WEBVTT - Bond Market Is Detaching From U.S. Policy and Looking Globally, Vogel Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:31.720 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. So 0:00:31.760 --> 0:00:33.680 it wasn't that long ago that we were talking about 0:00:33.680 --> 0:00:36.800 a possible bond market route, that all of the central 0:00:36.840 --> 0:00:40.559 banks are getting more hawkish, and that bonds globally, government 0:00:40.840 --> 0:00:43.040 bonds we're gonna all sell off, And now we see 0:00:43.640 --> 0:00:46.960 a rally yet again. Jim Vogel, who is the interest 0:00:47.040 --> 0:00:50.120 rate strategist at ft N Financial in Memphis, Tennessee, joins 0:00:50.200 --> 0:00:54.840 us now to explain whether this rally can continue. So, Jim, 0:00:54.880 --> 0:00:58.320 today we got some disappointing CPI numbers, inflation numbers. We 0:00:58.400 --> 0:01:01.200 also got retail sale that were not that great, and 0:01:01.320 --> 0:01:05.400 consumer sentiment also came in below expectations, and now people 0:01:05.440 --> 0:01:08.000 are saying it's going to be lower for longer again. 0:01:08.080 --> 0:01:11.399 How much can this cause bonds to rally over the 0:01:11.400 --> 0:01:17.320 near term? At Lisa is whether the curve starts flattening again. 0:01:17.760 --> 0:01:20.000 That was the big news out of June, and we 0:01:20.200 --> 0:01:22.920 lost that in July. So far we still have a 0:01:22.920 --> 0:01:26.920 steeper curve. Until we see thirties begin to pick up 0:01:26.959 --> 0:01:30.320 and do better and participate fully in the rally, we're 0:01:30.319 --> 0:01:34.240 not going to get back down necessarily to the tenure. 0:01:34.520 --> 0:01:37.400 Well wait, so, so just broadening out a little bit. 0:01:37.400 --> 0:01:41.759 In other words, you're saying that there was this curve steepening. 0:01:41.760 --> 0:01:45.160 In other words, people were increasing their expectations of longer 0:01:45.319 --> 0:01:48.400 term growth, of of of lower near term rates and 0:01:48.680 --> 0:01:52.200 higher longer term rates, and you're not seeing that stop 0:01:53.000 --> 0:01:58.320 due to these disappointing inflation numbers. Correct, So today's big 0:01:58.360 --> 0:02:02.520 star on the treasury her is the seven year. It's 0:02:02.640 --> 0:02:05.040 rare that the seven year is necessarily going to be 0:02:05.080 --> 0:02:08.440 the leading barometer of what happens next for interest rates. 0:02:08.480 --> 0:02:11.280 So we have got to see the thirty trade back 0:02:11.320 --> 0:02:16.800 below two and seven eights. So why isn't it There 0:02:16.840 --> 0:02:21.840 are still lingering positions that need to get out of 0:02:21.919 --> 0:02:26.520 some uh incorrect longs coming into this month, and so 0:02:26.600 --> 0:02:29.240 we haven't about two weeks of not a lot of 0:02:29.280 --> 0:02:34.639 news for people to try to rebalance their positions. So 0:02:34.680 --> 0:02:37.720 that they can participate in the long end and we 0:02:37.760 --> 0:02:41.600 can perhaps see a rally there that allows us to 0:02:41.720 --> 0:02:45.400 again trade the ten year back down another five basis 0:02:45.400 --> 0:02:48.840 points and truly get back into rally territory as we 0:02:48.919 --> 0:02:51.440 move into August. What kind of chances would you give 0:02:51.720 --> 0:02:57.480 for that to happen. We're under forty percent at this 0:02:57.560 --> 0:03:02.600 point because the CBS story, even though it doesn't appear 0:03:02.680 --> 0:03:07.240 every single day, UH is going to constantly hit the 0:03:07.280 --> 0:03:11.040 headlines as we approach August, particularly now that drag is 0:03:11.080 --> 0:03:13.800 going to be speaking at Jackson Hall. I just wonder 0:03:13.800 --> 0:03:16.720 if you can comment on something that my colleague Arcolague 0:03:16.720 --> 0:03:19.320 Tom King was talking about earlier that the president at 0:03:19.440 --> 0:03:22.840 President Donald Trump, his barometer seems to be the stock market, 0:03:22.880 --> 0:03:25.000 not the bond market. How do you come out on 0:03:25.040 --> 0:03:32.560 that the bond market has detached from