WEBVTT - Bloomberg Surveillance: ‘Fed-Friendly’ Data, Retail Earnings, Biden-Xi Meeting 0:00:05.120 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:08.520 --> 0:00:12.360 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.880 for insight from the best an economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:30.520 the Bloomberg Terminal, and the Bloomberg Business app. Joining us now, 0:00:30.560 --> 0:00:32.720 we're thrilled to every usually for big events, So today's 0:00:32.720 --> 0:00:34.960 a big event. It's always a big event. When Ellen 0:00:35.080 --> 0:00:40.080 Zenner joins his chief US economist, Morgan Stanley Ellen on claims, 0:00:40.120 --> 0:00:42.400 I go to the four week moving average. How do 0:00:42.440 --> 0:00:46.960 you interpret claims with this two hundred thirty one thousand statistic? 0:00:47.280 --> 0:00:50.120 And can you say there's finally a vector in place 0:00:50.600 --> 0:00:53.640 of higher claims more pain. 0:00:54.280 --> 0:00:57.200 So I hope that there's a higher vector in place. 0:00:57.920 --> 0:01:01.480 I disagree that higher claims will be more pain. We're 0:01:01.520 --> 0:01:04.959 coming off of extraordinarily low levels. As you said, we 0:01:05.000 --> 0:01:07.600 look at the four week moving average to smooth through volatility, 0:01:07.680 --> 0:01:11.120 and it has been lifting, but it is still very low. 0:01:11.160 --> 0:01:12.240 And so what does that tell me? 0:01:12.640 --> 0:01:16.120 Something that Mike and Lisa alluded to as well, normalization 0:01:16.840 --> 0:01:20.600 slowing in normalization, good god man, that's what we've been needing, 0:01:20.880 --> 0:01:23.920 and I don't see this accelerating at an extreme pace. 0:01:24.319 --> 0:01:26.160 I've been on the road the last few days in 0:01:26.240 --> 0:01:31.040 several states meeting with corporate clients. They are finally seeing 0:01:31.080 --> 0:01:33.680 some relief in terms of how tight the labor market 0:01:33.800 --> 0:01:37.800 has been in terms of the availability of the kinds 0:01:37.840 --> 0:01:41.480 of employees that they need. We're seeing not just claims 0:01:41.640 --> 0:01:45.280 rising a bit here, but I focus on continuing claims. 0:01:45.319 --> 0:01:48.640 People that have been losing their jobs are staying unemployed 0:01:48.680 --> 0:01:51.880 for a bit longer, and that's been rising since October, 0:01:51.920 --> 0:01:54.360 so it's getting more difficult to just get re employed 0:01:54.440 --> 0:01:56.840 right away. This is the kind of softness in the 0:01:56.920 --> 0:01:59.720 labor market that we have needed, and of course it 0:01:59.760 --> 0:02:03.400 takes pressure off the FED to raise rates again. Right 0:02:03.560 --> 0:02:05.160 going on extended. 0:02:04.680 --> 0:02:09.079 Hold, what is the distance between normalization and an outright downturn? 0:02:09.520 --> 0:02:13.359 So well, the difference is jobs stay positive, So normalization 0:02:13.520 --> 0:02:16.320 is you've got more supply coming back into the labor market, 0:02:16.400 --> 0:02:18.840 so you see participation rates rising, which we have. 0:02:19.680 --> 0:02:22.799 That is what puts upward pressure on the unemployment rate. 0:02:23.200 --> 0:02:26.440 And we've been seeing that, and if people are having 0:02:26.600 --> 0:02:28.720 taken longer to be able to get re employed, then 0:02:28.720 --> 0:02:31.359 that should produce further upward pressure on the unemployment rate. 0:02:31.720 --> 0:02:35.280 But that just takes pressure off the labor market, pressure 0:02:35.320 --> 0:02:36.960 off of businesses, off of margins. 0:02:37.000 --> 0:02:39.320 You see wages grow more. 0:02:39.160 --> 0:02:43.480 Slowly, and you'll see confidence build among FED policy makers 0:02:43.720 --> 0:02:47.040 that they have done enough here. I don't think we're 0:02:47.080 --> 0:02:51.120 anywhere near getting to negative job gains. I think negative 0:02:51.160 --> 0:02:55.120 jobs would mean that companies have stopped hiring. What I 0:02:55.160 --> 0:02:58.120 hear is that they're doing selective hiring, that they stop hiring, 0:02:58.360 --> 0:03:02.440 and that they start firing, and I mean firing up broadly. 