WEBVTT - Stocks Lose Steam After Housing Data 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keen along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.760 the Bloomberg Terminal, and the Bloomberg Business App. We're going 0:00:46.840 --> 0:00:48.880 to have a major growing up talk here. There's gonna 0:00:48.880 --> 0:00:52.240 be a little jargon involved here, Damien Sasar and Tom 0:00:52.320 --> 0:00:56.200 Keen and joining us Katherin Kaminski Alpha Simplex chief research 0:00:56.200 --> 0:01:02.960 strategist barely describes the academic and quantitative finance abilities here, Katie, 0:01:03.200 --> 0:01:07.120 you are trend based. I'm trend based. Dean Current is 0:01:07.200 --> 0:01:10.680 trend based. Bruno de Pire, the giant of quant at 0:01:10.720 --> 0:01:15.880 post dilemma, He's trend based. Was the trend shattered over 0:01:15.920 --> 0:01:17.759 what we saw ten days ago? 0:01:18.800 --> 0:01:21.240 Yes, I have to admit it's been a really tough 0:01:21.800 --> 0:01:24.560 environment for trend because if you look at I mean, 0:01:24.680 --> 0:01:27.240 let me just make one point here, the fifty day 0:01:27.280 --> 0:01:29.640 moving average for the S and P has recovered in 0:01:29.680 --> 0:01:32.120 the last six days to be only two percent down. 0:01:32.280 --> 0:01:36.120 I mean, we basically went from everything's going wrong back 0:01:36.160 --> 0:01:39.279 to well, I guess it's okay. And so the world 0:01:39.360 --> 0:01:42.640 is just, you know, from a trend perspective, shifted significantly, 0:01:43.200 --> 0:01:46.440 and some of the new trends that we're seeing their week, 0:01:46.600 --> 0:01:48.000 but they're very different. 0:01:48.560 --> 0:01:50.720 I'm going to go to August sixth, and folks, this 0:01:50.800 --> 0:01:54.559 involves wells, wildough, parabolics are all sorts of fancy things, 0:01:54.560 --> 0:01:57.880 a thing called ad x DMI. Kaminski got an A 0:01:57.960 --> 0:02:00.160 plus on the exam. I got to C minus. You 0:02:00.240 --> 0:02:03.040 ruin the curve, Katie. I'm looking at a lot of 0:02:03.080 --> 0:02:08.000 fancy quant technicals and what I saw is a jump condition. 0:02:08.600 --> 0:02:12.320 How do you get back on trend after a jump condition? 0:02:13.639 --> 0:02:16.040 Well, this is a good question because what happens when 0:02:16.080 --> 0:02:18.959 you have such a big move is that it adjust 0:02:19.080 --> 0:02:21.720 trend signals a lot. So you have to think a 0:02:21.760 --> 0:02:25.000 little bit about the type of trend filter that you're using. 0:02:25.120 --> 0:02:27.200 Some models are going to be much more like your 0:02:27.200 --> 0:02:32.440 classic moving averages, and those really adjust aggressively when you 0:02:32.520 --> 0:02:34.440 have that type of move But you can also use 0:02:34.520 --> 0:02:37.840 other types of models that may sort of windsor eyes 0:02:38.000 --> 0:02:40.720 or remove some of the outliers, and those may not 0:02:40.840 --> 0:02:42.920 be as much affected. But the truth is there may 0:02:42.960 --> 0:02:46.840 be information in this recent event that could be foreboding 0:02:46.919 --> 0:02:48.680 for potential trends to come. 0:02:48.840 --> 0:02:51.400 Katie, let's wins rise together. You're talking two hundred day 0:02:51.480 --> 0:02:54.400 moving average. I'd like to focus your attention on credit spread, 0:02:54.440 --> 0:02:57.600 specifically sovereign credit. The faults, the WOP spreads five year 0:02:58.400 --> 0:03:01.160 fifteen of the twenty five risky issuers, their spreads are 0:03:01.160 --> 0:03:04.240 below their two hundred day moving averages. Spreads barely moved 0:03:04.400 --> 0:03:06.920 in the recent selloff. Talk to us about the signals 0:03:06.919 --> 0:03:08.480 you're taking away from the credit market. 