fiscal policy. You're 0:03:32.639 --> 0:03:38.119 really basically starting in May, so I think Tom's correct them. 0:03:38.400 --> 0:03:42.560 The bond market is really looking globally now and not 0:03:42.760 --> 0:03:46.960 focused on Washington because the general opinion about whether we 0:03:47.000 --> 0:03:50.720 can get significant legislation passed in two thousand and seventeen 0:03:51.200 --> 0:03:55.160 has fallen off the radar. You know, earlier in the program, 0:03:55.200 --> 0:03:59.120 we were talking about possible contingency plans should the US 0:03:59.200 --> 0:04:02.720 come up against uh, the debt ceiling and fail to 0:04:03.080 --> 0:04:07.119 pass some measure to lift the threshold. And I'm wondering, 0:04:07.320 --> 0:04:10.000 with that kind of political pressure, is that on your radar? 0:04:10.080 --> 0:04:12.520 Do you think that that is something a material risk 0:04:12.600 --> 0:04:14.480 that could cause a bond market sell off that's sort 0:04:14.480 --> 0:04:19.280 of unrelated to some of these broader economic indicators. Yes, 0:04:19.320 --> 0:04:21.360 it certainly can if you go back and you look 0:04:21.400 --> 0:04:24.279 at the volatility. There are a few events over the 0:04:24.360 --> 0:04:27.599 last ten years that quite matched the debt ceiling fight 0:04:27.880 --> 0:04:31.279 of two thousand and eleven and then the small government 0:04:31.279 --> 0:04:34.120 shutdown or brief government shutdown in the fall of two 0:04:34.160 --> 0:04:37.200 thousand and thirteen. Those are always going to be major 0:04:37.279 --> 0:04:40.760 events that cause people to pull back from treasuries, not 0:04:40.880 --> 0:04:44.200 because they necessarily see long term risk, but just simply 0:04:44.240 --> 0:04:47.559 they have got to have the information of how that's 0:04:47.600 --> 0:04:50.839 going to resolve. And talking is keeping on the theme 0:04:51.040 --> 0:04:54.640 of political influence on the bond market. I also have 0:04:54.760 --> 0:04:57.040 to wonder right now, and we see the healthcare debate 0:04:57.839 --> 0:05:00.880 raging and the fact that the Senate GOP cannot get 0:05:00.920 --> 0:05:03.680 a bill together that they know they can pass. Does 0:05:03.720 --> 0:05:07.840 this sort of remove any promise of fiscal stimulus, and 0:05:07.960 --> 0:05:11.720 has the specter of fiscal stimulus been completely removed already 0:05:11.760 --> 0:05:14.080 from the bond market. Other words, our bond trainor is 0:05:14.080 --> 0:05:17.240 pretty much expecting nothing in terms of fiscal stimulus at 0:05:17.240 --> 0:05:22.080 this point. The stock market still has about a confidence 0:05:22.120 --> 0:05:24.440 that we're going to get some sort of fiscal stimulus. 0:05:24.520 --> 0:05:28.680 You continue to see that chatter around equities there. And 0:05:28.839 --> 0:05:32.240 so our view is that it's probably still somewhat in 0:05:32.279 --> 0:05:35.640 the in the bond market, but not in the near term. 0:05:35.680 --> 0:05:38.840 And so now any impact that might improve the economy 0:05:38.880 --> 0:05:41.880 and therefore really have a big impact on rates would 0:05:41.920 --> 0:05:44.719 not occur until the second half of two thousand and eighteen, 0:05:44.839 --> 0:05:48.160 and the impact would be rates higher. So, in other words, 0:05:48.160 --> 0:05:51.120 if there is no fiscal stimulus whatsoever, that will actually 0:05:51.360 --> 0:05:54.839 put a damper on yields and they could potentially go 0:05:54.960 --> 0:05:57.599 lower stay where they are more longer than people expect. 