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Speaker 1: Welcome to a special holiday edition of Bloomberg day Break.

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Speaker 1: US markets are closed for President's Day. I'm Nathan Hager,

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Speaker 1: and coming up on today's program, what's ahead for earnings

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Speaker 1: from the world's number one big box retailer, Plus how

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Speaker 1: to prepare for a second Trump presidency, why the obvious

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Speaker 1: market bets might not be the right ones, And we

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Speaker 1: speak to a big name in architecture and design here

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Speaker 1: his take on getting workers back to the office. That's

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Speaker 1: all straight ahead on this show. First, let's begin with

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Speaker 1: a conversation on earnings from Walmart. The companies do out

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Speaker 1: with fourth quarter results on Tuesday. Here for a preview

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Speaker 1: is Bloomberg Intelligence Senior analyst Jennifer Bartashis, who keeps an

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Speaker 1: eye on all things retail for us. Jen great to

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Speaker 1: have you with us on the holiday. So this is

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Speaker 1: a holiday quarter for Walmart. Shall we say it's going

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Speaker 1: to be happy returns?

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Speaker 2: In general? I think it was a very strong holiday

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Speaker 2: season for Walmart. When consumers are in that placed directly

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Speaker 2: into Walmart's strength. And when we look at what we

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Speaker 2: observed in the stores, you know, we saw a lot

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Speaker 2: of you know, customer engagement with with Walmart during the

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Speaker 2: entire quarter from Black Friday all the way through, and

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Speaker 2: so there's every reason to think that they should they

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Speaker 2: should have a pretty good quarter.

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Speaker 1: Are we going to see the kind of markdowns around

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Speaker 1: the holidays that could eat into margins?

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Speaker 2: Well, actually, I think that, you know, Walmart has done

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Speaker 2: a very good job of changing the way they plan

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Speaker 2: for holiday and being much more measured with regards to inventory.

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Speaker 2: When we really run into problems with markdowns, it's when

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Speaker 2: there's just too much inventory and they're not able to

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Speaker 2: sell through it. In our channel checks when we've been

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Speaker 2: in stores, we actually didn't see a very high level

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Speaker 2: of markdowns, which is very very promising, and that means

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Speaker 2: that they really probably sold through the majority of their

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Speaker 2: holiday inventory according to plans, so that should have very

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Speaker 2: little impact on gross margin at least for the quarter.

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Speaker 1: So what are we thinking that we're going to see

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Speaker 1: in terms of the sales mix. When you think about

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Speaker 1: a holiday quarter, you're thinking about a lot of big

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Speaker 1: ticket gift items. Possibly at the same time, Walmart has

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Speaker 1: a lot of those staples that it sells throughout the year.

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Speaker 1: I'm thinking about groceries and other lower cost items. So

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Speaker 1: what are we thinking in terms of a sales mix

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Speaker 1: around a holiday quarter.

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Speaker 2: Well, even for the holiday quarter, I think their sales

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Speaker 2: mix still skews to the consumables. If you think about

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Speaker 2: Thanksgiving fell in the quarter, that's a huge food holiday.

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Speaker 2: We saw traffic spike at Walmart as people were going

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Speaker 2: in to buy ingredients for those celebrations, and they just

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Speaker 2: sell so much food. But the good news is that

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Speaker 2: because inflation has been moditoring moderating a little bit, and

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Speaker 2: because Walmart was really quite outspoken and with regards to

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Speaker 2: holding prices study from last year, especially on holiday like

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Speaker 2: holiday related foods, there may been a little extra money

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Speaker 2: in people's pockets to actually buy into the higher margin

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Speaker 2: part of the store, which is general merchandise. And while

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Speaker 2: we didn't expect to see a lot of big tickets sales,

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Speaker 2: we do expect that they'll have done a little bit

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Speaker 2: better on things like apparel, beauty items, things that are

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Speaker 2: smaller level indulgences but make good gifting items.

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Speaker 1: It would be interesting to see if we do get

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Speaker 1: that kind of mix, because even though inflation is coming down,

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Speaker 1: it is still at pretty elevated level. So I wonder

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Speaker 1: what you're thinking in terms of what we could see

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Speaker 1: when it comes to consumers possibly trying to buy items

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Speaker 1: that sort of protect them from inflation at a place

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Speaker 1: like Walmart.

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Speaker 2: Well, you know, with regards to inflation, you know, we

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Speaker 2: are seeing some disinflation in food, but it's not across

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Speaker 2: every category. And so what we're continuing to see customers

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Speaker 2: and consumers gravitate to value and so, you know, where

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Speaker 2: they feel that they're getting a good value. Walmart has

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Speaker 2: been pretty aggressive in rollbacks where they've seen inflation come down,

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Speaker 2: and that generally attracts consumer attention. And so the inflation,

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Speaker 2: this inflation we're seeing is more on the food side

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Speaker 2: of the business at this point, and so we you know,

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Speaker 2: we just we we do see that as a positive,

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Speaker 2: but it's still going to be a little bit of

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Speaker 2: time before things really smooth out.

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Speaker 1: And of course Walmart has a fair amount of competition

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Speaker 1: in the food space, not just from its more traditional competitors,

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Speaker 1: but even now from Amazon, which is of course a

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Speaker 1: huge competitor for Walmart. Just across the board, Where do

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Speaker 1: you see Walmart in terms of market share against some

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Speaker 1: of those other really big competitors in the retail space.

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Speaker 2: Well, Walmart does have the lion's share of market share,

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Speaker 2: especially in grocery. But you know, there's there are never

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Speaker 2: ending threats with regards to competition in this space. Because

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Speaker 2: it's a very low margin business and because it is

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Speaker 2: an area where everybody needs to buy food and basic essentials,

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Speaker 2: there's just a lot of competition. Amazon has definitely been

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Speaker 2: sending indications that it wants to step up its game

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Speaker 2: and that it wants to become even more kind of

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Speaker 2: double down in grocery. There are some big pieces of

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Speaker 2: that strategy that we need to understand a little bit

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Speaker 2: better and how quickly that will materialize. Because Walmart's really

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Speaker 2: big strength is that they have all their stores right,

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Speaker 2: It's easy for people to stop in, it's easy to

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Speaker 2: do click and collect and place orders online and pick

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Speaker 2: it up at the store, and then they also have

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Speaker 2: their marketplace. And so for Amazon to compete effectively, they

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Speaker 2: also they really need to solve that problem of how

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Speaker 2: you compete with that many physical stores, and that'll take

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Speaker 2: some time for Amazon to to to figure that out.