0:03:09.520 --> 0:03:12.679 So the challenge with the credit market is not everything 0:03:12.800 --> 0:03:16.239 falls in one particular drop. And I think what I'm 0:03:16.240 --> 0:03:18.560 thinking about for credit is if you think about past 0:03:18.600 --> 0:03:22.320 crisis periods or other recessionary periods, it doesn't hit all 0:03:22.320 --> 0:03:25.480 markets at the same time. So I'm concerned that this 0:03:25.600 --> 0:03:27.680 recent event could just be a little bit of a 0:03:27.720 --> 0:03:31.040 warning signal that things are not necessarily going to be 0:03:31.080 --> 0:03:33.800 as soft as we would have liked, and that we 0:03:33.880 --> 0:03:37.280 could see a you know, more of a recessionary trade 0:03:37.320 --> 0:03:39.840 in the fall if we see more weaker. 0:03:39.720 --> 0:03:43.200 Data and we know the correlation between rising volatility and 0:03:43.240 --> 0:03:46.360 the unwind of Carrie leverage trades. For that matter, talk 0:03:46.400 --> 0:03:47.960 to us a little bit about what we've seen in 0:03:48.080 --> 0:03:51.400 just the last forty eight hours. I mean, follows back 0:03:51.440 --> 0:03:54.400 down below sixteen. I mean, Carrie is coming back. I mean, 0:03:54.480 --> 0:03:56.720 talk to us about what you envisioned as we head 0:03:56.720 --> 0:03:58.880 through the end of the summer, in which is still 0:03:59.040 --> 0:04:00.840 quite a liquid. 0:04:01.400 --> 0:04:03.920 Yes, I mean I think trading volumes tend to always 0:04:03.960 --> 0:04:05.960 be low in August, and if you look at what's 0:04:06.040 --> 0:04:09.880 happened with surprising to me, the market's acting like, well, 0:04:09.880 --> 0:04:12.400 that happened, but we're back to normal. And I really 0:04:12.440 --> 0:04:15.000 think that people are focused on the fact that they 0:04:15.000 --> 0:04:17.120 think now they're going to get cuts and that's going 0:04:17.160 --> 0:04:20.600 to get us through any potential economic weakness. So I 0:04:20.640 --> 0:04:25.360 think it's surprising how fast market sentiment shifts and people 0:04:25.480 --> 0:04:28.440 go from being terrified to you know, everything's fine. 0:04:28.920 --> 0:04:30.960 Do you think there was kindage out there? Are we 0:04:31.000 --> 0:04:33.200 going to get reports in ninety days? I mean what 0:04:33.720 --> 0:04:38.960 was the leverage placed that creates upset given the moves 0:04:39.000 --> 0:04:41.440 we saw. Was there a lot of leverage out there? 0:04:42.440 --> 0:04:43.880 I think there was. I mean, if you look at 0:04:43.920 --> 0:04:47.640 positioning and the CFTC in the futures markets, for sure 0:04:47.800 --> 0:04:51.839 had massive volumes on those sell off days. So I 0:04:51.880 --> 0:04:54.400 think it's more the relative value trades that are the 0:04:54.440 --> 0:04:57.240 bigger challenge because those tend to have a lot more leverage. 0:04:57.320 --> 0:05:00.560 So An that's why Carrie, for example, is and the 0:05:00.600 --> 0:05:05.560 focus I'd say that for trend. I mean, it was difficult, 0:05:05.600 --> 0:05:07.160 but you know, the leverage. 0:05:06.800 --> 0:05:07.680 Wasn't that hot? 0:05:07.960 --> 0:05:11.320 Damien. On a side note here, I'm having real trouble 0:05:11.920 --> 0:05:16.159 with the resurgence of option writing is a free lunch? Ah, Yes, 0:05:16.279 --> 0:05:18.880 now it's killing me. Well look, I'm doing everything I 0:05:18.920 --> 0:05:21.480 can on air not to tear it to shreds. 0:05:21.120 --> 0:05:22.800 Well, and I'm doing everything i can to avoid the 0:05:22.800 --> 0:05:24.479 carry trade. But you know, Katie, in this case, I 0:05:24.520 --> 0:05:27.960 really can't because real yield differentials are higher in thirty 0:05:28.000 --> 0:05:30.360 of the thorty. You know, major developed and merging market 0:05:30.360 --> 0:05:33.200 economies over the last year, and you've got countries like Brazil, Mexico, 0:05:33.240 --> 0:05:36.640 Indonesia and India which still have you know, three percent 0:05:36.760 --> 0:05:39.039 you know, real yields to your real yields after I 0:05:39.040 --> 0:05:41.080 mean that's after inflation. I mean, come