0:03:02.600 --> 0:03:05.760 And that's just not what we're seeing. But I'm ever watchful, 0:03:06.080 --> 0:03:09.160 especially reading earnings transcripts, to see if that's something that's 0:03:09.200 --> 0:03:10.639 around the around the corner. 0:03:10.680 --> 0:03:13.560 I'm glad you mentioned earnings because we were talking about Walmart, 0:03:13.560 --> 0:03:16.600 and I understand their idiosyncrasies here, but they talked about 0:03:16.680 --> 0:03:21.240 potentially seeing outright deflation over the next year with consumers 0:03:21.240 --> 0:03:24.480 clearly pushing back. You do see margin pressure, you do 0:03:24.600 --> 0:03:28.320 see a market deterioration and consumer appetite over the past 0:03:28.440 --> 0:03:31.760 ninety days. How concerning is that to you about the 0:03:31.800 --> 0:03:33.560 nonlinearity of where things could be. 0:03:34.000 --> 0:03:35.360 So, Lisa, we. 0:03:35.400 --> 0:03:37.480 Put out a consumer survey that goes out into the 0:03:37.480 --> 0:03:40.480 field every two weeks, and one of the biggest areas 0:03:40.520 --> 0:03:43.520 of trade down that households have been doing is within 0:03:43.680 --> 0:03:47.400 stores themselves, say, going from a high priced branded good 0:03:47.720 --> 0:03:51.160 to the generic good within the store. And that means 0:03:51.160 --> 0:03:54.400 that those retailers are going to see some deflation. And 0:03:54.440 --> 0:03:57.920 we've been hearing from businesses that input costs are falling, 0:03:58.560 --> 0:04:02.080 but prices that they're charged or falling faster. And that's 0:04:02.120 --> 0:04:05.720 important because we all started to think we the economics 0:04:05.720 --> 0:04:09.800 community at large, not myself though an exception, started to 0:04:09.840 --> 0:04:13.360 think that households just have unlimited price tolerance, and that 0:04:13.440 --> 0:04:16.280 is not the case. Finances start to slow, we run 0:04:16.320 --> 0:04:19.719 through that excess savings, and you will start to trade down. 0:04:20.000 --> 0:04:24.359 The lower income groups that Walmart serves are the groups 0:04:24.400 --> 0:04:28.600 that have been standing the greatest pressure. Look at delinquency 0:04:28.680 --> 0:04:31.800 rates for the lowest income groups on credit cards on 0:04:31.880 --> 0:04:34.600 auto loans, that points to stress. 0:04:35.360 --> 0:04:39.320 Ellen Molly Smith and Alice Atkins for Bloomberg made a 0:04:39.320 --> 0:04:42.120 big splash the other day using your research, the Morgan 0:04:42.160 --> 0:04:45.679 Stanley View and the key distinction is a four point 0:04:45.720 --> 0:04:49.479 three percent unemployment rate. I hereby dubb at the Zentner 0:04:49.560 --> 0:04:53.039 four point three percent statistic. How do we get to 0:04:53.160 --> 0:04:57.560 a four point three percent unemployment rate that radically shifts 0:04:57.760 --> 0:04:58.640 Fed policy? 0:04:58.800 --> 0:05:01.799 I'm not expecting right close them from the Fed. 0:05:02.839 --> 0:05:06.040 The unemployment rate at four point three percent, we think 0:05:06.200 --> 0:05:09.159 is a soft landing unemployment rate in that it is 0:05:09.240 --> 0:05:14.120 driven by slower job gains and higher labor force participation. 0:05:14.240 --> 0:05:17.880 Now I understand that is a beautiful scenario for the FED. 0:05:18.320 --> 0:05:21.520 And we have them cutting next year by one hundred. 0:05:21.240 --> 0:05:23.680 Basis points because of normalization. 0:05:23.800 --> 0:05:27.000 That's very different than cutting because the FED thinks there's 0:05:27.000 --> 0:05:29.680 a recession. If the FED thinks that there's recession, they're 0:05:29.720 --> 0:05:32.720 starting big and they're doing a lot, and that's very 0:05:32.720 --> 0:05:34.520 different than the normalization scenario. 