Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane
Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment,
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Speaker 1: Interview of the Day on international economics and Trade and
Speaker 1: with China, John Farroll Without Question, Katherine Man long Ago
Speaker 1: of brand Ice and other points, and O. E. C.
Speaker 1: D and now Darkening the Door at Fortress Corbett two
Speaker 1: thousand four, Peterson Institute, Breaking Up is Hard to Do,
Speaker 1: Global codependency, collective action and the challenges of global adjustment
Speaker 1: light years out in front of others. On the China
Speaker 1: US matter, Katherine Man, John a world class economist that
Speaker 1: really didn't need much for an introduction a sol at
Speaker 1: a greet global chief economists. Good morning to Catherine, Thank
Speaker 1: you great to see. Let's walk through that code dependency.
Speaker 1: Have we given enough thought to the full out of
Speaker 1: two of the launchest economies in the world, essentially going
Speaker 1: on it with each other? I think the answer is no. UM.
Speaker 1: I think the stock market has gyrated a little bit,
Speaker 1: but but has not fully appreciated the potential for a divorce. Um,
Speaker 1: and that certainly is something that the administration would like
Speaker 1: to see. Is it is a divorce, I mean we
Speaker 1: could get closer together. I mean the the objectives of
Speaker 1: market access, which was the original UH design of the
Speaker 1: Section three or one case, you know, protecting intellectual property,
Speaker 1: creating a level playing field for foreign firms in China
Speaker 1: in order to be able to access the market and
Speaker 1: serve the citizens and the firms there um. That would
Speaker 1: that would tighten the relationship. But that's not the direction
Speaker 1: that we currently appear to be going in. Divorce seems
Speaker 1: to be the direction that we're going in. That might
Speaker 1: be the direction we're going again in your view, is
Speaker 1: that the objective though, Catherine, because that's a different that's
Speaker 1: a different scenario. Entighly, the objective, as you points out,
Speaker 1: was to get market access. To rebelief that the objective
Speaker 1: now is to have a divorce. Well, I think that
Speaker 1: we've we've seen a number of different communications that suggest
Speaker 1: that if firms want to avoid having to pay the tariffs,
Speaker 1: that they should um move their production back to the
Speaker 1: United States. That that is a nice thing to say,
Speaker 1: it's probably unrealistic um and instead, uh, there will be
Speaker 1: some supply change that go to other countries, not not
Speaker 1: necessarily to the United States and probably not to the
Speaker 1: United States. So it's it's kind of, uh, you divorce
Speaker 1: China and you take up with I don't know, Vietnam
Speaker 1: or something like that. Um and and that's the strategy
Speaker 1: two pages decades ago, Catherine Man is a trade deficit sustainable?
Speaker 1: Maybe some of it's dated. Chapter three is must read,
Speaker 1: including at the White House, has us comparative advantage changed?
Speaker 1: And on page thirty where does comparative advantage come from?
Speaker 1: Lecture the president right now? A wise one. So comparative
Speaker 1: advantage comes from productivity growth, it comes from educated workers,
Speaker 1: it comes from how you use your resources, and and
Speaker 1: that is uh not none of that is enhanced with
Speaker 1: trade wars. It is an intellectual leap, going back to
Speaker 1: Ricardo Smith of tearing down the certitude of Thomas Munn
Speaker 1: and others hundreds of years ago. I mean John Farrell's
Speaker 1: ancestors lived Thomas Munn England. Are we going back to that? No,
Speaker 1: I don't think we're going to go back to um.
Speaker 1: A tar key, that's our tarkey is the word that
Speaker 1: the trade economists use when you produce and consume everything
Speaker 1: at home, which is the what the tweets said this morning,
Speaker 1: John continue, um So, I mean you don't you don't know.
Speaker 1: I mean, if you're a producer, you want market access
Speaker 1: to more markets to to sell your stuff. If you're
Speaker 1: a consumer, you want the variety that comes from you know,
Speaker 1: what you can buy that doesn't come from your own country.
Speaker 1: Um so. And of course producing you know, producing things abroad,
Speaker 1: it's cheaper, so that's good as well from a pocketbook standpoint.
Speaker 1: So there are a lot of reasons why you know,
Speaker 1: we think trade is good and uh it should be enhanced.
