kind of nod their heads and they say great, and 237 00:12:34,400 --> 00:12:36,840 Speaker 1: then they go right back to work. This seems pretty 238 00:12:36,880 --> 00:12:41,120 Speaker 1: straightforward it It doesn't seem like anyone could call you 239 00:12:41,160 --> 00:12:44,520 Speaker 1: out as being, uh, you know, anti growth or anti 240 00:12:44,600 --> 00:12:47,440 Speaker 1: fairness and all. What kind of reception do you get? Well, 241 00:12:47,480 --> 00:12:50,520 Speaker 1: I'll tell you what. It's um. The left and the right, 242 00:12:51,240 --> 00:12:54,080 Speaker 1: especially on you know, with the various media agree with 243 00:12:54,120 --> 00:12:57,199 Speaker 1: the concepts. And in Congress it's gaining traction. If you 244 00:12:57,240 --> 00:13:00,640 Speaker 1: look at yesterday, Senator Mark Warner was just giving a 245 00:13:00,679 --> 00:13:03,800 Speaker 1: talk with you know, one of your colleagues, Kevin Cirelli, 246 00:13:03,920 --> 00:13:06,520 Speaker 1: and he was saying, look, there's no conditions on the repatriation. 247 00:13:06,559 --> 00:13:09,480 Speaker 1: We need that there. So we are getting the traction. 248 00:13:09,559 --> 00:13:11,280 Speaker 1: We are getting the meetings and to the point where 249 00:13:11,280 --> 00:13:13,200 Speaker 1: they're saying, okay, can you flush this out for uce, 250 00:13:13,240 --> 00:13:16,000 Speaker 1: can you get us more detail? How can you operationalize that, 251 00:13:16,440 --> 00:13:21,840 Speaker 1: which led to something we call the corporate tax cut scorecard. Alright, so, um, 252 00:13:22,480 --> 00:13:25,040 Speaker 1: as the bill stands right now, though you're concerned that 253 00:13:25,160 --> 00:13:29,400 Speaker 1: it piles on debt without a commensurate uh kind of boost? 254 00:13:29,440 --> 00:13:33,520 Speaker 1: Is that correct? All right? My question is how much 255 00:13:33,600 --> 00:13:37,199 Speaker 1: time do they have to reconsider how what they've drafted, 256 00:13:37,280 --> 00:13:39,640 Speaker 1: considering the fact that we have a very tight deadline 257 00:13:39,960 --> 00:13:42,160 Speaker 1: before the end of the year, and as you were saying, 258 00:13:42,200 --> 00:13:46,120 Speaker 1: there's a feeling of desperation of wanting to get something done. Well, 259 00:13:46,200 --> 00:13:50,160 Speaker 1: the they have they could take all the time that 260 00:13:50,200 --> 00:13:52,920 Speaker 1: they need to come up with the tax policy, they 261 00:13:52,960 --> 00:13:56,640 Speaker 1: would have the greatest economic impact. But that's just on 262 00:13:56,679 --> 00:13:59,440 Speaker 1: the economic side. You've got to take the politics into account. 263 00:13:59,800 --> 00:14:02,840 Speaker 1: So the House is going to vote on their bill 264 00:14:03,000 --> 00:14:07,200 Speaker 1: under closed rule next week, which means no amendments. The Senate, 265 00:14:07,400 --> 00:14:10,280 Speaker 1: you know, they're filing amendments this weekend. They're going to 266 00:14:10,400 --> 00:14:14,080 Speaker 1: vote on it next week. Um, it's just a matter 267 00:14:14,120 --> 00:14:16,320 Speaker 1: of whether or not the process can be slowed down. 268 00:14:16,760 --> 00:14:20,720 Speaker 1: If the American people and if small businesses understood that 269 00:14:20,840 --> 00:14:23,800 Speaker 1: there will be companies that will be sending jobs overseas 270 00:14:23,840 --> 00:14:27,720 Speaker 1: and firing Americans that will get tax cuts, that could 271 00:14:27,840 --> 00:14:30,920 Speaker 1: motivate the public to say, look, we're all