0:05:34.680 --> 0:05:37.640 And then overlay with that, what we're hearing Julia Coronatto 0:05:37.720 --> 0:05:41.920 leading the way on this, doctor Coronado suggesting productivity is underestimated. 0:05:42.240 --> 0:05:45.359 Do you believe that we have an underestimation of the 0:05:45.360 --> 0:05:48.359 efficiency of the American economy and that gets you to 0:05:48.520 --> 0:05:51.560 a benevolent four point three percent unemployment rate? 0:05:51.800 --> 0:05:55.719 Yees, So I do think that productivity is being underestimated. 0:05:56.040 --> 0:05:59.480 I would add, though, that productivity has not been well estimated, 0:06:00.560 --> 0:06:02.799 and so you'd have to say, well, it's. 0:06:02.640 --> 0:06:06.880 Being estimated you worse than before. 0:06:07.040 --> 0:06:08.960 And I'm not sure we can say that, but I 0:06:08.960 --> 0:06:11.960 think there are a lot of new ways that productivity 0:06:12.839 --> 0:06:15.280 exhibits itself in the economy that we're just not able 0:06:15.320 --> 0:06:19.159 to capture. Government data is not able to capture. But absolutely, 0:06:19.160 --> 0:06:24.040 if productivity is higher, then you can withstand higher wage 0:06:24.040 --> 0:06:27.840 growth without it being inflationary. It gives the FED more 0:06:27.920 --> 0:06:31.320 runway because it keeps it lid on inflation. And so 0:06:31.360 --> 0:06:35.600 it's really it lifts all boats. It's productivity and infrastructure 0:06:35.640 --> 0:06:39.120 or what economists go to sleep at night dreaming about, Tom. 0:06:39.000 --> 0:06:41.440 Which is the reason why I think people are sort 0:06:41.440 --> 0:06:43.600 of hopeful that we're going to get that and we're 0:06:43.640 --> 0:06:47.839 going to create this soft landing and avoid something more challenging. 0:06:48.080 --> 0:06:50.360 I guess to wrap it all up, we've been talking 0:06:50.360 --> 0:06:53.719 all morning about the potential for deflation. Tom was talking 0:06:53.720 --> 0:06:56.360 about how difficult that is for any economy to handle. 0:06:56.400 --> 0:06:59.320 This was the word that Walmart used. But you're talking 0:06:59.320 --> 0:07:03.440 about normallyation. How concerned would you be to see some 0:07:03.480 --> 0:07:07.760 sort of material deflation, not disinflation. Deflation, and certain good 0:07:07.880 --> 0:07:10.600 sectors that we have been seeing on the margins over 0:07:10.600 --> 0:07:11.760 the past couple of months. 0:07:12.160 --> 0:07:14.680 Yeah, so, Lisa, good sectors. I'm not worried about it 0:07:14.680 --> 0:07:14.960 at all. 0:07:15.000 --> 0:07:18.320 We've goods prices in the US have been in deflation 0:07:18.680 --> 0:07:21.920 for a decade leading up to COVID. That's normal, right, 0:07:21.960 --> 0:07:25.840 we were importing a lot of deflation, but that's externally determined. 0:07:26.560 --> 0:07:29.280 I would be very, very concerned about a. 0:07:29.360 --> 0:07:34.840 Deflation scenario in the US for services, for domestically determined prices. 0:07:35.040 --> 0:07:38.000 For US to get to that broadly, you're talking about 0:07:38.080 --> 0:07:42.600 an extraordinary downturn on the magnitude of the financial crisis 0:07:42.880 --> 0:07:45.800 in two thousand and eight that would get that kind 0:07:45.800 --> 0:07:49.600 of price declines, declines in the level of prices instead. 0:07:50.040 --> 0:07:52.840 I think deceleration is in train. I think it's going 0:07:52.880 --> 0:07:55.520 to be faster than the FED is expecting. And I 0:07:55.560 --> 0:07:57.800 think I've been really pleased, and I think they should 0:07:57.800 --> 0:08:00.080 be pleased too with the progress that we see. 0:08:00.520 --> 0:08:03.840 The Newtonian mechanics of Ellen Zentner, of Morgan Stanley there 0:08:03.840 --> 0:08:06.840 and the dynamics of price change. Ellen, thank you so 0:08:06.920 --> 0:08:13.880 much for the brief. William Dudley joins us now former 0:08:13.920 --> 0:08:17.200 New York Fed president of Bloomberg opinion columnist Bill Ewan, 0:08:17.280 --> 0:08:21.120 I'm going to suggest Professor williams now holding Court in 0:08:21.160 --> 0:08:25.520 the former Dudley chair, have a unique perspective on our flows, 0:08:25.960 --> 0:08:29.840 our liquidity, our trust Sitting at the New York Fed. 0:08:30.480 --> 0:08:35.600 What is the confidence or trust deterioration you've observed. 