Speaker 1: Um We know, of course that there are adjustment issues
Speaker 1: as well, and that's been kind of the centerpiece of
Speaker 1: a lot of concerns. But closing the door to to trade,
Speaker 1: closing the door to um uh created markets abroader to
Speaker 1: to buy things from abroad. That doesn't enhance your capacity
Speaker 1: of your economy to deliver on on what your citizen's
Speaker 1: talk about. Comparative advantage though, because it's not that clear cut.
Speaker 1: Let's take the chip industry for instance, the Chinese import
Speaker 1: a load of semis from US companies. The Chinese would
Speaker 1: essentially like to end that. And the way they're looking
Speaker 1: to end that is the beef up these industries by
Speaker 1: subsidizing the This administration has a problem with that. That's
Speaker 1: not about comparative advantage. That's about skewing the results to
Speaker 1: your own advantage. It is not about a level playing field.
Speaker 1: The Chinese are ultimately doing the same thing on the
Speaker 1: Catherine Well. So, uh, comparative advantage is not immutable. It
Speaker 1: doesn't just come from the weather or from you know,
Speaker 1: the whether you have you know, minerals in the ground.
Speaker 1: Comparative advantage is something that can be built um as
Speaker 1: I say, educated workers, that's something that you build. Um
Speaker 1: A you know, superior technologies, those are something that you build.
Speaker 1: So so you know, subsidization is something that has is
Speaker 1: the you know, the Chinese are pretty obvious about that
Speaker 1: right now, but it's not like it's the only country
Speaker 1: that does that. Um going back to the to the
Speaker 1: day with was it you know what's what's may are
Speaker 1: important computer chips or potato chips. That goes back to
Speaker 1: the nineties um and and the US allowed um US
Speaker 1: chip producers back in the day to create a cartel
Speaker 1: uh sem attack. If you're remember back then, um, and
Speaker 1: that was in order to promote U S semiconductor industry.
Speaker 1: So I mean we did it too. Uh, they're doing
Speaker 1: it and so it's it's not new under the sun.
Speaker 1: Chapter six is the trade deficit sustainable? Is the external
Speaker 1: deficit caused by unfair trade practices? What did you do
Speaker 1: write this chapter for young Trump? So, I mean, you know,
Speaker 1: it's uh, people ask that question back then. I mean
Speaker 1: I think that we should remember that that the issues
Speaker 1: that are being displayed in the in the current environment
Speaker 1: with with the U. S And China, these are not
Speaker 1: new issues. These are absolutely not new issues. What is
Speaker 1: new is that the size of the two countries involved,
Speaker 1: and that it is it is taking place after a
Speaker 1: period of time when there's been so much integration between
Speaker 1: the two countries. There's so much interesting simply chain relationships,
Speaker 1: and that that means taking Barrett taking that apart is
Speaker 1: much more costly than than in Mrs Farroll from Coventry
Speaker 1: emails in and she says, what's it going to do
Speaker 1: for the dollar? She doesn't care about all this mumbo jumbo.
Speaker 1: She just wants to know what's it going to do
Speaker 1: for the dollar? Well, in the short run, all this
Speaker 1: uncertainty associated with policy changes, trade wars and so forth,
Speaker 1: people tend to um go to the dollar. Uh, it's
Speaker 1: the place that you go for safe haven. UM. But
Speaker 1: there are other kind of currencies that have started to
Speaker 1: be a little bit more attractive as well, which is
Speaker 1: which is the end? So by and large we're looking
Speaker 1: at short term improvements or a dollar appreciation. But then
Speaker 1: you know, then you the buyer's remorse sets in and
Speaker 1: the cost of disentangling your value chains looks bad. Um,
Speaker 1: and uh, there's and that, and there's a big trade deficit,
Speaker 1: trade deficity. There's a big um fiscal budget deficit that
Speaker 1: the US currently has, larger than uh most countries would
Speaker 1: have at this point in their business cycle. And you
Speaker 1: will have to be issuing treasury securities and I think
Speaker 1: there's some question marks about that. So cancery on a
Speaker 1: question for you, how you model to pass through from
Speaker 1: tariffs that could be on everything and they could be
Speaker 1: hired too, through to final prices and plug in those
Speaker 1: effects assumptions for me as well, because I think that's important.
