Speaker 1: Welcome to a special holiday edition of Bloomberg day Break.
Speaker 1: US markets are closed for President's Day. I'm Nathan Hager,
Speaker 1: and coming up on today's program, what's ahead for earnings
Speaker 1: from the world's number one big box retailer, Plus how
Speaker 1: to prepare for a second Trump presidency, why the obvious
Speaker 1: market bets might not be the right ones, And we
Speaker 1: speak to a big name in architecture and design here
Speaker 1: his take on getting workers back to the office. That's
Speaker 1: all straight ahead on this show. First, let's begin with
Speaker 1: a conversation on earnings from Walmart. The companies do out
Speaker 1: with fourth quarter results on Tuesday. Here for a preview
Speaker 1: is Bloomberg Intelligence Senior analyst Jennifer Bartashis, who keeps an
Speaker 1: eye on all things retail for us. Jen great to
Speaker 1: have you with us on the holiday. So this is
Speaker 1: a holiday quarter for Walmart. Shall we say it's going
Speaker 1: to be happy returns?
Speaker 2: In general? I think it was a very strong holiday
Speaker 2: season for Walmart. When consumers are in that placed directly
Speaker 2: into Walmart's strength. And when we look at what we
Speaker 2: observed in the stores, you know, we saw a lot
Speaker 2: of you know, customer engagement with with Walmart during the
Speaker 2: entire quarter from Black Friday all the way through, and
Speaker 2: so there's every reason to think that they should they
Speaker 2: should have a pretty good quarter.
Speaker 1: Are we going to see the kind of markdowns around
Speaker 1: the holidays that could eat into margins?
Speaker 2: Well, actually, I think that, you know, Walmart has done
Speaker 2: a very good job of changing the way they plan
Speaker 2: for holiday and being much more measured with regards to inventory.
Speaker 2: When we really run into problems with markdowns, it's when
Speaker 2: there's just too much inventory and they're not able to
Speaker 2: sell through it. In our channel checks when we've been
Speaker 2: in stores, we actually didn't see a very high level
Speaker 2: of markdowns, which is very very promising, and that means
Speaker 2: that they really probably sold through the majority of their
Speaker 2: holiday inventory according to plans, so that should have very
Speaker 2: little impact on gross margin at least for the quarter.
Speaker 1: So what are we thinking that we're going to see
Speaker 1: in terms of the sales mix. When you think about
Speaker 1: a holiday quarter, you're thinking about a lot of big
Speaker 1: ticket gift items. Possibly at the same time, Walmart has
Speaker 1: a lot of those staples that it sells throughout the year.
Speaker 1: I'm thinking about groceries and other lower cost items. So
Speaker 1: what are we thinking in terms of a sales mix
Speaker 1: around a holiday quarter.
Speaker 2: Well, even for the holiday quarter, I think their sales
Speaker 2: mix still skews to the consumables. If you think about
Speaker 2: Thanksgiving fell in the quarter, that's a huge food holiday.
Speaker 2: We saw traffic spike at Walmart as people were going
Speaker 2: in to buy ingredients for those celebrations, and they just
Speaker 2: sell so much food. But the good news is that
Speaker 2: because inflation has been moditoring moderating a little bit, and
Speaker 2: because Walmart was really quite outspoken and with regards to
Speaker 2: holding prices study from last year, especially on holiday like
Speaker 2: holiday related foods, there may been a little extra money
Speaker 2: in people's pockets to actually buy into the higher margin
Speaker 2: part of the store, which is general merchandise. And while
Speaker 2: we didn't expect to see a lot of big tickets sales,
Speaker 2: we do expect that they'll have done a little bit
Speaker 2: better on things like apparel, beauty items, things that are
Speaker 2: smaller level indulgences but make good gifting items.
Speaker 1: It would be interesting to see if we do get
Speaker 1: that kind of mix, because even though inflation is coming down,
Speaker 1: it is still at pretty elevated level. So I wonder
Speaker 1: what you're thinking in terms of what we could see
Speaker 1: when it comes to consumers possibly trying to buy items
Speaker 1: that sort of protect them from inflation at a place
Speaker 1: like Walmart.
Speaker 2: Well, you know, with regards to inflation, you know, we
Speaker 2: are seeing some disinflation in food, but it's not across
Speaker 2: every category. And so what we're continuing to see customers
Speaker 2: and consumers gravitate to value and so, you know, where
Speaker 2: they feel that they're getting a good value. Walmart has
Speaker 2: been pretty aggressive in rollbacks where they've seen inflation come down,
Speaker 2: and that generally attracts consumer attention. And so the inflation,
Speaker 2: this inflation we're seeing is more on the food side
Speaker 2: of the business at this point, and so we you know,
Speaker 2: we just we we do see that as a positive,
Speaker 2: but it's still going to be a little bit of
Speaker 2: time before things really smooth out.
