Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you.
Speaker 1: Along with my co host Lisa Brahmas. Each day we
Speaker 1: bring you the most noteworthy and useful interviews for you
Speaker 1: and your money. Whether at the grocery store or the
Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
Speaker 1: or wherever you listen to podcasts, as well as that
Speaker 1: Bloomberg dot com. Well, it doesn't look like we are
Speaker 1: getting something from Apple when it comes to satellites and
Speaker 1: the infrastructure that they're creating in order to have faster, better,
Speaker 1: more reliable access. Uh sure. Overd is here shrug in
Speaker 1: her shoulders, making some interesting faces. She's a she's a
Speaker 1: calmness covering tech. This is radio. Actually not think it is.
Speaker 1: Honestly like these are These are fantastic expressions and sort
Speaker 1: of say everything that you need to say. You're dubious. Okay,
Speaker 1: just hold on a second. Just just buy your shrug
Speaker 1: and the face that you just made. Bloomberg opinion columnist
Speaker 1: Shia Overday. My guess is at your take on this
Speaker 1: is that it's a and this guy kind of investment
Speaker 1: that is something that they can do with their oodles
Speaker 1: of cash. And that seems feasible. Uh maybe, yeah, So
Speaker 1: I think that my reason for the shrugging is that
Speaker 1: there are a lot of companies working on UM what
Speaker 1: are called kind of low Earth orbit satellites UM that
Speaker 1: are in theory will be used to provide better or
Speaker 1: more available mobile internet service. So, you know, Jeff Bezos,
Speaker 1: both Amazon and his Blue Origin Space company are working
Speaker 1: on a project. So it's SpaceX, the Elon Musk company.
Speaker 1: There's a number of smaller startups like one Web that
Speaker 1: are also working on these projects. And the idea seems cool, right.
Speaker 1: It's that right now, providing mobile internet it requires a
Speaker 1: lot of physical infrastructure on the ground, right you have
Speaker 1: cell phone towers and all these base stations, and as
Speaker 1: we move into a five G world, there's going to
Speaker 1: be even more of these nests sary UM to kind
Speaker 1: of provide efficient and reliable mobile internet. And so the
Speaker 1: idea is that we can fire a whole bunch of
Speaker 1: satellites into space that may be a more effective solution
Speaker 1: to provide mobile internet, particularly in places that are rural
Speaker 1: or remote, either in the developing world or in places
Speaker 1: like the Arctic or Alaska or rural Iowa or whatever.
Speaker 1: But it's gonna be it's gonna be very expensive, and
Speaker 1: it's gonna take a very long time, and there's legitimate
Speaker 1: questions about whether any of this stuff is technologically feasible.
Speaker 1: It's interesting, and we also saw today with the Boeing
Speaker 1: launch and then the failure to reach the space station.
Speaker 1: The satellite business is a tough business. Uh. There's a
Speaker 1: lot of failed satellite companies out there, and there's a
Speaker 1: lot of bond holders out are holding on the paper
Speaker 1: and they're really concerned. There's spaces literally littered with failed
Speaker 1: satellites up there. If your Apple is I guess the
Speaker 1: question a lot investors have is because I think the
Speaker 1: surprise a lot of investors is is it better to
Speaker 1: kind of do it yourself or just kind of outsourced.
Speaker 1: I guess yeah, it's a very good point, and you're
Speaker 1: right there. There are a lot of failed satellite companies
Speaker 1: out there, including satellite broadband companies. So we'll see how
Speaker 1: this progresses. On the other hand, look, we do want companies,
Speaker 1: particularly companies like Apple that throw off lots of cash
Speaker 1: to invest in put in promising future projects. And we
Speaker 1: talked about earlier with Amazon. Right, we've seen the investments
Speaker 1: they've made in their infrastructure with things like warehouses and
Speaker 1: their delivery operation that that has really paid dividends in
Speaker 1: transforming the company and getting packages to people's homes faster.
Speaker 1: I have a crazy idea, and we were talking about
Speaker 1: this John Butler of Bloomery Intelligence earlier. Why does an
Speaker 1: Apple with its crazy billads of cash just by a
Speaker 1: T and T by Verizon? Okay, I mean it's a look,
Speaker 1: it's a totally it's a totally fair question. And look,
Speaker 1: we did see we have seen circumstances in the past
Speaker 1: where Google they did not buy one of the telecom companies,
Speaker 1: but they did have their own um Internet and cable
Speaker 1: television company, which they have significantly scaled back because they
Speaker 1: felt that they couldn't really make it work on a
Speaker 1: large scale the way that you know, the sort of
Speaker 1: comcasts and A T and T s of the world
Speaker 1: make it work. It'since I'm looking at the A T
Speaker 1: and T. I'm sorry. The Apple shares fifty two week
Speaker 1: high today, uh stocks up seventy percent year to date,
Speaker 1: market cap of one and a quarter trillion dollars share.