0:05:58.000 --> 0:06:02.320 It would certainly allow nervousness about the Fed shrinking balance 0:06:02.360 --> 0:06:05.200 she to calm down a little bit. If we don't 0:06:05.240 --> 0:06:08.599 have a stimulus bill that looks in some sort of 0:06:08.600 --> 0:06:12.159 shape to pass by the middle of the fourth quarter, 0:06:12.760 --> 0:06:15.080 do you think everyone's prepared for that. Are they positioned 0:06:15.080 --> 0:06:20.880 for it? The bond market generally is. But there's so 0:06:20.960 --> 0:06:25.680 many things that are happening with regards to deposit growth 0:06:25.960 --> 0:06:30.320 and how excess reserve management will take place among the 0:06:30.560 --> 0:06:33.800 in the national banking system that it's really hard to 0:06:33.839 --> 0:06:39.799 say that the entire balance she uh plan is fully 0:06:39.839 --> 0:06:43.680 integrated into prices right now. We think the level of 0:06:43.720 --> 0:06:47.080 say the tenure accurately reflects it, but in terms of 0:06:47.120 --> 0:06:49.240 all the other changes that are going to take place, 0:06:49.640 --> 0:06:52.040 there's still a lot to learn. I want to thank 0:06:52.040 --> 0:06:54.200 you very much for joining us. Jim Vogel is interest 0:06:54.279 --> 0:07:11.560 rate strategist for FT and Financial joining us from Memphis, Tennessee. Well, 0:07:11.640 --> 0:07:14.400 Jenny Yellen, chair of the Federal Reserve, just finished up 0:07:14.960 --> 0:07:22.240 what could be possibly her last Congressional half year testimony yesterday, 0:07:22.560 --> 0:07:26.520 and uh what she said was largely, uh, pretty consistent 0:07:26.640 --> 0:07:30.400 with what people were expecting, but there were some little 0:07:30.800 --> 0:07:33.600 moments of surprise. For more context, I want to bring 0:07:33.600 --> 0:07:36.920 in Bob Eisenbie's vice chairman and chief monetary economist at 0:07:36.960 --> 0:07:41.080 Cumberland Advisors in sarah Sota, Florida. He also was formerly 0:07:41.680 --> 0:07:45.360 the director of Research at the Federal Reserve Bank of Atlanta. So, Bob, 0:07:45.600 --> 0:07:50.400 what was your number one takeaway from this two day testimony. Well, 0:07:50.440 --> 0:07:54.160 my takeaway was that things seemed to be, as far 0:07:54.240 --> 0:07:59.000 as the fform C is concerned, on track for a 0:07:59.120 --> 0:08:04.240 gradual return of interest rates to a more normal position 0:08:04.480 --> 0:08:10.320 and probably move on the portfolio to normalize, beginning perhaps 0:08:10.320 --> 0:08:13.800 in September. I think that's the most likely date at 0:08:13.840 --> 0:08:17.360 this juncture. Um, Well, hold on, that's actually important, right, 0:08:17.400 --> 0:08:21.000 So if they begin allowing some of their holdings to 0:08:21.080 --> 0:08:25.360 run off starting in September, they have a pretty pretty 0:08:25.400 --> 0:08:28.760 determined preset course of how much the let to roll off, 0:08:29.040 --> 0:08:31.680 and under some estimates, that would mean that more than 0:08:31.720 --> 0:08:34.960 four hundred billion dollars of securities could roll off in 0:08:35.040 --> 0:08:38.040 the two years ended at the end of two Is 0:08:38.080 --> 0:08:42.800 that what you're expecting. Yeah, They've they've got baby steps 0:08:43.320 --> 0:08:46.880 about two hundred and forty billion up through the end 0:08:46.880 --> 0:08:49.720 of two thousand and eighteen. And that's really where my 0:08:49.800 --> 0:08:52.719 focus is on this point in time, because we'll get 0:08:52.760 --> 0:08:55.240 a pretty good sense of what the market reaction is 0:08:55.280 --> 0:08:57.880 likely to be and what the Treasury does. I mean, 0:08:57.920 --> 0:09:01.040 it depends on whether the Treasury replaces those securities are 0:09:01.080 --> 0:09:04.320 not as to what the ultimate impact would be. I 0:09:04.360 --> 0:09:08.080 did find it interesting that I thought that Janet Yale 0:09:08.160 --> 0:09:11.560 intended to put herself in the group of people, and 0:09:11.600 --> 0:09:14.079 there's a wide range of views on the f m 0:09:14.120 --> 0:09:17.000 C in that group of people who felt that there 0:09:17.040 --> 0:09:19.560 would not be much of an impact as far as 0:09:21.000 --> 0:09:24.840 treasury yields were concerned. I want to pick up on 0:09:24.920 --> 0:09:28.040 something you said, because you bring in this idea of 0:09:28.080 --> 0:09:31.679 the people at the Federal Reserve, you have experience with 0:09:31.760 --> 0:09:35.040 the people at the Federal Reserve formerly executive vice president 0:09:35.040 --> 0:09:38.600 and director of Research at the Federal Reserve Bank of Atlanta. 