Speaker 1: And of course Walmart has a fair amount of competition
Speaker 1: in the food space, not just from its more traditional competitors,
Speaker 1: but even now from Amazon, which is of course a
Speaker 1: huge competitor for Walmart. Just across the board, Where do
Speaker 1: you see Walmart in terms of market share against some
Speaker 1: of those other really big competitors in the retail space.
Speaker 2: Well, Walmart does have the lion's share of market share,
Speaker 2: especially in grocery. But you know, there's there are never
Speaker 2: ending threats with regards to competition in this space. Because
Speaker 2: it's a very low margin business and because it is
Speaker 2: an area where everybody needs to buy food and basic essentials,
Speaker 2: there's just a lot of competition. Amazon has definitely been
Speaker 2: sending indications that it wants to step up its game
Speaker 2: and that it wants to become even more kind of
Speaker 2: double down in grocery. There are some big pieces of
Speaker 2: that strategy that we need to understand a little bit
Speaker 2: better and how quickly that will materialize. Because Walmart's really
Speaker 2: big strength is that they have all their stores right,
Speaker 2: It's easy for people to stop in, it's easy to
Speaker 2: do click and collect and place orders online and pick
Speaker 2: it up at the store, and then they also have
Speaker 2: their marketplace. And so for Amazon to compete effectively, they
Speaker 2: also they really need to solve that problem of how
Speaker 2: you compete with that many physical stores, and that'll take
Speaker 2: some time for Amazon to to to figure that out.
Speaker 2: On the general merchandise side, though, one of the other
Speaker 2: things that we're watching carefully is the rise of like
Speaker 2: Tamu and Sian, and because these are direct competitors, more
Speaker 2: on the marketplace side and more on the general merchandise side,
Speaker 2: so we are seeing a lot of competitive dyce across
Speaker 2: the board for Walmart.
Speaker 1: Bloomberg Intelligence Senior analyst Jennifer bartashis Thanks for this, Jen,
Speaker 1: really good having you on with us, and we'll be
Speaker 1: looking out for those earnings from Walmart. They are due
Speaker 1: out tomorrow around seven am Wall Street time, but before that,
Speaker 1: roughly an hour earlier, we expect results from Home Depot
Speaker 1: and those details could give us a check on the
Speaker 1: housing and home improvement markets. So here to discuss those
Speaker 1: numbers before they come out, is your reading covers Housing
Speaker 1: for Bloomberg Intelligence. Thanks for being here, Drew. Of course,
Speaker 1: we know just how challenged the housing market's been with
Speaker 1: high mortgage rates and high listing prices. How could that
Speaker 1: play into the results we get from Home Depot on Tuesday.
Speaker 3: Sure, So heading into the results, the bar is pretty
Speaker 3: low for home Depot. If you recalled, during their last
Speaker 3: earnings release, they guided to same store sales being down
Speaker 3: about three to four percent for the full year, So
Speaker 3: that's kind of what we're expecting to see in the
Speaker 3: fourth quarter as well. If you look at some of
Speaker 3: the data on retail sales. You'll see that when you
Speaker 3: look at home centers, the market's still declining in the
Speaker 3: low to mid single digits. So it's still a challenging environment,
Speaker 3: but I think the attention has really started to shift
Speaker 3: to twenty twenty four. And on that note, we would
Speaker 3: expect that they're going to suggest probably a remodeling market
Speaker 3: that's relatively flat next year, and that would be similar
Speaker 3: to some of the commentary that we heard from some
Speaker 3: of their suppliers. So better trends in the second half,
Speaker 3: first half, but still a little bit of a challenging
Speaker 3: market out there.
Speaker 1: You wonder, well whether that outlook for the second half
Speaker 1: could stay as resilient if we continue to see interest
Speaker 1: rates at the levels that we're at right now. In
Speaker 1: this expectation in the market that maybe the Fed's not
Speaker 1: going to be able to move as quickly as we
Speaker 1: might like. I mean, that could play into the outlook
Speaker 1: for home depot as well, couldn't it.
Speaker 3: Yeah, that's a great point because part of the reason
Speaker 3: that we think the second half will get better is
Speaker 3: because we're assuming in our base case that mortgage rates
Speaker 3: fall down to somewhere six and quarter six and a
Speaker 3: half percent as we get through the year, and the
Speaker 3: idea is that would boost existing home sales. And as
Speaker 3: we know, people that move tend to spend significantly more
Speaker 3: than people that don't move. So to the extent that
Speaker 3: interest rates remain high, you know, we have seen a
Speaker 3: lot of volatility, and with that hot CPI print we
Speaker 3: had recently, we actually see mortgage rates back above seven percent.
Speaker 3: So to the extent that rates remain high and volatile,
Speaker 3: that could certainly impact existing home sales and ultimately demand
Speaker 3: for remodeling spending.
Speaker 1: And to the point about home remodel spending, you got
Speaker 1: to wonder what the appetite is for a big home
Speaker 1: projects right now that home depot caters to with inflation
Speaker 1: where it is, I mean, how can you game that out?