Speaker 1: Just do that for US briefly. Well. So a lot
Speaker 1: of people do focus on for the foreign currency translations,
Speaker 1: so a product, you know, in theory of product is
Speaker 1: priced in yen or in yuan R and B, and
Speaker 1: then you adjust the price to translate it into dollars.
Speaker 1: And so they say, oh, well, if the yuan depreciates
Speaker 1: by ten percent, it offsets ten That's actually way too simplistic,
Speaker 1: because in fact, all that is invoiced in dollars to
Speaker 1: start with, so there's much less of a dollar translation
Speaker 1: effect than most people think. Catherine Man really really interesting,
Speaker 1: thoughtful stuff. Great to catch hell you this morning, Catherine Man,
Speaker 1: City Group Global Chief Economist Tom really thoughtful stuff and
Speaker 1: some great analysis of the last couple of days on
Speaker 1: this story. The big issue. The President certainly optimistic about
Speaker 1: the chances of a deal, saying it would become apparent
Speaker 1: in about three or four weeks whether trade talks with
Speaker 1: China we're going to be successful. Planning to meet with
Speaker 1: this Chinese counterpart, the President said he has a feeling
Speaker 1: it's going to be very successful here in New York
Speaker 1: to discuss some please to say is YenS nord Exante
Speaker 1: data founder and CEO. Good morning to yents. Good morning.
Speaker 1: The concept of the Trump put market sensitive policy preferences,
Speaker 1: and we've seen that being activated just a little bit
Speaker 1: in the last twenty four hours. Yeah. I think we
Speaker 1: saw obviously a very big market reaction starting last week
Speaker 1: and accelerating very much on Monday, and then the rhetoric
Speaker 1: from from Trump changed a little bit. I thought the
Speaker 1: Keys sentence really yesterday was this thing about the tariffs
Speaker 1: on the remain inning three hundred billion was not set
Speaker 1: in stone, like that was something that was still to
Speaker 1: be decided. So I thought that was the opening. That
Speaker 1: was the most reason, the most important reason why we're
Speaker 1: starting to rally back a little bit in these risk
Speaker 1: asses that have been hammered. There's a belief that we
Speaker 1: have the series of automatic stabilizers that will kick in.
Speaker 1: These policy preferences will kick in the likes of China,
Speaker 1: the sheep put that have growth and the risks around
Speaker 1: growth increased too much. They'll deliver stimulus that if the
Speaker 1: market backs off too much, the President will back away
Speaker 1: from market negative policy preferences, for instance, the FED put
Speaker 1: the power put. We've talked about that so much, all
Speaker 1: of these three things. Yes, do you believe that those
Speaker 1: three things could be activated? What do you think the
Speaker 1: risks are, the constraints around the deployment of those initiatives. Yes,
Speaker 1: so I think the problem with that narrative is that
Speaker 1: a lot of them have already been deployed, and then
Speaker 1: there's places like the eurosoone where they don't really have
Speaker 1: much left. So I was in the Chinese have have
Speaker 1: stimulated already, The FED has already done their pivot. Doesn't
Speaker 1: mean they couldn't quite aggressively in surprise, but they've done
Speaker 1: a fair bid. So I think really the most important
Speaker 1: part of what you're describing is some kind of softening
Speaker 1: of the stands in the trade negotiation itself. That's something
Speaker 1: that can be sort of pulled out of the hat
Speaker 1: if needed, if if the market started to tank, and
Speaker 1: that will be important to market certainly in the short term.
Speaker 1: So those are things I'm watching. Until then, We've got
Speaker 1: to think about how the efex market adjust as well.
Speaker 1: I hear a lot of analysis around the tariff impact,
Speaker 1: which doesn't account for the FX market adjusting. Just how
Speaker 1: much will the redmen be adjusted and to what degree
Speaker 1: and how much tolerance do the Chinese have to allow
Speaker 1: a weaker Chinese currency. Yeah, so the Chinese authorities really
Speaker 1: have a challenge on your hands here, right, because if
Speaker 1: they wanted to fully adjust to the tariff that is
Speaker 1: now spiking up on a large proportion of their goods,
Speaker 1: we would need to see a big move of like
Speaker 1: maybe more than ten percent. On the other hand, they've
Speaker 1: signaled from a psychological perspective that they don't really want
Speaker 1: to have it above seven. That was the signal they
Speaker 1: sent in the second half of last year, and I
Speaker 1: think that's a signal they're sending again. We are their fixings.
