Speaker 1: P and L is brought to you by proper Cloth,
Speaker 1: a leader in men's custom shirts, with proprietary smart sized
Speaker 1: technology and top rated customer service. Ordering a custom shirt
Speaker 1: has never been easier. Visit proper cloth dot com to
Speaker 1: order your first custom shirt today. Welcome to the Bloomberg
Speaker 1: P and L Podcast. I'm pim Fox. Along with my
Speaker 1: co host Lisa Abramowitz. Each day we bring you the
Speaker 1: most important, noteworthy, and useful interviews for you and your money,
Speaker 1: whether at the grocery store or the trading floor. Find
Speaker 1: the Bloomberg P and L Podcast on iTunes, SoundCloud and
Speaker 1: at Bloomberg dot com. I would like to get a
Speaker 1: better sense of what caused the bond market to make
Speaker 1: such a significant move yesterday following Jenny Ellen's testimony in
Speaker 1: front of the Senate UH Committee. I want to bring
Speaker 1: in Carl Rickadonna, chief US economist for Bloomberg Intelligence. Carl,
Speaker 1: I noticed that the probability of a March rate hike
Speaker 1: rose to from just two days ago. What do you
Speaker 1: think drove this move? This is a double whammy UH
Speaker 1: due to her remarks yesterday which really focused on the
Speaker 1: dangers of waiting too long, which is something we had
Speaker 1: actually heard from her on several prior occasions. So you know,
Speaker 1: was this an unjustified moved I to me, it looked
Speaker 1: overstated yesterday and you saw about a five basis point
Speaker 1: move in the tenure and then it kind of faded
Speaker 1: later in the day. Then this morning, this is the
Speaker 1: other part of the double whammy. You get this barrage
Speaker 1: of strong economic data. The New York Empire Survey was
Speaker 1: very strong, Retail sales were very strong. Cp I surprised
Speaker 1: the the upside. And so this all just seems to
Speaker 1: fall on. When it rains, it pours, right, Uh. And
Speaker 1: so this just falls onto the notion that the Fed
Speaker 1: is going to be forced to, uh you know what,
Speaker 1: maybe adhere to a tighter tightening schedule. Uh. Then uh,
Speaker 1: maybe they had preferred just a few weeks so or
Speaker 1: a month or so ago. I like that whammy. Can
Speaker 1: I add another whammy? All right? What are they going
Speaker 1: to do in March? They're gonna raise rates. I don't
Speaker 1: think they're going to move in March. I know the
Speaker 1: odds are increasing. We take no for an answer, all right,
Speaker 1: So move ahead? Sure, how many rate heights for the
Speaker 1: rest of the year. I still think it's going to
Speaker 1: be too now. It is subject to the data, and
Speaker 1: Cherry Yellen has made that abundantly clear. And if we
Speaker 1: really see a new normal for the economy which is
Speaker 1: vigor as opposed to sluggishness, then they could they could possibly,
Speaker 1: uh stick to that schedule of three. But I really
Speaker 1: think that that we have persistent sluggishness endemic in the U.
Speaker 1: S economy and that's going to limit them to two.
Speaker 1: I got it. So you think that you're gonna have
Speaker 1: two interest rate increases this year? Yes, if the composition
Speaker 1: of the border governors of the Federal Reserve changes dramatically
Speaker 1: and or we get a signal between now and let's
Speaker 1: say that second rate increase that you're describing, If we
Speaker 1: get a signal that Janet Yellen is not going to
Speaker 1: be around in two thousand eighteen on as chair of
Speaker 1: the Federal Reserve, what happens anything, Well, we are economists
Speaker 1: and Fed watchers will have to re evaluate the FED
Speaker 1: reaction function based on who's at the Fed. And if
Speaker 1: it's uh someone who is looking like the next chair
Speaker 1: is going to be someone more hawkish, then you have
Speaker 1: to reprice FED action as a result. Right, you know,
Speaker 1: it's interesting. Uh, your question, Pim really highlights one of
Speaker 1: the big tensions that Janet Allen is going to be
Speaker 1: facing today in her testimony as she did yesterday, which
Speaker 1: is the Fed's role in regulatory supervision of the banks.
Speaker 1: And I want to bring in UH Dean and Nathan Dean,
Speaker 1: who's the government analyst for Bloomberg Intelligence, to give us
Speaker 1: a little bit more of a sense of first of all,
Speaker 1: what the significance is of Dan Trullo stepping down as
Speaker 1: a federalsor of governor in the upcoming months. Uh and
Speaker 1: and and two you know where we are with respect
Speaker 1: to the Dodd Frank overhaul and what the implications there
Speaker 1: could be. So the the earth of nation of Daniel
Speaker 1: Trula really takes away the point man on the subtle
Speaker 1: reserve capital requirements, the negotiations with Bossel and the International
Speaker 1: UH Capital Requirements Framework. And what it does is that
Speaker 1: it pushes him aside. It allows Donald Prompt to bring
Speaker 1: in this new vice Vice Chair of Supervision and Regulation,
Speaker 1: and it really negates any future rulemakings that we're going
Speaker 1: to see from the Fed. UH. You know, there was
Speaker 1: a lot of talk about, you know, will the Governor
Speaker 1: Trulo continue to negotiate, continue to sign up for more
Speaker 1: capital rules. Uh. And this really negates that. You know.