on, I mean, 0:05:41.160 --> 0:05:44.039 like rate differentials are still wide. Investors are still going 0:05:44.080 --> 0:05:46.520 to be attracted to the carry trade, especially when you've 0:05:46.520 --> 0:05:48.520 got real yields in Japan negative two and a half 0:05:48.560 --> 0:05:50.920 percent still, So talk to us a little bit about 0:05:51.560 --> 0:05:53.080 you know, what you're seeing in the markets. Can you 0:05:53.080 --> 0:05:55.560 see people putting leverage positions back on as we get 0:05:55.560 --> 0:05:56.360 into the end of this year. 0:05:57.680 --> 0:05:59.680 I mean, I think you will see that. I definitely 0:05:59.680 --> 0:06:02.359 think that that people got spooked by what happened. But 0:06:02.880 --> 0:06:06.039 you know, as you noted, there's just so much divergence 0:06:06.160 --> 0:06:09.320 across the market, so there's opportunity to be had. And 0:06:09.360 --> 0:06:13.400 when there's that type of dislocation, you know, it generates interest. 0:06:13.920 --> 0:06:16.040 What does the real yield technicals tell you? 0:06:17.680 --> 0:06:20.760 Well, right now we're looking at fixed income. The biggest 0:06:20.760 --> 0:06:23.599 thing that I would say is that we are seeing 0:06:23.760 --> 0:06:26.479 very very strong technical signals and fixed income. It's the 0:06:26.520 --> 0:06:29.760 one asset class that made sort of a seismic shift 0:06:29.839 --> 0:06:34.560 this summer. Been short fixed income for so long, and 0:06:34.640 --> 0:06:37.200 now there seems to be a steady view that rates 0:06:37.240 --> 0:06:39.320 are going down, so I think that's something. 0:06:39.480 --> 0:06:42.040 Yeah, for your mortals, Katie, what you're basically saying is 0:06:42.080 --> 0:06:44.159 your technicals are price up, yield lower. 0:06:45.440 --> 0:06:45.960 Exactly. 0:06:47.080 --> 0:07:00.680 Okay, Katie Kimiski, I think we'll leave it thick. Michael 0:07:00.720 --> 0:07:03.360 Purvis from Tall Back and joins Us, I got eight 0:07:03.400 --> 0:07:06.040 ways to go here, Michael Purvis, Are we back on trend? 0:07:06.320 --> 0:07:08.520 Michael Purverse, are we back? I'm good trend? 0:07:10.040 --> 0:07:12.240 Yeah, Like if we could just delete, like, you know, 0:07:12.760 --> 0:07:16.920 six days from a lot of charts, you know. Yeah, 0:07:17.080 --> 0:07:19.440 ask yourself the question if we didn't have that big 0:07:19.520 --> 0:07:23.320 spike in that and that vicious sell off earlier this month. Tom, 0:07:23.480 --> 0:07:27.280 you know what's really different right about the economy? What's 0:07:27.280 --> 0:07:31.560 different about uh, the interest rate trajectory or for the 0:07:31.600 --> 0:07:33.600 matter of corporate earnings and whether you want to buy 0:07:33.680 --> 0:07:36.760 or sell the stock market right now? I think we're 0:07:36.800 --> 0:07:39.280 we haven't really learned too much from that BIX spike 0:07:39.360 --> 0:07:44.920 other than what how much market structure, liquidity and sort 0:07:44.960 --> 0:07:47.920 of you know, trade leverage, and there's various facets of 0:07:47.920 --> 0:07:51.240 the trade leverage discussion are embedded in there. So yeah, 0:07:51.280 --> 0:07:53.760 I mean, I it hasn't changed my thinking that we 0:07:53.840 --> 0:07:57.480 want to be bullish equities that I'm the big tack 0:07:57.520 --> 0:08:02.480 will continue to lead the way higher, and I think 0:08:02.520 --> 0:08:06.240 we're you know, I never understood why fifty BIPs was 0:08:06.240 --> 0:08:09.560 was so sort of viciously embraced by by the by 0:08:09.600 --> 0:08:13.200 the rates markets because we had a cool job sprint 0:08:14.160 --> 0:08:14.880 a few weeks. 