Speaker 1: Every day they come in the morning, they set essentially
Speaker 1: at a starting level, and that has been set low
Speaker 1: signal that they don't want it to be weaker than
Speaker 1: it already is. So they're sort of stuck between, Okay,
Speaker 1: what will be good for their exporters and what do
Speaker 1: they need to keep the situation calm, both in relation
Speaker 1: to keeping the trade negotiation going, not to do as
Speaker 1: anything that looks offensive to Minuchin and Trump and so forth,
Speaker 1: but also to avoid capital flight. Um, and that's a
Speaker 1: really big, big balancing act. Yeah, and some money question
Speaker 1: here is not only ram n B to seven in
Speaker 1: the vector that we see well out over two standard deviations,
Speaker 1: but dollar dynamics as well. If we assume now blended
Speaker 1: dollar is range bound. Should we look at a blended
Speaker 1: dollar Bloomberg Dollar Index or d x Y index or
Speaker 1: do we have to disaggreg gate Asia d x Y
Speaker 1: that bundled Pacific rim index or do we aggregate to
Speaker 1: the major pairs? What do we do in terms of
Speaker 1: judging scaling stronger dollar? Yeah? No, I always always look
Speaker 1: at it in a number of buckets. Right, So you
Speaker 1: want to look at this sort of low yield bucket,
Speaker 1: which is the yen and the euro and the Swiss
Speaker 1: franc What is that bucket? Hero hasn't moved at all? No,
Speaker 1: And obviously end is strong and the Swiss francs has
Speaker 1: been getting strong as well. And then you have like
Speaker 1: a bucket that is the commodity bucket, which is very
Speaker 1: important with Australia and Canada and so forth. And then
Speaker 1: you have the surrounding countries adjacent bucket to China, which
Speaker 1: witch buckets should Secretary Manu should look at. So I
Speaker 1: think from his perspective, clearly he wants to look at
Speaker 1: the Bilattal crosses for the people who is negotiating with,
Speaker 1: but he also needs to think about, Okay, what are
Speaker 1: the crosses that's going to really impact the I'm sure
Speaker 1: he's looking what do you think, what do you what crosses?
Speaker 1: What cross is the president at Well, he needs to
Speaker 1: look at dollar max, he needs to look at dollar
Speaker 1: can and look at dollar career. So there's probably a
Speaker 1: handful that are really important. Yes, we know the administration
Speaker 1: has looked at the Euro before. It's been interesting over
Speaker 1: the last week that the euro has been so resilient.
Speaker 1: I remember a conversation you and I had a number
Speaker 1: of months ago, and we were talking about the prospect
Speaker 1: of going into another risk off scenario and how the
Speaker 1: efex market would respond and we'd have this very counterintuitive
Speaker 1: move whether euro just wouldn't sell off in that environment.
Speaker 1: So walk me through what's been happening here and why
Speaker 1: the euro is starting to take on the character to
Speaker 1: some degree of the Japanese yen. Yeah. Yeah, the there's
Speaker 1: definitely an element of that. So it makes sense in
Speaker 1: the context of the rate environment that you have in
Speaker 1: the euro Zone. It's not that the yield curve is
Speaker 1: totally flat like you have in Japan, but there's very
Speaker 1: limited move for European interest rates to move further. So
Speaker 1: that means when global interest rates drop, actually the rate
Speaker 1: differential moves in the Euro's favor. So that's sort of
Speaker 1: the simple explanation from what's going on from a float perspective.
Speaker 1: What's happening is that European investors are incredibly active in
Speaker 1: emerging market trades around the world, and when you have
Speaker 1: some severe risk aversion, you get unwinding of those. And
Speaker 1: we saw it very clearly last week that the specific
Speaker 1: day when Ian was trading the worst with Thursday with
Speaker 1: some big moves and key emerging market currencies, and the
Speaker 1: euro actually had a pretty strong rally just as that happened.