Speaker 3: Yees. So, we have seen a pullback in big ticket
Speaker 3: discretionary purchases. That's really been one of the drivers over
Speaker 3: the last couple of years that's really helped boost sames
Speaker 3: source sales, and that's where we're seeing a pretty big pullback,
Speaker 3: declines in the mid single digit range. We don't think
Speaker 3: these projects are necessarily being destroyed, but they're being delayed.
Speaker 3: So we do think that as existing home sales start
Speaker 3: to pick up and we get to the tail end
Speaker 3: of twenty twenty four and into twenty twenty five, we
Speaker 3: do expect to see a rebound, and one of the
Speaker 3: reasons is because what we're seeing with home equity. Home
Speaker 3: prices are up more than forty percent over the last
Speaker 3: couple of years, and homeowners are sitting on record home equity.
Speaker 3: On average, average home owner has about three hundred thousand
Speaker 3: dollars in equity. So we do think that that big
Speaker 3: ticket market will start to unfreeze towards a tail end
Speaker 3: of next year and into twenty twenty five.
Speaker 1: Yeah, that'll be an interesting point to see whether that
Speaker 1: home equity continues to keep the consumer going like we've seen,
Speaker 1: there's been so much resilience in consumer spending despite inflation.
Speaker 1: When it comes to this quarter, though, Drew, how much
Speaker 1: of a factor does seasonality play in? How do companies
Speaker 1: like home Depot typically do in a holiday quarter?
Speaker 3: Yeah, so when you think of home Depot, traditionally their
Speaker 3: strong season is in the spring. That's you know, where
Speaker 3: they make a lot of money. But that being said,
Speaker 3: home Depot and those, you know, the broader home improvement
Speaker 3: industry has really started to lean more into the holiday
Speaker 3: because they've seen a lot of demand from consumers. You know,
Speaker 3: that includes Halloween where they've had great success, you know,
Speaker 3: great great deals on Black Friday, and they've continued that
Speaker 3: into the Christmas holiday. You've see them expand their assortments
Speaker 3: and can consumers have really reacted positive, positively. So it's
Speaker 3: not an area where you would traditionally think of a
Speaker 3: home improvement retailer like home Depot really leaning into, but
Speaker 3: it is. It is something that they've got more involved
Speaker 3: in over the last couple of years.
Speaker 1: And you can't help but notice the inflatables that time
Speaker 1: of year that put out on the lawn. Now, I
Speaker 1: know you've done some research over at BI on the
Speaker 1: growth opportunity that home Depot could get out of the
Speaker 1: professional contractor segment as opposed to DIY customers. Is that
Speaker 1: something that home Depots moving into more aggressively and can
Speaker 1: we see that reflected in the results as well?
Speaker 3: Yeah? Great question. So in the near term, the professional
Speaker 3: contractor is still out out performing the DIY customer. But
Speaker 3: if we step back and we look big picture, home
Speaker 3: Depot generates about fifty percent of their sales from the
Speaker 3: professional contractor on the other hand, Lows generates about twenty
Speaker 3: five percent, so that's been one of the key drivers
Speaker 3: of relative performance for Home Depot. But what's interesting is
Speaker 3: we kind of look down the road a little bit.
Speaker 3: They're tackling a new market for what they call complex pros.
Speaker 3: So these are bigger projects, think of large scale remodels
Speaker 3: and renovations, and what they're trying to do is really
Speaker 3: consolidate the number of suppliers a contractor needs to work with.
Speaker 3: So you think of a traditional contractor, maybe they're getting
Speaker 3: windows and doors from one supplier, they're getting flooring and
Speaker 3: cabinets from somewhere else. So what Home Depot is looking
Speaker 3: to do, and they've rolled this out in a couple markets,
Speaker 3: is consolidate that relationship. They want to bring everything in house,
Speaker 3: and they're looking to be able to do this type
Speaker 3: of project in bulk. So it's something that represents a
Speaker 3: huge untapped market for them. It's probably something that's going
Speaker 3: to develop over the next several years, but as you mentioned,
Speaker 3: a big growth growth opportunity.
Speaker 1: Nonetheless, do you think that's the kind of thing that
Speaker 1: could play into the outlook for this year that we
Speaker 1: get from Home Depot this week so.
Speaker 3: I don't know that necessarily that it's going to move
Speaker 3: the needle in twenty twenty four. You know, we do
Speaker 3: think that the pro will probably come back with greater
Speaker 3: strength towards the end of the year. But in terms
Speaker 3: of this kind of new initiative on those large complex projects,
Speaker 3: you think that's probably more of a twenty twenty five
Speaker 3: into twenty twenty six story.
Speaker 1: Interesting. Well, we're going to be looking out for those
Speaker 1: results from home depot just around the corner here. So
Speaker 1: thanks for this, Drew, really good having you on with us.
Speaker 3: Thank you.
Speaker 1: That's Bloomberg Intelligence Senior analyst Drew Redding. Up next on
Speaker 1: the program, how to Prepare for a second Trump presidency.