for tax reform, 272 00:14:30,960 --> 00:14:34,520 Speaker 1: but not this tax reform. Well, maybe you've got to 273 00:14:34,560 --> 00:14:37,840 Speaker 1: start a hashtag campaign or something like that. I mean, 274 00:14:38,120 --> 00:14:40,960 Speaker 1: this idea of the corporate tax cut scorecard, We've got 275 00:14:40,960 --> 00:14:44,560 Speaker 1: an example of it here. Seems pretty straightforward. Pim hashtag 276 00:14:44,800 --> 00:14:48,560 Speaker 1: r O I tax plan please consider I love it, 277 00:14:48,680 --> 00:14:50,800 Speaker 1: all right, we got we got them on board, all right. 278 00:14:50,880 --> 00:14:53,280 Speaker 1: That wasn't hard. I think that was the easy part. 279 00:14:53,520 --> 00:14:56,120 Speaker 1: Thanks very much. Chris Mackie is the founder of Solution 280 00:14:56,200 --> 00:15:00,000 Speaker 1: Nomics and really well done on the corporate tax cut scorecards. 281 00:15:00,040 --> 00:15:15,640 Speaker 1: A very interesting idea. New rules, New rules in China 282 00:15:15,880 --> 00:15:20,640 Speaker 1: unveiled at the government briefing today, giving global financial companies 283 00:15:20,680 --> 00:15:24,040 Speaker 1: access to the world's second largest economy. Here to tell 284 00:15:24,120 --> 00:15:27,080 Speaker 1: us more about it. As Tom orlec cheeked, Asia Economist 285 00:15:27,120 --> 00:15:30,440 Speaker 1: for Bloomberg and he joins us from Beijing. Tom, thank 286 00:15:30,480 --> 00:15:32,600 Speaker 1: you very much for being with us and staying up 287 00:15:32,600 --> 00:15:35,160 Speaker 1: for us so late in the day. Tell us about 288 00:15:35,280 --> 00:15:39,160 Speaker 1: this move and what it really means for the asset 289 00:15:39,240 --> 00:15:42,000 Speaker 1: managers and the financial companies that are doing business or 290 00:15:42,040 --> 00:15:45,640 Speaker 1: want to do business in China. Well, it's an extremely 291 00:15:45,680 --> 00:15:49,040 Speaker 1: striking announcement him. It comes at the end of Donald 292 00:15:49,040 --> 00:15:54,400 Speaker 1: Trump's today meeting with China's President Hi Jimping, will legitimately 293 00:15:54,440 --> 00:15:59,400 Speaker 1: be represented as a pretty substantial outcome of that summit. Um. 294 00:15:59,440 --> 00:16:02,560 Speaker 1: I think for China and for you and for the US, 295 00:16:02,600 --> 00:16:05,680 Speaker 1: there's a win on both sides. For China, they've got 296 00:16:05,680 --> 00:16:09,960 Speaker 1: a highly indebted economy, overstretched banks, banks which need a 297 00:16:10,000 --> 00:16:13,480 Speaker 1: capital infusion, banks which need an infusion of expertise and 298 00:16:13,520 --> 00:16:16,560 Speaker 1: how to manage risk. On the U s side, you've 299 00:16:16,600 --> 00:16:18,720 Speaker 1: got banks, You've got Wall Street who are hungry to 300 00:16:18,760 --> 00:16:22,400 Speaker 1: come into China. As the world's second largest financial market, 301 00:16:22,520 --> 00:16:26,680 Speaker 1: the world's fastest growing financial market, this opening move gives 302 00:16:26,720 --> 00:16:30,520 Speaker 1: something to both sides. Well, Tom, it certainly is an 303 00:16:30,560 --> 00:16:33,840 Speaker 1: opportunity for banks globally that have been wanting to get 304 00:16:33,880 --> 00:16:37,400 Speaker 1: into China. I wonder are people talking at all about 305 00:16:37,480 --> 00:16:40,360 Speaker 1: the fact that this is happening at a later stage 306 00:16:40,680 --> 00:16:43,640 Speaker 1: of China's credit cycle and at a time when non 307 00:16:43,680 --> 00:16:49,480 Speaker 1: performing