Speaker 1: The Mexican pigs have been one of them. So we're
Speaker 1: unwinding the carry traits to some degree ends and I'm
Speaker 1: just wondering how long it takes to flush that out
Speaker 1: and before the Euro takes on what we would expect,
Speaker 1: which is a Euro to be weaker in this kind
Speaker 1: of environment. Yes, so I think it depends on whether
Speaker 1: you have like a short term hedging dynamics where there's
Speaker 1: some big real money guys that put some effects hedge
Speaker 1: in their portfolio, or whether it's really like a more
Speaker 1: wholesale getting out of every everything on a more structural basis.
Speaker 1: So I think we've seen the hedge elements take place,
Speaker 1: and now these e M portfolio managed have to decide, okay,
Speaker 1: do they sell the securities too. I don't think we're
Speaker 1: quite there yet. We have enjoyed five even six tweets
Speaker 1: from the President this morning. These are Elizabethan tweets back
Speaker 1: to Mercantile England of another time in place in one
Speaker 1: of the great thrust here. Yen's is the idea from
Speaker 1: the President that quote, we can make a deal with
Speaker 1: China tomorrow before their companies start leaving so as not
Speaker 1: to lose US a business. Explain this trade war if
Speaker 1: it's with a totalitarian regime led by a communist party.
Speaker 1: I mean, it's not even Elizabethan dynamics, is it. It's
Speaker 1: clearly a totally different situation than in a democracy where
Speaker 1: there's sort of different voices that can have their own opinions.
Speaker 1: One thing that I always thought was sort of tricky
Speaker 1: about the US China dynamic versus the US versus Mexico
Speaker 1: dynamic was that it there's in the US a reasonable
Speaker 1: amount of political backing for a tough stance versus China.
Speaker 1: So that means that the US kind of has a
Speaker 1: fighting chance, but can they really measure up with a
Speaker 1: you can call it to terror the Tera regime, but
Speaker 1: a regime where it's it's certainly more government directed. That's
Speaker 1: a big question. So the pains, I think on the
Speaker 1: sort of political coherence versus the actual economic pain. This
Speaker 1: is wonderful, Jory, thank you so much, and he will
Speaker 1: continue with us here, uh this morning. This is a
Speaker 1: really important conversation. Synthathizing off right now we're gonna jump
Speaker 1: to the equity markets, but also with a touch to technology.
Speaker 1: Mark Lehman that JMP Securities is encyclopedic on the heritage
Speaker 1: and history of his Gun Valley and also equity Marcus Mark,
Speaker 1: let me go to the general markets right now. With
Speaker 1: futures up twenty two, Can you acquire shares this morning
Speaker 1: or you on the sidelines? Well, I think you're going
Speaker 1: to have a necessary bounce back from a week of
Speaker 1: down drafts in a week of bad news. I think
Speaker 1: this is just the beginning. Though. We're not going to
Speaker 1: have a lot of news as relates to tariffs through
Speaker 1: the next six weeks, and looking for a catalyst for
Speaker 1: the market between now and then, now that earnings are
Speaker 1: behind us, is going to be hard to find UM.
Speaker 1: So this is going to be a kind of a
Speaker 1: wishy washy period I think for some time, and I
Speaker 1: expected about I'm not sure this is about to be
Speaker 1: bought for the next light up for the market so far.
Speaker 1: Went Bush out with a note saying that Apple iPhone
Speaker 1: production costs could rise to to three mark. How are
Speaker 1: you thinking about the prospect of higher costs, how it
Speaker 1: gets absorbed, whether it's in the margin or just a
Speaker 1: full path through to the consumer, Jonathan Johnathan, I think
Speaker 1: it's gonna be a little bit of both. I think
Speaker 1: you're going to see some companies able to absorb but
Speaker 1: and you're going to see some people probably pass it
Speaker 1: on the consumer. But I think this is going to
Speaker 1: put a wet blanket on a lot of demand here
Speaker 1: UM And I think we've seen um bits of this
Speaker 1: over time and some markets where they've been able to
Speaker 1: absorb it. I just think we're running out of legs
Speaker 1: to do that. And I think that's the reason why
Speaker 1: you have more pessimism in the tech stocks and more
Speaker 1: pessimism in the international community. And I again expect this
Speaker 1: to not go away quickly. We had some self inflicted
Speaker 1: um damaged by the President that he's been quickly able
Speaker 1: to reverse and this is not going to be one
Speaker 1: of those. Unfortunately, Well, what went through the demand in
Speaker 1: China because I didn't get convincing guidance from the big semis,
Speaker 1: the big chip makers in the last couple of weeks
Speaker 1: about China for the year ahead, even before this escalation marks.