Speaker 1: It's interesting. Trula is on Bloomberg Television earlier today. Uh,
Speaker 1: and he highlighted, in response to a question of a
Speaker 1: from Bloomberg Televisions David Weston, that perhaps the net was
Speaker 1: cast too large originally with the Dodd Frank Act. Take
Speaker 1: a listen to what he had to say. The post
Speaker 1: U crisis regime, both supervisory and regulatory, that's been put
Speaker 1: in place in many instances cast the net perhaps too
Speaker 1: broadly or deeply. I've been particularly concerned with the impact
Speaker 1: on community banks. You know that the risk based capital
Speaker 1: rules had to be changed to take into account what
Speaker 1: the media that the big regionals and the largest banks
Speaker 1: were doing, But in the process, those same rules applied
Speaker 1: to community banks. Uh. Nathan, do you think that it's
Speaker 1: significant that Dan Trullo himself sees places where Dodd Frank
Speaker 1: could be potentially curtailed. Absolutely. And I think the debate
Speaker 1: that we're going to see over the next year is
Speaker 1: what's the scope of the curtailing or the weakening of
Speaker 1: these provisions. You know, the Photo Reserve has already taken
Speaker 1: steps to weaken the qualitative c CAR for banks between
Speaker 1: fifty and two and fifty billion. Bloomberg News obtained a
Speaker 1: memo about the next version of the Choice Act trying
Speaker 1: to do away with that qualitative c CAR. So I
Speaker 1: think what we're going to have to expect from the
Speaker 1: set over the next year. Maybe Jennet Allen will tell
Speaker 1: us a little bit more in this cestimony this morning,
Speaker 1: is what are her plans for the next year are
Speaker 1: she Is she going to be open to working with
Speaker 1: Republicans to scaling back down regulations for those fifty billion
Speaker 1: dollar size and banks, or is she essentially going to
Speaker 1: say that, you know what, I think what we have
Speaker 1: is appropriate right now and it will be up to
Speaker 1: the next said share in the next you know, Donald
Speaker 1: Trump's appointees to take that further. Carvera Donna, I want
Speaker 1: to put to you a scenario in which we have
Speaker 1: anti regulation at the FED. We have the promulgation of
Speaker 1: the administration's view that regulations ought to be diminished. So
Speaker 1: you have that, plus you have a relatively easy money policy.
Speaker 1: Because let's speculate that there are business leaders who will
Speaker 1: be taking some of those positions on the FED Board
Speaker 1: of governors and they're gonna want easy money. Do you
Speaker 1: see that that is a possibility. I definitely think that
Speaker 1: the you know, the regulatory wave ebbs and uh and
Speaker 1: Wayne's over the course of the uh uh you know,
Speaker 1: the aftermastatic. So I know it has been on on
Speaker 1: the rise, and I think that we could see it
Speaker 1: retreat for a bit for the reasons you mentioned, Nathan,
Speaker 1: you agree, do and I think what's going to happen
Speaker 1: here is it's really going to be which bank is
Speaker 1: going to see the most regulatory relief. You know, there's
Speaker 1: this huge debate in Washington. Is it the small banks?
Speaker 1: Is it the big banks? You know, we just heard
Speaker 1: that comment about community sized banks. So I think the
Speaker 1: debate is going to be can the big banks essentially
Speaker 1: attached themselves to this wave of deregulation that right now
Speaker 1: is favoring the smaller ones. P and L is brought
Speaker 1: to you by proper Cloth, the leader in men's custom shirts.
Speaker 1: At proper cloth dot com. Ordering custom shirts has never
Speaker 1: been easier. Create your custom shirt size by answering ten
Speaker 1: easy questions, select from over five fabrics to suit your
Speaker 1: personal taste. Sure start from eighty five dollars and are
Speaker 1: delivered in just two weeks with proper Clouds perfect fit guarantee.
Speaker 1: Remakes are completely free and expert staff are standing by
Speaker 1: to help. For premium quality, perfect fitting shirts, visit proper
Speaker 1: cloth dot com custom shirts made Smarter. Are you a
Speaker 1: snack person and your FETO lay person? Not a person
Speaker 1: and have an oatmeal? Yeah? Yeah, and that's what That's
Speaker 1: what they've been bolstered by. UM. But when I look
Speaker 1: at their earnings, on the face of it, it seems like,
Speaker 1: you know, they are benefiting from the fact that its
Speaker 1: revenue it's coming from these guilt free products. I want
Speaker 1: to be that in air quote. Yes I did put
Speaker 1: that in air. I mean, come on, and nothing's guilt free.