Speaker 1: John Authurs joins us with his opinion, including why the
Speaker 1: obvious market bets might not be the right ones. That's
Speaker 1: straight ahead on this special holiday edition of Bloomberg day Break.
Speaker 1: I'm Nathan Hager, and this is Bloomberg. You're listening to
Speaker 1: a special holiday edition of Bloomberg Daybreak. US markets are
Speaker 1: closed for President's Day. I'm Nathan Hager. That as we
Speaker 1: get closer to the next presidential election, the question that
Speaker 1: many investors are asking themselves more and more is this
Speaker 1: how should I position for a second Trump presidency? To
Speaker 1: try to answer that question, we bring in Bloomberg opinion
Speaker 1: columnist John Authurs, who writes on markets and investment. Great
Speaker 1: to have you on with us, John, And while none
Speaker 1: of this is a foregone conclusion, we did see how
Speaker 1: caught off guard markets were after Trump one in twenty sixteen.
Speaker 1: Are we in a better position this time around? I mean,
Speaker 1: we kind of know what we're going to get from
Speaker 1: a Trump presidency in some respects.
Speaker 4: In some respects, I mean, I think that the big
Speaker 4: difference is that absolutely everybody knows that it could happen,
Speaker 4: whereas eight years ago most people didn't think that. The
Speaker 4: other interesting thing about last time around, though, was that
Speaker 4: the actual impact of how Trump would affect markets was
Speaker 4: very difficult to gauge. So you had the last few
Speaker 4: months before the election. Every time something looked good for Trump,
Speaker 4: the markets would sell off, and then when he actually
Speaker 4: surprisingly won, the markets had a great boom. So that
Speaker 4: in itself makes it very hard to track what he's
Speaker 4: going to do. I think what is intriguing at the moment,
Speaker 4: and I'll try to stay in my lane as a
Speaker 4: financial rather than the political pundit, but the belief is
Speaker 4: very strong, even among relatively more conservative outlets, that Trump
Speaker 4: two point zero is going to be different, that he's
Speaker 4: really going to do populism properly this time, that he's
Speaker 4: going to be genuinely authoritarian, that he's going to do
Speaker 4: protectionism properly this time, and that he's really going to
Speaker 4: leave NATO, et cetera, et cetera. That is interesting how
Speaker 4: strong that point of view has become and how quickly
Speaker 4: it to shape At about the point that Rond de
Speaker 4: Santis has plainly blown it, towards the end of last year,
Speaker 4: it really became very clear that it was going to
Speaker 4: be a Trump candidacy.
Speaker 2: Again.
Speaker 4: It's interesting how that suddenly became something approaching a media panic,
Speaker 4: and it's hard to imagine that that would also have
Speaker 4: had an effect on the market. So we're dealing with
Speaker 4: what is with something that people can understand and can
Speaker 4: accept as a possible outcome, which is different from eight
Speaker 4: years ago. But I'm not sure that the level of
Speaker 4: certainty about exactly what he would mean is there. I mean,
Speaker 4: in terms of his economics eight years ago, Trump's first
Speaker 4: term was basically straightforward chamber of commerce, traditional conservative republican economics,
Speaker 4: tax cuts, lower regulation, nothing that would particularly scare the market.
Speaker 4: Some of the stuff that's being talked about this time.
Speaker 4: If he really does try for something more genuinely economically populist,
Speaker 4: wouldn't necessarily be so popular with the markets.
Speaker 1: Yeah, and some of the things that have been talked
Speaker 1: about to your point have already started to raise some eyebrows,
Speaker 1: This idea of a sixty six zero percent tariff on
Speaker 1: Chinese imports and elevated tariffs across the board for other markets.
Speaker 1: I mean, how do you prepare for something like that?
Speaker 1: Is that something that investors really do need to keep
Speaker 1: in mind in the event that the election does go
Speaker 1: Trump's way.
Speaker 4: I think you can tell that investors do have that
Speaker 4: in mind because of what's been happening to Chinese stocks,
Speaker 4: which there are many good reasons to be relatively negative
Speaker 4: about China these days. The fact that, depending on which
Speaker 4: index you're using, they are Chinese stocks and net worth
Speaker 4: no more than they were twenty years ago. When you
Speaker 4: think of the growth that's happened in China's economy in
Speaker 4: that period, Plainly that would make no sense at all
Speaker 4: unless people were trying to factor in some fairly considerable
Speaker 4: risk of major protectionism. Ultimately, I think the way that
Speaker 4: benefits if there is somebody to go long on, and
Speaker 4: obviously you want to be short on things directly affected
Speaker 4: with China. At the moment, there is very unobtrusively there
Speaker 4: is a big boom in Mexico, which is extremely counterintuitive
Speaker 4: given that Trump's first policy pronouncement when he first immediately
Speaker 4: after coming down that escalator in twenty fifteen, was to
Speaker 4: attack Mexico. Mexico is probably the single biggest beneficiary of
Speaker 4: a really big tarif on China because it has much
Speaker 4: more of a chance to get to get jobs back
Speaker 4: at on its side of the border. And it would
Speaker 4: behoove the US to make it easier to builds jobs
Speaker 4: and factories at the border, because that way people are
Speaker 4: more likely to immigrate from Central Americans stay there rather
Speaker 4: than try to cross the border.