0:08:14.720 --> 0:08:17.600 Ago, Michael, the unwind of the carry trade, for that matter, 0:08:17.640 --> 0:08:20.200 the unwind of leverage trades. Yet just three days ago, 0:08:20.240 --> 0:08:22.120 I'm reading your note on precious metals here and you're 0:08:22.160 --> 0:08:25.440 talking about silver being a leverage play on gold. So 0:08:25.480 --> 0:08:28.120 do you think that, you know, in a risk off environment, 0:08:28.160 --> 0:08:30.280 one where you want to get more defensive, silver is 0:08:30.280 --> 0:08:31.520 going to play out for you or is that more 0:08:31.560 --> 0:08:34.640 of a play for risk on investors. 0:08:35.040 --> 0:08:37.800 Well, that's a great question, and it's a little bit 0:08:37.840 --> 0:08:40.720 different because to me it's leverage. It's leverage to the 0:08:40.720 --> 0:08:44.040 gold price, right, And so the question is is to 0:08:44.080 --> 0:08:46.480 really answer your question, is gold going to do okay 0:08:46.600 --> 0:08:49.680 in a risk on environment? Because what for silver to 0:08:49.720 --> 0:08:53.240 really accelerate? You really need gold to have a real rally, 0:08:53.280 --> 0:08:56.600 not just a quick flip, right, You need something substantial. 0:08:56.640 --> 0:08:59.240 I do think it feels like something is building here 0:08:59.520 --> 0:09:02.720 within the gold complex, gold, you know, being sort of 0:09:03.080 --> 0:09:05.480 the foundation of that, and then silver being a levered 0:09:05.480 --> 0:09:08.200 play on that. So I don't I think if gold 0:09:08.200 --> 0:09:12.040 can rally, that's really the question. And I think if 0:09:12.080 --> 0:09:16.319 gold can really rally, then silver will will have outsize returns. 0:09:16.480 --> 0:09:18.880 If gold just moves up a bit, and then you're right, 0:09:18.920 --> 0:09:23.080 then silver will be vulnerable to to the you know, 0:09:23.080 --> 0:09:27.000 whatever risk off type dynamics we get there. It has 0:09:27.080 --> 0:09:31.560 been an underappreciated asset within the gold complex, and I 0:09:31.600 --> 0:09:33.240 think there's a lot of catch up to happen there. 0:09:33.400 --> 0:09:35.560 Can I ask a dumb question purpose I'll know this 0:09:35.640 --> 0:09:39.200 and Damien you'll know this. I look at silver is 0:09:39.240 --> 0:09:42.600 like the third floor Tiffany. But the answer is silver 0:09:42.880 --> 0:09:47.040 is solar, right, It's like use of silver and solar. 0:09:48.240 --> 0:09:51.559 Yeah. Well, there's a lot of sort of new energy 0:09:52.240 --> 0:09:55.800 or sort of new technology demands for silver. It comes 0:09:55.840 --> 0:09:59.040 from not just solar tom but water purification, a wide 0:09:59.160 --> 0:10:04.960 range of electronics, a lot of battery and electric vehicles, 0:10:05.880 --> 0:10:09.960 you know, employee silver in there. So there are you know, 0:10:10.120 --> 0:10:13.080 real industrial applications that are new. And of course there's 0:10:13.120 --> 0:10:15.680 the third four of Tiffany demand a part of it 0:10:15.720 --> 0:10:16.080 as well. 0:10:16.160 --> 0:10:16.319 Well. 0:10:16.320 --> 0:10:18.120 Michael, I mean really for me, I mean what we're 0:10:18.120 --> 0:10:20.560 talking about here, and I want to bring it back gold, silver, 0:10:20.720 --> 0:10:23.920 precious metals. They're really a defensive asset and a risk 0:10:23.960 --> 0:10:26.560 off environment, or one would have you believe. Yet, you know, 0:10:26.600 --> 0:10:29.800 look at where and the correlation to US real yields 0:10:29.840 --> 0:10:32.200 remains very very strong, right, So when I think of 0:10:32.280 --> 0:10:34.560 real yield differentials, I think of gold as a hedge 0:10:34.559 --> 0:10:36.520 against that. And so I'm looking now at US real 0:10:36.559 --> 0:10:39.480 yields at one point seven seven percent, really belows of 0:10:39.520 --> 0:10:41.600 the cycle. I mean, just how much lower in the 0:10:41.679 --> 0:10:43.200 US real yield can we go? Is that going to 0:10:43.200 --> 0:10:45.280 give a boost to gold, which is right now trading 0:10:45.280 --> 0:10:46.640 near all time highs. 