0:09:39.400 --> 0:09:42.080 You mentioned eighteen who's going to be at the Federal 0:09:42.080 --> 0:09:47.240 Reserve in that Board of Governor's table that is the 0:09:47.320 --> 0:09:50.320 sixty dollar questions? Oh, come on, there's a little bit 0:09:50.320 --> 0:09:55.720 of inflation. Well, we we have four people right now. 0:09:55.760 --> 0:09:59.800 We have one new nominee uh from the Trump and 0:10:00.000 --> 0:10:04.760 illustration uh Stan Fisher's term is up in two thousand 0:10:04.720 --> 0:10:08.120 and eighteen as well, So this is going to be 0:10:08.160 --> 0:10:10.559 another give us some names. Come on, we're gonna I'm 0:10:10.600 --> 0:10:13.760 pushing you here. Oh well, I mean who would I 0:10:13.800 --> 0:10:15.599 like to say? Well, who do you think do you 0:10:15.600 --> 0:10:18.280 think that Janet Yellen will get the nod. I think 0:10:18.280 --> 0:10:20.720 it's questionable whether she'll get the nod or not. And 0:10:20.760 --> 0:10:23.040 it's more likely we'll get some sort of a business 0:10:23.120 --> 0:10:28.320 person in or um, someone like a former head of 0:10:28.480 --> 0:10:33.040 the Council of Economic Advisors that John Taylor. All of 0:10:33.080 --> 0:10:37.080 those would be good potential people to have on the 0:10:37.120 --> 0:10:44.240 board as as as potential uh the leader. Well, I 0:10:44.240 --> 0:10:48.000 think John Taylor would be would be my first pick too, 0:10:48.520 --> 0:10:52.000 but Glenn Hubbard would be certainly right there along with 0:10:52.080 --> 0:10:55.720 it in terms of someone who's a top errat economist 0:10:55.760 --> 0:10:59.120 and and the knows about policy and and understands policy. 0:10:59.280 --> 0:11:02.520 So Gary co has also been flirted. He's currently the 0:11:02.600 --> 0:11:06.560 chief economist for President Trump and former CEO at Goldman Sachs. 0:11:06.800 --> 0:11:10.800 How do you think his influence would change the FED 0:11:11.840 --> 0:11:16.440 if he were chairman? You mean, um, well, I think 0:11:16.480 --> 0:11:19.920 you bring a little bit more of a market's focus. Uh, 0:11:20.120 --> 0:11:23.520 maybe a shorter term view, because most of the people 0:11:23.559 --> 0:11:27.120 on Wall Street tend to have, uh, you know, a 0:11:27.200 --> 0:11:30.000 long term is the end of the day. Would you 0:11:30.040 --> 0:11:32.120 be more hawks? I think that that's that's the question 0:11:32.120 --> 0:11:36.719 that people are wondering. That's that's a good question and 0:11:37.000 --> 0:11:39.400 I don't have a good sense of where he would 0:11:39.440 --> 0:11:43.280 come out on that. Uh, right now, with inflation being 0:11:43.280 --> 0:11:47.280 where it is, I'm not sure what Hawckeys really means, 0:11:47.880 --> 0:11:51.480 because you know, we don't really have an inflation inflation 0:11:51.520 --> 0:11:55.280 problem at this point. So and if the if there's 0:11:55.280 --> 0:11:59.079 an inflation problem, it's that people are concerned that inflation 0:11:59.200 --> 0:12:02.640 is too low. I personally don't think there's anything wrong 0:12:02.679 --> 0:12:06.480 with one point four percent inflation. I think it's perhaps 0:12:07.040 --> 0:12:13.199 diverting attention at this juncture and creating some potential risks 0:12:13.400 --> 0:12:20.120 by attempting to keep the economy overheating. And having said that, 0:12:21.440 --> 0:12:24.040 the path that the f o MC has laid out 0:12:24.080 --> 0:12:26.160 seems to be a reasonable one at this point as 0:12:26.200 --> 0:12:29.640 far as rates are concerned, at least from my perspective. Bob, earlier, 0:12:29.920 --> 0:12:33.640 you were saying that chair Yelling puts herself in the 0:12:33.720 --> 0:12:38.640 camp not thinking that the bond roll off will the 0:12:38.760 --> 0:12:42.679 balance you roll off will affect treasure yields all that much. 0:12:43.080 --> 0:12:47.520 Do you think that they're accurate in that assessment? Well, 0:12:48.720 --> 0:12:55.440 they have essentially, uh, really moderated what the total rolloff 0:12:55.480 --> 0:12:58.680 would otherwise be and have taken I think a very 0:12:58.720 --> 0:13:02.640 conservative view when it comes to the maturing of the securities, 0:13:03.320 --> 0:13:07.920 because right