loan volumes are spiking. Yeah, I think that's rightly so. 308 00:16:49,560 --> 00:16:52,560 Speaker 1: I mean foreign banks are being invited to the end 309 00:16:52,680 --> 00:16:56,280 Speaker 1: of China's credit party, not the beginning. We've had a 310 00:16:56,320 --> 00:17:00,920 Speaker 1: tumultuous eight nine year credit cycle in China. The debt 311 00:17:01,000 --> 00:17:04,000 Speaker 1: to GDP ratio has blown up, bank balance sheets have 312 00:17:04,119 --> 00:17:07,359 Speaker 1: blown up. The official data doesn't show many bad loans, 313 00:17:07,400 --> 00:17:11,200 Speaker 1: but most people think they're out there. China. Foreign banks 314 00:17:11,200 --> 00:17:14,480 Speaker 1: are not being invited in at the best time, But 315 00:17:14,960 --> 00:17:17,480 Speaker 1: that's why there would be. That's why they're being invited in. 316 00:17:17,760 --> 00:17:21,520 Speaker 1: But the problem very carry on. No, no, I. But 317 00:17:21,920 --> 00:17:24,080 Speaker 1: the reason why I'm asking this is because a lot 318 00:17:24,119 --> 00:17:26,560 Speaker 1: of people used to say, you know, if China blows up, 319 00:17:26,640 --> 00:17:28,560 Speaker 1: it's going to be a contained risk. It's not going 320 00:17:28,600 --> 00:17:30,520 Speaker 1: to affect the rest of the financial system because of 321 00:17:30,560 --> 00:17:34,000 Speaker 1: how insular the market is. Does this increase sort of 322 00:17:34,040 --> 00:17:40,240 Speaker 1: the global risk to the financial system? Well, um, I 323 00:17:40,280 --> 00:17:42,760 Speaker 1: think you can look at it two ways. Um, So 324 00:17:43,240 --> 00:17:47,000 Speaker 1: if China blew up right now, yes, the financial system 325 00:17:47,080 --> 00:17:51,440 Speaker 1: is contained. So the direct blow to your JP Morgan's, 326 00:17:51,480 --> 00:17:54,480 Speaker 1: your Bank of America's UM, your Deutsche banks will be 327 00:17:54,520 --> 00:17:57,679 Speaker 1: limited because they have a limited presence. At the same time, 328 00:17:57,760 --> 00:18:00,480 Speaker 1: if China blew up, China is the second largest economy 329 00:18:00,480 --> 00:18:03,080 Speaker 1: in the world, is the biggest trading nation in the world, 330 00:18:03,320 --> 00:18:06,040 Speaker 1: So all of the other countries which these US and 331 00:18:06,080 --> 00:18:09,520 Speaker 1: European banks operated in would take a significant hit, and 332 00:18:09,560 --> 00:18:12,720 Speaker 1: so the global financial system would take a hit through 333 00:18:12,760 --> 00:18:15,359 Speaker 1: the real economy. Now, what you're going to see now 334 00:18:15,840 --> 00:18:19,640 Speaker 1: is the world financial markets, the global financial institutions moving 335 00:18:19,640 --> 00:18:22,800 Speaker 1: into China hopefully to help up clear to help clear 336 00:18:22,880 --> 00:18:24,520 Speaker 1: up some of the problems, some of the mass in 337 00:18:24,600 --> 00:18:28,200 Speaker 1: China's financial system. That's a positive. At the same time, 338 00:18:28,240 --> 00:18:31,840 Speaker 1: it's going to mean the mechanisms for contagion, the networks 339 00:18:31,840 --> 00:18:34,199 Speaker 1: which connect China's financial system with the rest of the 340 00:18:34,240 --> 00:18:38,560 Speaker 1: world are going to be much stronger, much more integrated. Hey, Tom, 341 00:18:38,640 --> 00:18:40,719 Speaker 1: but I haven't kind of been here before because I 342 00:18:40,800 --> 00:18:45,000 Speaker 1: recall that you know, member HSBC, Holding City Bank, Standard 343 00:18:45,080 --> 00:18:47,640 Speaker 1: Chartered