0:10:47.520 --> 0:10:50.040 You know, one thing I would push back on New 0:10:50.080 --> 0:10:53.560 Damien on that is that you're right. Normally you see 0:10:53.600 --> 0:10:56.800 a pretty clear correlation between real interest rates in the 0:10:56.880 --> 0:11:00.400 United States and gold, and or real rate differential between 0:11:00.440 --> 0:11:05.000 the US and places like Japan for example. They're there. 0:11:05.040 --> 0:11:07.920 But over the last year and a half we've seen 0:11:07.960 --> 0:11:12.000 gold push higher despite higher real interest rates here and 0:11:12.040 --> 0:11:15.360 despite a strong dollar. So what's going on? I think 0:11:15.400 --> 0:11:17.960 what's really going on is what's is that there's a 0:11:17.960 --> 0:11:21.840 lot of central banks, notably in Asia China in particular, 0:11:22.200 --> 0:11:24.520 that have been sort of buying the dip. And if 0:11:24.559 --> 0:11:26.920 you look at the gold rally, it's it's put a 0:11:26.920 --> 0:11:29.000 pretty impressive rally over the last year and a half. 0:11:29.440 --> 0:11:33.400 That has been a that has been a very low 0:11:33.480 --> 0:11:36.679 volatility rally. Typically, when you get a sort of what 0:11:36.760 --> 0:11:39.080 I would call a Wall Street gold rally, you see 0:11:39.080 --> 0:11:41.480 a lot of excitement and the stuff flies up and 0:11:41.559 --> 0:11:44.720 the gold balls fly up. You haven't seen that. And 0:11:44.760 --> 0:11:47.400 if it's a central bank type of exercise where they're 0:11:47.559 --> 0:11:49.800 where they're buying dips but they're not buying at the 0:11:50.000 --> 0:11:52.960 at the very tippy top, that's sort of inherently a 0:11:53.040 --> 0:11:55.880 low that sort of crushes ball in that asset class. 0:11:56.080 --> 0:11:58.160 So I think there's that happening. But here we are 0:11:58.160 --> 0:12:01.040 looking at an election form on from now where both 0:12:01.080 --> 0:12:06.480 sides are basically endorsing a some version of a loose 0:12:06.520 --> 0:12:11.760 fiscal policy. You haven't seen anything about fiscal tightness from 0:12:11.800 --> 0:12:14.439 either side. Here. It's all about, you know, it's really 0:12:14.480 --> 0:12:19.080 about implementation of a fiscal stimulus. That's what the debate is. 0:12:19.440 --> 0:12:21.720 And so I think the world's looking at that and saying, look, 0:12:21.760 --> 0:12:24.320 you know, the deficits are high, I'm going to own gold, 0:12:24.640 --> 0:12:27.040 and Damian. When I look at the gold chart, I'm 0:12:27.040 --> 0:12:28.760 looking at something that looks like it's going to break 0:12:28.840 --> 0:12:33.240 higher here, So I think, I think gold it's really 0:12:33.320 --> 0:12:35.440 about some of these sort of longer term friends, and 0:12:35.600 --> 0:12:37.560 if it does break higher, then you'll probably see some 0:12:37.600 --> 0:12:41.360 Wall Street a Wall Street rally follow one. 0:12:42.360 --> 0:12:45.680 You mentioned Asian Michael Purvis, and just very quickly here 0:12:46.280 --> 0:12:48.079 you had an arch call on a d x Y. 0:12:48.240 --> 0:12:50.600 I looked at the Bloomberg Dollar Index, which has weighted 0:12:50.679 --> 0:12:54.360 much more to em into China, and I'm sorry, there's 0:12:54.360 --> 0:12:58.880 a resilient dollar strength still in place. What do you 0:12:58.960 --> 0:13:02.480 need to see, say, finally the dollar's broken? 0:13:05.240 --> 0:13:10.600 Well, you know, like, are you saying win the dx 0:13:10.720 --> 0:13:12.040 Y for example, or. 0:13:11.880 --> 0:13:14.800 Yeah, I'll let you, I'll let you pick the Okay, 0:13:14.400 --> 0:13:18.120 but but but but I think what, yeah, yeah, I 0:13:18.120 --> 0:13:19.680 mean the dollar broken. 