Speaker 1: So what's your base case for demand? I think you're
Speaker 1: going to see just a damp dampening right now. I
Speaker 1: think globally, I think there's just too much skittishness as
Speaker 1: it relates to pricing, and there's too much skittishness as
Speaker 1: it relates to what is going on politically. UM and
Speaker 1: I think probably has the most to lose, but I
Speaker 1: think politically they have the most um the ability probably
Speaker 1: to stay there the longest. And I think the president
Speaker 1: here UM has less to lose, but I think he
Speaker 1: has more to lose politically. It's kind of an interesting
Speaker 1: juxtaposition between the two. I just think, Um, that's a
Speaker 1: bad situation for a resolution, and that will just dampen things.
Speaker 1: And that's a bad situation I think for the market. Marxist,
Speaker 1: are the time left that we've got with you? I
Speaker 1: have to ask why was Uber and Life missed priced
Speaker 1: by intelligence, well meaning bankers. It's a great it's dollar question. UM.
Speaker 1: I think the fee was bigger than that, but continue, Yes,
Speaker 1: the optimism obviously was high. UM. I think there was
Speaker 1: enough demand both institutionally, which we will talk about and
Speaker 1: we will see very shortly by what institutions participated what
Speaker 1: did not. UM. I think the retail hype, if you will,
Speaker 1: was great. UM. But the reality is and I think
Speaker 1: the most important thing as some of the later investors,
Speaker 1: both publicly as well as the last private rounds are
Speaker 1: well underwater well underwater lift as approaching lower than the
Speaker 1: first print. And it reminds people that individual investors are
Speaker 1: sometimes least likely UM, who should be participating in some
Speaker 1: of these deals. And that's unfortunate, really unfortunate. Mark Leman,
Speaker 1: thank you. We look to speak to you against soon.
Speaker 1: Mr Lehman is with j MP Securities with decades of
Speaker 1: experience on Left Coast equity and technology markets. Dana tells
Speaker 1: you where us Dana, to John's point, what portion of
Speaker 1: stores is from China? I mean like Big Box or
Speaker 1: Bergdorf Goodman, what portions from China? High? Thank you for
Speaker 1: having me today. UM. We just did a big piece
Speaker 1: in terms of whether it's retail, whether it's apparel, what
Speaker 1: percentage of all goods comes from China, And frankly, it
Speaker 1: could be at least twenty five of all goods may
Speaker 1: come in some former way from China, So it's significant.
Speaker 1: And what we're seeing is companies are taking three different
Speaker 1: actions in order to alleviate some of the pressure. And
Speaker 1: none of this happens overnight. It happens over time. So
Speaker 1: planning is key, and whether it's diversifying where your goods
Speaker 1: come from, whether it's negotiating with the manufacturers who you
Speaker 1: do business with in order for them to eat some
Speaker 1: of the costs, and last and mostly, what companies do
Speaker 1: not want to do is raise prices to the end consumer.
Speaker 1: So there is a lot of work going on behind
Speaker 1: the scenes in order to manage the exposure to China.
