1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,200 --> 00:00:13,160 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,799 Speaker 1: Find Bloomberg Surveillance on Apple, podcast, SoundCloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:29,400 Speaker 1: and of course on the Bloomberg Terminal. Will next year 6 00:00:29,680 --> 00:00:31,479 Speaker 1: be the Year of the bond? Eric Knutson joining us 7 00:00:31,480 --> 00:00:34,159 Speaker 1: now multi asset class CIO at new Berger Berman. Eric, 8 00:00:34,200 --> 00:00:35,600 Speaker 1: I want to start there because that seems to be 9 00:00:35,680 --> 00:00:38,279 Speaker 1: one of the consensus is out there that this will 10 00:00:38,320 --> 00:00:41,080 Speaker 1: be a great year, particularly in government debt. Do you 11 00:00:41,159 --> 00:00:46,040 Speaker 1: agree what we do? We do and and two thousand 12 00:00:46,080 --> 00:00:48,839 Speaker 1: twenty three could continue to be pretty challenging for stocks, 13 00:00:48,840 --> 00:00:50,959 Speaker 1: but we do think that we are at a bit 14 00:00:50,960 --> 00:00:53,640 Speaker 1: of a sea change. I've been doing this almost as 15 00:00:53,640 --> 00:00:56,320 Speaker 1: long as Howard Marks, and I would agree that the 16 00:00:56,360 --> 00:00:59,520 Speaker 1: next period of time is going to be quite different 17 00:00:59,520 --> 00:01:02,000 Speaker 1: from the last ten of fifteen years. And one of 18 00:01:02,040 --> 00:01:04,360 Speaker 1: the key elements there is that rates have to be 19 00:01:04,520 --> 00:01:08,200 Speaker 1: in our view, structurally higher, associated with higher structural inflation 20 00:01:08,560 --> 00:01:11,760 Speaker 1: and the FEDS determination and frankly, the capital markets need 21 00:01:11,880 --> 00:01:15,760 Speaker 1: to have a real um positive real yield across the 22 00:01:16,000 --> 00:01:20,040 Speaker 1: government bond curve. The FED is forecasting that rates at 23 00:01:20,080 --> 00:01:21,679 Speaker 1: the end of this year are gonna be five ish 24 00:01:21,760 --> 00:01:24,000 Speaker 1: per cent. Growth is going to be half of a percent, 25 00:01:24,080 --> 00:01:26,479 Speaker 1: inflation is going to be three point two percent. That's 26 00:01:26,520 --> 00:01:29,160 Speaker 1: a real yield of almost two percent. We haven't seen 27 00:01:29,160 --> 00:01:32,479 Speaker 1: a real yield like that consistently for over fifteen years. 28 00:01:32,840 --> 00:01:35,200 Speaker 1: We think you should pay attention to the FED. And 29 00:01:35,319 --> 00:01:38,319 Speaker 1: this is a dramatic change from the environment we've seen 30 00:01:38,319 --> 00:01:40,400 Speaker 1: over the last ten of fifteen years. Do we see 31 00:01:40,400 --> 00:01:45,880 Speaker 1: a pivot eric? That's not our expectation the FED. We 32 00:01:45,920 --> 00:01:47,960 Speaker 1: believe that FED and other central banks are going to 33 00:01:48,040 --> 00:01:52,120 Speaker 1: need to maintain tight financial conditions through two thousand three. 34 00:01:52,400 --> 00:01:54,800 Speaker 1: You see it with the Bank of Japan beginning their 35 00:01:54,840 --> 00:01:58,480 Speaker 1: normalization process even earlier than people expected, and that that 36 00:01:58,560 --> 00:02:02,280 Speaker 1: then encourages the rest of global financial conditions to to 37 00:02:02,440 --> 00:02:05,560 Speaker 1: tighten um And now what appears to be an even 38 00:02:05,600 --> 00:02:09,760 Speaker 1: more rapid and perhaps chaotic and disorderly you know, reopening 39 00:02:09,800 --> 00:02:13,079 Speaker 1: by China, which could lead to more rapid growth, more 40 00:02:13,200 --> 00:02:15,480 Speaker 1: robust growth from China sooner rather than later. That just 41 00:02:15,639 --> 00:02:18,839 Speaker 1: adds to the need for global central banks to keep 42 00:02:18,880 --> 00:02:22,400 Speaker 1: financial conditions. I thought about actually buying my hellcat by 43 00:02:22,440 --> 00:02:25,959 Speaker 1: shorting JGBS, but I can't get a borrow and now 44 00:02:25,960 --> 00:02:28,360 Speaker 1: with the end strengthening, that would kill me. Is there 45 00:02:28,400 --> 00:02:30,359 Speaker 1: anything else you want to went about? Uh? No, No, 46 00:02:30,600 --> 00:02:34,200 Speaker 1: I I just think it's an interesting trade that um 47 00:02:34,200 --> 00:02:36,280 Speaker 1: now I understand really when I look at the end 48 00:02:36,360 --> 00:02:38,880 Speaker 1: right now one thirty one why it's called the widow 49 00:02:38,880 --> 00:02:42,639 Speaker 1: maker in terms of yeah, in terms of what else 50 00:02:42,680 --> 00:02:47,440 Speaker 1: to expect for three? Um, where do you see earnings? 51 00:02:47,520 --> 00:02:50,480 Speaker 1: Because this is uh something that a lot of people 52 00:02:50,480 --> 00:02:52,280 Speaker 1: have flagged to us, is maybe the most important part, 53 00:02:52,360 --> 00:02:55,480 Speaker 1: certainly in the equity space. Right we're still expecting two 54 00:02:55,560 --> 00:02:58,239 Speaker 1: hundred and ten dollars two hundred and twenty dollars a share? 55 00:02:58,600 --> 00:03:02,399 Speaker 1: Does that need to come in absolute? Well, So there's 56 00:03:02,440 --> 00:03:05,960 Speaker 1: a huge difference in opinion between strategists and macro economists 57 00:03:05,960 --> 00:03:08,920 Speaker 1: who are expecting recession and who are protecting earnings anywhere 58 00:03:08,960 --> 00:03:13,280 Speaker 1: from eighty to two ten or dollars, and that assumes 59 00:03:13,280 --> 00:03:16,280 Speaker 1: a recession and that or or even radically slow in growth. 60 00:03:16,320 --> 00:03:19,720 Speaker 1: Even if we avoid recession, that's normally accompanied by earnings 61 00:03:19,720 --> 00:03:23,760 Speaker 1: declines of ten to bottom up consensus Wall Street forecasts 62 00:03:23,760 --> 00:03:27,160 Speaker 1: are still expecting earnings in two thousand twenty three about 63 00:03:27,160 --> 00:03:29,799 Speaker 1: two hundred thirty dollars to share up four is per cent. 64 00:03:30,400 --> 00:03:32,720 Speaker 1: Our view is that earnings have to come down from 65 00:03:32,760 --> 00:03:36,320 Speaker 1: that two thirty dollar target percent um whether they get 66 00:03:36,360 --> 00:03:38,840 Speaker 1: to one eighty were not quite that barage. We think 67 00:03:38,880 --> 00:03:42,160 Speaker 1: that there are corporate management teams at various levers, especially 68 00:03:42,160 --> 00:03:45,080 Speaker 1: in a more inflationary environment, to support earnings, but we 69 00:03:45,160 --> 00:03:48,960 Speaker 1: think they end the year below the current per share 70 00:03:48,960 --> 00:03:52,040 Speaker 1: that we expect for two two and that's the last 71 00:03:52,120 --> 00:03:54,960 Speaker 1: leg down, that's the last source of pressure on equities. 