Bank of East Asia. I mean they all opened 344 00:18:47,840 --> 00:18:52,360 Speaker 1: mainland subsidy of mainland Chinese subsidiaries back in two thousand 345 00:18:52,840 --> 00:18:59,840 Speaker 1: and seven, as well as other foreign financial institutions what happened. Yes, 346 00:19:00,480 --> 00:19:02,800 Speaker 1: you're right, this is not the first time we've been here. 347 00:19:03,400 --> 00:19:06,760 Speaker 1: We had big foreign banks buying a steak in Chinese 348 00:19:06,840 --> 00:19:11,399 Speaker 1: banks HSBC, Royal Bank of Scotland, Bank of America, or 349 00:19:11,440 --> 00:19:14,120 Speaker 1: big steaks minority stakes in some of the big Chinese 350 00:19:14,119 --> 00:19:17,800 Speaker 1: banks HSBC and Standard Chartered have set up very limited 351 00:19:17,840 --> 00:19:21,800 Speaker 1: branch networks on the Chinese mainland. That was a little bang. 352 00:19:22,160 --> 00:19:24,320 Speaker 1: I think what we're seeing today is a big bang. 353 00:19:24,640 --> 00:19:26,840 Speaker 1: This isn't foreign banks being allowed to come in and 354 00:19:26,840 --> 00:19:30,000 Speaker 1: take minority stakes and open a few branches. This is 355 00:19:30,040 --> 00:19:32,640 Speaker 1: foreign banks being allowed to come in and take over 356 00:19:33,040 --> 00:19:36,480 Speaker 1: Chinese banks. Okay, but time, does this mean that that 357 00:19:36,560 --> 00:19:38,760 Speaker 1: foreign banks now they can come in rather than having 358 00:19:38,760 --> 00:19:42,879 Speaker 1: small losses, now they can have big losses. Well, I 359 00:19:42,920 --> 00:19:46,560 Speaker 1: think the hope is that they can help recapitalize, deal 360 00:19:46,600 --> 00:19:49,679 Speaker 1: with some of the stresses in China's financial system and 361 00:19:49,720 --> 00:19:53,400 Speaker 1: then position them for growth. But yes, I mean opportunity 362 00:19:53,400 --> 00:19:55,119 Speaker 1: and risk of flip sides of the same kind of 363 00:19:55,160 --> 00:19:57,960 Speaker 1: same coin. Time, do you have a sense of what 364 00:19:58,080 --> 00:20:01,840 Speaker 1: the demand is like from big global financial firms to 365 00:20:02,400 --> 00:20:04,679 Speaker 1: rush into China at this point? Will there be a 366 00:20:04,680 --> 00:20:09,040 Speaker 1: wave of banks flooding into China. I think if we 367 00:20:09,080 --> 00:20:11,080 Speaker 1: look at the way the markets reacted to this today, 368 00:20:11,160 --> 00:20:13,760 Speaker 1: to this today, there's been a pretty muted reaction. We 369 00:20:13,800 --> 00:20:16,480 Speaker 1: didn't see a big move in equity markets, we didn't 370 00:20:16,480 --> 00:20:18,960 Speaker 1: see a big move in the c n Y, and 371 00:20:19,000 --> 00:20:21,600 Speaker 1: I think that's because there's a sort of widespread recognition 372 00:20:21,880 --> 00:20:24,960 Speaker 1: that on both sides, whilst this is a big bang announcement, 373 00:20:25,200 --> 00:20:27,320 Speaker 1: the progress is going to be increments. It's going to 374 00:20:27,400 --> 00:20:31,000 Speaker 1: be gradual. China doesn't want to open up immediately to 375 00:20:31,080 --> 00:20:35,199 Speaker 1: a surge of inbounded investment in the financial sector. Foreign 376 00:20:35,240 --> 00:20:38,520 Speaker 1: firms are going to tread pretty cautiously as well. There's 377 00:20:38,560 --> 00:20:42,960 Speaker 1: political risk, there's credit risk, there's risk around whether money 378 00:20:43,000 --> 00:20:44,800 Speaker 1: that comes in is going to be able to get out. 379 00:20:45,119 --> 00:20:46,919 Speaker 1: Foreign firms