Speaker 1: It just seems like whatever they're doing, shareholders just love it.
Speaker 1: So I guess the big issue for this company has
Speaker 1: been can it pivot from a phone only company, hence
Speaker 1: it only company, to a more of a diversified services company.
Speaker 1: Looks like the market saying yes, I think that's right,
Speaker 1: and the market is saying yes, I certainly have doubts
Speaker 1: about whether that transformation is real. Um it is. It
Speaker 1: is very interesting to look at what Apple is spending
Speaker 1: money on. So this is a company that has, as
Speaker 1: a share of revenue, tripled their expenditure on research and
Speaker 1: development the last five years. That Apple, for a tech company,
Speaker 1: is still spending a relatively small share of their revenue,
Speaker 1: about six percent of their revenue on research and development projects.
Speaker 1: So that's everything from the stuff that is going into
Speaker 1: phones right now to these kind of future satellite projects
Speaker 1: and augmented reality glasses and driverless cars and whatever comes next.
Speaker 1: So I think investors have been very willing to be
Speaker 1: patient on seeing some of those longer term projects payoff.
Speaker 1: It is right now affecting Apple's profit that you see
Speaker 1: the profit margin at Apple has gone. The operating profit
Speaker 1: margin used to be five years ago and now it's
Speaker 1: twenty four percent. It's at the lowest level. It's been
Speaker 1: in a decade and one big reason for that is
Speaker 1: this heavy spending on research and development. Yeah, I know exactly.
Speaker 1: It's fair enough. It is still a massively profitable company.
Speaker 1: Thanks so much for joining a shore of a Bloomer
Speaker 1: Opinion technology commas. You can read all of her work
Speaker 1: and all the other great work done by our folks
Speaker 1: at Bloomberg Opinion, at Bloomberg dot com, slash opinion or
Speaker 1: on the terminal op I n go. They do fantastic work.
Speaker 1: Really give me, I think, unique views into a lot
Speaker 1: of industries, a lot of companies, a lot of the
Speaker 1: news items going on UH, and they're really well informed.
Speaker 1: And I heard you to read that Bloomberg Opinion work.
Speaker 1: Outstanding stuff on the terminal end on the website. Well,
Speaker 1: a year ago today, where were we A year ago today?
Speaker 1: We were down, you know, close to the markets. Were
Speaker 1: doing that. You're doing exactly what Tom Kane does exact
Speaker 1: day because he's not here, so you're you know, so
Speaker 1: I am doing it. What a difference of year makes
Speaker 1: a year ago? Our next guest kim In Peter Kenny,
Speaker 1: founder of the Strategic Board Solutions UH and Kenny, a
Speaker 1: company he was in this studio a year ago, saying
Speaker 1: things aren't so bad. Let's get constructive. Peter Kenny, thanks
Speaker 1: so much for joining us. Where do you stand now?
Speaker 1: You boy? You a you were super right? Thank you?
Speaker 1: What do we do now? Do you think? You know?
Speaker 1: It's been a great year. I kind of expected this
Speaker 1: pretty much more or less to the point on the
Speaker 1: SMP five. I'm still very constructive, believe it or not,
Speaker 1: in spite of the fact that we've just seen a
Speaker 1: gain for the SMP five this year. I'm still constructive,
Speaker 1: but much more modestly so. So instead of the tent
Speaker 1: that we saw this year, I'm looking at maybe between
Speaker 1: six and nine percent next year. May get us to
Speaker 1: by the end of the year. The reason why I'm
Speaker 1: still constructive in spite of the fact that we've seen
Speaker 1: a gain is because we have very low interest rates,
Speaker 1: great economic data, clear signs of re engagement in terms
Speaker 1: of growth in the U. S. Economy, great news and
Speaker 1: the trade front, and consumer sentiment, income employment. This stuff
Speaker 1: is just super strong, and I think that we're going
Speaker 1: to continue to see that. You know, the tide lift
Speaker 1: all right, Peter, there's a difference between six or nine
Speaker 1: percent returns that steadily get developed over the year. That
Speaker 1: seems to be different than what people think is going
Speaker 1: to happen, where it's going to be front load in
Speaker 1: the front half of the year and the back half
Speaker 1: is going to be kind of rough based on political uncertainty.