0:08:36.679 --> 0:08:38.840 I think there is a complete trust in the New 0:08:38.920 --> 0:08:42.520 York Fed because that the Fed basically understands the plumbing 0:08:42.520 --> 0:08:44.840 of the financial system and understands what needs to be 0:08:44.920 --> 0:08:48.840 done to make sure that plumbing works always, even under 0:08:48.840 --> 0:08:51.400 times is pressed. One area of vulnerability where the Fed 0:08:51.440 --> 0:08:53.160 and the treasure you're looking at right now is the 0:08:53.200 --> 0:08:56.520 treasure market itself, because the buying of treasury borrowing has 0:08:56.520 --> 0:08:59.880 gone up dramatically and the capacity of the primary dealers 0:09:00.080 --> 0:09:04.000 to take on that uh that burden has diminished because 0:09:04.000 --> 0:09:08.240 of all the regulation on capital and leverage. So there 0:09:08.280 --> 0:09:10.680 do need to be some significant changes, I think, to 0:09:10.760 --> 0:09:15.280 the treasury market to make it more strong and resilient. 0:09:15.360 --> 0:09:17.200 And what I propose is a couple of things. One 0:09:17.240 --> 0:09:19.720 central characteringum of treasuries, so they all go through a 0:09:19.720 --> 0:09:21.720 central current party, so your risk is just to the 0:09:21.760 --> 0:09:24.040 central current party. Allows you to net out a lot 0:09:24.080 --> 0:09:26.360 of bilateral risk to a single risk to one. 0:09:26.720 --> 0:09:27.840 Uh end person. 0:09:28.360 --> 0:09:34.400 Second, increase the leverage the haircuts a bit so that 0:09:34.440 --> 0:09:36.520 they don't need to be increased during time to stress. 0:09:36.760 --> 0:09:39.040 Right now, you have low haircuts, and then there's there's stress, 0:09:39.040 --> 0:09:41.079 and the haircuts go up, which force people to sell. 0:09:41.440 --> 0:09:44.400 And the last thing which Mike was talking about is 0:09:45.320 --> 0:09:48.680 opening up the fens repo facility more broadly, making it 0:09:48.720 --> 0:09:51.040 so that people can take treasures and turn them into 0:09:51.080 --> 0:09:53.559 cash at any time. And if they know that, then 0:09:53.559 --> 0:09:56.280 they don't actually have to sell the treasures, you know, 0:09:56.440 --> 0:09:58.040 in anticipation of a problem. 0:09:58.400 --> 0:10:00.880 They can wait to see if they actually need the care. 0:10:00.600 --> 0:10:03.480 Bill if none of that gets done. Do you think 0:10:03.760 --> 0:10:07.040 the action we've seen and what you expect compromises the 0:10:07.120 --> 0:10:09.240 QT program coming out of the FED. 0:10:10.240 --> 0:10:11.040 No, I don't think so. 0:10:11.080 --> 0:10:13.120 I mean, I think the QT program basically is on 0:10:13.120 --> 0:10:16.359 autopilot as long as there isn't a lot of market disruptions. 0:10:16.400 --> 0:10:19.560 So if the market performs reasonably well, then QT keeps going. 0:10:19.920 --> 0:10:21.680 Only if we have the kind of events like we 0:10:21.760 --> 0:10:25.000 had in September twenty nineteen or market twenty twenty, we 0:10:25.000 --> 0:10:27.920 can see QT is suspended because if the market isn't 0:10:27.920 --> 0:10:29.840 working right, the last thing the Fed wants to do 0:10:29.920 --> 0:10:31.760 is done more securities in the marketplace. 0:10:32.160 --> 0:10:35.120 What's as take here, Bill, If there isn't this sort 0:10:35.160 --> 0:10:38.400 of fix that you propose or this three pronged proposal, 0:10:38.880 --> 0:10:41.319 how much are we seeing what sort of the new 0:10:41.320 --> 0:10:44.240 normal looks like with bouncing around twenty basis points on 0:10:44.280 --> 0:10:47.520 a ten year yield from day to day versus something 0:10:47.800 --> 0:10:51.160 more significant that creates a real crisis in the world's 0:10:51.160 --> 0:10:53.120 deepest and most liquid market. 