are going to be wanting to kick the 380 00:20:46,960 --> 00:20:50,600 Speaker 1: tires pretty thoroughly before they make substantial plays in the 381 00:20:50,680 --> 00:20:53,320 Speaker 1: China market. Tom Or like, thank you so much for 382 00:20:53,400 --> 00:20:55,280 Speaker 1: joining us. I know it's late for you there. Tom Or, 383 00:20:55,320 --> 00:20:59,840 Speaker 1: like chief Asia economist for Bloomberg talking about China removing 384 00:21:00,000 --> 00:21:03,840 Speaker 1: limits on foreign ownership of Chinese banks and asset managers 385 00:21:04,040 --> 00:21:07,560 Speaker 1: really coming at an interesting time given where China is 386 00:21:07,640 --> 00:21:21,960 Speaker 1: in the credit cycle, time to bring in Dave Wilson, 387 00:21:22,000 --> 00:21:25,280 Speaker 1: Bloomberg Stocks commist and blogger at M Live. Go on 388 00:21:25,320 --> 00:21:27,480 Speaker 1: the Bloomberg Remember to send Dave an email and sign 389 00:21:27,560 --> 00:21:30,000 Speaker 1: up for his daily free email newsletter. Go ahead, just 390 00:21:30,000 --> 00:21:33,359 Speaker 1: send it to d Wilson at Bloomberg dot net. Become 391 00:21:33,400 --> 00:21:36,240 Speaker 1: a smarter investor and also joining us as Lindsay Upper 392 00:21:36,359 --> 00:21:39,639 Speaker 1: Specialty retail reporter for Bloomberg. Because of course we're going 393 00:21:39,680 --> 00:21:41,760 Speaker 1: to talk about J. C. Penny. Jacques Penny. The share 394 00:21:41,800 --> 00:21:44,400 Speaker 1: is up more than sixteen and a half percent right now, 395 00:21:44,640 --> 00:21:47,399 Speaker 1: Dave Wilson, what is sort of following? What is what 396 00:21:47,440 --> 00:21:49,560 Speaker 1: are you following this morning? Because I was looking again 397 00:21:49,640 --> 00:21:53,359 Speaker 1: today at Roku the follow on to yesterday's move. Stock 398 00:21:53,400 --> 00:21:58,000 Speaker 1: of Roku up eleven and a half percent today. Well, 399 00:21:58,000 --> 00:22:01,840 Speaker 1: you know, they are all these ten show deals out there. 400 00:22:01,960 --> 00:22:06,000 Speaker 1: They're kind of swirling around, and it seems like maybe 401 00:22:06,040 --> 00:22:10,359 Speaker 1: because it's a Friday that and you've got trading curtailed 402 00:22:10,400 --> 00:22:14,239 Speaker 1: a bit because of the Veterans Day holiday that, you know, 403 00:22:14,280 --> 00:22:17,600 Speaker 1: people are kind of cycling back to those deals. You know, 404 00:22:17,800 --> 00:22:20,760 Speaker 1: twenty one century Fox shares up two and a half 405 00:22:20,800 --> 00:22:23,080 Speaker 1: three pcent, depending on which class you look at, they 406 00:22:23,119 --> 00:22:26,360 Speaker 1: have to both in the SMP five hundred, and you've 407 00:22:26,359 --> 00:22:29,080 Speaker 1: had CNBC report that a deal between the Film and 408 00:22:29,119 --> 00:22:32,760 Speaker 1: Television Company and Disney has not been abandoned, So that's 409 00:22:32,800 --> 00:22:35,080 Speaker 1: still kind of kicking around. I was seeing a bit 410 00:22:35,080 --> 00:22:37,080 Speaker 1: of a rebound and Time Warner. Of course, there's all 411 00:22:37,119 --> 00:22:39,320 Speaker 1: the speculation we've had in the last couple of days 412 00:22:39,359 --> 00:22:42,359 Speaker 1: that A. T and T might have to sell CNN 413 00:22:42,480 --> 00:22:46,080 Speaker 1: to get the deal through that it's working on. Uh. 414 00:22:46,440 --> 00:22:48,720 Speaker 1: Time warners up two points Umber saying A T and 415 00:22:48,760 --> 00:22:52,639 Speaker 1: T also higher you've got the shopping mall on, but 