72 00:03:55,760 --> 00:03:59,000 Speaker 1: Is that more on the demand side that that earnings 73 00:03:59,000 --> 00:04:01,760 Speaker 1: pressure is going to come, or on the input cost 74 00:04:01,840 --> 00:04:06,000 Speaker 1: side and supply some of both margins have to come 75 00:04:06,080 --> 00:04:08,680 Speaker 1: under pressure there. It's like there's still almost at secular 76 00:04:08,800 --> 00:04:12,360 Speaker 1: highs um that has to normalize to a certain degree. 77 00:04:12,400 --> 00:04:14,960 Speaker 1: Corporate management teams, particularly in the United States, have gotten 78 00:04:15,040 --> 00:04:18,200 Speaker 1: very good at managing managing margin margins, but they have 79 00:04:18,279 --> 00:04:20,400 Speaker 1: to come down somewhat. So it's going to be a 80 00:04:20,440 --> 00:04:24,440 Speaker 1: mix of both popline pressure as well as pressure on margins. 81 00:04:24,640 --> 00:04:27,159 Speaker 1: When do we start to go back to a new normal, right, 82 00:04:27,200 --> 00:04:28,880 Speaker 1: I mean, at what point we can we reset and 83 00:04:29,000 --> 00:04:32,039 Speaker 1: understand whether we just can expect a lower turns for 84 00:04:32,080 --> 00:04:36,000 Speaker 1: the next decade in equity index indices, or perhaps or 85 00:04:36,040 --> 00:04:39,120 Speaker 1: aversion back to the FED getting to low rates and 86 00:04:39,320 --> 00:04:43,719 Speaker 1: some sort of pre pandemic norm. Well, we don't believe 87 00:04:43,720 --> 00:04:45,839 Speaker 1: we're going back to the new normal of the last 88 00:04:45,880 --> 00:04:50,279 Speaker 1: time of fifteen years with low inflation, low rates, financial repression, etcetera. 89 00:04:50,320 --> 00:04:53,600 Speaker 1: We think we're going to a more normalized rate environment 90 00:04:53,600 --> 00:04:57,240 Speaker 1: with structurally higher inflation, in part because of a fundamental 91 00:04:57,320 --> 00:04:59,880 Speaker 1: change in the relative power of labor versus capital, which 92 00:05:00,000 --> 00:05:02,839 Speaker 1: as we're just talking about, in part because of de globalization, 93 00:05:02,880 --> 00:05:05,880 Speaker 1: in part because of de carbonization, um, in part because 94 00:05:05,880 --> 00:05:09,280 Speaker 1: of changing demographics and the changing role and relationship of 95 00:05:10,200 --> 00:05:15,120 Speaker 1: China with major major trade partners and with their domestic policy. UM. So, 96 00:05:15,160 --> 00:05:17,480 Speaker 1: we don't think we go back to the new normal 97 00:05:17,560 --> 00:05:19,800 Speaker 1: any type. So we're really going back to a more 98 00:05:19,920 --> 00:05:23,440 Speaker 1: or old normal, more typical environment. Doesn't mean there aren't 99 00:05:23,440 --> 00:05:25,960 Speaker 1: going to be interesting opportunities. We see great opportunities in 100 00:05:25,960 --> 00:05:28,760 Speaker 1: short duration fixed income to your treasuries at four point 101 00:05:28,800 --> 00:05:33,560 Speaker 1: three percent yield, they're they're battling with SMP five earnings yield. 102 00:05:33,560 --> 00:05:36,760 Speaker 1: You haven't seen a comparison like that since two thousand seven. 103 00:05:37,040 --> 00:05:40,920 Speaker 1: Short duration treasury, short duration investment grade credit, mortgage backed securities, 104 00:05:41,160 --> 00:05:43,880 Speaker 1: structured product we think will be very interesting this year. 105 00:05:44,240 --> 00:05:47,719 Speaker 1: Within the US. We like, we like value stocks, quality stocks, 106 00:05:47,800 --> 00:05:51,039 Speaker 1: high dividend yielding stocks. Money now as opposed to money 107 00:05:51,040 --> 00:05:54,560 Speaker 1: in the future. But now you've actually got competition from 108 00:05:54,560 --> 00:05:58,360 Speaker 1: the ristory rate um for your capital. Eric Newtson doesn't 109 00:05:58,360 --> 00:06:01,680 Speaker 1: necessarily paint a particularly wonderful picture for returns for equities, 110 00:06:01,680 --> 00:06:04,120 Speaker 1: but certainly the short term of the treasury curve. Eric 111 00:06:04,279 --> 00:06:06,159 Speaker 1: Neutson of new Berger Burman, thank you so much for 112 00:06:06,240 --> 00:06:19,280 Speaker 1: being with us. We have seen such a rapid pace 113 00:06:19,360 --> 00:06:21,680 Speaker 1: of tightening four five basis points in the span of 114 00:06:21,760 --> 00:06:24,640 Speaker 1: nine months. The economy hasn't fully felt the effects of that. 115 00:06:24,720 --> 00:06:26,680 Speaker 1: So I guess if you are on the team recession, 116 00:06:27,000 --> 00:06:29,640 Speaker 1: you're saying, just wait until it hits dies. And that 117 00:06:29,640 --> 00:06:32,279 Speaker 1: would really bring back the idea of credibility for the Fed, 118 00:06:32,480 --> 00:06:35,800 Speaker 1: right that they can essentially shoot down inflation, which brings 119 00:06:35,880 --> 00:06:38,560 Speaker 1: us to our next guest and esteemed member of the 120 00:06:38,600 --> 00:06:43,279 Speaker 1: Bloomberg executive team, Editor in Chief Emeritus for Bloomberg, Matt Winkler. 121 00:06:43,400 --> 00:06:45,480 Speaker 1: You wrote, a column that is fascinating where you basically 122 00:06:45,560 --> 00:06:47,280 Speaker 1: pushed back against all the people who are saying the 123 00:06:47,279 --> 00:06:51,160 Speaker 1: FED is just behind the curve. They're getting it wrong, saying, actually, 124 00:06:51,360 --> 00:06:54,479 Speaker 1: it seems like they're bang on target. Well, thank you, 125 00:06:54,600 --> 00:06:57,440 Speaker 1: great to be with you. Happy New Year. A year 126 00:06:57,480 --> 00:06:59,960 Speaker 1: ago at this time, the prevailing narrative, as you say, 127 00:07:00,200 --> 00:07:02,159 Speaker 1: was the FED was behind the curve. Now, let's just 128 00:07:02,200 --> 00:07:08,839 Speaker 1: go back and remember that inflation was seven uh, and 129 00:07:08,920 --> 00:07:12,960 Speaker 1: that's what prompted the outcry. And we also need to 130 00:07:13,000 --> 00:07:15,680 Speaker 1: be reminded of the fact that the US was making 131 00:07:15,960 --> 00:07:20,480 Speaker 1: the most dramatic recovery from the pandemic recession, which was 132 00:07:20,520 --> 