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Speaker 2: On the general merchandise side, though, one of the other

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Speaker 2: things that we're watching carefully is the rise of like

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Speaker 2: Tamu and Sian, and because these are direct competitors, more

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Speaker 2: on the marketplace side and more on the general merchandise side,

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Speaker 2: so we are seeing a lot of competitive dyce across

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Speaker 2: the board for Walmart.

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Speaker 1: Bloomberg Intelligence Senior analyst Jennifer bartashis Thanks for this, Jen,

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Speaker 1: really good having you on with us, and we'll be

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Speaker 1: looking out for those earnings from Walmart. They are due

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Speaker 1: out tomorrow around seven am Wall Street time, but before that,

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Speaker 1: roughly an hour earlier, we expect results from Home Depot

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Speaker 1: and those details could give us a check on the

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Speaker 1: housing and home improvement markets. So here to discuss those

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Speaker 1: numbers before they come out, is your reading covers Housing

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Speaker 1: for Bloomberg Intelligence. Thanks for being here, Drew. Of course,

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Speaker 1: we know just how challenged the housing market's been with

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Speaker 1: high mortgage rates and high listing prices. How could that

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Speaker 1: play into the results we get from Home Depot on Tuesday.

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Speaker 3: Sure, So heading into the results, the bar is pretty

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Speaker 3: low for home Depot. If you recalled, during their last

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Speaker 3: earnings release, they guided to same store sales being down

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Speaker 3: about three to four percent for the full year, So

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Speaker 3: that's kind of what we're expecting to see in the

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Speaker 3: fourth quarter as well. If you look at some of

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Speaker 3: the data on retail sales. You'll see that when you

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Speaker 3: look at home centers, the market's still declining in the

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Speaker 3: low to mid single digits. So it's still a challenging environment,

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Speaker 3: but I think the attention has really started to shift

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Speaker 3: to twenty twenty four. And on that note, we would

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Speaker 3: expect that they're going to suggest probably a remodeling market

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Speaker 3: that's relatively flat next year, and that would be similar

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Speaker 3: to some of the commentary that we heard from some

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Speaker 3: of their suppliers. So better trends in the second half,

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Speaker 3: first half, but still a little bit of a challenging

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Speaker 3: market out there.

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Speaker 1: You wonder, well whether that outlook for the second half

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Speaker 1: could stay as resilient if we continue to see interest

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Speaker 1: rates at the levels that we're at right now. In

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Speaker 1: this expectation in the market that maybe the Fed's not

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Speaker 1: going to be able to move as quickly as we

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Speaker 1: might like. I mean, that could play into the outlook

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Speaker 1: for home depot as well, couldn't it.

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Speaker 3: Yeah, that's a great point because part of the reason

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Speaker 3: that we think the second half will get better is

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Speaker 3: because we're assuming in our base case that mortgage rates

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Speaker 3: fall down to somewhere six and quarter six and a

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Speaker 3: half percent as we get through the year, and the

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Speaker 3: idea is that would boost existing home sales. And as

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Speaker 3: we know, people that move tend to spend significantly more

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Speaker 3: than people that don't move. So to the extent that

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Speaker 3: interest rates remain high, you know, we have seen a

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Speaker 3: lot of volatility, and with that hot CPI print we

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Speaker 3: had recently, we actually see mortgage rates back above seven percent.

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Speaker 3: So to the extent that rates remain high and volatile,

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Speaker 3: that could certainly impact existing home sales and ultimately demand

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Speaker 3: for remodeling spending.

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Speaker 1: And to the point about home remodel spending, you got

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Speaker 1: to wonder what the appetite is for a big home

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Speaker 1: projects right now that home depot caters to with inflation

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Speaker 1: where it is, I mean, how can you game that out?

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Speaker 3: Yees. So, we have seen a pullback in big ticket

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Speaker 3: discretionary purchases. That's really been one of the drivers over

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Speaker 3: the last couple of years that's really helped boost sames

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Speaker 3: source sales, and that's where we're seeing a pretty big pullback,

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Speaker 3: declines in the mid single digit range. We don't think

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Speaker 3: these projects are necessarily being destroyed, but they're being delayed.

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Speaker 3: So we do think that as existing home sales start

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Speaker 3: to pick up and we get to the tail end

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Speaker 3: of twenty twenty four and into twenty twenty five, we

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Speaker 3: do expect to see a rebound, and one of the

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Speaker 3: reasons is because what we're seeing with home equity. Home

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Speaker 3: prices are up more than forty percent over the last

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Speaker 3: couple of years, and homeowners are sitting on record home equity.

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Speaker 3: On average, average home owner has about three hundred thousand

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Speaker 3: dollars in equity. So we do think that that big

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Speaker 3: ticket market will start to unfreeze towards a tail end

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Speaker 3: of next year and into twenty twenty five.

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Speaker 1: Yeah, that'll be an interesting point to see whether that

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Speaker 1: home equity continues to keep the consumer going like we've seen,

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Speaker 1: there's been so much resilience in consumer spending despite inflation.

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Speaker 1: When it comes to this quarter, though, Drew, how much

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Speaker 1: of a factor does seasonality play in? How do companies

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Speaker 1: like home Depot typically do in a holiday quarter?

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Speaker 3: Yeah, so when you think of home Depot, traditionally their

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Speaker 3: strong season is in the spring. That's you know, where

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Speaker 3: they make a lot of money. But that being said,

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Speaker 3: home Depot and those, you know, the broader home improvement

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Speaker 3: industry has really started to lean more into the holiday

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Speaker 3: because they've seen a lot of demand from consumers. You know,

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Speaker 3: that includes Halloween where they've had great success, you know,

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Speaker 3: great great deals on Black Friday, and they've continued that

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Speaker 3: into the Christmas holiday. You've see them expand their assortments

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Speaker 3: and can consumers have really reacted positive, positively. So it's

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Speaker 3: not an area where you would traditionally think of a

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Speaker 3: home improvement retailer like home Depot really leaning into, but

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Speaker 3: it is. It is something that they've got more involved

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Speaker 3: in over the last couple of years.

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Speaker 1: And you can't help but notice the inflatables that time

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Speaker 1: of year that put out on the lawn. Now, I

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Speaker 1: know you've done some research over at BI on the

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Speaker 1: growth opportunity that home Depot could get out of the

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Speaker 1: professional contractor segment as opposed to DIY customers. Is that

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Speaker 1: something that home Depots moving into more aggressively and can

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Speaker 1: we see that reflected in the results as well?