0:10:53.559 --> 0:10:55.480 I think the volatility we've seen this year is not 0:10:55.640 --> 0:10:58.520 a treasure market function problem. I think the volatility we've 0:10:58.520 --> 0:11:00.000 seen this year is people trying to figure out what 0:11:00.200 --> 0:11:03.400 what's the trajectory of short term rates over the next 0:11:03.640 --> 0:11:06.360 six to twelve months, and there's been lots of changes 0:11:06.360 --> 0:11:09.160 in view as the economic data has come out. I 0:11:09.160 --> 0:11:12.280 think the problem is more when all sudden people want 0:11:12.280 --> 0:11:14.480 it dump treasuries and there's not enough capacity on their 0:11:14.559 --> 0:11:17.680 side to absorb that. That has happened a few times, 0:11:18.360 --> 0:11:21.160 and obviously it needs it needs a catalyst, and it's 0:11:21.160 --> 0:11:23.440 hard to predict what that catalyst could be, But what 0:11:23.480 --> 0:11:25.439 I want is a treasury market that can handle those 0:11:25.480 --> 0:11:27.240 kind of shocks if and when they occur. 0:11:27.600 --> 0:11:30.080 Are you saying that right now there is an inability. 0:11:30.320 --> 0:11:32.520 What do you expect will happen if there is some 0:11:32.559 --> 0:11:33.880 sort of catalyst. 0:11:34.800 --> 0:11:37.320 Well, if there's sometimes are cast One of the problems 0:11:37.360 --> 0:11:40.560 we allowed the treasury trading is handled by algorithmic traders 0:11:40.559 --> 0:11:43.960 who basically don't really provide long term liquity to the market. 0:11:44.040 --> 0:11:47.960 They just provide liquidity for a microsecond and then they 0:11:48.640 --> 0:11:51.760 move it security off to someone else, and when things 0:11:51.840 --> 0:11:56.000 get scary, they completely withdraw from the market, and then 0:11:56.080 --> 0:11:57.800 the market is really now then has to go to 0:11:57.800 --> 0:11:58.920 the primary dealer community. 0:11:59.080 --> 0:12:00.280 But the primary dealer commun. 0:12:00.160 --> 0:12:02.880 Has an allocated capital to this business because most of 0:12:02.880 --> 0:12:05.120 the time they're actually not doing it, so there's no 0:12:05.160 --> 0:12:10.240 one there sort of an extremist provide balance sheet capacity 0:12:10.280 --> 0:12:12.080 to sort of come the market. And that's one reason 0:12:12.120 --> 0:12:14.720 why you'd like to have the ability to take your 0:12:15.080 --> 0:12:17.800 treasury security to the FED and turn them into cash 0:12:18.080 --> 0:12:21.040 without actually having to sell them. So the Treasury is 0:12:21.080 --> 0:12:22.760 only one the FED is the only one that has 0:12:22.760 --> 0:12:25.520 a balance sheet that is actually elastic, So why not 0:12:25.559 --> 0:12:28.560 make it clear that that elastic balance sheet available on 0:12:28.600 --> 0:12:31.640 an ex anti basis as opposed to only exposts after 0:12:31.720 --> 0:12:32.960 the vice she had the problem? 0:12:33.360 --> 0:12:37.120 Bill, how does our data dependency look next year? I 0:12:37.120 --> 0:12:41.000 think we've had a celebration of disinflation in place. Is 0:12:41.040 --> 0:12:45.200 the nature or character of the Fed's data dependency different 0:12:45.280 --> 0:12:46.360 now and forward? 0:12:47.240 --> 0:12:50.760 Well, I think they're more confident that they've moved monetary 0:12:50.760 --> 0:12:53.400 policy to a restrictive level and it's actually working to 0:12:53.520 --> 0:12:56.560 bring down inflation. But we still don't know a lot 0:12:56.600 --> 0:12:59.440 of things. We don't really know if how tight monetary 0:12:59.440 --> 0:13:01.400 policy is. We don't know how long it's going to 0:13:01.400 --> 0:13:03.560 take to get inflation down to two percent. So I 0:13:03.559 --> 0:13:06.360 think the degree of uncertainty risk is a lot less 0:13:06.440 --> 0:13:09.720 less today than it was, say, eighteen months ago, when 0:13:09.760 --> 0:13:11.920 the Fed started the tightening process. But there's still a 0:13:11.960 --> 0:13:14.120 lot of uncertainty about how strong the economics can being, 0:13:14.120 --> 0:13:15.240 whether the Fed is done. 0:13:15.480 --> 0:13:17.360 What a roller coaster write this bond market has been 0:13:17.400 --> 0:13:19.160 on over the last few months. 