00:07:25,520 Speaker 1: the worst since the global depression eight decades ago, and 133 00:07:25,560 --> 00:07:28,680 Speaker 1: we were getting close to what is now the three 134 00:07:28,720 --> 00:07:32,040 Speaker 1: point seven unemployment, right, So the U s economy was 135 00:07:32,040 --> 00:07:35,520 Speaker 1: actually doing very well, better than any major developed economy 136 00:07:35,520 --> 00:07:40,200 Speaker 1: in the world. And that's when the FED decided, Okay, 137 00:07:40,240 --> 00:07:43,760 Speaker 1: the data is what drives us. We're data dependent. We're 138 00:07:43,800 --> 00:07:46,760 Speaker 1: now going to tighten credit. And everybody said they were 139 00:07:46,840 --> 00:07:51,720 Speaker 1: too late, too little, etcetera. And we know that what happened, 140 00:07:51,760 --> 00:07:56,080 Speaker 1: as you said, an unprecedented tightening, but a tightening that 141 00:07:56,200 --> 00:07:59,880 Speaker 1: came when the U. S. Economy was much stronger resilient 142 00:08:00,680 --> 00:08:03,040 Speaker 1: than it otherwise would have been. And I think that's 143 00:08:03,080 --> 00:08:05,640 Speaker 1: the parenthetical clause that's left out of this, is that 144 00:08:05,680 --> 00:08:08,440 Speaker 1: the U. S. Economy was much stronger when they Fed tightened. 145 00:08:08,720 --> 00:08:12,480 Speaker 1: And so here we are today. Inflation is way below 146 00:08:12,640 --> 00:08:16,800 Speaker 1: the nine point one peak in June, when everybody said 147 00:08:16,800 --> 00:08:20,680 Speaker 1: the FED had lost its way. The bond market never 148 00:08:21,400 --> 00:08:25,880 Speaker 1: gave up on the FED. The bond market was always confident, somehow, 149 00:08:26,040 --> 00:08:29,920 Speaker 1: some way, this inflation problem is going to be resolved. Well, 150 00:08:29,920 --> 00:08:31,760 Speaker 1: but the bond market got the FED wrong at the 151 00:08:31,840 --> 00:08:34,640 Speaker 1: end of right because we looked at a two year 152 00:08:34,679 --> 00:08:38,120 Speaker 1: yield that was zero point seven percent, we looked at 153 00:08:38,160 --> 00:08:40,280 Speaker 1: a ten uere yield at one and a half percent, 154 00:08:40,520 --> 00:08:43,600 Speaker 1: we saw a massive rise. People underestimated how much the 155 00:08:43,640 --> 00:08:46,960 Speaker 1: FED would have to do in order to combat inflation, 156 00:08:47,240 --> 00:08:50,720 Speaker 1: heading into how much credibility do you give the idea 157 00:08:50,760 --> 00:08:53,640 Speaker 1: that we're in a new higher inflation regime that will 158 00:08:53,679 --> 00:08:56,560 Speaker 1: cause a real question mark for the FED in terms 159 00:08:56,600 --> 00:08:58,240 Speaker 1: of how far hard they have to go and how 160 00:08:58,280 --> 00:08:59,920 Speaker 1: much pain they have to I'm not sure the bond 161 00:09:00,000 --> 00:09:03,640 Speaker 1: market actually ever lost its way here that you know, 162 00:09:03,720 --> 00:09:08,800 Speaker 1: we're talking about maybe relative values, but the bond market 163 00:09:08,960 --> 00:09:13,280 Speaker 1: was never convinced that run over inflation was here ever, 164 00:09:13,640 --> 00:09:17,480 Speaker 1: and that appears to be still correct. Okay, what the 165 00:09:17,520 --> 00:09:19,880 Speaker 1: bond market, if you say, got wrong is it didn't 166 00:09:19,960 --> 00:09:23,000 Speaker 1: expect the Fed to tighten to the extent that it 167 00:09:23,040 --> 00:09:26,599 Speaker 1: did to contain inflation. But the bond market always anticipated 168 00:09:26,840 --> 00:09:29,800 Speaker 1: that inflation would be much lower than many of our 169 00:09:29,920 --> 00:09:32,920 Speaker 1: strategists and pundits have predicted. And so that's where we 170 00:09:32,960 --> 00:09:36,439 Speaker 1: are today. The Fed is still going to keep interest 171 00:09:36,520 --> 00:09:39,559 Speaker 1: rates elevated, They've already said that, and so the bond 172 00:09:39,559 --> 00:09:42,640 Speaker 1: market is anticipating that we're still going to see what 173 00:09:42,840 --> 00:09:46,319 Speaker 1: five six percent inflation six months, but a year from 174 00:09:46,360 --> 00:09:48,280 Speaker 1: now it's going to be much closer to the two 175 00:09:48,280 --> 00:09:53,800 Speaker 1: percent target. We talked to Eddie Ardnny yesterday who was saying, um, 176 00:09:53,840 --> 00:09:58,760 Speaker 1: that you haven't really seen anything break. You've seen implosions 177 00:09:58,800 --> 00:10:01,600 Speaker 1: here and there in crypto notably, but there hasn't been 178 00:10:01,640 --> 00:10:04,640 Speaker 1: any contagion across the entire financial system. And he said, 179 00:10:05,000 --> 00:10:07,720 Speaker 1: you know, maybe this Fed has gotten it right there, 180 00:10:07,720 --> 00:10:11,040 Speaker 1: probably closer to a soft landing, and there's a chance 181 00:10:11,080 --> 00:10:13,960 Speaker 1: that there's no landing at all. Um, do you think 182 00:10:14,000 --> 00:10:17,880 Speaker 1: that we're starting to see a growing view that we 183 00:10:17,960 --> 00:10:21,400 Speaker 1: could have a very short and shallow recession or even 184 00:10:21,520 --> 00:10:24,520 Speaker 1: not have a recession. Okay, so here a couple of things. 185 00:10:24,679 --> 00:10:29,000 Speaker 1: A year ago, we were all concerned about supply chain bottlenecks, 186 00:10:29,040 --> 00:10:32,600 Speaker 1: if you recall, and the ships in the Port of 187 00:10:32,640 --> 00:10:36,600 Speaker 1: Los Angeles, the largest port, We're backed up as far 188 00:10:36,640 --> 00:10:39,680 Speaker 1: as the eye could see maybe sixty five ships waiting 189 00:10:39,960 --> 00:10:43,640 Speaker 1: to unload their cargoes. When we caught up with Jeans Sirocco, 190 00:10:43,679 --> 00:10:46,200 Speaker 1: who's the executive director of the Port of Los Angeles 191 00:10:46,280 --> 00:10:51,600 Speaker 1: just a month ago, the whole waterfront was blissfully free 192 00:10:52,200 --> 00:10:55,280 Speaker 1: of any supply chain bottlenecks. So there's an example where 193 00:10:55,640 --> 00:10:59,800 Speaker 1: common prevailing assumptions a year ago turned out to be 194 00:11:00,559 --> 00:11:04,760 Speaker 1: the worst as far as it went, and now it's 195 00:11:04,760 --> 00:11:07,840 Speaker 1: gotten better. So it's very similar with the rest of 196 00:11:07,880 --> 00:11:12,120 Speaker 1: the U. S. Economy, which is everybody you can think 197 00:11:12,160 --> 00:11:15,280 Speaker 1: of was worried about it. Recession