Speaker 1: What could it mean for the dollar the bond market
Speaker 1: if the president, if the former president does become president,
Speaker 1: succeeds in doing populism, as you say, right this.
Speaker 4: Time, I think if he does populism right and again, politically,
Speaker 4: there are there are lots of things wrong with the
Speaker 4: way the American and Western European economies have gone over
Speaker 4: the last few decades, so it's a perfectly defensible policy
Speaker 4: choice to make. I think it's pretty straightforward that markets
Speaker 4: wouldn't like it. However, on the issue of tariffs, if
Speaker 4: he's really going to go with big protectionism, that's bad
Speaker 4: for the dollar because the foreign exchange market will generally
Speaker 4: try to counteract tariffs. So if that if if you're
Speaker 4: making imports that much less competitive through adding on tariffs,
Speaker 4: that the the currency market will generally make them more
Speaker 4: competitive again by by changing the by changing the exchange rates.
Speaker 4: I think the very interesting subject that may come up,
Speaker 4: and which is a much more valid subject than any other,
Speaker 4: is fiscal policy. If Trump is at the moment, there's
Speaker 4: in terms of neither Biden nor Trump has any real
Speaker 4: right to moral right to complain about the scale of
Speaker 4: the deficit at the moment, because they both started their
Speaker 4: terms with by taking actions that quite obviously increase the deficit.
Speaker 4: Huge unfunded tax cutman, you know, the the the spending
Speaker 4: that Biden did at the beginning of his turn. There
Speaker 4: does come a point, and when rates are higher, that
Speaker 4: point is closer. When you really can't finance too much
Speaker 4: more borrowing or you can, but it just has to
Speaker 4: be at higher rates. That is one that I think
Speaker 4: there is. There's certainly a chance if if you get
Speaker 4: a Trump two point zero and he starts with a
Speaker 4: with a tax cut in a tariff and spend some
Speaker 4: money on something boosts defense spending, something like that, it's
Speaker 4: possible that you really do get a bond market strike
Speaker 4: that the you know, the bonds, bond yields shoot up.
Speaker 1: And to your point, John, the one of the big
Speaker 1: legislative victories that Trump one point I had was a
Speaker 1: massive tax cut, as you glued to. It raises the
Speaker 1: question about whether the FED steps in to sort of
Speaker 1: counterbalance whatever might happen on the fiscal side. And even
Speaker 1: during the first go round for former President Trump, we
Speaker 1: saw him really hit the FED hard, at least rhetorically
Speaker 1: on social media. Yes, what's the potential impact on FED
Speaker 1: independence of a second Trump presidency.
Speaker 4: That's a very interesting one. I certainly get the impression,
Speaker 4: but again we need to see how you know the
Speaker 4: difference between bark and bite. He did appoint j Powell, who,
Speaker 4: at the point that he hired him had been a
Speaker 4: FED government for I think as long as ten years.
Speaker 4: It's certainly been around for a long time. He had
Speaker 4: never dissented from any of the monetary policy decisions they
Speaker 4: had made in the years before he could have. You know,
Speaker 4: there were a couple of plausible candidates Kevin Walsh Taylor
Speaker 4: that there were some candidates who would have very clearly
Speaker 4: really shaken the FED up, and instead he really moved.
Speaker 4: It's difficult to see anything that Jay Powell has done
Speaker 4: that you can confidently say Janet Yellen wouldn't have done.
Speaker 4: So let's get that, get that that clear at first.
Speaker 4: It's one of the things that happened in Trump one point, oh,
Speaker 4: was that he blinked on the possibility of really shaking
Speaker 4: up the FED. And in terms of the institutions, the
Speaker 4: Senate bulked at one or two of the obviously unqualified
Speaker 4: people he wanted to put on the board. Now, if
Speaker 4: you have and I think if he does win, the
Speaker 4: chances that he has the Senate very high. If he
Speaker 4: has a majority in the in the Senate and that
Speaker 4: majority has moved more in you know, the marga direction
Speaker 4: and further away from the you know, Chamber of Commerce
Speaker 4: institutional Republican wing, Yeah, it's possible he could really do
Speaker 4: some things to the FEDS in he could effectively change
Speaker 4: the Fed's independence by bringing on some much more radically
Speaker 4: minded people. That that is a possibility. Again, I'm not
Speaker 4: going to tell you that the FED has done a
Speaker 4: perfect job in every respect and could not is above criticism,
Speaker 4: because that's obviously not true. I again, from the point
Speaker 4: of view of how markets would deal with it, they
Speaker 4: like the devil they know, and that would scare them.