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Speaker 3: Yeah? Great question. So in the near term, the professional

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Speaker 3: contractor is still out out performing the DIY customer. But

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Speaker 3: if we step back and we look big picture, home

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Speaker 3: Depot generates about fifty percent of their sales from the

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Speaker 3: professional contractor on the other hand, Lows generates about twenty

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Speaker 3: five percent, so that's been one of the key drivers

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Speaker 3: of relative performance for Home Depot. But what's interesting is

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Speaker 3: we kind of look down the road a little bit.

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Speaker 3: They're tackling a new market for what they call complex pros.

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Speaker 3: So these are bigger projects, think of large scale remodels

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Speaker 3: and renovations, and what they're trying to do is really

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Speaker 3: consolidate the number of suppliers a contractor needs to work with.

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Speaker 3: So you think of a traditional contractor, maybe they're getting

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Speaker 3: windows and doors from one supplier, they're getting flooring and

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Speaker 3: cabinets from somewhere else. So what Home Depot is looking

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Speaker 3: to do, and they've rolled this out in a couple markets,

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Speaker 3: is consolidate that relationship. They want to bring everything in house,

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Speaker 3: and they're looking to be able to do this type

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Speaker 3: of project in bulk. So it's something that represents a

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Speaker 3: huge untapped market for them. It's probably something that's going

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Speaker 3: to develop over the next several years, but as you mentioned,

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Speaker 3: a big growth growth opportunity.

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Speaker 1: Nonetheless, do you think that's the kind of thing that

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Speaker 1: could play into the outlook for this year that we

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Speaker 1: get from Home Depot this week so.

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Speaker 3: I don't know that necessarily that it's going to move

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Speaker 3: the needle in twenty twenty four. You know, we do

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Speaker 3: think that the pro will probably come back with greater

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Speaker 3: strength towards the end of the year. But in terms

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Speaker 3: of this kind of new initiative on those large complex projects,

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Speaker 3: you think that's probably more of a twenty twenty five

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Speaker 3: into twenty twenty six story.

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Speaker 1: Interesting. Well, we're going to be looking out for those

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Speaker 1: results from home depot just around the corner here. So

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Speaker 1: thanks for this, Drew, really good having you on with us.

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Speaker 3: Thank you.

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Speaker 1: That's Bloomberg Intelligence Senior analyst Drew Redding. Up next on

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Speaker 1: the program, how to Prepare for a second Trump presidency.

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Speaker 1: John Authurs joins us with his opinion, including why the

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Speaker 1: obvious market bets might not be the right ones. That's

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Speaker 1: straight ahead on this special holiday edition of Bloomberg day Break.

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Speaker 1: I'm Nathan Hager, and this is Bloomberg. You're listening to

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Speaker 1: a special holiday edition of Bloomberg Daybreak. US markets are

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Speaker 1: closed for President's Day. I'm Nathan Hager. That as we

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Speaker 1: get closer to the next presidential election, the question that

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Speaker 1: many investors are asking themselves more and more is this

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Speaker 1: how should I position for a second Trump presidency? To

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Speaker 1: try to answer that question, we bring in Bloomberg opinion

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Speaker 1: columnist John Authurs, who writes on markets and investment. Great

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Speaker 1: to have you on with us, John, And while none

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Speaker 1: of this is a foregone conclusion, we did see how

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Speaker 1: caught off guard markets were after Trump one in twenty sixteen.

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Speaker 1: Are we in a better position this time around? I mean,

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Speaker 1: we kind of know what we're going to get from

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Speaker 1: a Trump presidency in some respects.

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Speaker 4: In some respects, I mean, I think that the big

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Speaker 4: difference is that absolutely everybody knows that it could happen,

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Speaker 4: whereas eight years ago most people didn't think that. The

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Speaker 4: other interesting thing about last time around, though, was that

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Speaker 4: the actual impact of how Trump would affect markets was

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Speaker 4: very difficult to gauge. So you had the last few

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Speaker 4: months before the election. Every time something looked good for Trump,

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Speaker 4: the markets would sell off, and then when he actually

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Speaker 4: surprisingly won, the markets had a great boom. So that

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Speaker 4: in itself makes it very hard to track what he's

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Speaker 4: going to do. I think what is intriguing at the moment,

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Speaker 4: and I'll try to stay in my lane as a

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Speaker 4: financial rather than the political pundit, but the belief is

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Speaker 4: very strong, even among relatively more conservative outlets, that Trump

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Speaker 4: two point zero is going to be different, that he's

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Speaker 4: really going to do populism properly this time, that he's

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Speaker 4: going to be genuinely authoritarian, that he's going to do

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Speaker 4: protectionism properly this time, and that he's really going to

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Speaker 4: leave NATO, et cetera, et cetera. That is interesting how

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Speaker 4: strong that point of view has become and how quickly

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Speaker 4: it to shape At about the point that Rond de

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Speaker 4: Santis has plainly blown it, towards the end of last year,

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Speaker 4: it really became very clear that it was going to

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Speaker 4: be a Trump candidacy.

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Speaker 2: Again.

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Speaker 4: It's interesting how that suddenly became something approaching a media panic,

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Speaker 4: and it's hard to imagine that that would also have

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Speaker 4: had an effect on the market. So we're dealing with

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Speaker 4: what is with something that people can understand and can

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Speaker 4: accept as a possible outcome, which is different from eight

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Speaker 4: years ago. But I'm not sure that the level of

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Speaker 4: certainty about exactly what he would mean is there. I mean,

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Speaker 4: in terms of his economics eight years ago, Trump's first

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Speaker 4: term was basically straightforward chamber of commerce, traditional conservative republican economics,

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Speaker 4: tax cuts, lower regulation, nothing that would particularly scare the market.

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Speaker 4: Some of the stuff that's being talked about this time.

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Speaker 4: If he really does try for something more genuinely economically populist,

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Speaker 4: wouldn't necessarily be so popular with the markets.

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Speaker 1: Yeah, and some of the things that have been talked

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Speaker 1: about to your point have already started to raise some eyebrows,

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Speaker 1: This idea of a sixty six zero percent tariff on

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Speaker 1: Chinese imports and elevated tariffs across the board for other markets.

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Speaker 1: I mean, how do you prepare for something like that?

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Speaker 1: Is that something that investors really do need to keep

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Speaker 1: in mind in the event that the election does go

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Speaker 1: Trump's way.