416 00:22:52,680 --> 00:22:56,080 Speaker 1: didn't but didn't Stephen What didn't Randall Stevenson say? I mean, 417 00:22:56,080 --> 00:22:58,400 Speaker 1: he was at a conference yesterday. He said that he's 418 00:22:58,480 --> 00:23:00,679 Speaker 1: no interest. He said it would make no sense to 419 00:23:00,760 --> 00:23:04,200 Speaker 1: be selling CNN is part of the takeover for Time Warner. Indeed, 420 00:23:04,240 --> 00:23:06,560 Speaker 1: he did mean, not that that's you know, set in 421 00:23:06,600 --> 00:23:08,919 Speaker 1: stone anyway, but that's what he said. He did say that. 422 00:23:08,960 --> 00:23:11,040 Speaker 1: But it's just more a matter of you know, you're 423 00:23:11,080 --> 00:23:13,840 Speaker 1: getting a bit of a rebound and the shares you've got. 424 00:23:14,160 --> 00:23:18,000 Speaker 1: Mace Richard mentioned the mall owner. Third points Dan Loebe 425 00:23:18,000 --> 00:23:20,920 Speaker 1: with a steak and who knows where we go from there, 426 00:23:20,960 --> 00:23:22,840 Speaker 1: but nonetheless it stocks up one and a half percent. 427 00:23:22,880 --> 00:23:25,560 Speaker 1: And then the most intriguing one perhaps today, which sort 428 00:23:25,560 --> 00:23:28,240 Speaker 1: of leads us where we're going next, is Macy's. This 429 00:23:28,400 --> 00:23:32,280 Speaker 1: report out of Deal Reporter that you know, if Amazon 430 00:23:32,440 --> 00:23:35,200 Speaker 1: dot Com is going to go after a department store chain, 431 00:23:35,720 --> 00:23:38,159 Speaker 1: maybe they don't want to focus on Coals, even though 432 00:23:38,200 --> 00:23:40,960 Speaker 1: they have a partnership agreement with them. Maybe they would 433 00:23:40,960 --> 00:23:43,480 Speaker 1: be better off taking a look at Macy's and that 434 00:23:43,640 --> 00:23:45,840 Speaker 1: stocks up two point two percent at the moment. Well, 435 00:23:45,960 --> 00:23:50,040 Speaker 1: Macy's and of course j C. Penny shares almost eighteen 436 00:23:50,240 --> 00:23:53,239 Speaker 1: percent up, and Lindsay Rupp here is joining us UH 437 00:23:53,359 --> 00:23:57,280 Speaker 1: specialty retail reporter for Bloomberg. Lindsay, you know, here's the 438 00:23:57,400 --> 00:23:59,920 Speaker 1: question that I have for you. J C. Penny or 439 00:24:00,000 --> 00:24:03,879 Speaker 1: reported better than expected earnings, actual sales growth in the 440 00:24:04,080 --> 00:24:08,760 Speaker 1: same stores quarter over quarter. Is this just a blip 441 00:24:08,840 --> 00:24:11,920 Speaker 1: before a bigger downturn or is there something that j C. 442 00:24:12,040 --> 00:24:15,800 Speaker 1: Penny is doing that's materially changing the company's outlook. Well, so, 443 00:24:15,920 --> 00:24:20,159 Speaker 1: I hate to be the bearer of um not bad news, 444 00:24:20,240 --> 00:24:22,640 Speaker 1: but this sales pop came for them on the back 445 00:24:22,680 --> 00:24:24,760 Speaker 1: of a liquidation they had to get rid of a 446 00:24:24,760 --> 00:24:28,280 Speaker 1: bunch of inventory that wasn't working in women's apparel. I mean, 447 00:24:28,320 --> 00:24:31,440 Speaker 1: that's not a good thing. It They had a loss 448 00:24:31,440 --> 00:24:34,080 Speaker 1: this quarter because they had to liquidate all this inventory, 449 00:24:34,480 --> 00:24:36,359 Speaker 1: but it's better than keeping it around and not having 450 00:24:36,359 --> 00:24:38,359 Speaker 1: its soul, that's true. But they also had to liquidate 451 00:24:38,400 --> 00:24:41,040 Speaker 1: inventory in the second quarter too because they were closing 452 00:24:41,040 --> 00:24:42,960 Speaker 1: a lot of stores. So J. C. Penny is in 453 00:24:43,040 --> 00:24:46,280 Speaker 1: a time of intense transition. And one good thing they 454 00:24:46,320 --> 00:24:48,560 Speaker 1: did say is that, you know, they're putting appliances into 455 00:24:48,600 --> 00:24:50,760 Speaker 1: their stores right, trying to take share from Sears as 456 00:24:50,760 --> 00:24:55,000 Speaker 1: Sears continues its slow circle towards whatever it's inevitable end 457 00:24:55,000 --> 00:24:57,760 Speaker 1: will be. And uh, you know, they sat there their 458 00:24:57,880 --> 00:25:01,280 Speaker 1: comparable sales and appliances were up thirty percent, and you know, 459 00:25:01,320 --> 00:25:03,560 Speaker 1: the appliance sales more than doubled from last year. But 460 00:25:03,560 --> 00:25:06,199 Speaker 1: that's a new business for them, so we don't really know. Well, 461 00:25:06,320 --> 00:25:08,480 Speaker 1: I mean, that's a small base. We're assuming that it's 462 00:25:08,480 --> 00:25:11,119 Speaker 1: coming off of. So I think there are some green shoots. 463 00:25:11,160 --> 00:25:13,320 Speaker 1: I think they're trying to write things, um, but I 464 00:25:13,400 --> 00:25:16,399 Speaker 1: am surprised at the extent of this rally. Stock is 465 00:25:16,440 --> 00:25:18,520 Speaker 1: up more than seventeen and a half percent right now. 466 00:25:18,560 --> 00:25:22,879 Speaker 1: I remember speaking about this with Punamgyal, our Bloomberg intelligence expert. 467 00:25:22,920 --> 00:25:24,760 Speaker 1: When it comes to retail, we were speaking about it 468 00:25:24,800 --> 00:25:29,040 Speaker 1: in October when the company talked about that big inventory liquidation. 469 00:25:29,680 --> 00:25:33,800 Speaker 1: Is there a sort of factor about all of the 470 00:25:33,840 --> 00:25:36,520 Speaker 1: real estate that the company you know still currently owns 471 00:25:36,520 --> 00:25:39,560 Speaker 1: because they're still closing stores. They are still closing stores, 472 00:25:39,600 --> 00:25:41,920 Speaker 1: And I mean, I think we'll see every department store 473 00:25:41,920 --> 00:25:45,520 Speaker 1: and retailer reevaluate its fleet after the holidays. Um, Because 474 00:25:45,560 --> 00:25:47,560 Speaker 1: I don't think anyone's figured out what the right answer 475 00:25:47,680 --> 00:25:49,400 Speaker 1: is in terms of how many stores do you need 476 00:25:49,440 --> 00:25:53,680 Speaker 1: to have, how you optimize your stores and your online business. 477 00:25:53,720 --> 00:25:55,840 Speaker 1: You know, if people are going to shift online, how 478 00:25:55,840 --> 00:25:57,439 Speaker 1: many stores do you really need? But if you want 479 00:25:57,480 --> 00:25:59,520 Speaker 1: to use them as fulfillment, it's it's like a it's 480 00:25:59,560 --> 00:26:03,360 Speaker 1: a silly fluctuating equation. And the other thing that I 481 00:26:03,440 --> 00:26:05,320 Speaker 1: was missing out of this J. C. Penny report is 482 00:26:05,320 --> 00:26:08,360 Speaker 1: is any kind of discussion about holiday. Um, There there 483 00:26:08,400 --> 00:26:11,640 Speaker 1: wasn't really any forecast and about holiday. They they're excited 484 00:26:11,680 --> 00:26:15,320 Speaker 1: about what they're doing in Sephora and and toys and appliances, 485 00:26:15,880 --> 00:26:18,480 Speaker 1: but they need a good holiday that's going to be 486 00:26:18,480 --> 00:26:20,800 Speaker 1: really important for them. Well, David, come on in here, 487 00:26:20,840 --> 00:26:23,399 Speaker 1: because I'm curious, first of