Speaker 1: You can always put guilter at anything. Can say food,
Speaker 1: beverage and tobacco analysts for Bloomberg Intelligence, I want to
Speaker 1: get your thoughts on Pepsi's results. High Lisa Sure, PepsiCo
Speaker 1: reported today another sound quarter. Um. You know, PepsiCo among
Speaker 1: the food beversbacal companies that I cover, seems to be
Speaker 1: the one that seems to be the most predictable, the
Speaker 1: steady grower, and this is just another quarter in that mix.
Speaker 1: UM down well, maybe a lot of those anticipated perhaps,
Speaker 1: um From a fundamental point of view, it's biggest drivers
Speaker 1: in North America are free to lay quaker that the
Speaker 1: beverage business collectively put up good numbers, you know, high
Speaker 1: single digit sales, high signle digit operating profits. It's really
Speaker 1: the non North America operations. They're having some currency issues
Speaker 1: outside you know, the US North America. But overall, you know,
Speaker 1: if you're a fundamental owner of PepsiCo, I think you
Speaker 1: had to be pleased with today's numbers. Hey, can can
Speaker 1: I just ask you to give us a view of
Speaker 1: the industry right now? I mean, we got the results
Speaker 1: from Dr Pepper Snapple this week. I want to know
Speaker 1: what's going on with Most and Corps Brewing in the
Speaker 1: wake of that whole beer market shake up and then
Speaker 1: Constellation brands with the Mexico can business. Sure, well, it's
Speaker 1: a lot in there to unpack their pim. But do
Speaker 1: my best. You know, the beverage business is a steady grower,
Speaker 1: and you know, like I think, across all beverages, it's
Speaker 1: the alcohol beverages that are probably doing the best. It's
Speaker 1: still the craft distill business. The craft beers are still
Speaker 1: doing pretty well, they're getting a little more competitive. It's
Speaker 1: the non alcoholic side that, excuse me, growing a little
Speaker 1: more slowly. Some of the turmoil that the companies are
Speaker 1: siting here is some of the uncertainties in Latin America.
Speaker 1: You know's just talk about a border tax. A lot
Speaker 1: of these companies source goods from Mexico. Um. Well, Constellation
Speaker 1: is Corona beer right in the United States. That's right.
Speaker 1: It's a big drive out of Constellation brands sales and profits.
Speaker 1: So if there's a tax imposed there, you know, that
Speaker 1: could be uh, you know, an issue for them. They
Speaker 1: have some strategies to mitigate that way they source goods
Speaker 1: and so on. Um. But nevertheless, you know, you can't
Speaker 1: scape a you know, attacks if there's one imposed on
Speaker 1: a big piece of business. Um. But you know what
Speaker 1: about most and cores go there ken most of corps
Speaker 1: are still digesting, uh you know the full steak in
Speaker 1: the essay b. Miller Um business that they got as
Speaker 1: part of the inhazard bush Um deal with any relinquished
Speaker 1: their partnership steak. Those beers put up by most and
Speaker 1: corps tend to be slow growing because of the so
Speaker 1: called popular beers, not so much the Craft beers um
Speaker 1: that are really where the action is in the US.
Speaker 1: You know, you're talking about Middle Light and Coors Light
Speaker 1: and so they have leading shares, but they're just not
Speaker 1: growing as quickly. I think a lot of the millennials
Speaker 1: are moving to more um you know, exotic tasting richard
Speaker 1: flavored beers. Well, I'm wondering if they're going to move
Speaker 1: toward more exotic tasting mac and cheese. Kraft Hynes is
Speaker 1: going to be reporting today after the bell shares are
Speaker 1: up more than in the past twelve months. What do
Speaker 1: you look expecting real quick out of the earnings today.
Speaker 1: I think everyone's gonna be looking at the margins. You know,
Speaker 1: Craft is all about margin enhancement right now. They're on
Speaker 1: a tremendous sweeping cost cutting program. Uh, they're close to
Speaker 1: meeting their two year target of cost cutting. We expect
Speaker 1: at some point second quarter, maybe second half of this
Speaker 1: year for them to start looking to the top line,
Speaker 1: whether that's acquisitions, whether that's new products. But this this
Speaker 1: quarter is all about cost cutting and how much more
Speaker 1: they can boost operating margins. All right, well, we're gonna
Speaker 1: be looking for that. Look for the earnings. The estimate
Speaker 1: is for earnings of eighty seven cents. We'll be bringing
Speaker 1: that to you, of course, as soon as it is
Speaker 1: released for craft Hines. Thanks very much for joining us.
Speaker 1: Kenna sha is food beverage tobacco analysts for Bloomberg Intelligence.
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
Speaker 1: out there on Twitter at pim Fox. I'm out there
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
Speaker 1: You can always catch us worldwide on Bloomberg Radio. P
Speaker 1: and L is brought to you by proper Cloth, a
Speaker 1: leader in men's custom shirts with proprietary, smart sized technology
Speaker 1: and top rated customer service. Ordering a custom shirt has
Speaker 1: never been easier. Visit proper cloth dot com to order
Speaker 1: your first custom shirt today