now mortgage backed security paydowns have been running 0:13:07.920 --> 0:13:12.480 around twenty billion a month. Uh, and obviously they're going 0:13:12.720 --> 0:13:16.400 very slow on that side. Uh. And the rest of 0:13:16.440 --> 0:13:20.920 the securities are, you know, they're they're really taking baby 0:13:20.920 --> 0:13:24.920 steps as far as I'm concerned because of the uncertainty 0:13:24.960 --> 0:13:28.600 about what the actual impacts will be, both in terms 0:13:28.600 --> 0:13:32.480 of impacts on interest rates, but also what if any 0:13:32.520 --> 0:13:37.840 implications market responses would have for the subsequent path of 0:13:38.240 --> 0:13:42.679 movements in the target rate. Bob talk about the market 0:13:42.760 --> 0:13:46.680 moves or consequences that JP Morgan Chase shares down one 0:13:46.679 --> 0:13:49.880 and a half percent, Morgan Stanley down one percent. Uh. 0:13:50.559 --> 0:13:53.360 You know, City Bank down three quarters of a percent, 0:13:53.400 --> 0:13:57.520 Bank of America down two percent. Today. What do you 0:13:57.559 --> 0:14:01.720 take away from today's releases about banks and about investing 0:14:01.720 --> 0:14:05.480 in financials. Well, financials have done very well, So there's 0:14:05.480 --> 0:14:11.160 probably just a little bit of a reassessment um perhaps 0:14:11.280 --> 0:14:16.520 because of concern about the extent to which regulation and 0:14:16.559 --> 0:14:19.320 the FED. One of the things that Jennie Ellen talked 0:14:19.360 --> 0:14:22.760 about was she was not in favor of removing removing 0:14:22.800 --> 0:14:25.720 a lot of the regulations that a lot of the 0:14:25.760 --> 0:14:29.760 financial institutions have been arguing for so uh you know, 0:14:29.840 --> 0:14:34.080 to the extent that she's for keeping a lot of 0:14:34.080 --> 0:14:37.680 those regulations, that's essentially a negative as far as the 0:14:37.720 --> 0:14:40.320 financials are concerned. I want to thank you very much 0:14:40.320 --> 0:14:42.560 for spending time with us. Bob eisen Biss is vice 0:14:42.640 --> 0:14:47.320 chairman and chief monetary economist of Cumberland Advisers. They are 0:14:47.400 --> 0:15:03.359 based in Sarasota, Florida. But we got retail sales today 0:15:03.400 --> 0:15:06.880 and they were not great. Retail sales unexpectedly dropped for 0:15:06.920 --> 0:15:09.640 a second month in June. And not only did they drop, 0:15:09.880 --> 0:15:12.280 but it wasn't just autos, it was across the board. 0:15:12.320 --> 0:15:14.560 It's leaving a lot of people wondering what the future 0:15:14.600 --> 0:15:17.360 of retailers will bring. Sema Shaw joins us now. She's 0:15:17.400 --> 0:15:21.360 consumer discretionary analyst for Bloomberg Intelligence, and we're also joined 0:15:21.360 --> 0:15:25.080 by Christian Magoon, chief executive officer of Amplify Investments in 0:15:25.080 --> 0:15:29.920 Colorado Springs. Sema, let's start with you retail sales unexpectedly dropping. 0:15:30.280 --> 0:15:33.240 What was driving that? Um, there was a deceleration, as 0:15:33.240 --> 0:15:34.720 you mentioned, sort of across the board. I think what 0:15:34.840 --> 0:15:39.680 was most notable was that, uh, May was weaker than expected, 0:15:39.720 --> 0:15:41.840 so I think maybe people thought there'd be some rebound 0:15:41.920 --> 0:15:46.400 and that non store sales, so online decelerated their growth 0:15:46.400 --> 0:15:49.040 from last month, so that's kind of it still is up, 0:15:49.560 --> 0:15:51.800 but the growth wasn't. No, but this is important because 0:15:51.800 --> 0:15:54.240 it sort of suggests something more with the consumer than 0:15:54.280 --> 0:15:56.560 simply a show. I mean, personally, you and I have 0:15:56.640 --> 0:15:59.760 discussed that before. Other than building materials, which was flat 0:16:00.040 --> 0:16:02.680 last month, but up this month, I haven't seen a 0:16:02.720 --> 0:16:06.240 lot of strength across the board in any particular category. 