Speaker 4: They are much happier with monetary policy being at least
Speaker 4: to some extent, free from democracy, free from the traviles
Speaker 4: of being being buffeted by democracy. So that is a
Speaker 4: the the FED could become a very interesting question. I
Speaker 4: mean for his first year. I don't know of a way.
Speaker 4: I mean, there's you know, we now have an impeachment
Speaker 4: of Secretary mayorcus I mean, unless they want to impeach
Speaker 4: J Powell or something. I can't imagine we get two
Speaker 4: thirds in the Senate, I don't I'm not, as far
Speaker 4: as I'm aware, he can't fire Powell until his term
Speaker 4: ends a year into the next presidential ten uh. Generally speaking,
Speaker 4: if the if the FED thinks fiscal policy is too
Speaker 4: stimulative and may tend to make inflation worse. It's just
Speaker 4: straightforwardly in their mandate. Okay, they'd better tighten monetary policy accordingly. Yeah.
Speaker 4: That that's that they're not allowed to sort of get
Speaker 4: into a you know, political flame fight about whether it
Speaker 4: was sensible to be spending more money. But they are
Speaker 4: allowed to say, we see this as increasing the risks
Speaker 4: of overheating and inflation, so we're raising rates. That's you know,
Speaker 4: that's that's very central to the traditional punch bowl rule.
Speaker 1: It's a lot to think about as we get closer
Speaker 1: to finding out what version of the next presidency we're
Speaker 1: going to get check. That's Bloomberg Opinion columnist John Authurs.
Speaker 1: And up next on the program, we talked return to Office.
Speaker 1: Stay with us for a conversation with a big name
Speaker 1: in architecture and design for his take on getting workers
Speaker 1: in the bill. That's straight Ahead. On the special holiday
Speaker 1: edition of Bloomberg Daybreak. I'm Nathan Hager, and this is.
Speaker 2: Going to.
Speaker 1: Welcome back to the special holiday edition of Bloomberg Daybreak.
Speaker 1: US markets are closed for President's Day. I'm Nathan Hager.
Speaker 1: Now let's bring you a conversation with a man who
Speaker 1: wants to change the face of our cities. Thomas Heatherwick
Speaker 1: is the designer behind New York's Little Island and Vessel
Speaker 1: in Manhattan's Hudson Yard district, as well as Google's new
Speaker 1: London headquarters. He says our buildings need to be more
Speaker 1: human and less boring. Heatherwick has said Vessel will reopen
Speaker 1: to the public this year after being closed in twenty
Speaker 1: twenty one for safety reasons. He's been speaking with Bloomberg
Speaker 1: Daybreak Europe banker Steven Carrol Stephen Nathan.
Speaker 5: Thomas Heatherwick is one of the best known names in
Speaker 5: modern building design. His studio has won more than one
Speaker 5: hundred awards. Cities from New York to London to Tokyo
Speaker 5: boast examples of his work, and he even designed the
Speaker 5: cauldron for the Olympic flame in the twenty twelve London Games.
Speaker 5: Now he wants to end what he's called a blandemic
Speaker 5: in buildings. He's written a book on the subject called
Speaker 5: Human Eyes. I've been discussing this with him and how
Speaker 5: he's applying this philosophy to his latest projects.
Speaker 6: We talk about how nature is good and there is
Speaker 6: evidence showing that people take less time to heal in
Speaker 6: spaces where they can look out at nature, and what
Speaker 6: nature has is a necessary visual complexity. And we've had
Speaker 6: buildings for the last eighty years which are flatter and smoother,
Speaker 6: and shinier and plainer and more serious than ever in history.
Speaker 6: And what the science is starting to show is that
Speaker 6: they aren't just maybe not nice. Some people might call
Speaker 6: them ugly, but they actually your body starts to go
Speaker 6: into stress when you don't have necessary visual complexity. But
Speaker 6: I'm not calling to go back to the past and
Speaker 6: copyhold buildings. Even some of the new buildings, they've really
Speaker 6: made an effort to put visual enrichment and detail into them,
Speaker 6: which makes it interesting to walk around. But it's not
Speaker 6: just a cosmetic thing. What we've discovered is our humanness
Speaker 6: needs places to have that interestingness.
Speaker 5: That's a difficult conversation though, when you're thinking about where
Speaker 5: the money goes in a project. What violence should we
Speaker 5: be placing on design when it comes to a building
Speaker 5: like that versus the cast values?
Speaker 6: The word that value really is the right word. The
Speaker 6: problem we had was that that style that came in
Speaker 6: that said flatter, smoother, shinier, more serious, plainer was fashionably good,
Speaker 6: was not good for us, but it was also a
Speaker 6: bit cheaper, and so with the Humanized campaign, we're really
Speaker 6: arguing that we need to make a step change a
Speaker 6: bit like we've had in the world of architecture. We
Speaker 6: talk about the green premium, which is that a building
Speaker 6: you do need to pay a little bit more for
Speaker 6: it to be highly environmentally good, performing well, but unless
Speaker 6: people care about it. We've had this dirty secret in construction,
Speaker 6: which is buildings get demolished, and so the worst value
Speaker 6: is to build buildings that society doesn't care about because
Speaker 6: they get demolished. So, for example, with commercial buildings, the
Speaker 6: average age in the UK of a commercial building is
Speaker 6: forty years, so if I was a commercial building, I
Speaker 6: would have been killed thirteen years ago. And the carbon
Speaker 6: in construction is five times that of the whole aviation industry.