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Speaker 4: I think you can tell that investors do have that

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Speaker 4: in mind because of what's been happening to Chinese stocks,

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Speaker 4: which there are many good reasons to be relatively negative

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Speaker 4: about China these days. The fact that, depending on which

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Speaker 4: index you're using, they are Chinese stocks and net worth

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Speaker 4: no more than they were twenty years ago. When you

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Speaker 4: think of the growth that's happened in China's economy in

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Speaker 4: that period, Plainly that would make no sense at all

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Speaker 4: unless people were trying to factor in some fairly considerable

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Speaker 4: risk of major protectionism. Ultimately, I think the way that

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Speaker 4: benefits if there is somebody to go long on, and

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Speaker 4: obviously you want to be short on things directly affected

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Speaker 4: with China. At the moment, there is very unobtrusively there

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Speaker 4: is a big boom in Mexico, which is extremely counterintuitive

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Speaker 4: given that Trump's first policy pronouncement when he first immediately

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Speaker 4: after coming down that escalator in twenty fifteen, was to

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Speaker 4: attack Mexico. Mexico is probably the single biggest beneficiary of

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Speaker 4: a really big tarif on China because it has much

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Speaker 4: more of a chance to get to get jobs back

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Speaker 4: at on its side of the border. And it would

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Speaker 4: behoove the US to make it easier to builds jobs

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Speaker 4: and factories at the border, because that way people are

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Speaker 4: more likely to immigrate from Central Americans stay there rather

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Speaker 4: than try to cross the border.

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Speaker 1: What could it mean for the dollar the bond market

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Speaker 1: if the president, if the former president does become president,

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Speaker 1: succeeds in doing populism, as you say, right this.

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Speaker 4: Time, I think if he does populism right and again, politically,

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Speaker 4: there are there are lots of things wrong with the

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Speaker 4: way the American and Western European economies have gone over

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Speaker 4: the last few decades, so it's a perfectly defensible policy

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Speaker 4: choice to make. I think it's pretty straightforward that markets

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Speaker 4: wouldn't like it. However, on the issue of tariffs, if

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Speaker 4: he's really going to go with big protectionism, that's bad

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Speaker 4: for the dollar because the foreign exchange market will generally

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Speaker 4: try to counteract tariffs. So if that if if you're

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Speaker 4: making imports that much less competitive through adding on tariffs,

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Speaker 4: that the the currency market will generally make them more

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Speaker 4: competitive again by by changing the by changing the exchange rates.

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Speaker 4: I think the very interesting subject that may come up,

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Speaker 4: and which is a much more valid subject than any other,

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Speaker 4: is fiscal policy. If Trump is at the moment, there's

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Speaker 4: in terms of neither Biden nor Trump has any real

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Speaker 4: right to moral right to complain about the scale of

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Speaker 4: the deficit at the moment, because they both started their

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Speaker 4: terms with by taking actions that quite obviously increase the deficit.

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Speaker 4: Huge unfunded tax cutman, you know, the the the spending

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Speaker 4: that Biden did at the beginning of his turn. There

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Speaker 4: does come a point, and when rates are higher, that

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Speaker 4: point is closer. When you really can't finance too much

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Speaker 4: more borrowing or you can, but it just has to

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Speaker 4: be at higher rates. That is one that I think

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Speaker 4: there is. There's certainly a chance if if you get

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Speaker 4: a Trump two point zero and he starts with a

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Speaker 4: with a tax cut in a tariff and spend some

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Speaker 4: money on something boosts defense spending, something like that, it's

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Speaker 4: possible that you really do get a bond market strike

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Speaker 4: that the you know, the bonds, bond yields shoot up.

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Speaker 1: And to your point, John, the one of the big

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Speaker 1: legislative victories that Trump one point I had was a

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Speaker 1: massive tax cut, as you glued to. It raises the

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Speaker 1: question about whether the FED steps in to sort of

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Speaker 1: counterbalance whatever might happen on the fiscal side. And even

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Speaker 1: during the first go round for former President Trump, we

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Speaker 1: saw him really hit the FED hard, at least rhetorically

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Speaker 1: on social media. Yes, what's the potential impact on FED

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Speaker 1: independence of a second Trump presidency.

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Speaker 4: That's a very interesting one. I certainly get the impression,

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Speaker 4: but again we need to see how you know the

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Speaker 4: difference between bark and bite. He did appoint j Powell, who,

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Speaker 4: at the point that he hired him had been a

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Speaker 4: FED government for I think as long as ten years.

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Speaker 4: It's certainly been around for a long time. He had

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Speaker 4: never dissented from any of the monetary policy decisions they

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Speaker 4: had made in the years before he could have. You know,

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Speaker 4: there were a couple of plausible candidates Kevin Walsh Taylor

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Speaker 4: that there were some candidates who would have very clearly

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Speaker 4: really shaken the FED up, and instead he really moved.

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Speaker 4: It's difficult to see anything that Jay Powell has done

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Speaker 4: that you can confidently say Janet Yellen wouldn't have done.

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Speaker 4: So let's get that, get that that clear at first.

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Speaker 4: It's one of the things that happened in Trump one point, oh,

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Speaker 4: was that he blinked on the possibility of really shaking

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Speaker 4: up the FED. And in terms of the institutions, the

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Speaker 4: Senate bulked at one or two of the obviously unqualified

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Speaker 4: people he wanted to put on the board. Now, if

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Speaker 4: you have and I think if he does win, the

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Speaker 4: chances that he has the Senate very high. If he

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Speaker 4: has a majority in the in the Senate and that

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Speaker 4: majority has moved more in you know, the marga direction

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Speaker 4: and further away from the you know, Chamber of Commerce

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Speaker 4: institutional Republican wing, Yeah, it's possible he could really do

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Speaker 4: some things to the FEDS in he could effectively change

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Speaker 4: the Fed's independence by bringing on some much more radically

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Speaker 4: minded people. That that is a possibility. Again, I'm not

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Speaker 4: going to tell you that the FED has done a

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Speaker 4: perfect job in every respect and could not is above criticism,

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Speaker 4: because that's obviously not true. I again, from the point

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Speaker 4: of view of how markets would deal with it, they

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Speaker 4: like the devil they know, and that would scare them.

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Speaker 4: They are much happier with monetary policy being at least

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Speaker 4: to some extent, free from democracy, free from the traviles

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Speaker 4: of being being buffeted by democracy. So that is a

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Speaker 4: the the FED could become a very interesting question. I

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Speaker 4: mean for his first year. I don't know of a way.