0:16:06.440 --> 0:16:10.640 And we were talking about Target. Target was better announced 0:16:10.680 --> 0:16:13.080 that sales might be better than expected for Q two, 0:16:13.120 --> 0:16:15.280 but that likely comes at the risk of margin and 0:16:15.320 --> 0:16:17.480 the investment they've made in price. So maybe people are 0:16:17.480 --> 0:16:20.400 willing to buy either online or in stores, but it's 0:16:20.600 --> 0:16:23.000 very price competitive, and so I think that's the risk, 0:16:23.040 --> 0:16:25.840 and you're seeing that seem you know. I was looking 0:16:25.880 --> 0:16:27.280 at the stock charts, and I want to bring in 0:16:27.360 --> 0:16:29.560 Christian Magoon on this as well, because I was looking 0:16:29.600 --> 0:16:32.760 at the stock chart of Target. This was almost an 0:16:32.760 --> 0:16:37.320 eighty dollar stock last fall, all right, just last fall. 0:16:37.360 --> 0:16:41.360 It is now on sale at fifty three dollars. Macy's 0:16:41.840 --> 0:16:46.080 was a nearly a forty four dollar stock in November. 0:16:47.160 --> 0:16:49.920 It's also on sale at twenty two dollars and twenty 0:16:50.000 --> 0:16:53.280 three cents right now? Do they need saviors? Does someone 0:16:53.400 --> 0:16:55.600 have to come in? Because I want Christian to comment 0:16:55.640 --> 0:16:59.480 about the potential for Amazon spending even more money. But Sema, 0:16:59.480 --> 0:17:01.760 what do you think? Um, I don't know if they 0:17:01.800 --> 0:17:04.040 need statis you have to separate the fundamentals and the 0:17:04.119 --> 0:17:07.159 stock reaction. So if there's any good news, these guys 0:17:07.320 --> 0:17:12.720 jump up. But so people try, you know, they think, oh, hey, 0:17:12.760 --> 0:17:14.840 this is a turn. But to me, when I look 0:17:14.880 --> 0:17:17.359 at the competitive landscape, I don't see any upside for 0:17:18.359 --> 0:17:21.120 many of these guys, not particularly Target or a Maze's. 0:17:21.160 --> 0:17:22.879 But I just think, like, look at the way that 0:17:23.160 --> 0:17:26.840 Amazon is because I think it's a change in behavior. 0:17:26.920 --> 0:17:29.879 It's not just that it's one or the other. People 0:17:29.920 --> 0:17:32.679 want a combination. But as you get used to spending 0:17:32.720 --> 0:17:35.719 online and you have it's been your behavior. It's on 0:17:35.800 --> 0:17:38.240 your phone, and you're able they get the last mile 0:17:38.320 --> 0:17:41.080 through Whole Foods, it becomes increasingly difficult for other people 0:17:41.080 --> 0:17:44.440 to compete. Christian, you said that you think that Amazon 0:17:44.600 --> 0:17:47.400 could buy a player like Macy's. Can you explain why 0:17:47.440 --> 0:17:49.879 this would be a beneficial move for them. Yeah, I 0:17:49.880 --> 0:17:53.119 think it'd be a strategic acquisition because Amazon is trying 0:17:53.119 --> 0:17:56.199 to a semi set kind of get that last little um, 0:17:56.240 --> 0:17:59.119 you know, a few feet into physically being on on 0:17:59.240 --> 0:18:02.560 people's mind. Whole Foods is a great example of adding 0:18:02.600 --> 0:18:06.360 you know, four thirty physical locations. Macy's would be another 0:18:06.480 --> 0:18:10.000 interesting example of adding you know, close to seven locations. 0:18:10.560 --> 0:18:13.520 And this gives Amazon a way to not just show 0:18:13.640 --> 0:18:16.359 room things like Macy's does today, but also as a 0:18:16.400 --> 0:18:20.439 delivery center place to have storage lockers, potentially have autonomous 0:18:20.560 --> 0:18:23.399 vehicles go in and out of drone delivery, etcetera. And 0:18:23.400 --> 0:18:27.440 then also obviously Amazon has a great uh technology base, 0:18:27.480 --> 0:18:31.080 whether it's kind of these voice enabled devices or just 0:18:31.320 --> 0:18:35.480 um they're kind of ever present online um effort to 0:18:35.600 --> 0:18:38.160 promote some of these brands Macy's has. So I think 0:18:38.400 --> 0:18:41.040 that physical footprint is going to be important. I believe 0:18:41.359 --> 0:18:43.719 Seema is exactly right. It's not going to be just online, 0:18:43.760 --> 0:18:45.280 it's not going to be just brick and mortar. It's 0:18:45.280 --> 0:18:48.080 going to be omni channel in Amazon's probably in the 0:18:48.160 --> 0:18:51.359 cat's seat