Speaker 6: So they're bad environmentally, they're bad socially because they don't
Speaker 6: bring us together. Yeah, and after COVID, when the digital
Speaker 6: revolution is really kicked in, you can stay at home,
Speaker 6: get a PhD, work by everything. Cities are dangerous places
Speaker 6: when you don't have people in them, So we need
Speaker 6: cities that bring us together and nurture the togetherness and
Speaker 6: not being scared of each other.
Speaker 5: And does that need to go into planning rules then,
Speaker 5: is it's the question that we need to change the
Speaker 5: regulations around buildings in the same way that we do
Speaker 5: around sustainability to incorporate rules like that.
Speaker 6: Planning's being quite basic and it's a very difficult thing
Speaker 6: to get right. But in the book we talk about
Speaker 6: the three distances you can experience buildings. If you imagine
Speaker 6: being one hundred and fifty meters away from a building,
Speaker 6: seeing it from a distance, how it fits in with
Speaker 6: the city. You then look at the street distance, which
Speaker 6: is when you're starting to be maybe only twenty or
Speaker 6: thirty meters away. But the most impactful and the one
Speaker 6: that we've found the least regulatory support for design teams
Speaker 6: for society is door distance, because actually your emotion isn't
Speaker 6: at the top, it's at the bottom, because that's where
Speaker 6: we all are, where us as pass us by walk past,
Speaker 6: And we spend too much time talking about insides of buildings.
Speaker 6: A thousand times more people will walk past the outside
Speaker 6: than ever go inside. So designing for buildings to be
Speaker 6: givers rather than take us I mean selfishly, as a
Speaker 6: designer of buildings, I want your great grandchildren to say
Speaker 6: about one of the buildings I've done, No, don't knock
Speaker 6: it down, let's repair it, let's adjust it, instead of
Speaker 6: saying meh, knock it down, because the carbon in buildings
Speaker 6: is it's ridiculous.
Speaker 5: On the projects that you've worked on, look for example
Speaker 5: the Google campus, the King's Cross which people might be
Speaker 5: very familiar with in London as well. There's a fantastic
Speaker 5: roof garden going onto the top of that, which is
Speaker 5: a really interesting design feature. But again that's when you
Speaker 5: talk about perspective that's not at the street level, whereas
Speaker 5: when you walk by its street level from the images
Speaker 5: that we've seen, does it look that different from what
Speaker 5: else that you see in the area. How would you
Speaker 5: contribute to resolving that issue.
Speaker 6: Well, I'm actually really pleased you've brought it up because
Speaker 6: you don't know what we're doing at the ground level.
Speaker 6: It is an enormous building. It's three hundred and thirty
Speaker 6: meters long. It's the same size as a cruise liner
Speaker 6: coming into King's Cross, so as you will see and
Speaker 6: what isn't apparent at the moment behind the hoardings and
Speaker 6: the amazing thing about the building is it's lifted up
Speaker 6: two stories and so underneath we can build a village.
Speaker 6: So that village will start to be being constructed this
Speaker 6: year and that will be a higgeldy pigglety collection of
Speaker 6: wooden sub buildings of differing heights. They tip forward at
Speaker 6: different angles, they're not in alignment, they're different colors, they
Speaker 6: have different people and community organizations as part of them.
Speaker 6: So in a sense we're going to be doing a
Speaker 6: radical chance to reinvent High Street. But to my point,
Speaker 6: we judge buildings all the time by the top, just
Speaker 6: as you have the ground is actually where your feeling is.
Speaker 6: As you say, no one's in a helicopter looking down
Speaker 6: on the amazing garden we put on the.
Speaker 5: Top AND's tonally they're lucky people who work there that
Speaker 5: get to use those.
Speaker 6: Yeah, and it's wonderful. I mean we're in an incredible
Speaker 6: building at this moment. You're one of the privileged people
Speaker 6: in London who will get to be in this building,
Speaker 6: as will the people in our Google building. But your
Speaker 6: real duty, I believe as a building designer you're to
Speaker 6: some extent a public servant, and so what are you
Speaker 6: making a building give? But I don't think this is
Speaker 6: sort of just altruistic. It means that for a Google
Speaker 6: an organization like that, what does your employee think as
Speaker 6: they walk into that building, as they tell their grandmother
Speaker 6: they work there. How do the social values of that
Speaker 6: building manifest? And for a very long time, we've had
Speaker 6: buildings that have been takers, not givers. You know how
Speaker 6: many times have you walked down a street past a
Speaker 6: big glass lobby dead to the passer by and you
Speaker 6: can see the some luxury private world beyond and you
Speaker 6: can see the leather sofa and the marble reception desk,
Speaker 6: but it's got nothing for you. It's almost rubbing in
Speaker 6: its exclusiveness. So the Google building in King's Cross will
Speaker 6: be the opposite of that.