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Speaker 4: I mean, there's you know, we now have an impeachment

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Speaker 4: of Secretary mayorcus I mean, unless they want to impeach

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Speaker 4: J Powell or something. I can't imagine we get two

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Speaker 4: thirds in the Senate, I don't I'm not, as far

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Speaker 4: as I'm aware, he can't fire Powell until his term

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Speaker 4: ends a year into the next presidential ten uh. Generally speaking,

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Speaker 4: if the if the FED thinks fiscal policy is too

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Speaker 4: stimulative and may tend to make inflation worse. It's just

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Speaker 4: straightforwardly in their mandate. Okay, they'd better tighten monetary policy accordingly. Yeah.

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Speaker 4: That that's that they're not allowed to sort of get

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Speaker 4: into a you know, political flame fight about whether it

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Speaker 4: was sensible to be spending more money. But they are

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Speaker 4: allowed to say, we see this as increasing the risks

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Speaker 4: of overheating and inflation, so we're raising rates. That's you know,

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Speaker 4: that's that's very central to the traditional punch bowl rule.

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Speaker 1: It's a lot to think about as we get closer

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Speaker 1: to finding out what version of the next presidency we're

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Speaker 1: going to get check. That's Bloomberg Opinion columnist John Authurs.

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Speaker 1: And up next on the program, we talked return to Office.

435
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Speaker 1: Stay with us for a conversation with a big name

436
00:25:31,160 --> 00:25:34,680
Speaker 1: in architecture and design for his take on getting workers

437
00:25:35,440 --> 00:25:37,959
Speaker 1: in the bill. That's straight Ahead. On the special holiday

438
00:25:38,080 --> 00:25:41,680
Speaker 1: edition of Bloomberg Daybreak. I'm Nathan Hager, and this is.

439
00:25:41,680 --> 00:25:41,919
Speaker 2: Going to.

440
00:25:45,119 --> 00:25:48,640
Speaker 1: Welcome back to the special holiday edition of Bloomberg Daybreak.

441
00:25:48,760 --> 00:25:52,159
Speaker 1: US markets are closed for President's Day. I'm Nathan Hager.

442
00:25:52,280 --> 00:25:54,479
Speaker 1: Now let's bring you a conversation with a man who

443
00:25:54,560 --> 00:25:57,960
Speaker 1: wants to change the face of our cities. Thomas Heatherwick

444
00:25:58,200 --> 00:26:01,159
Speaker 1: is the designer behind New York's Little Island and Vessel

445
00:26:01,240 --> 00:26:04,280
Speaker 1: in Manhattan's Hudson Yard district, as well as Google's new

446
00:26:04,320 --> 00:26:07,520
Speaker 1: London headquarters. He says our buildings need to be more

447
00:26:07,600 --> 00:26:11,840
Speaker 1: human and less boring. Heatherwick has said Vessel will reopen

448
00:26:11,880 --> 00:26:14,520
Speaker 1: to the public this year after being closed in twenty

449
00:26:14,560 --> 00:26:18,000
Speaker 1: twenty one for safety reasons. He's been speaking with Bloomberg

450
00:26:18,080 --> 00:26:21,280
Speaker 1: Daybreak Europe banker Steven Carrol Stephen Nathan.

451
00:26:21,480 --> 00:26:24,080
Speaker 5: Thomas Heatherwick is one of the best known names in

452
00:26:24,200 --> 00:26:27,320
Speaker 5: modern building design. His studio has won more than one

453
00:26:27,400 --> 00:26:31,040
Speaker 5: hundred awards. Cities from New York to London to Tokyo

454
00:26:31,119 --> 00:26:34,080
Speaker 5: boast examples of his work, and he even designed the

455
00:26:34,200 --> 00:26:37,520
Speaker 5: cauldron for the Olympic flame in the twenty twelve London Games.

456
00:26:38,240 --> 00:26:41,240
Speaker 5: Now he wants to end what he's called a blandemic

457
00:26:41,400 --> 00:26:44,120
Speaker 5: in buildings. He's written a book on the subject called

458
00:26:44,320 --> 00:26:47,440
Speaker 5: Human Eyes. I've been discussing this with him and how

459
00:26:47,480 --> 00:26:50,520
Speaker 5: he's applying this philosophy to his latest projects.

460
00:26:51,000 --> 00:26:53,840
Speaker 6: We talk about how nature is good and there is

461
00:26:53,880 --> 00:26:58,720
Speaker 6: evidence showing that people take less time to heal in

462
00:26:59,480 --> 00:27:02,800
Speaker 6: spaces where they can look out at nature, and what

463
00:27:02,960 --> 00:27:07,760
Speaker 6: nature has is a necessary visual complexity. And we've had

464
00:27:07,800 --> 00:27:12,640
Speaker 6: buildings for the last eighty years which are flatter and smoother,

465
00:27:13,119 --> 00:27:18,280
Speaker 6: and shinier and plainer and more serious than ever in history.

466
00:27:18,520 --> 00:27:22,520
Speaker 6: And what the science is starting to show is that

467
00:27:22,560 --> 00:27:25,720
Speaker 6: they aren't just maybe not nice. Some people might call

468
00:27:25,720 --> 00:27:29,119
Speaker 6: them ugly, but they actually your body starts to go

469
00:27:29,160 --> 00:27:32,879
Speaker 6: into stress when you don't have necessary visual complexity. But

470
00:27:32,920 --> 00:27:35,000
Speaker 6: I'm not calling to go back to the past and

471
00:27:35,040 --> 00:27:38,800
Speaker 6: copyhold buildings. Even some of the new buildings, they've really

472
00:27:38,880 --> 00:27:44,160
Speaker 6: made an effort to put visual enrichment and detail into them,

473
00:27:44,359 --> 00:27:47,240
Speaker 6: which makes it interesting to walk around. But it's not

474
00:27:47,440 --> 00:27:51,760
Speaker 6: just a cosmetic thing. What we've discovered is our humanness

475
00:27:52,240 --> 00:27:54,840
Speaker 6: needs places to have that interestingness.

476
00:27:55,119 --> 00:27:58,240
Speaker 5: That's a difficult conversation though, when you're thinking about where

477
00:27:58,280 --> 00:28:00,440
Speaker 5: the money goes in a project. What violence should we

478
00:28:00,520 --> 00:28:03,400
Speaker 5: be placing on design when it comes to a building

479
00:28:03,520 --> 00:28:05,800
Speaker 5: like that versus the cast values?