in July and paying 198 00:11:15,320 --> 00:11:18,440 Speaker 1: double the price for used cars, right, I mean, prices 199 00:11:18,520 --> 00:11:22,360 Speaker 1: were obviously that's part of inflation, just off the charts, 200 00:11:22,400 --> 00:11:25,439 Speaker 1: and now we're looking at that and that market used cars. 201 00:11:25,440 --> 00:11:28,200 Speaker 1: I've seen it just collapse. Right, We got data out 202 00:11:28,200 --> 00:11:30,560 Speaker 1: of Spain, for example, today that shows inflation is coming 203 00:11:30,600 --> 00:11:33,679 Speaker 1: down much faster than expected. Do we get closer to 204 00:11:33,679 --> 00:11:35,880 Speaker 1: two percent? Are the break evens? Right? You think in 205 00:11:35,920 --> 00:11:39,559 Speaker 1: a year? Well, look, the bond market is a collection 206 00:11:39,920 --> 00:11:42,439 Speaker 1: of everybody with the most at stake, if you want 207 00:11:42,440 --> 00:11:44,520 Speaker 1: to think about it that way. So these are the 208 00:11:44,559 --> 00:11:48,439 Speaker 1: people who have resources everywhere. They're betting their reputations and 209 00:11:48,480 --> 00:11:51,800 Speaker 1: their fortunes, and they're all over the world. And treasuries 210 00:11:51,840 --> 00:11:55,400 Speaker 1: are the most widely held security anywhere in the world 211 00:11:55,440 --> 00:11:58,920 Speaker 1: and the most liquid, and that collectively is, as far 212 00:11:58,960 --> 00:12:03,120 Speaker 1: as I'm concerned, the most uh, if you like evidentiary 213 00:12:04,080 --> 00:12:06,760 Speaker 1: way of looking at this equation, which is these people 214 00:12:06,760 --> 00:12:11,439 Speaker 1: are saying, somehow, some way, just as you said, matt Um, 215 00:12:11,480 --> 00:12:13,920 Speaker 1: the inflation that we've been seeing is not going to 216 00:12:14,040 --> 00:12:18,920 Speaker 1: be runaway. It's going to decelerate um in the months ahead. 217 00:12:19,040 --> 00:12:23,600 Speaker 1: And by the way, the economy still ends two thousand 218 00:12:23,720 --> 00:12:31,360 Speaker 1: twenty two up, not down. Up. Well. Obviously, two thousand 219 00:12:31,440 --> 00:12:33,640 Speaker 1: twenty two was a very hard year to predict, and 220 00:12:33,800 --> 00:12:37,160 Speaker 1: so much has happened, including Elon Musk buying Twitter, which 221 00:12:37,200 --> 00:12:39,080 Speaker 1: is another curveball that I don't think any of us 222 00:12:39,080 --> 00:12:41,240 Speaker 1: saw coming back in April. Another one of your great 223 00:12:41,240 --> 00:12:45,800 Speaker 1: pieces was entitled in defense of Elon Musk's managerial excellence. 224 00:12:45,920 --> 00:12:48,960 Speaker 1: Having seen now eight months later, what has happened to 225 00:12:49,080 --> 00:12:52,240 Speaker 1: Tesla's stock? What has happened inside of Twitter since he 226 00:12:52,280 --> 00:12:55,400 Speaker 1: took over? How, if at all, does your view change 227 00:12:55,440 --> 00:12:59,839 Speaker 1: in hindsight? Well, I never understood the Twitter UH debaccle 228 00:12:59,840 --> 00:13:01,880 Speaker 1: of you want to call it that from the beginning 229 00:13:01,880 --> 00:13:05,480 Speaker 1: and said so at the time. I think what's missing 230 00:13:05,559 --> 00:13:10,520 Speaker 1: in the discussion of Tesla right now, which obviously has 231 00:13:10,559 --> 00:13:15,800 Speaker 1: been the biggest casualty maybe of the tech UH industry, 232 00:13:16,280 --> 00:13:21,080 Speaker 1: is that it's still valued more than Toyota. Okay, if 233 00:13:21,120 --> 00:13:23,360 Speaker 1: you look at and nobody mentions that, if you look 234 00:13:23,360 --> 00:13:26,240 Speaker 1: at the market capitalization of Tesla today, having lost what 235 00:13:27,720 --> 00:13:32,400 Speaker 1: its value in, it's still what three hundred and fifty 236 00:13:32,600 --> 00:13:37,560 Speaker 1: billion dollars in market uh and you know that's worth 237 00:13:37,559 --> 00:13:42,280 Speaker 1: more than Toyota. So it's worth still after all this carnage. Now, 238 00:13:42,320 --> 00:13:46,400 Speaker 1: why is that? I would say partly because the automobile 239 00:13:46,440 --> 00:13:49,640 Speaker 1: itself is way ahead of where the rest of the 240 00:13:49,640 --> 00:13:53,440 Speaker 1: auto industry has been. It is, by far in the 241 00:13:53,520 --> 00:13:59,000 Speaker 1: US the most popular e V still um and you 242 00:13:59,040 --> 00:14:00,680 Speaker 1: know that's the real what do you at the moment? 243 00:14:00,679 --> 00:14:04,000 Speaker 1: Even if you add General Motors market cap to Ford's 244 00:14:04,080 --> 00:14:08,040 Speaker 1: market cap to Toyota's market cap, Tesla is still worth substantially. Yeah, 245 00:14:08,120 --> 00:14:12,520 Speaker 1: and so okay, maybe that's all a mirage, But given 246 00:14:12,559 --> 00:14:15,800 Speaker 1: all the carnage that we've all been talking about, I 247 00:14:15,840 --> 00:14:19,520 Speaker 1: just think it's interesting no one, no one mentions that 248 00:14:19,640 --> 00:14:23,720 Speaker 1: the market cap of Tesla today, okay, in the twenty 249 00:14:23,760 --> 00:14:27,840 Speaker 1: two is still worth more than Toyota. Matt Winkler, Fabulous 250 00:14:27,880 --> 00:14:30,520 Speaker 1: to have you on with your perspective, Matt Winkler, Editor 251 00:14:30,880 --> 00:14:38,400 Speaker 1: emeritus of Bloomberg, Editor in chief Emeritus. This has been 252 00:14:38,400 --> 00:14:40,680 Speaker 1: one of the big questions, not only with respect to 253 00:14:40,760 --> 00:14:43,160 Speaker 1: China and the economy, but also with respect to COVID. 254 00:14:43,320 --> 00:14:45,560 Speaker 1: Do we have to care about coronavirus again? People have 255 00:14:45,600 --> 00:14:48,600 Speaker 1: to start getting tested in more masks. Lawrence Houer, I 256 00:14:48,720 --> 00:14:51,040 Speaker 1: was I loved speaking with you. I saw your name 257 00:14:51,080 --> 00:14:53,040 Speaker 1: pop up and I thought to myself, I really want 258 00:14:53,040 --> 00:14:54,120 Speaker 1: to speak to you, and I hate that I have 259 00:14:54,160 --> 00:14:55,600 Speaker 1: to speak to you, because why do we have the 260 00:14:55,680 --> 00:14:58,520 Speaker 1: reprisal of COVID yet once again, the associate professor at 261 00:14:58,520 --> 00:15:01,920 Speaker 1: the University of Nebraska Medical Center and Special Pathogens Research 262 00:15:01,960 --> 00:15:04,560 Speaker 1: Network Director, Lauren, It is great to see you, and 263 00:15:04,600 --> 00:15:06,400 Speaker 1: it is also terrible to see you because people are 264 00:15:06,400 --> 00:15:09,240 Speaker 1: starting to get worried about a new variant. How much 265 00:15:09,280 --> 00:15:11,600 Speaker 1: are you concerned about this? How much is that tied 266 00:15:12,000 --> 00:15:14,320 Speaker 1: just sort of the mass infection level that we're seeing 267 00:15:14,320 --> 00:15:18,240 Speaker 1: in China. Yeah, that's a great question, and I agree. 