to figure out that mix. Well, you know, Seema, 0:18:51.440 --> 0:18:54.080 there's a report today and and Christian you can come 0:18:54.080 --> 0:18:56.080 in on this as well. There's a report from Goldman 0:18:56.119 --> 0:18:59.720 Sachs saying that while they put Walmart on their Conviction 0:18:59.760 --> 0:19:02.840 boy list and the stock is up one point three 0:19:03.600 --> 0:19:06.480 and they said that the Walmart is well positioned for 0:19:06.520 --> 0:19:10.199 any competition with Amazon. I guess it's also in reference 0:19:10.240 --> 0:19:11.720 to the fact that they're going to have to absorb 0:19:12.160 --> 0:19:17.320 that the Whole Foods acquisition. Seema, what about Walmart? Walmart 0:19:17.359 --> 0:19:19.520 to me is a little bit of a different customer. 0:19:19.560 --> 0:19:22.320 It's a lower end on average. I mean, it's not 0:19:22.520 --> 0:19:25.480 really a direct competitor or Whole Foods, I would argue, 0:19:25.640 --> 0:19:29.239 I mean, I understand, but right relation to Amazon. Yet, 0:19:29.520 --> 0:19:33.080 Walmart has the stores, but they don't have the back 0:19:33.200 --> 0:19:37.320 end infrastructure online as well developed as Amazon. And as 0:19:37.359 --> 0:19:39.840 we've seen from multiple retailers, that seems to be the 0:19:39.960 --> 0:19:44.359 harder part to execute versus getting having the online and 0:19:44.400 --> 0:19:47.359 that infrastructure correct and the logistics and then buying the 0:19:47.400 --> 0:19:50.480 bricks and mortar. So I think that is more that 0:19:50.640 --> 0:19:53.400 is a bigger That's something that's they're going to struggle 0:19:53.440 --> 0:19:55.520 to get. Like they've made all these small acquisitions like 0:19:55.640 --> 0:19:58.600 Jet and mod you know, modcloth and things like that. 0:19:58.640 --> 0:20:00.919 But how do you put those together and how do 0:20:00.960 --> 0:20:04.359 you have that seamless experience that people had, say like 0:20:04.400 --> 0:20:07.080 on Amazon Prime Day, where the site was so quick 0:20:07.119 --> 0:20:09.920 to load and to still you know, get the deliveries out. 0:20:10.000 --> 0:20:12.400 That part, to me is very hard to replicate. So Christian, 0:20:12.560 --> 0:20:13.960 I want to I want to go back to that 0:20:14.080 --> 0:20:18.080 image that that you portrayed of Amazon buying Macy's and 0:20:18.119 --> 0:20:21.200 having these stores with drones flying over them and autonomous 0:20:21.240 --> 0:20:25.560 cars and Jetson's you know, uh family member flying overhead. 0:20:25.720 --> 0:20:29.159 I'm just trying to figure out, you know, in this image, 0:20:29.440 --> 0:20:31.760 are we getting back to the same model that kind 0:20:31.760 --> 0:20:34.200 of is failing right now for a lot of the retailers, 0:20:34.240 --> 0:20:38.840 which is uh that if people are ordering online, they 0:20:38.920 --> 0:20:43.560 don't need the physical location, why store up? Yeah, I 0:20:43.560 --> 0:20:46.720 think it's a it's kind of hybrid, uh, based off 0:20:46.760 --> 0:20:50.080 the current brick and mortar model, and the hybrid nature 0:20:50.119 --> 0:20:53.119 is having those physical locations might allow you to do 0:20:53.200 --> 0:20:56.920 just in time delivery of thirty minutes or an hour. Um. 0:20:57.000 --> 0:20:59.760 You know, if grocery, the grocery industry is truly going 0:20:59.800 --> 0:21:02.120 to be disrupt is you need to be able to 0:21:02.359 --> 0:21:05.520 have something like a same day delivery service, and physical 0:21:05.560 --> 0:21:08.760 locations in in these major communities like a Macy's or 0:21:09.040 --> 0:21:12.440 Whole Foods offer is going to help that out. In addition, 0:21:12.440 --> 0:21:15.920 there's a large, you know, population growing city city population 0:21:15.960 --> 0:21:18.639 that may need actually a storage locker or a different 0:21:18.640 --> 0:21:22.040 place besides their place of where they're living or their 0:21:22.480 --> 0:21:25.760 actual place of employment to actually go out and pick 0:21:25.880 --> 0:21:29.240 up packages that are are delivered in a locker. And 0:21:29.240 --> 0:21:32.800 then I