all, whether the optimism that 488 00:26:23,440 --> 00:26:26,639 Speaker 1: we're seeing in J. C. Petty and Macy's is spreading 489 00:26:26,760 --> 00:26:32,240 Speaker 1: into other UH retailers. Also, you know how how long 490 00:26:32,400 --> 00:26:35,000 Speaker 1: lasting this could be based on some technical aspects. Well, 491 00:26:35,080 --> 00:26:37,080 Speaker 1: you've got calls up three and a half percent, so 492 00:26:37,119 --> 00:26:39,600 Speaker 1: that's another plus north from th which had numbers out 493 00:26:39,680 --> 00:26:43,320 Speaker 1: late yesterday down one a quarter percent at the moment 494 00:26:43,400 --> 00:26:45,280 Speaker 1: that they didn't come in so well. But if you 495 00:26:45,280 --> 00:26:47,600 Speaker 1: want to understand why you've got a popping penny, you 496 00:26:47,640 --> 00:26:51,639 Speaker 1: have to go straight to short interest, the percentage of 497 00:26:51,840 --> 00:26:55,960 Speaker 1: shares available for trading that had been borrowed and sold 498 00:26:55,960 --> 00:26:58,560 Speaker 1: in anticipation at the price would fall. And when you 499 00:26:58,680 --> 00:27:01,639 Speaker 1: run those numbers, you see that short interest in penny 500 00:27:01,640 --> 00:27:04,439 Speaker 1: at least, according to our figures, fifty and a half 501 00:27:04,560 --> 00:27:06,840 Speaker 1: percent of the float. That is one of the ten 502 00:27:06,960 --> 00:27:11,040 Speaker 1: biggest percentages for any company on the New York Stock Exchange. 503 00:27:11,160 --> 00:27:13,280 Speaker 1: So you get any piece of good news, you're gonna 504 00:27:13,320 --> 00:27:15,679 Speaker 1: have these short sellers out there that are going to 505 00:27:15,760 --> 00:27:18,480 Speaker 1: have to buy what they previously sold, in other words, 506 00:27:18,480 --> 00:27:20,760 Speaker 1: cover their shorts and so you get these sort of 507 00:27:20,800 --> 00:27:24,119 Speaker 1: extreme moves even though what's really happening at the company 508 00:27:24,280 --> 00:27:27,320 Speaker 1: may not justify them. I'm trying to think cover cover 509 00:27:27,400 --> 00:27:30,120 Speaker 1: their shorts at j C. Penny. Oh no, oh no, 510 00:27:30,280 --> 00:27:31,840 Speaker 1: I won't go there, but I will tell you that 511 00:27:32,080 --> 00:27:34,960 Speaker 1: not this time a year anyway, it's long pants. Thank you. 512 00:27:35,119 --> 00:27:38,440 Speaker 1: Thank Speaking of which, Canada Goose we spoke about it yesterday, 513 00:27:38,480 --> 00:27:41,280 Speaker 1: the maker of those Parker's and down jackets and so on. 514 00:27:41,600 --> 00:27:44,160 Speaker 1: Stock is up another three percent today. Thanks very much. 515 00:27:44,200 --> 00:27:46,800 Speaker 1: Dave Wilson, Bloomberg Stocks Commas to send um an email. 516 00:27:46,880 --> 00:27:49,520 Speaker 1: D Wilson Bloomberg dot net signed up for his daily 517 00:27:49,560 --> 00:27:52,040 Speaker 1: free email newsletter and our thanks to Lindsay Up, specialty 518 00:27:52,080 --> 00:27:57,440 Speaker 1: retailer reporter for Bloomberg. Thanks for listening to the Bloomberg 519 00:27:57,480 --> 00:28:00,640 Speaker 1: P and L podcast. You can subscribe in Lessen Interviews 520 00:28:00,640 --> 00:28:04,720 Speaker 1: at Apple Podcasts, SoundCloud or whatever podcast platform you prefer. 521 00:28:05,119 --> 00:28:08,680 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 522 00:28:08,720 --> 00:28:12,000 Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast, 523 00:28:12,040 --> 00:28:14,640 Speaker 1: you can always catch us worldwide on Bluebirg Radio