480
00:28:05,840 --> 00:28:08,320
Speaker 6: The word that value really is the right word. The

481
00:28:08,359 --> 00:28:12,120
Speaker 6: problem we had was that that style that came in

482
00:28:12,200 --> 00:28:18,960
Speaker 6: that said flatter, smoother, shinier, more serious, plainer was fashionably good,

483
00:28:19,640 --> 00:28:22,080
Speaker 6: was not good for us, but it was also a

484
00:28:22,119 --> 00:28:26,320
Speaker 6: bit cheaper, and so with the Humanized campaign, we're really

485
00:28:26,400 --> 00:28:30,639
Speaker 6: arguing that we need to make a step change a

486
00:28:30,680 --> 00:28:33,439
Speaker 6: bit like we've had in the world of architecture. We

487
00:28:33,520 --> 00:28:36,920
Speaker 6: talk about the green premium, which is that a building

488
00:28:37,119 --> 00:28:39,320
Speaker 6: you do need to pay a little bit more for

489
00:28:39,360 --> 00:28:44,440
Speaker 6: it to be highly environmentally good, performing well, but unless

490
00:28:44,480 --> 00:28:48,880
Speaker 6: people care about it. We've had this dirty secret in construction,

491
00:28:49,360 --> 00:28:53,880
Speaker 6: which is buildings get demolished, and so the worst value

492
00:28:54,200 --> 00:28:57,880
Speaker 6: is to build buildings that society doesn't care about because

493
00:28:58,080 --> 00:29:02,640
Speaker 6: they get demolished. So, for example, with commercial buildings, the

494
00:29:02,680 --> 00:29:05,320
Speaker 6: average age in the UK of a commercial building is

495
00:29:05,400 --> 00:29:08,440
Speaker 6: forty years, so if I was a commercial building, I

496
00:29:08,480 --> 00:29:11,720
Speaker 6: would have been killed thirteen years ago. And the carbon

497
00:29:12,240 --> 00:29:18,080
Speaker 6: in construction is five times that of the whole aviation industry.

498
00:29:18,520 --> 00:29:23,520
Speaker 6: So they're bad environmentally, they're bad socially because they don't

499
00:29:23,520 --> 00:29:27,480
Speaker 6: bring us together. Yeah, and after COVID, when the digital

500
00:29:27,520 --> 00:29:30,080
Speaker 6: revolution is really kicked in, you can stay at home,

501
00:29:30,200 --> 00:29:35,080
Speaker 6: get a PhD, work by everything. Cities are dangerous places

502
00:29:35,120 --> 00:29:38,040
Speaker 6: when you don't have people in them, So we need

503
00:29:38,120 --> 00:29:43,800
Speaker 6: cities that bring us together and nurture the togetherness and

504
00:29:43,840 --> 00:29:45,720
Speaker 6: not being scared of each other.

505
00:29:45,640 --> 00:29:47,479
Speaker 5: And does that need to go into planning rules then,

506
00:29:47,560 --> 00:29:49,520
Speaker 5: is it's the question that we need to change the

507
00:29:49,600 --> 00:29:51,960
Speaker 5: regulations around buildings in the same way that we do

508
00:29:52,000 --> 00:29:54,680
Speaker 5: around sustainability to incorporate rules like that.

509
00:29:55,600 --> 00:29:58,520
Speaker 6: Planning's being quite basic and it's a very difficult thing

510
00:29:58,560 --> 00:30:01,840
Speaker 6: to get right. But in the book we talk about

511
00:30:01,840 --> 00:30:05,240
Speaker 6: the three distances you can experience buildings. If you imagine

512
00:30:05,280 --> 00:30:07,520
Speaker 6: being one hundred and fifty meters away from a building,

513
00:30:07,560 --> 00:30:10,040
Speaker 6: seeing it from a distance, how it fits in with

514
00:30:10,080 --> 00:30:12,920
Speaker 6: the city. You then look at the street distance, which

515
00:30:12,960 --> 00:30:15,520
Speaker 6: is when you're starting to be maybe only twenty or

516
00:30:15,520 --> 00:30:19,200
Speaker 6: thirty meters away. But the most impactful and the one

517
00:30:19,240 --> 00:30:24,320
Speaker 6: that we've found the least regulatory support for design teams

518
00:30:24,520 --> 00:30:29,600
Speaker 6: for society is door distance, because actually your emotion isn't

519
00:30:29,680 --> 00:30:33,240
Speaker 6: at the top, it's at the bottom, because that's where

520
00:30:33,240 --> 00:30:36,560
Speaker 6: we all are, where us as pass us by walk past,

521
00:30:36,640 --> 00:30:40,120
Speaker 6: And we spend too much time talking about insides of buildings.

522
00:30:40,280 --> 00:30:44,040
Speaker 6: A thousand times more people will walk past the outside

523
00:30:44,360 --> 00:30:48,320
Speaker 6: than ever go inside. So designing for buildings to be

524
00:30:48,360 --> 00:30:51,320
Speaker 6: givers rather than take us I mean selfishly, as a

525
00:30:51,360 --> 00:30:55,600
Speaker 6: designer of buildings, I want your great grandchildren to say

526
00:30:55,720 --> 00:30:57,760
Speaker 6: about one of the buildings I've done, No, don't knock

527
00:30:57,800 --> 00:31:01,680
Speaker 6: it down, let's repair it, let's adjust it, instead of

528
00:31:01,720 --> 00:31:05,480
Speaker 6: saying meh, knock it down, because the carbon in buildings

529
00:31:05,640 --> 00:31:07,240
Speaker 6: is it's ridiculous.

530
00:31:07,320 --> 00:31:09,440
Speaker 5: On the projects that you've worked on, look for example

531
00:31:09,520 --> 00:31:11,760
Speaker 5: the Google campus, the King's Cross which people might be

532
00:31:11,840 --> 00:31:14,680
Speaker 5: very familiar with in London as well. There's a fantastic

533
00:31:14,760 --> 00:31:17,040
Speaker 5: roof garden going onto the top of that, which is

534
00:31:17,480 --> 00:31:19,560
Speaker 5: a really interesting design feature. But again that's when you

535
00:31:19,560 --> 00:31:22,600
Speaker 5: talk about perspective that's not at the street level, whereas

536
00:31:22,600 --> 00:31:25,480
Speaker 5: when you walk by its street level from the images

537
00:31:25,480 --> 00:31:27,880
Speaker 5: that we've seen, does it look that different from what

538
00:31:27,920 --> 00:31:30,400
Speaker 5: else that you see in the area. How would you

539
00:31:30,480 --> 00:31:32,200
Speaker 5: contribute to resolving that issue.