0:13:19.000 --> 0:13:19.599 Bell, what if for? 0:13:19.679 --> 0:13:21.520 To catch up with you? SA always is former New 0:13:21.600 --> 0:13:25.120 York Fed President Bill Dutley. There an interesting thought provoking 0:13:25.160 --> 0:13:27.800 piece from Bill on the future of this treasury market. 0:13:37.920 --> 0:13:39.760 We talked to a lot of experts on this, and 0:13:39.800 --> 0:13:41.360 this is what you get if you get a double 0:13:41.360 --> 0:13:44.200 degree at the you claimed holy Cross, the College of 0:13:44.200 --> 0:13:51.280 the Holy Cross, and economics in accounting, the hyper detail, mathematics, ratios, 0:13:51.840 --> 0:13:56.160 the financial analysis of retail that Chuck Rahm has acclaimed for. 0:13:56.240 --> 0:13:58.600 He's a Gordon Haskett. I'm not going to mince words. 0:13:58.600 --> 0:14:01.520 We protect the copyright of all of our guests. Get 0:14:01.760 --> 0:14:05.120 his brilliance from Gordon A Hausket. How do you go 0:14:05.160 --> 0:14:10.040 and outperform on Walmart with a thirty pe? Explain why 0:14:10.080 --> 0:14:14.559 Walmart has a pe like a luxury goods pervader. 0:14:15.600 --> 0:14:19.720 And Walmart's been executing lawlessly for several quarters and even 0:14:19.800 --> 0:14:23.520 maybe the past couple of years, and the business mixshift 0:14:23.560 --> 0:14:26.080 and the gross market visibility. I mean, there's never been 0:14:26.120 --> 0:14:28.360 a time in the twenty years I've covered Walmart where 0:14:28.720 --> 0:14:32.360 I've been this bullish on the long term outlook. Clearly 0:14:32.440 --> 0:14:36.120 today it's interesting. It's a little bit about positioning. You 0:14:36.160 --> 0:14:39.880 guys talked in your remarks about valuation. That's a factor 0:14:40.840 --> 0:14:43.280 if you really dig it underneath the covers here, it's 0:14:43.320 --> 0:14:45.640 really less about the top line. And I think less 0:14:45.640 --> 0:14:48.640 about the back half of October commentary that the CFO 0:14:48.760 --> 0:14:51.440 recently made. I think it's more about the margin flow 0:14:51.480 --> 0:14:54.920 through that was disappointing. The US margins were disappointing. So 0:14:55.160 --> 0:14:57.480 when you have a stock at an all time high, 0:14:57.520 --> 0:14:59.960 at very rich valuations and you get a little bit 0:15:00.080 --> 0:15:02.720 but disconnect, you get this negative reaction. I think the 0:15:02.760 --> 0:15:04.520 stock will come back throughout the day and over the 0:15:04.520 --> 0:15:07.440 next couple of weeks, but today could be difficult for 0:15:07.480 --> 0:15:07.840 the stock. 0:15:08.240 --> 0:15:11.760 Can they compete with Amazon or Darra I never said 0:15:11.800 --> 0:15:15.160 this before, Chuck Grum, But can they beat Amazon? 0:15:16.440 --> 0:15:18.160 I don't know if they can beat Amazon, but they 0:15:18.160 --> 0:15:21.600 can definitely compete. And I think the physical assets of 0:15:21.640 --> 0:15:24.280 their four thousand plus stores in the country really provide 0:15:24.280 --> 0:15:27.280 them with being really close and being able to connect 0:15:27.280 --> 0:15:30.120 with their customers. So Walmart plus there's a lot of 0:15:30.200 --> 0:15:33.400 opportunity there. So can they beat Probably not, but can 0:15:33.440 --> 0:15:34.640 they compete one hundred percent? 0:15:34.840 --> 0:15:37.800 Chuck, you said that margins disappointed, and that's really interesting 0:15:37.840 --> 0:15:39.800 At a time where people are wondering when are consumers 0:15:39.800 --> 0:15:42.880 is going to start pushing back on price increases? Is 0:15:42.920 --> 0:15:46.280 this an indication that Walmart is seeing that that time 0:15:46.400 --> 0:15:48.520 is now and then order for them to compete, they've 0:15:48.520 --> 0:15:49.960 got to take a hit on the margins. 