0:13:20.400 --> 0:13:23.760 You know, they get sort of into existential questions about 0:13:23.840 --> 0:13:26.160 just you know, with the reserve status of the reserve 0:13:26.200 --> 0:13:28.720 currency and so forth. I don't think, you know, if 0:13:28.760 --> 0:13:30.400 I'm bullish gold and think it's going to go to 0:13:30.640 --> 0:13:32.600 you know, pick a number twenty seven hundred twenty eight 0:13:32.679 --> 0:13:36.439 hundred later this year into twenty five. That doesn't mean 0:13:36.440 --> 0:13:38.920 the dollar is apparently broken. That does mean people want 0:13:38.960 --> 0:13:41.800 to sort of build up, you know, a position of 0:13:41.840 --> 0:13:44.560 golden maybe hold onto that for some time down the road. There, 0:13:45.200 --> 0:13:47.760 you know, is the dollar going to break because Europe 0:13:47.800 --> 0:13:50.720 is suddenly or get really weaker because Europe is going 0:13:50.800 --> 0:13:54.680 to suddenly accelerate and economic growth and the central bank 0:13:54.720 --> 0:13:57.120 there is going to adopt, you know, a much more 0:13:57.160 --> 0:14:00.360 hawkish policy. I mean, I don't really sort of that, 0:14:00.559 --> 0:14:04.080 So I think, to me, like the dollar breaking, it's 0:14:04.120 --> 0:14:07.400 got to come down to let's talk about dollar weekening. 0:14:07.440 --> 0:14:09.280 It's got to come down to the rest of the 0:14:09.320 --> 0:14:14.200 world starting to do a lot economically with a more 0:14:14.640 --> 0:14:18.200 overtly hawkish posture from their central banks, while the US 0:14:18.280 --> 0:14:21.240 economy starts falling apart, and the that doesn't you know, 0:14:21.280 --> 0:14:22.800 sort of emergency cuts. 0:14:23.040 --> 0:14:36.880 Michael, thank you for the brief. Michael Purvis catch Oliver 0:14:37.120 --> 0:14:40.760 Chen is expert at this. He's the one guy I know, 0:14:41.440 --> 0:14:45.720 among many people in retail I to figure out what 0:14:45.760 --> 0:14:49.560 we want to buy, what we need to buy, and 0:14:49.600 --> 0:14:51.720 what we have to have. Oliver Chen is a TD 0:14:51.880 --> 0:14:54.920 Cowen and joined us right now Oliver. I think the 0:14:55.000 --> 0:14:58.560 malarkey about China is just that the Chinese, is the 0:14:58.560 --> 0:15:01.720 Wall Street Journal wrote up, are not dumb. They're going 0:15:01.760 --> 0:15:05.240 to Japan, they're doing a currency flip, and they're saving 0:15:05.320 --> 0:15:08.960 on luxury. Is luxury not as gloomy as the gloom 0:15:09.000 --> 0:15:11.040 because China is doing terrible. 0:15:12.320 --> 0:15:15.840 Well. Luxury is pretty mixed now, right Tom, in line 0:15:15.880 --> 0:15:18.880 with what you're saying. China we're really watching just due 0:15:18.920 --> 0:15:22.960 to the housing issues and valuation there. But you are right, 0:15:23.440 --> 0:15:26.160 the Chinese are traveling with the weaker yin and that's 0:15:26.200 --> 0:15:30.040 happening in Japan is seeing very strong numbers. Our main 0:15:30.120 --> 0:15:33.240 idea here is LVMH. We love Louis Vatan still, but 0:15:33.760 --> 0:15:37.000 we're cautious. We're cautiously optimistic in what we're seeing in 0:15:37.040 --> 0:15:40.360 these trends, and the trends have slowed unfortunately, Well, the. 0:15:40.320 --> 0:15:42.240 Trends are slowed. Do they clear out? Is there a 0:15:42.280 --> 0:15:48.000 shumpertarian creative destruction where you know, luxury A takes over 0:15:48.120 --> 0:15:50.400 luxury B. Yeah. 0:15:50.440 --> 0:15:54.480 I think consolidation will continue to be a theme. However, 0:15:54.560 --> 0:15:59.480 everybody's watching the case with Michael Core's and tapestry and 0:15:59.520 --> 0:16:02.040 the ft. See that's something to pay attention to, but 0:16:02.480 --> 0:16:05.680 consolidation the big getting bigger. You know, we're seeing deals 0:16:05.720 --> 0:16:08.640 also with retailers such as Neiman Marcus and Sacks, and 0:16:08.680 --> 0:16:11.400 that's part of what's happening. That's part of why we 0:16:11.480 --> 0:16:14.920 do like LVMH. They spend nine to ten billion dollars 0:16:14.960 --> 0:16:19.440 in advertising and promotion those power brands in Dior, Louis 0:16:19.520 --> 0:16:23.960 Vaton as well as Tiffany. Competing against that scale is 0:16:24.080 --> 0:16:29.160 certainly very difficult, and the luxury industry already is very 0:16:29.160 --> 0:16:31.080 concentrated relative to others. 