540
00:31:32,240 --> 00:31:34,360
Speaker 6: Well, I'm actually really pleased you've brought it up because

541
00:31:34,760 --> 00:31:36,440
Speaker 6: you don't know what we're doing at the ground level.

542
00:31:37,080 --> 00:31:39,400
Speaker 6: It is an enormous building. It's three hundred and thirty

543
00:31:39,400 --> 00:31:42,720
Speaker 6: meters long. It's the same size as a cruise liner

544
00:31:42,800 --> 00:31:46,360
Speaker 6: coming into King's Cross, so as you will see and

545
00:31:46,440 --> 00:31:49,080
Speaker 6: what isn't apparent at the moment behind the hoardings and

546
00:31:49,120 --> 00:31:51,960
Speaker 6: the amazing thing about the building is it's lifted up

547
00:31:52,000 --> 00:31:56,200
Speaker 6: two stories and so underneath we can build a village.

548
00:31:56,520 --> 00:31:59,680
Speaker 6: So that village will start to be being constructed this

549
00:31:59,760 --> 00:32:04,360
Speaker 6: year and that will be a higgeldy pigglety collection of

550
00:32:04,720 --> 00:32:09,280
Speaker 6: wooden sub buildings of differing heights. They tip forward at

551
00:32:09,280 --> 00:32:12,880
Speaker 6: different angles, they're not in alignment, they're different colors, they

552
00:32:12,920 --> 00:32:17,320
Speaker 6: have different people and community organizations as part of them.

553
00:32:17,640 --> 00:32:19,880
Speaker 6: So in a sense we're going to be doing a

554
00:32:20,000 --> 00:32:24,600
Speaker 6: radical chance to reinvent High Street. But to my point,

555
00:32:25,200 --> 00:32:28,800
Speaker 6: we judge buildings all the time by the top, just

556
00:32:28,840 --> 00:32:32,719
Speaker 6: as you have the ground is actually where your feeling is.

557
00:32:33,000 --> 00:32:35,480
Speaker 6: As you say, no one's in a helicopter looking down

558
00:32:35,480 --> 00:32:37,080
Speaker 6: on the amazing garden we put on the.

559
00:32:37,000 --> 00:32:39,200
Speaker 5: Top AND's tonally they're lucky people who work there that

560
00:32:39,280 --> 00:32:40,040
Speaker 5: get to use those.

561
00:32:40,080 --> 00:32:42,360
Speaker 6: Yeah, and it's wonderful. I mean we're in an incredible

562
00:32:42,360 --> 00:32:45,160
Speaker 6: building at this moment. You're one of the privileged people

563
00:32:45,200 --> 00:32:47,200
Speaker 6: in London who will get to be in this building,

564
00:32:47,520 --> 00:32:50,480
Speaker 6: as will the people in our Google building. But your

565
00:32:50,560 --> 00:32:54,200
Speaker 6: real duty, I believe as a building designer you're to

566
00:32:54,240 --> 00:32:58,160
Speaker 6: some extent a public servant, and so what are you

567
00:32:58,520 --> 00:33:01,320
Speaker 6: making a building give? But I don't think this is

568
00:33:01,400 --> 00:33:05,440
Speaker 6: sort of just altruistic. It means that for a Google

569
00:33:05,760 --> 00:33:09,240
Speaker 6: an organization like that, what does your employee think as

570
00:33:09,240 --> 00:33:12,720
Speaker 6: they walk into that building, as they tell their grandmother

571
00:33:12,800 --> 00:33:15,800
Speaker 6: they work there. How do the social values of that

572
00:33:15,880 --> 00:33:19,400
Speaker 6: building manifest? And for a very long time, we've had

573
00:33:19,480 --> 00:33:22,840
Speaker 6: buildings that have been takers, not givers. You know how

574
00:33:22,880 --> 00:33:25,040
Speaker 6: many times have you walked down a street past a

575
00:33:25,080 --> 00:33:29,480
Speaker 6: big glass lobby dead to the passer by and you

576
00:33:29,520 --> 00:33:32,880
Speaker 6: can see the some luxury private world beyond and you

577
00:33:32,920 --> 00:33:37,480
Speaker 6: can see the leather sofa and the marble reception desk,

578
00:33:37,720 --> 00:33:41,280
Speaker 6: but it's got nothing for you. It's almost rubbing in

579
00:33:41,320 --> 00:33:44,960
Speaker 6: its exclusiveness. So the Google building in King's Cross will

580
00:33:45,000 --> 00:33:45,800
Speaker 6: be the opposite of that.

581
00:33:46,040 --> 00:33:48,880
Speaker 5: Okay. I want to ask you about your journey on

582
00:33:49,000 --> 00:33:51,320
Speaker 5: coming to these conclusions in this latest book as well,

583
00:33:51,400 --> 00:33:53,840
Speaker 5: because you know you've had these huge tryants. We've talked

584
00:33:53,840 --> 00:33:57,720
Speaker 5: about some of them already. One project which has attracted

585
00:33:57,720 --> 00:34:00,680
Speaker 5: criticism was Vassal in New York. It had to be

586
00:34:00,760 --> 00:34:03,120
Speaker 5: closed to the public since twenty twenty one and over

587
00:34:03,160 --> 00:34:05,640
Speaker 5: a number of suicides that happened there. I wonder how

588
00:34:05,760 --> 00:34:08,440
Speaker 5: you feel about that project now and how you reflect

589
00:34:08,480 --> 00:34:10,239
Speaker 5: on what you learned from that process.

590
00:34:10,840 --> 00:34:17,280
Speaker 6: Vessel was a project commissioned to help create the atmosphere

591
00:34:17,320 --> 00:34:20,880
Speaker 6: and identity of a new district in New York that

592
00:34:20,920 --> 00:34:24,279
Speaker 6: hadn't existed before. It was a very very brave piece

593
00:34:24,320 --> 00:34:30,400
Speaker 6: of commissioning and an incredible investment in helping to wholeheartedly

594
00:34:30,440 --> 00:34:35,759
Speaker 6: make distinctiveness in a place. But it timed very unfortunately.

595
00:34:35,880 --> 00:34:40,880
Speaker 6: It timed its opening just before this terrible pandemic, something

596
00:34:40,920 --> 00:34:46,120
Speaker 6: that affected the mental health of millions of people all

597
00:34:46,120 --> 00:34:49,000
Speaker 6: over the world, and some of that mental health impact

598
00:34:49,040 --> 00:34:54,480
Speaker 6: was particularly felt amongst young people. That project was astonishingly

599
00:34:55,000 --> 00:34:58,800
Speaker 6: compelling in how it engaged people. It was a number

600
00:34:58,840 --> 00:35:03,640
Speaker 6: one backdrop on Grinder and in Tinder and all these things.