0:15:50.360 --> 0:15:53.120 Well, I think almost uniformly, you know, consumers are pushing 0:15:53.160 --> 0:15:55.000 back on price and that's why prices are coming down 0:15:55.000 --> 0:15:57.840 almost across the board. And can we cover Home Depot, 0:15:57.840 --> 0:16:01.520 we cover TJ, we cover you know Hard, you know, Macy's, Walmart, 0:16:01.520 --> 0:16:04.880 They're all talking about prices starting to flatten out and retreat. 0:16:05.200 --> 0:16:07.480 I think the US margins were softer because of the 0:16:07.520 --> 0:16:11.760 GLP influence on the on the margins because of the drug. 0:16:11.840 --> 0:16:14.440 It's a lower margin product. It was a higher sales 0:16:14.440 --> 0:16:17.040 in here in the quarter. And when you have discretionary 0:16:17.080 --> 0:16:20.240 sales be softer, those are higher margin categories for Walmart. 0:16:20.280 --> 0:16:23.480 So it's really a mixed factor. It looks like obviously 0:16:23.520 --> 0:16:25.480 the calls at eight o'clock and the callbacks are later 0:16:25.520 --> 0:16:27.200 in the day, so we'll get more clarity later in 0:16:27.200 --> 0:16:29.040 the day. But looking at what it looks like now, 0:16:29.080 --> 0:16:30.400 I think it's more of a mixed factor. 0:16:30.800 --> 0:16:33.120 You know, we were talking earlier about what's good news 0:16:33.200 --> 0:16:35.480 or bad news for the broader economy. When Walmart does 0:16:35.560 --> 0:16:38.640 headly or well in terms of which consumers are shopping, 0:16:38.640 --> 0:16:41.240 there is there any read through based on the earnings 0:16:41.240 --> 0:16:43.520 that we've gotten from retailers about whether we're seeing a 0:16:43.560 --> 0:16:46.120 division between haves and have nots, about whether we are 0:16:46.200 --> 0:16:49.800 seeing any broader trends in terms of how the consumer 0:16:49.920 --> 0:16:52.280 is evolving, Which areas are going to be bright spots 0:16:52.320 --> 0:16:52.880 and which won't. 0:16:54.040 --> 0:16:56.040 That's a great question. I think it's really too early 0:16:56.080 --> 0:16:56.360 to tell. 0:16:56.400 --> 0:16:58.440 I mean, you look at Walmart's numbers, they're up, you know, 0:16:58.560 --> 0:17:01.960 comp up five, Target yesterday down five. You know, you 0:17:02.000 --> 0:17:06.240 look at Macy's down six or seven. Here, it looks 0:17:06.280 --> 0:17:09.360 pretty uniform. I think there's pressures across the board. It's 0:17:09.359 --> 0:17:11.320 not really like the high end doing well. You guys 0:17:11.320 --> 0:17:15.200 talked about Berbery earlier. We'll get more color from Nordstrom 0:17:15.240 --> 0:17:18.480 next week. I think it's pretty uniform across the board. 0:17:18.480 --> 0:17:20.640 And you know, we've been talking about our consumer surveys 0:17:20.680 --> 0:17:24.200 being weak, traffic being weak. Today's numbers and the reactions 0:17:24.200 --> 0:17:26.320 here over the past forty eight hours have really nothing 0:17:26.320 --> 0:17:28.560 to do with the top line. The top line and 0:17:28.640 --> 0:17:31.440 the sales are pretty much in line with where people thought. 0:17:31.520 --> 0:17:34.639 It's a positioning and it's the margin flow throughs for 0:17:34.680 --> 0:17:35.480 certain companies. 0:17:36.000 --> 0:17:40.600 What's the future of Nordstrom's the family dynamic and also 0:17:40.680 --> 0:17:43.680 the attempt to be luxury. I guess what I is 0:17:43.680 --> 0:17:47.960 an amateur, I'd say is accessible luxury. Is nord Strum 0:17:48.080 --> 0:17:50.040 a sleeper for five years out? 0:17:51.400 --> 0:17:53.200 I think it's a great concept. 