Speaker 1: And it's been going on for a while. But it
Speaker 1: doesn't happen overnight. So Dinna, I'm really interested in the
Speaker 1: success right they might be having with negotiating with manufacturers
Speaker 1: in China. Do those manufacturers have any margin to absorb
Speaker 1: those higher costs? I think sometimes yes they do. We've
Speaker 1: been hearing again and again from a lot of the
Speaker 1: branded vendors and from a lot of the retailers that
Speaker 1: factories over in China do not want to lose the
Speaker 1: business that they currently have, so they're willing to work
Speaker 1: with the terrorists and eat some of the cost and
Speaker 1: share some of those burdens with the vendors or with
Speaker 1: the retailers. What it all means in the numbers is
Speaker 1: first going to settle out, but this is certainly a
Speaker 1: continuing work in progress of the highest magnetudes. Does it
Speaker 1: affect retail shares now or do you sort of have
Speaker 1: to wait to see the math, the Excel spreadsheets, what
Speaker 1: the cell side believes in such look at yesterday the
Speaker 1: screen was all read basically it's act now, think later,
Speaker 1: and yes, it is affecting retail stock prices now. It's
Speaker 1: affecting comer stock prices now. Because the endgame of when
Speaker 1: is it going to impact sales in the future. Let's
Speaker 1: just take Macy's as an iconic big brand in a
Speaker 1: cupper coffee. Technically, folks, it's an ugly church. Danny Telsey,
Speaker 1: what is your target on Macy's. I mean, I think
Speaker 1: Macy's they're going to release their numbers tomorrow. Jeff Kinnett
Speaker 1: has a host of solid initiatives in place in order
Speaker 1: to reinvigorate sales and reinvent reinvent the business. I think
Speaker 1: that the first quarter was a tough quarter and you
Speaker 1: have a lot of solid assets. Can you drive top
Speaker 1: line growth remains the question. I think that's what everyone
Speaker 1: will be focused on. So danna looking at the retail
Speaker 1: universe right now, you've gone through those three options for
Speaker 1: retailers on how they deal with the higher tariffs. Let's
Speaker 1: say there are some companies that won't have the success
Speaker 1: you're talking about with the manufacturers on the ground in China.
Speaker 1: Let's say the worst case happens. Let's just explore that
Speaker 1: that you have to pass it all through to the
Speaker 1: final consumer. Which part of retail has the highest consumer
Speaker 1: price tolerance where they do have that kind of flexibility
Speaker 1: to have some passed through without damaging demand too much.
Speaker 1: It's high end. It's those consumers that are the wealthiest,
Speaker 1: and that's the high end. Keep in mind that most
Speaker 1: luxury goods are not made in China. You have the
Speaker 1: mid tier who has who has exposure and they can't
Speaker 1: afford it, and they will definitely be watching what they
Speaker 1: spend those dollars on. But the high end has the
Speaker 1: greatest level of resistance to price increases, Dana, every listener
Speaker 1: coast to coast in worldwide is observing empty storefront space,
Speaker 1: and everybody's got their story on this. I don't want
Speaker 1: to board people with it. But how does it adjust?
Speaker 1: Does the real estate prices come down for retail? Is
Speaker 1: the stuff permanently empty? What does Dana Telsey? I think
Speaker 1: the five year plan of the tenure plan is on
Speaker 1: all the empty square footage John and I see when
Speaker 1: we go home in the Bentley A couple of very
Speaker 1: nice A couple of things. I think Number one is
Speaker 1: the fact that when you have top quality locations, top
Speaker 1: quality space, there's always a value to it. And basically
Speaker 1: it's the value that is brought there by the complementary tenants.
Speaker 1: What you and I both see, whether it's on in
Speaker 1: urban areas like that we're seeing here on Fifth Avenue.
Speaker 1: We're seeing new usages develop, We're seeing a focus on services.
Speaker 1: We're seeing restaurants, we're seeing spas, We're seeing activities where
Speaker 1: services are definitely warranted. And that's where you're seeing consumers
Speaker 1: gather in this world today where everyone is looking down
Speaker 1: at their phone, and the first thing you wake up
Speaker 1: in the morning you see is your mobile phone, and
Speaker 1: the last thing before you go to bed is your
Speaker 1: mobile phone. How do you get people to network and communicate.
Speaker 1: That's why you're seeing more retail brands, whether it's incorporate restaurants,
Speaker 1: whether it's incorporate other categories. We're seeing a changing of
Speaker 1: the guard. And I think that good space where there
Speaker 1: is large density of population always his value. Investing in
Speaker 1: that space is essential to taket new again. Dana Chelsea seconds.
Speaker 1: I need to spring refresh. I'm told by Bergdorff, what
Speaker 1: is the must thing I'm buying this summer for various
Speaker 1: and sunder boots? Nice? I mean you can. You can
Speaker 1: get some boots. You're gonna get some sandals, You're gonna
Speaker 1: get some denim jeans, a host of things these days.
Speaker 1: Dana Telsey, go away, Dan Telsey, Oh you can see me, Jimmy. Yeah.
Speaker 1: Dana Telsey. Love love having Dana Telsey on. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
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Speaker 1: I'm on Twitter at Tom Keane. Before the podcast, you
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.