268 00:15:18,280 --> 00:15:20,000 Speaker 1: Happy to see you and sad to see you because 269 00:15:20,000 --> 00:15:23,200 Speaker 1: it means we're back to seeing large numbers of COVID. 270 00:15:23,680 --> 00:15:26,240 Speaker 1: So I think for me, one of the biggest concerns 271 00:15:26,320 --> 00:15:29,360 Speaker 1: is less that that a new variants emerging UM and 272 00:15:29,400 --> 00:15:31,440 Speaker 1: more about the just volume of cases that may be 273 00:15:31,560 --> 00:15:34,760 Speaker 1: coming out of China. I mean, we've seen some numbers 274 00:15:34,800 --> 00:15:37,520 Speaker 1: that look like the early days of COVID when we 275 00:15:37,520 --> 00:15:39,480 Speaker 1: were we weren't even calling it COVID and we were 276 00:15:39,480 --> 00:15:41,760 Speaker 1: watching from Afar to see what would happen in China. 277 00:15:41,880 --> 00:15:44,320 Speaker 1: So I think the numbers of cases are what we're 278 00:15:44,320 --> 00:15:46,760 Speaker 1: worried about seeing come into Europe, come into the US, 279 00:15:46,840 --> 00:15:50,960 Speaker 1: come into the global UM environment. And and if we 280 00:15:51,000 --> 00:15:53,680 Speaker 1: do see new variants emerge, I think it'll be important 281 00:15:53,680 --> 00:15:56,680 Speaker 1: to track what they are UM, what what the sub 282 00:15:56,760 --> 00:15:59,320 Speaker 1: variants are and make sure that we can adjust are 283 00:15:59,600 --> 00:16:03,600 Speaker 1: our tools, Lauren, Can China be trusted to reliably do 284 00:16:03,720 --> 00:16:07,320 Speaker 1: that and to count the case this period? I think 285 00:16:07,320 --> 00:16:09,360 Speaker 1: it's it's not what we're seeing right now for sure. 286 00:16:09,560 --> 00:16:11,440 Speaker 1: Um we're not seeing the data we would like to 287 00:16:11,480 --> 00:16:14,800 Speaker 1: see out of China, especially on the deaths, um on, 288 00:16:14,800 --> 00:16:18,960 Speaker 1: on the sequencing that they're doing. Um So they've reduced 289 00:16:19,120 --> 00:16:21,560 Speaker 1: the amount of people that they're even testing. UM So 290 00:16:21,600 --> 00:16:23,600 Speaker 1: we're not seeing testing data. But we also know that 291 00:16:23,640 --> 00:16:25,480 Speaker 1: the testing is much lower than it was just a 292 00:16:25,480 --> 00:16:28,400 Speaker 1: few weeks ago. Um And and so I think the 293 00:16:28,800 --> 00:16:31,600 Speaker 1: pressure has to be on China to share every single 294 00:16:31,680 --> 00:16:34,600 Speaker 1: number they have, right so, what what are the case 295 00:16:34,680 --> 00:16:37,160 Speaker 1: counts that they're aware of, what testing are they doing, 296 00:16:37,240 --> 00:16:40,840 Speaker 1: and importantly, what variants are they seeing? Is it only 297 00:16:40,880 --> 00:16:43,320 Speaker 1: the variants that pose a risk to the rest of 298 00:16:43,360 --> 00:16:47,080 Speaker 1: the world if we are worried about it's spreading once again, 299 00:16:47,240 --> 00:16:50,000 Speaker 1: If no new variants emerge, how much of the population 300 00:16:50,080 --> 00:16:52,240 Speaker 1: is going to be relatively immune or at least not 301 00:16:52,320 --> 00:16:54,600 Speaker 1: have any form of severe disease because we've already had 302 00:16:54,600 --> 00:16:58,640 Speaker 1: so many infections and vaccinations as well. Yeah, that's a 303 00:16:58,680 --> 00:17:01,960 Speaker 1: great question. I think that that large numbers of COVID 304 00:17:02,040 --> 00:17:05,879 Speaker 1: are are problematic and dangerous no matter what, because the 305 00:17:05,920 --> 00:17:08,280 Speaker 1: more COVID cases you have, the more likely you are 306 00:17:08,320 --> 00:17:12,200 Speaker 1: going to see those um those severe cases and the deaths. 307 00:17:12,240 --> 00:17:15,120 Speaker 1: So no matter what, we are going to have large 308 00:17:15,200 --> 00:17:18,440 Speaker 1: numbers of cases coming out of China and impacting the 309 00:17:18,440 --> 00:17:21,960 Speaker 1: global health environment, the global economy, um and and that 310 00:17:22,000 --> 00:17:25,320 Speaker 1: can be really dangerous. I think the anytime you have 311 00:17:25,480 --> 00:17:30,159 Speaker 1: a less immune population, UM, you're going to see the 312 00:17:30,200 --> 00:17:32,639 Speaker 1: potential for variance. So even if we're not seeing variants 313 00:17:32,720 --> 00:17:36,399 Speaker 1: right now, uh, seeing those large numbers come out could 314 00:17:36,480 --> 00:17:39,040 Speaker 1: impact the likelihood that we see a new variant in 315 00:17:39,040 --> 00:17:43,280 Speaker 1: the future. Lauren, how does how does the US situation 316 00:17:43,400 --> 00:17:48,119 Speaker 1: look right now with regards to COVID infection rates, specifically 317 00:17:48,240 --> 00:17:51,359 Speaker 1: New York City around the Madison Square Garden area, because 318 00:17:51,400 --> 00:17:53,840 Speaker 1: I'm going there tonight with my closest friends. Not a 319 00:17:53,840 --> 00:17:56,840 Speaker 1: selfish question at all. Yeah, I would definitely recommend wearing 320 00:17:56,840 --> 00:17:59,520 Speaker 1: a mask in Madison Square Garden. I think COVID rates 321 00:17:59,560 --> 00:18:02,439 Speaker 1: are so high and we're seeing a lot of um 322 00:18:02,560 --> 00:18:05,200 Speaker 1: I l I or influenza like illness all across the 323 00:18:05,400 --> 00:18:09,040 Speaker 1: Northeast and and really all across the US, So it 324 00:18:09,160 --> 00:18:12,480 Speaker 1: is a risky time to be in close quarters with people. 