think, finally, um, it's it's hard to ignore 0:21:33.119 --> 0:21:35.959 the impulse buying that way we do him and Lisa 0:21:36.160 --> 0:21:38.960 when we're walking through a store, and Amazon is missing 0:21:39.040 --> 0:21:40.680 some of that. I think we do some of the 0:21:40.720 --> 0:21:43.960 impulse buying online, but obviously when you're a physical store, 0:21:44.160 --> 0:21:47.119 I think that increases um kind of the likelihood that 0:21:47.160 --> 0:21:49.280 you could pick up some other things. And I think 0:21:49.280 --> 0:21:52.600 that will be beneficial to Amazon and other online retailers 0:21:52.600 --> 0:21:55.240 once they have a little bit more of a physical footprint. Right, Well, 0:21:55.240 --> 0:21:57.000 they've got to get into the store in the first place. 0:21:57.040 --> 0:21:59.960 I'm just to note the average Prime member at Amazon's 0:22:00.040 --> 0:22:04.800 spends hundred dollars on the online shopping platform annually. They 0:22:04.800 --> 0:22:09.000 spend non Prime members they spend seven hundred dollars, so 0:22:09.280 --> 0:22:11.920 nearly double the amount. And this is a big deal 0:22:11.920 --> 0:22:14.720 when it comes to Amazon Prime selling day, right, SIMI, 0:22:14.840 --> 0:22:17.080 because it's not just about the product, it's about signing 0:22:17.119 --> 0:22:20.480 people up for that. Yes, because I think that part 0:22:20.480 --> 0:22:23.720 of what makes them so defensible against other people who 0:22:23.800 --> 0:22:26.280 mimic their online platform is the fact that it is 0:22:26.320 --> 0:22:31.240 a marketplace, it's prime, and it's almost part of people's behavior. 0:22:31.280 --> 0:22:33.560 It's on your phone, and that makes people, i think, 0:22:33.560 --> 0:22:36.399 at a certain price, even at a certain level, less 0:22:36.400 --> 0:22:40.120 price sensitive. And then it then you would be typically 0:22:40.160 --> 0:22:43.360 because it's just so convenient and you don't really need 0:22:43.440 --> 0:22:47.560 more than one Amazon Prime membership like in for a competitor, 0:22:47.720 --> 0:22:50.639 and I think that's what makes their first mover advantage 0:22:50.680 --> 0:22:53.879 so powerful. Thank you very much, Sema Shaw, consumer discretionary 0:22:53.880 --> 0:23:10.400 analysts for Bloomberg Intelligence. Christian Magoon, chief executive of Amplify Investments, Well, 0:23:10.440 --> 0:23:11.600 we want to know that they have to go to 0:23:11.640 --> 0:23:14.560 the blackboard again. Stephen Dennis is our senate reporter from 0:23:14.600 --> 0:23:18.000 Bloomberg News and he joins us from Capitol Hill in Washington, 0:23:18.359 --> 0:23:20.879 and he can be followed on Twitter at Stephen T. 0:23:21.359 --> 0:23:24.080 Dennis and he's got two ends. Well, are we going 0:23:24.119 --> 0:23:27.920 to get another rewrite? Stephen, Yeah, I think they're gonna 0:23:27.920 --> 0:23:32.000 have to put together a package for moderate there's a 0:23:32.000 --> 0:23:36.080 bunch of holdout moderates, about a handful that come from 0:23:36.080 --> 0:23:41.159 Medicaid expansion state. They didn't really get much in yesterday's rewrite, 0:23:41.920 --> 0:23:47.720 and I think over the weekend before Monday or shortly 0:23:47.760 --> 0:23:52.080 thereafter getting a CBO score on this bill, I think 0:23:52.119 --> 0:23:55.560 Mitch McConnell is probably gonna have to dig back deep 0:23:55.600 --> 0:24:00.840 into the leftover pocket change in his pocket and start 0:24:00.880 --> 0:24:04.000 spending some of the extra money that he has to 0:24:04.400 --> 0:24:07.600 uh get these senators back on board, Stephen, When you 0:24:07.640 --> 0:24:12.639 talk with analysts and and policy wanks on Washington, on 0:24:12.960 --> 0:24:16.919 Capitol Hill, what do they say about the likelihood that 0:24:17.040 --> 0:24:19.720 Republicans can come together in any way for this or 0:24:19.760 --> 0:24:22.840 whether at some point they'll have to reach out across 0:24:22.840 --> 0:24:24.960 the aisle two Democrats and try to do something a 0:24:25.000 --> 0:24:29.000 little more about partisan I think right now we're basically 0:24:29.080 --> 0:24:33.639