0:16:31.520 --> 0:16:33.400 Oliver, I'd love to ask you about Kith Grayson and 0:16:33.720 --> 0:16:35.600 Peter Mallar, but I really need to know what was 0:16:35.640 --> 0:16:39.360 your primary takeaway from yesterday's US retail sales report. 0:16:40.960 --> 0:16:44.920 Yeah, we're excited about a better than feared consumer. The 0:16:44.960 --> 0:16:49.600 consumer still continues to be choiceful and considered and also 0:16:49.760 --> 0:16:55.280 look for value hacking opportunities, trading up, trading down. But 0:16:55.480 --> 0:16:58.800 we've been very bullish on Walmart. Walmart's our top idea, 0:16:59.200 --> 0:17:03.520 and Walmart foremost offers every day low prices, a focus 0:17:03.560 --> 0:17:07.000 on value in addition to being a tech platform and 0:17:07.040 --> 0:17:10.800 a retail ecosystem, so it offers the best of both worlds. 0:17:10.920 --> 0:17:12.800 Well, talk to us about Walmart for that matter, talk 0:17:12.800 --> 0:17:15.720 to us about consumer discretionary within the broader context of 0:17:15.760 --> 0:17:17.720 the S and P. I think it's one of the 0:17:18.119 --> 0:17:19.960 underperformers this year. I think it's only up three and 0:17:20.000 --> 0:17:22.439 a half percent year to date. Obviously Amazon has a 0:17:22.440 --> 0:17:24.159 lot to do with that. But you know, talk to 0:17:24.240 --> 0:17:25.879 us a little bit about what you're seeing in terms 0:17:25.880 --> 0:17:27.320 of consumption here in the US. 0:17:28.359 --> 0:17:32.320 Yeah, we are in the midst of a consumer discretionary recession. 0:17:32.400 --> 0:17:35.159 So those trends have been very tough. What's been a 0:17:35.160 --> 0:17:39.200 brighter spot at Walmart is general merchandise was flat. That 0:17:39.240 --> 0:17:43.240 had previously been negative for about nine quarters, So that's 0:17:43.240 --> 0:17:47.840 something we're watching. The consumer is very much impacted by 0:17:47.960 --> 0:17:52.160 inflation and feeling mixed in terms of consumer confidence. There 0:17:52.160 --> 0:17:55.840 are some brighter spots. Unemployment it's rising, but it's at 0:17:55.880 --> 0:17:58.640 a low ish level at four point three percent. There's 0:17:58.680 --> 0:18:03.119 still dollars of savings on the sidelines. But overall, I 0:18:03.119 --> 0:18:07.520 think this choppy consumer behavior will continue, and consumers are 0:18:07.520 --> 0:18:08.560 looking for value. 0:18:08.680 --> 0:18:11.840 You and I disagreed on this. Oliver Chen in five years, 0:18:11.880 --> 0:18:14.200 where are the department stores? I don't get it. 0:18:15.800 --> 0:18:20.400 Yeah, it's we'll see what's happening. Our idea here is Coles, 0:18:21.160 --> 0:18:23.960 but these department stores generated a lot of cash flow. 0:18:24.000 --> 0:18:25.760 There's a lot of work that needs to be done. 0:18:26.080 --> 0:18:29.960 Macy's is working on its private label. It's also closing 0:18:30.000 --> 0:18:34.760 stores and working on small format. So we're gonna see 0:18:35.080 --> 0:18:38.920 change and innovation and department stores. But overall, our top 0:18:39.000 --> 0:18:41.240 ideas are Costco, Walmart, Aulta. 0:18:41.280 --> 0:18:45.560 Damien Coles ten year track record negative five percent per year. 0:18:45.640 --> 0:18:47.879 You know tem yesterday I was at the Westchester in 0:18:47.920 --> 0:18:50.560 White Plains, the Westchester Mall. It was dead. And I'll 0:18:50.560 --> 0:18:52.120 tell you this. A lot of the stores they are 0:18:52.160 --> 0:18:55.600 like Alo and Lululemon. I mean, you're not getting a 0:18:55.640 --> 0:18:57.840 lot of food traffic there and quite for that matter, Oliver, 0:18:57.960 --> 0:18:59.760 let me ask you this. A lot of those stores 0:18:59.760 --> 0:19:02.600 are like, I don't know, closed down or coming soon, 0:19:02.760 --> 0:19:04.439 you know what I mean. So, I mean, do you 0:19:04.480 --> 0:19:07.680 really still see foot traffic at malls in the suburbs. 