325 00:18:12,920 --> 00:18:15,720 Speaker 1: Um and and we're seeing a lot of illness still 326 00:18:15,840 --> 00:18:18,640 Speaker 1: so UM, I think there's a lot of people who 327 00:18:18,680 --> 00:18:23,480 Speaker 1: are worried about an ongoing COVID surge and um and 328 00:18:23,640 --> 00:18:26,320 Speaker 1: it's coupled with a respiratory virus season like we have 329 00:18:26,400 --> 00:18:29,480 Speaker 1: not seen in several years. So it's not the safest 330 00:18:29,480 --> 00:18:32,680 Speaker 1: time to be out in public. Uh, certainly without a mask. 331 00:18:33,040 --> 00:18:36,080 Speaker 1: But but you know, just in those close quarters. Is 332 00:18:36,080 --> 00:18:38,200 Speaker 1: it ever going to go away? Lauren? I mean, it's 333 00:18:38,240 --> 00:18:43,080 Speaker 1: been almost three years, right, um, and now we're adding 334 00:18:43,119 --> 00:18:46,359 Speaker 1: all of these other You've got the respiratory infection. People 335 00:18:46,359 --> 00:18:51,080 Speaker 1: are worried about fluid pneumonia again, I've had I think 336 00:18:51,160 --> 00:18:54,240 Speaker 1: six shots since March of Are we ever going to 337 00:18:54,320 --> 00:18:57,840 Speaker 1: get over this? I don't think COVID is ever going 338 00:18:57,880 --> 00:18:59,640 Speaker 1: to go away. We're not going to get to zero 339 00:18:59,680 --> 00:19:02,119 Speaker 1: COVID and and and I think that's also part of 340 00:19:02,160 --> 00:19:04,639 Speaker 1: what we're seeing in China right now. Um. One of 341 00:19:04,640 --> 00:19:07,359 Speaker 1: the one of the things that we're hoping to see 342 00:19:07,440 --> 00:19:09,480 Speaker 1: is that we get on a cadence similar to flu 343 00:19:09,640 --> 00:19:13,040 Speaker 1: where UM, where we're getting vaccinated on a regular schedule, 344 00:19:13,280 --> 00:19:16,280 Speaker 1: we're minimizing the impact of the disease on our life um, 345 00:19:16,320 --> 00:19:20,000 Speaker 1: and we're reducing spread wherever possible. So I think we're 346 00:19:20,040 --> 00:19:22,880 Speaker 1: still in this sort of Perry emergency phase where we're 347 00:19:23,080 --> 00:19:25,960 Speaker 1: just figuring out how to live with covid um. It's 348 00:19:25,960 --> 00:19:28,680 Speaker 1: still certainly quite dangerous. But as we get on that 349 00:19:28,800 --> 00:19:31,600 Speaker 1: you know, routine vaccination schedule, as we get more and 350 00:19:31,600 --> 00:19:34,080 Speaker 1: more data on how and when we need to vaccinate people, 351 00:19:34,400 --> 00:19:36,639 Speaker 1: and as we come back to sort of believing in 352 00:19:36,640 --> 00:19:39,640 Speaker 1: the science of vaccines and and all of the other 353 00:19:39,720 --> 00:19:42,200 Speaker 1: tools we've built in a in a very short amount 354 00:19:42,240 --> 00:19:45,359 Speaker 1: of time um that hopefully we will be able to 355 00:19:45,400 --> 00:19:47,560 Speaker 1: live with it in a much less painful way. I 356 00:19:47,600 --> 00:19:49,359 Speaker 1: hope it's not a strategy. And that's this is the 357 00:19:49,920 --> 00:19:52,560 Speaker 1: reason why I say that, is because we're talking about masking. 358 00:19:52,600 --> 00:19:55,160 Speaker 1: We're talking about how you should probably be careful congregating 359 00:19:55,160 --> 00:19:58,359 Speaker 1: with your closest friends, and yet I can pretty much 360 00:19:58,359 --> 00:20:00,480 Speaker 1: guarantee that Matt Miller will still be at that concert. 361 00:20:00,560 --> 00:20:02,120 Speaker 1: You will not be wearing a mask, and neither will 362 00:20:02,119 --> 00:20:04,119 Speaker 1: anybody else in there. I'm just going to suggest that 363 00:20:04,359 --> 00:20:06,360 Speaker 1: if you take a look at a lot of airplanes, 364 00:20:06,840 --> 00:20:08,960 Speaker 1: and you look at that very few people are masked, 365 00:20:08,960 --> 00:20:11,680 Speaker 1: and those that are are given glances of what's wrong 366 00:20:11,720 --> 00:20:13,199 Speaker 1: with you? Do you have the flu? Or? I mean, 367 00:20:13,240 --> 00:20:15,240 Speaker 1: because we all want to get back to normal. So 368 00:20:15,280 --> 00:20:18,480 Speaker 1: how do you change a culture that is absolutely opposed 369 00:20:18,680 --> 00:20:20,400 Speaker 1: to masking and using some of the tools that you're 370 00:20:20,440 --> 00:20:24,000 Speaker 1: talking about. Yeah, I completely agree with you. I think 371 00:20:24,080 --> 00:20:27,520 Speaker 1: that it has become very divisive to even talk about, 372 00:20:27,600 --> 00:20:30,240 Speaker 1: let alone use some of these important public health strategies. 373 00:20:30,720 --> 00:20:32,639 Speaker 1: I think we have to go back to the roots 374 00:20:32,720 --> 00:20:36,719 Speaker 1: of explaining what where the science comes from, why we 375 00:20:36,840 --> 00:20:39,359 Speaker 1: use masks when we use them, and and maybe the 376 00:20:39,400 --> 00:20:42,720 Speaker 1: culture won't change, And unfortunately that that is something we 377 00:20:42,760 --> 00:20:44,800 Speaker 1: may have to deal with. But I think that it 378 00:20:44,960 --> 00:20:48,359 Speaker 1: is it is, it is. It remains an option for 379 00:20:48,400 --> 00:20:52,320 Speaker 1: people UM, and it certainly remains the recommendation UM, at 380 00:20:52,359 --> 00:20:56,400 Speaker 1: least from me. And I think it's important to keep 381 00:20:56,440 --> 00:20:59,240 Speaker 1: making that recommendation, sort of normalizing that this is a 382 00:20:59,320 --> 00:21:01,679 Speaker 1: choice that is saying for people to make and is 383 00:21:01,720 --> 00:21:04,480 Speaker 1: not a political statement. It is a statement where you're saying, 384 00:21:04,680 --> 00:21:06,399 Speaker 1: I need to protect my health or I want to 385 00:21:06,440 --> 00:21:08,720 Speaker 1: help protect the health of others, and I'm going to 386 00:21:08,840 --> 00:21:10,720 Speaker 1: choose to do that. And so the more we can 387 00:21:10,760 --> 00:21:13,960 Speaker 1: normalize that, the easier it gets to make that decision. 