Speaker 5: Okay. I want to ask you about your journey on
Speaker 5: coming to these conclusions in this latest book as well,
Speaker 5: because you know you've had these huge tryants. We've talked
Speaker 5: about some of them already. One project which has attracted
Speaker 5: criticism was Vassal in New York. It had to be
Speaker 5: closed to the public since twenty twenty one and over
Speaker 5: a number of suicides that happened there. I wonder how
Speaker 5: you feel about that project now and how you reflect
Speaker 5: on what you learned from that process.
Speaker 6: Vessel was a project commissioned to help create the atmosphere
Speaker 6: and identity of a new district in New York that
Speaker 6: hadn't existed before. It was a very very brave piece
Speaker 6: of commissioning and an incredible investment in helping to wholeheartedly
Speaker 6: make distinctiveness in a place. But it timed very unfortunately.
Speaker 6: It timed its opening just before this terrible pandemic, something
Speaker 6: that affected the mental health of millions of people all
Speaker 6: over the world, and some of that mental health impact
Speaker 6: was particularly felt amongst young people. That project was astonishingly
Speaker 6: compelling in how it engaged people. It was a number
Speaker 6: one backdrop on Grinder and in Tinder and all these things.
Speaker 6: And the project was built above code. The barriers all
Speaker 6: around it were built above the code that would have
Speaker 6: been needed for any normal structure. But its compellingness had
Speaker 6: a dark side, and so there were no accidents on it.
Speaker 6: It was very sadly chosen by a tiny handful of
Speaker 6: people to to this terrible, awful thing. So this year
Speaker 6: is the year that it's going to be refitted with
Speaker 6: a protected, protective barrier. But it was this sort of
Speaker 6: dark side of its success, was this use that people had.
Speaker 6: I mean there are nearby there are levels that are
Speaker 6: just as high as many bits of the vessel which
Speaker 6: have balustrades that no one was choosing to jump from.
Speaker 6: So it's it was very sad and telling thing of
Speaker 6: our time. It will be later this year that these
Speaker 6: the safety measures are going to be implemented by the
Speaker 6: commissioners of the project. So I'm pleased to be able
Speaker 6: to say.
Speaker 5: That, do they diminish your design in any way? Do
Speaker 5: you think to have protective screens like that erected on
Speaker 5: to the.
Speaker 6: No, because we've worked with them and they've been really
Speaker 6: sensitive to getting the design to have the similar quality
Speaker 6: as the original vessel structure. So it's not a kind
Speaker 6: of thing thrown on at the last minute. It's had
Speaker 6: an enormous amount of development and reflection to get it right.
Speaker 6: So my hope is that it will and there at
Speaker 6: the moment there is a sample section of it on
Speaker 6: the vessel and it looks really good, so it's it
Speaker 6: doesn't need to be at the cost of the project.
Speaker 6: The whole point of the project is it's public. My passion,
Speaker 6: all my studios projects are public, and look at Little Island.
Speaker 6: If you get you know just down from there that
Speaker 6: opened three years ago and is just packed with people
Speaker 6: and loved and has these free performances on it and
Speaker 6: is a main place for New Yorker's fitness and visitors,
Speaker 6: and is all about the river and nature. So I
Speaker 6: think we are hungry for public spaces that are wholehearted
Speaker 6: and which sort of validate all of us.
Speaker 2: You know.
Speaker 6: The thing that sort of inspires me really is that
Speaker 6: there are seven point whatever billion people on the planet,
Speaker 6: and every one of us thinks we're special. It's human nature.
Speaker 6: And I think for too long we have not designed
Speaker 6: the places the public life. You know how they say
Speaker 6: you can't change what you can't measure. We haven't been
Speaker 6: measuring the biggest experiences of buildings, who are on the
Speaker 6: street outside, who will never come in.
Speaker 5: That's Thomas Heatherwick, the founder and design director of Heathwic Studios.
Speaker 5: He's not daunted by the prospect of higher interest rates
Speaker 5: or remote working threatening the future of offices. He says
Speaker 5: he's hopeful and excited by the challenge of adapting existing
Speaker 5: buildings to new uses. And that's a question, he says,
Speaker 5: of being ingenious with what you've got.
Speaker 1: Nathan, Thanks Steven. That's Bloomberg Stephen Carroll from our European
Speaker 1: headquarters in London. And that does it for this special
Speaker 1: holiday edition of Bloomberg Daybreak. Join us again Tuesday morning
Speaker 1: at five am Wall Street Time for the latest on
Speaker 1: markets overseas and all the news you need to start
Speaker 1: your day. I'm Nathan Hager. Stay with us. The top
Speaker 1: stories and global business headlines are coming up right now