601
00:35:03,840 --> 00:35:08,200
Speaker 6: And the project was built above code. The barriers all

602
00:35:08,719 --> 00:35:11,279
Speaker 6: around it were built above the code that would have

603
00:35:11,320 --> 00:35:16,440
Speaker 6: been needed for any normal structure. But its compellingness had

604
00:35:16,480 --> 00:35:20,480
Speaker 6: a dark side, and so there were no accidents on it.

605
00:35:20,480 --> 00:35:25,480
Speaker 6: It was very sadly chosen by a tiny handful of

606
00:35:25,480 --> 00:35:32,080
Speaker 6: people to to this terrible, awful thing. So this year

607
00:35:33,280 --> 00:35:36,759
Speaker 6: is the year that it's going to be refitted with

608
00:35:36,960 --> 00:35:40,960
Speaker 6: a protected, protective barrier. But it was this sort of

609
00:35:41,360 --> 00:35:46,160
Speaker 6: dark side of its success, was this use that people had.

610
00:35:46,200 --> 00:35:49,040
Speaker 6: I mean there are nearby there are levels that are

611
00:35:49,680 --> 00:35:52,760
Speaker 6: just as high as many bits of the vessel which

612
00:35:52,840 --> 00:35:56,640
Speaker 6: have balustrades that no one was choosing to jump from.

613
00:35:56,680 --> 00:36:01,680
Speaker 6: So it's it was very sad and telling thing of

614
00:36:01,719 --> 00:36:05,680
Speaker 6: our time. It will be later this year that these

615
00:36:06,440 --> 00:36:11,080
Speaker 6: the safety measures are going to be implemented by the

616
00:36:11,160 --> 00:36:13,680
Speaker 6: commissioners of the project. So I'm pleased to be able

617
00:36:13,719 --> 00:36:14,200
Speaker 6: to say.

618
00:36:14,000 --> 00:36:16,279
Speaker 5: That, do they diminish your design in any way? Do

619
00:36:16,320 --> 00:36:18,759
Speaker 5: you think to have protective screens like that erected on

620
00:36:18,840 --> 00:36:19,160
Speaker 5: to the.

621
00:36:19,320 --> 00:36:22,200
Speaker 6: No, because we've worked with them and they've been really

622
00:36:22,239 --> 00:36:27,440
Speaker 6: sensitive to getting the design to have the similar quality

623
00:36:27,719 --> 00:36:31,359
Speaker 6: as the original vessel structure. So it's not a kind

624
00:36:31,440 --> 00:36:33,920
Speaker 6: of thing thrown on at the last minute. It's had

625
00:36:33,960 --> 00:36:37,520
Speaker 6: an enormous amount of development and reflection to get it right.

626
00:36:37,600 --> 00:36:40,839
Speaker 6: So my hope is that it will and there at

627
00:36:40,880 --> 00:36:44,200
Speaker 6: the moment there is a sample section of it on

628
00:36:44,280 --> 00:36:50,480
Speaker 6: the vessel and it looks really good, so it's it

629
00:36:50,520 --> 00:36:52,360
Speaker 6: doesn't need to be at the cost of the project.

630
00:36:52,719 --> 00:36:55,640
Speaker 6: The whole point of the project is it's public. My passion,

631
00:36:56,000 --> 00:36:59,120
Speaker 6: all my studios projects are public, and look at Little Island.

632
00:36:59,480 --> 00:37:02,200
Speaker 6: If you get you know just down from there that

633
00:37:02,360 --> 00:37:06,480
Speaker 6: opened three years ago and is just packed with people

634
00:37:07,280 --> 00:37:10,920
Speaker 6: and loved and has these free performances on it and

635
00:37:11,040 --> 00:37:15,080
Speaker 6: is a main place for New Yorker's fitness and visitors,

636
00:37:15,600 --> 00:37:18,480
Speaker 6: and is all about the river and nature. So I

637
00:37:18,520 --> 00:37:23,080
Speaker 6: think we are hungry for public spaces that are wholehearted

638
00:37:23,719 --> 00:37:26,680
Speaker 6: and which sort of validate all of us.

639
00:37:26,760 --> 00:37:26,960
Speaker 2: You know.

640
00:37:27,040 --> 00:37:30,600
Speaker 6: The thing that sort of inspires me really is that

641
00:37:31,000 --> 00:37:34,560
Speaker 6: there are seven point whatever billion people on the planet,

642
00:37:34,880 --> 00:37:38,240
Speaker 6: and every one of us thinks we're special. It's human nature.

643
00:37:38,760 --> 00:37:41,280
Speaker 6: And I think for too long we have not designed

644
00:37:42,080 --> 00:37:45,240
Speaker 6: the places the public life. You know how they say

645
00:37:45,640 --> 00:37:48,520
Speaker 6: you can't change what you can't measure. We haven't been

646
00:37:48,560 --> 00:37:52,840
Speaker 6: measuring the biggest experiences of buildings, who are on the

647
00:37:52,880 --> 00:37:55,279
Speaker 6: street outside, who will never come in.

648
00:37:55,400 --> 00:37:59,440
Speaker 5: That's Thomas Heatherwick, the founder and design director of Heathwic Studios.

649
00:38:00,000 --> 00:38:02,399
Speaker 5: He's not daunted by the prospect of higher interest rates

650
00:38:02,480 --> 00:38:06,000
Speaker 5: or remote working threatening the future of offices. He says

651
00:38:06,040 --> 00:38:09,840
Speaker 5: he's hopeful and excited by the challenge of adapting existing

652
00:38:09,920 --> 00:38:12,960
Speaker 5: buildings to new uses. And that's a question, he says,

653
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Speaker 5: of being ingenious with what you've got.

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Speaker 1: Nathan, Thanks Steven. That's Bloomberg Stephen Carroll from our European

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Speaker 1: headquarters in London. And that does it for this special

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Speaker 1: holiday edition of Bloomberg Daybreak. Join us again Tuesday morning

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Speaker 1: at five am Wall Street Time for the latest on

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Speaker 1: markets overseas and all the news you need to start

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Speaker 1: your day. I'm Nathan Hager. Stay with us. The top

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Speaker 1: stories and global business headlines are coming up right now