388 00:21:14,040 --> 00:21:16,720 Speaker 1: I mean, I know, masks are not you know, they're 389 00:21:16,760 --> 00:21:18,520 Speaker 1: not the place people want to be right now. And 390 00:21:18,520 --> 00:21:21,760 Speaker 1: that's completely reasonable to to feel that way, UM, And 391 00:21:21,840 --> 00:21:24,560 Speaker 1: many people are making that choice. UM. But but it 392 00:21:24,680 --> 00:21:26,800 Speaker 1: certainly shouldn't be that the people who do make the 393 00:21:26,880 --> 00:21:30,800 Speaker 1: choice to mask are judged or are looked upon as 394 00:21:30,920 --> 00:21:34,040 Speaker 1: as making a poor choice. Lauren, just real quick here 395 00:21:34,160 --> 00:21:36,680 Speaker 1: and to finish up, what is the chance in your 396 00:21:36,760 --> 00:21:39,600 Speaker 1: view of our being subjected to a pandemic like the 397 00:21:39,600 --> 00:21:43,159 Speaker 1: one that we just went through with another mutation of 398 00:21:43,200 --> 00:21:47,040 Speaker 1: the COVID of virus. I think our chance of going 399 00:21:47,080 --> 00:21:50,240 Speaker 1: through another pandemic is quite high. I'm not necessarily sure 400 00:21:50,280 --> 00:21:52,960 Speaker 1: that it is it will be with a COVID mutation 401 00:21:53,080 --> 00:21:56,320 Speaker 1: or you know, a co variant of concern um, but 402 00:21:56,440 --> 00:22:00,840 Speaker 1: certainly we could see a pandemic with another virus or 403 00:22:00,920 --> 00:22:04,480 Speaker 1: with a mutation of this same virus in our lives. Um. 404 00:22:04,560 --> 00:22:08,920 Speaker 1: The risk associated with these new viruses coming into our 405 00:22:08,920 --> 00:22:12,000 Speaker 1: population just continues to grow. And so if we don't 406 00:22:12,040 --> 00:22:15,320 Speaker 1: implement the tools UM that we've developed during COVID and 407 00:22:15,359 --> 00:22:17,760 Speaker 1: also some of the lessons learned. Making sure that there 408 00:22:17,760 --> 00:22:21,400 Speaker 1: are lessons learned and not just lessons identified. Um, we 409 00:22:21,440 --> 00:22:25,320 Speaker 1: will continue to be at risk for another pandemic. Lawrence Our, 410 00:22:25,680 --> 00:22:28,960 Speaker 1: thank you, I guess, but also not thank you. I 411 00:22:29,040 --> 00:22:31,200 Speaker 1: love talking with you. I love the insight that you bring. 412 00:22:31,520 --> 00:22:34,200 Speaker 1: I hope that I hope that the worst case scenario 413 00:22:34,240 --> 00:22:35,720 Speaker 1: does not come to pass. I'm sure we all do. 414 00:22:35,800 --> 00:22:38,600 Speaker 1: Lawrence Our of the University of Nebraska Medical Center, thank 415 00:22:38,640 --> 00:22:51,080 Speaker 1: you so much. It's the difference of year makes right. 416 00:22:51,119 --> 00:22:53,720 Speaker 1: Because last holiday season we were talking about goods that 417 00:22:53,760 --> 00:22:56,280 Speaker 1: were stuck on ships and on trucks and the supply 418 00:22:56,359 --> 00:22:58,880 Speaker 1: chain that was a total mess. Therefore, there were such 419 00:22:58,880 --> 00:23:01,560 Speaker 1: a limited quantity of going people were willing to pay 420 00:23:01,680 --> 00:23:03,960 Speaker 1: up for them. Now it's entirely different. There's too much 421 00:23:03,960 --> 00:23:07,159 Speaker 1: stuff that people frankly aren't trying to buy anymore, so 422 00:23:07,200 --> 00:23:10,480 Speaker 1: they're less price tolerant. Let's get a take on this data. 423 00:23:10,520 --> 00:23:15,080 Speaker 1: Telsa founder, CEO and chief Research officer at Telsey Advisory Group, 424 00:23:15,160 --> 00:23:17,560 Speaker 1: and this is the exact dynamic that has led to 425 00:23:17,640 --> 00:23:21,360 Speaker 1: an inventory glatt in retails retailers like Target. That meant 426 00:23:21,520 --> 00:23:24,440 Speaker 1: Matt mentioned, do we have a sense of the progress 427 00:23:24,560 --> 00:23:27,720 Speaker 1: they are making and doing that discounting and working that 428 00:23:27,840 --> 00:23:31,280 Speaker 1: inventory down. Hi, how are you thank you for having me? 429 00:23:31,720 --> 00:23:34,679 Speaker 1: I think overall what surprised people coming out of the 430 00:23:34,760 --> 00:23:37,919 Speaker 1: third quarter is that the retailers did make progress in 431 00:23:37,960 --> 00:23:41,400 Speaker 1: lowering their inventory. There should be more progress made by 432 00:23:41,440 --> 00:23:44,320 Speaker 1: the end of the fourth quarter, and as retailers report 433 00:23:44,359 --> 00:23:47,840 Speaker 1: their preliminary holiday sales results, many of them the end 434 00:23:47,880 --> 00:23:50,639 Speaker 1: of next week the beginning of the following watch for 435 00:23:50,680 --> 00:23:54,199 Speaker 1: those inventory numbers. I think they did make progress. I 436 00:23:54,240 --> 00:23:56,720 Speaker 1: think some of these markedowns and discounts that they have 437 00:23:57,280 --> 00:24:01,040 Speaker 1: even buy one get one off for some definitely helped 438 00:24:01,080 --> 00:24:03,399 Speaker 1: to pave the way. But it will still be at 439 00:24:03,480 --> 00:24:06,520 Speaker 1: least through the first quarter because don't forget, you need 440 00:24:06,560 --> 00:24:10,400 Speaker 1: wholesale accounts to order, and wholesale accounts like the department 441 00:24:10,440 --> 00:24:13,920 Speaker 1: stores are ordering very carefully down around ten to fift 442 00:24:14,680 --> 00:24:17,600 Speaker 1: from what I hear for the spring selling season, with 443 00:24:17,680 --> 00:24:20,919 Speaker 1: the goal for both the brands and the retailers to 444 00:24:21,000 --> 00:24:24,879 Speaker 1: get back and focus to promote less, promote less. So 445 00:24:24,960 --> 00:24:27,360 Speaker 1: you're saying that that doesn't need to continue, even if 446 00:24:27,520 --> 00:24:29,560 Speaker 1: we are looking next year at an economy that if 447 00:24:29,600 --> 00:24:31,920 Speaker 1: it doesn't fall into an out raper session could soften 448 00:24:32,040 --> 00:24:35,480 Speaker 1: because in theory, that also brings down consumers spending power. 449 00:24:36,520 --> 00:24:38,199 Speaker 1: Keep in mind a couple of things when you think 450 00:24:38,240 --> 00:24:41,160 Speaker 1: about the bifurcation of the consumer. The middle to high 451 00:24:41,280 --> 00:24:44,480 Speaker 1: end still has dollars. They have dollars to spend its 452 00:24:44,520 --> 00:24:48,240 Speaker 1: product innovation that drives demand. They'll be looking for bargains, 453 00:24:48,280 --> 00:24:50,320 Speaker 1: and the benefit is going to be the trade down 454 00:24:50,320 --> 00:24:53,320 Speaker 1: to the off pricers, the lower to middle income consumer. 