0:17:53.800 --> 0:17:57.120 I think the rack has really been their achilles heel 0:17:57.240 --> 0:17:59.200 over the past several years. So if they could get 0:17:59.200 --> 0:18:02.320 the rack fix. I think the fact that they all 0:18:02.359 --> 0:18:05.199 have a huge presence of full line stores across the 0:18:05.280 --> 0:18:08.560 country is actually a tremendous asset piece of v Coals 0:18:08.600 --> 0:18:11.720 or Macy's, which have got hundreds of stores. So I 0:18:11.760 --> 0:18:14.040 think it's I think it's a viable concept. They need 0:18:14.080 --> 0:18:16.000 to get the rack fixed, and that's what people and 0:18:16.040 --> 0:18:17.240 investors have been waiting for. 0:18:17.480 --> 0:18:18.320 Chuck, what's the rack? 0:18:19.680 --> 0:18:21.120 It's a ro off price division. 0:18:21.280 --> 0:18:23.399 And what do you mean by fixed? What's wrong with it? 0:18:24.680 --> 0:18:26.040 Well, when you look at you know, you look at 0:18:26.240 --> 0:18:28.920 TJ and Ross comping up, you know, load of mid 0:18:28.920 --> 0:18:31.760 single digits, and you see the rack comping down. It's 0:18:31.760 --> 0:18:33.960 just it's been broken. I mean it's their business hasn't 0:18:33.960 --> 0:18:36.959 been good. It seems like there's been some cannibalization across 0:18:36.960 --> 0:18:39.639 the store base. We're not exactly. Sure, there's been some 0:18:39.680 --> 0:18:42.240 merchandise issues. They've tried to price up when when the 0:18:42.240 --> 0:18:46.480 consumer wanted to be priced down. But yeah, the North 0:18:46.520 --> 0:18:49.520 From viable for sure. But the rack division, the off 0:18:49.520 --> 0:18:51.399 price division, I'm sorry, we're not clarifying earlier. 0:18:51.440 --> 0:18:53.120 Is really the No, It's okay now, I know, I'm 0:18:53.160 --> 0:18:54.800 just just for people who are trying to follow. Have 0:18:54.840 --> 0:18:58.040 you noticed, Chuck that the off rack the rack is 0:18:58.080 --> 0:19:00.840 actually close to the Nord from stores. Have you noticed that, 0:19:01.119 --> 0:19:02.000 which is kind of odd. 0:19:02.760 --> 0:19:04.919 Yeah, I mean I could tell you my wife, We'll 0:19:05.240 --> 0:19:06.679 tend to go to the rack now a lot more 0:19:06.760 --> 0:19:07.400 than a bowl line. 0:19:07.440 --> 0:19:08.400 So that's what I'm talking about. 0:19:08.440 --> 0:19:13.640 The cannibalization factor of that is probably maybe the issue here, 0:19:13.720 --> 0:19:15.560 and maybe they need to close more rack stores, but 0:19:15.640 --> 0:19:17.800 you know, ironically, they're trying to grow more right now. 0:19:17.840 --> 0:19:20.199 So we're old rated, we're kind of we're kind of 0:19:20.320 --> 0:19:22.240 perplexed on some of the strategies there. 0:19:22.280 --> 0:19:24.560 For the time being, it's trying to be TJX and 0:19:24.720 --> 0:19:27.000 knowst them at the same time with the same grand 0:19:27.520 --> 0:19:30.840 it's hot to do, Chuck, Thank you, Chuck Goldenske, thank 0:19:30.840 --> 0:19:33.640 you mate. 0:19:35.359 --> 0:19:38.280 Right now and these important meets we're making jokes about it. 0:19:38.320 --> 0:19:41.280 Come on, this is important. Michael Hurston joins and I 0:19:41.359 --> 0:19:45.600 had a China research a twenty two v AT research. Michael, 0:19:45.600 --> 0:19:48.200 thank you so much for briefing us this morning. What 0:19:48.280 --> 0:19:51.520 did you What was the unexpected that you saw last night? 0:19:51.880 --> 0:19:55.240 Besides a dictator faux pap by the president late? What 0:19:55.320 --> 0:19:56.800 was the unexpected of the meeting? 0:19:58.320 --> 0:20:03.639 Nothing too unexpected, frank, which I think is good. Maybe 0:20:03.640 --> 0:20:07.040 the Chinese readout perhaps was a bit more positive than 0:20:07.080 --> 0:20:09.840 I was expecting, and that really reflects what has been 0:20:09.880 --> 0:20:13.400 a bit of a excuse me, a recalibration in China's 0:20:13.440 --> 0:20:16.840 official tone towards the US over the last few weeks. 0:20:16.880 --> 0:20:19.479 But other than that, I would say, no big surprises. 0:20:20.000 --> 0:20:21.680 Okay, no big surprise is great. 0:20:21.720 --> 0:20:22.520 What's next? 0:20:22.680 --> 0:20:26.040 When's the next meeting? Is the President travel to China 0:20:26.200 --> 0:20:29.680