0:19:08.080 --> 0:19:11.480 Well, foot traffic and traffic has been sluggish to negative, 0:19:12.119 --> 0:19:16.320 So something we're watching. People are struggling to get slightly 0:19:16.400 --> 0:19:19.240 positive traffic. So you really have to work on conversion 0:19:19.359 --> 0:19:23.920 and transactions. That's part of what's happening. It's needs versus wants, 0:19:24.000 --> 0:19:28.000 and consumers are really focused on needs and food and 0:19:28.080 --> 0:19:31.720 costco and great value. They also still love beauty. Beauty 0:19:31.800 --> 0:19:34.240 is a great category of essentials, so you have to 0:19:34.240 --> 0:19:37.840 be very selective. We also have a younger customer problem 0:19:38.080 --> 0:19:41.440 at department stores, where department stores really need to broadcast 0:19:41.480 --> 0:19:45.000 and be appealing to gen Z and beyond. So I 0:19:45.000 --> 0:19:48.639 think it just depends. Athletic leisure is a long term trend, 0:19:48.800 --> 0:19:54.600 comfort stretch, anti stink. You know, it's all very conducive 0:19:54.680 --> 0:19:58.439 to the future, but there's a lot of dynamicism in 0:19:58.480 --> 0:20:00.240 the sector at large, to. 0:20:00.160 --> 0:20:03.680 Be clear, Oliver Chen into the autumn into twenty twenty five, 0:20:03.960 --> 0:20:05.560 Walmart's your single best idea. 0:20:06.160 --> 0:20:09.720 Yeah, Walmart's our top idea this year, and we continue 0:20:09.720 --> 0:20:13.399 to be excited. I think artificial intelligence right, the marketplace model, 0:20:13.520 --> 0:20:18.320 digital advertising plus calliefower, then cross Pizza. You know, there's 0:20:18.359 --> 0:20:18.960 a lot happening. 0:20:19.080 --> 0:20:21.760 I got to ask, how's ultra lux doing across the nation. 0:20:24.560 --> 0:20:28.840 We're excited about things you like like Petech, Philippe and Rolex. 0:20:29.200 --> 0:20:35.080 Tiffany has a great a great piece with Tiffany Locke. 0:20:35.520 --> 0:20:39.280 And then within beauty, what's happening a lot is ultra 0:20:39.400 --> 0:20:42.240 high end fragrances. Fragrances is a big idea, and we 0:20:42.320 --> 0:20:42.840 like code be. 0:20:42.840 --> 0:20:45.480 Afraid to ask what is the margin on quote unquote 0:20:45.920 --> 0:20:49.080 ultra high end fragrances wants to know, Well. 0:20:48.920 --> 0:20:52.920 The cost that gets sold is very modest, like under 0:20:53.400 --> 0:20:58.080 so the margins, just like watches, can be exceptional like 0:20:58.160 --> 0:21:01.520 eighty percent plus. But it's all about emotions and the innovation. 0:21:01.680 --> 0:21:04.440 Oh really, thank you. We'll quote you on that, Oliver Chen. 0:21:04.600 --> 0:21:09.439 It's all about emotions. He's a Toronto dominion and writing 0:21:09.440 --> 0:21:22.920 a beautiful work across all of this life. You did 0:21:22.920 --> 0:21:25.120 you look at the front pages of Lisa Matteo hour 0:21:25.800 --> 0:21:28.359 Lisa Friday. What do you got? 0:21:28.440 --> 0:21:31.000 We're starting off with a scandal in the world of 0:21:31.040 --> 0:21:33.760 elite high school math. So this will interest you, Tom. 0:21:34.040 --> 0:21:37.560 The American Mathematics competition, you know about it, Students spend 0:21:37.640 --> 0:21:42.560 years preparing for it, attracts attention top colleges, finance industry recruiters, 0:21:42.560 --> 0:21:44.880 been around for seventy four years. But the Wall Street 0:21:44.960 --> 0:21:48.240 Journal is saying there's been online leaks of the test 0:21:48.320 --> 0:21:52.280 and it's gotten out. They were available online hours days 0:21:52.280 --> 0:21:55.720 before students sat down for the test. Some were free, 0:21:55.800 --> 0:21:58.520 some were had a charge of like a few hundred dollars. 0:21:59.160 --> 0:22:03.680 But kids about it. The league on TikTok, parents, math coaches, 0:22:03.720 --> 0:22:05.879 they're all up in arms. They want the content you know, 0:22:05.920 --> 0:22:07.840