455 00:24:53,600 --> 00:24:56,360 Speaker 1: You're gonna see the targets and the walmarts move through 456 00:24:56,400 --> 00:25:00,000 Speaker 1: inventory and the focus on essentials will be even more 457 00:25:00,080 --> 00:25:03,680 Speaker 1: for those consumers. So I think we should have not 458 00:25:03,760 --> 00:25:07,680 Speaker 1: the same cadence of promotions, but the value offering will 459 00:25:07,720 --> 00:25:10,680 Speaker 1: be even more dynamic than it was this year. They'll 460 00:25:10,720 --> 00:25:14,639 Speaker 1: be able to get goods at more compelling prices because 461 00:25:14,680 --> 00:25:17,560 Speaker 1: you're not going to have hopefully higher gas prices like 462 00:25:17,600 --> 00:25:19,640 Speaker 1: what you had last year. Well, and the question also 463 00:25:19,720 --> 00:25:22,040 Speaker 1: is whether how much people have shifted some of the 464 00:25:22,040 --> 00:25:24,840 Speaker 1: supply chains away from China during this time, or whether 465 00:25:24,880 --> 00:25:27,840 Speaker 1: the reopening of China will actually allow a lot of 466 00:25:27,880 --> 00:25:31,639 Speaker 1: these retailers to buy goods at lower, more compelling pricing. Tana, 467 00:25:31,760 --> 00:25:34,600 Speaker 1: how much have you seen a real rejiggering of where 468 00:25:34,640 --> 00:25:37,199 Speaker 1: some of the clothing, where some of the items are 469 00:25:37,200 --> 00:25:40,800 Speaker 1: being manufactured. Over the past three years, we've seen a 470 00:25:40,840 --> 00:25:43,439 Speaker 1: lot of rejiggering, and I think the ability to diverse 471 00:25:43,520 --> 00:25:46,800 Speaker 1: fight from China has been in place for a long time. 472 00:25:47,200 --> 00:25:49,720 Speaker 1: I think the change for twenty three is going to 473 00:25:49,800 --> 00:25:52,679 Speaker 1: be the cost of ocean freight rates, the cost of 474 00:25:52,800 --> 00:25:55,880 Speaker 1: air freighting, and frankly not even air freighting as much 475 00:25:55,920 --> 00:25:58,320 Speaker 1: goods in as they had in the past. What's gonna 476 00:25:58,359 --> 00:26:01,960 Speaker 1: be sticky is higher labor us that is not going away. 477 00:26:02,080 --> 00:26:04,440 Speaker 1: What is going to moderate is going to be those 478 00:26:04,440 --> 00:26:09,000 Speaker 1: supply chain costs that should get retailers more flexibility. Promotions 479 00:26:09,000 --> 00:26:11,520 Speaker 1: will be higher than they were in twenty one, they'll 480 00:26:11,520 --> 00:26:13,280 Speaker 1: be higher than they were in the first half of 481 00:26:13,359 --> 00:26:16,359 Speaker 1: twenty two, but hopefully we're not going back to two 482 00:26:16,240 --> 00:26:18,919 Speaker 1: thou nineteen levels. It's interesting, you know, I was in 483 00:26:19,000 --> 00:26:21,399 Speaker 1: Detroit a couple of months ago talking with Mark Royce, 484 00:26:21,560 --> 00:26:25,199 Speaker 1: and obviously automotive is a little bit different than the 485 00:26:25,240 --> 00:26:27,239 Speaker 1: retail that you're covering, but he was saying, look, we're 486 00:26:27,280 --> 00:26:29,520 Speaker 1: not going to go back to the days of big discounts. 487 00:26:29,560 --> 00:26:30,960 Speaker 1: We're not going to go back to the days of 488 00:26:31,000 --> 00:26:35,199 Speaker 1: pack dealer lots. We're gonna keep selling these products at 489 00:26:35,280 --> 00:26:38,200 Speaker 1: M S r P. And he has to be confident 490 00:26:38,320 --> 00:26:41,680 Speaker 1: that um CEOs of other carmakers are going to act 491 00:26:41,720 --> 00:26:46,439 Speaker 1: the same way, right UM can can retailers try and 492 00:26:46,480 --> 00:26:49,240 Speaker 1: follow that same strategy or will they undercut each other? 493 00:26:50,280 --> 00:26:52,720 Speaker 1: I think overall, when there is as much inventory glad 494 00:26:52,760 --> 00:26:55,400 Speaker 1: as we've had, I think they're all being aggressive. You've 495 00:26:55,440 --> 00:26:58,440 Speaker 1: seen after the holiday season what Target did with their 496 00:26:58,480 --> 00:27:02,200 Speaker 1: clearance event. I think when Amazon had their second Prime 497 00:27:02,320 --> 00:27:06,400 Speaker 1: Day in October, that basically opened this spigot for Target, Walmart, 498 00:27:06,480 --> 00:27:09,639 Speaker 1: and Old Navy to discount aggressively. I think getting the 499 00:27:09,680 --> 00:27:13,520 Speaker 1: inventor is more normalized. You're not going to no promotions, 500 00:27:13,840 --> 00:27:16,800 Speaker 1: but you're not going to have the burst of promotions 501 00:27:16,840 --> 00:27:19,560 Speaker 1: with seventy and eighty percent off that we saw in 502 00:27:19,640 --> 00:27:23,240 Speaker 1: some instances this year. Dana Uh, we were talking yesterday 503 00:27:23,280 --> 00:27:26,400 Speaker 1: a little bit pickleball. The rackets made in China are 504 00:27:26,560 --> 00:27:29,080 Speaker 1: so much cheaper than the rackets made in the US, 505 00:27:29,119 --> 00:27:32,360 Speaker 1: and today somebody on my Twitter feed mentioned snap on tools. 506 00:27:32,440 --> 00:27:35,359 Speaker 1: They're also incredibly expensive made in the US compared to 507 00:27:35,359 --> 00:27:38,280 Speaker 1: the husky tools you see at home deep home made 508 00:27:38,280 --> 00:27:42,359 Speaker 1: in China. Is deglobalization really going to happen because the 509 00:27:42,400 --> 00:27:45,119 Speaker 1: price differences are really pretty massive, and so I wonder, 510 00:27:45,440 --> 00:27:49,240 Speaker 1: you know, if we go down that road, is it inflationary? 511 00:27:49,880 --> 00:27:52,280 Speaker 1: You're absolutely right. I mean, what we've seen is we've 512 00:27:52,320 --> 00:27:56,000 Speaker 1: seen the ability to produce goods in China and frankly, 513 00:27:56,040 --> 00:27:58,199 Speaker 1: the quality of the speed that it takes in the 514 00:27:58,240 --> 00:28:02,320 Speaker 1: cost is lower. We've seeing a focus on diversification, whether 515 00:28:02,400 --> 00:28:06,639 Speaker 1: to South America, whether to Africa, whether whether to America. 516 00:28:07,080 --> 00:28:11,320 Speaker 1: But managing prices key, whether it's raw materials, labor costs, 517 00:28:11,400 --> 00:28:15,000 Speaker 1: or shipping. I think China will always remain relevant. I 518 00:28:15,040 --> 00:28:17,720 Speaker 1: think the percentage coming from China will continue to be 519 00:28:17,800 --> 00:28:20,080 Speaker 1: reduced Data Telsea. Thank you so much for being with us. 520 00:28:20,160 --> 00:28:23,320 Speaker 1: Dana Telsey of Telsey Advisory Group. This is the Bloomberg 521 00:28:23,359 --> 00:28:27,720 Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from 522 00:28:27,760 --> 00:28:31,119 Speaker 1: seven to ten am Eastern on Bloomberg Radio and on 523 00:28:31,200 --> 00:28:35,520 Speaker 1: Bloomberg Television each day from six to nine am for 524 00:28:35,760 --> 00:28:40,680 Speaker 1: insight from the best in economics, finance, investment, and international relations. 525 00:28:41,160 --> 00:28:45,800 Speaker 1: And subscribe to the Surveillance Podcast on Apple podcast, SoundCloud, 526 00:28:45,960 --> 00:28:49,560 Speaker 1: Bloomberg dot com, and of course on the terminal, I'm 527 00:28:49,600 --> 00:28:52,280 Speaker 1: Tom keene In. This is Bloomberg.