Speaker 1: Would you agree with that assessment? Absolutely? Okay, yes, So
Speaker 1: in the first half of the year, what kind of
Speaker 1: returns can people expect? I think first, by the end
Speaker 1: of the second quarter, I think you're gonna look at
Speaker 1: maybe seven to nine. But it is definitely going to
Speaker 1: be much more choppy than we saw this year, even
Speaker 1: in the first half, even in the first half, and
Speaker 1: I would suggest that the volatility that we see peak
Speaker 1: next year will be in the first half. Really why well,
Speaker 1: a couple of things. First of all, the cbo EUM
Speaker 1: options are suggesting that there's complacency in the market, and
Speaker 1: pretty much everything else is suggesting that as well. And
Speaker 1: the fix if you look at the fixed with a
Speaker 1: twelve handles complacency in the market. When you see those
Speaker 1: two um indicators at the press levels that they're at there,
Speaker 1: it's almost a near certainty that something is going to
Speaker 1: disrupt that calmness in the market. And I think that
Speaker 1: that's likely to happen somewhere Q one, Q two. Now,
Speaker 1: I'm still constructive on the year, but I do think
Speaker 1: we're going to start seeing some volatility. It's just we
Speaker 1: just had too long a period without it. So is
Speaker 1: how much of your you know, six to eight, six
Speaker 1: to nine percent kind of return scenario predicated upon a
Speaker 1: very benign FED? Big part that great, Yes, that's a
Speaker 1: huge part of this, because you know we're heading into
Speaker 1: an election year and we all know that the FED
Speaker 1: historically in an election year tends not to be active
Speaker 1: in the market in terms of shifting policy. Now, the
Speaker 1: FED has already told me I was suggesting maybe we
Speaker 1: could have a rate increase at the data Lisa quote
Speaker 1: unquote rejected that. If she's right, She's absolutely right. Now
Speaker 1: we're going to continue to see the FED ad liquidity
Speaker 1: because you know, we have the Repoke conversation. But that said,
Speaker 1: I don't think we're going to see much in the
Speaker 1: way for its side. Yet you reject that as well. Yes,
Speaker 1: I mean, it just seems implausible to me. They are
Speaker 1: so shell shocked by what happened last year in December
Speaker 1: that there's no way they're going to do that. Rightly. Okay,
Speaker 1: So the question is we're gonna actually see inflation pick up.
Speaker 1: I think we may see a degree of inflation. And
Speaker 1: the reason why I say only a degree in spite
Speaker 1: of what we saw today in the data, is because
Speaker 1: the global economy is not going to allow inflation to
Speaker 1: really rise above where we're seeing it right now. But then,
Speaker 1: how much inflation do we need to see before it
Speaker 1: disrupts the sort of complacency that we see around no
Speaker 1: inflation and that that's being priced into. I don't think
Speaker 1: that inflation is going to be the driver of what
Speaker 1: upsets the complacent. I don't I just don't see it.
Speaker 1: You know, we're seeing great, great employment numbers, great confidence,
Speaker 1: and great income gains, and we're seeing that in really
Speaker 1: healthy spending, but we're not seeing it through to the
Speaker 1: economy in terms of making things more expensive, with the
Speaker 1: exception of some real estate some pockets, of course, but
Speaker 1: that's been a thing that we've been dealing with for now,
Speaker 1: for three or four or five years. We've seen in
Speaker 1: twenty nineteen in this grind up in the market. You know,
Speaker 1: periods during the year would be people were saying I
Speaker 1: gotta go defensive, and then we'd see people going back
Speaker 1: into more cyclicals or maybe even the growth stocks. How
Speaker 1: do you how do you think the will be in
Speaker 1: terms of do I take a little bit more risk
Speaker 1: with microL folio or I get a little bit more defensive. Well,
Speaker 1: I think that people who have been around for any
Speaker 1: period of time at all are And I was with
Speaker 1: a couple of pretty significant individuals last night. In terms
Speaker 1: of the markets, the sense is that listen, if I'm
Speaker 1: putting the money money to work in the market right now,
Speaker 1: I'm nervous. I'm nervous. Why because of the run up
Speaker 1: we've seen, you know, So, I think if people are
Speaker 1: looking at their overall portfolio, they're going to look at
Speaker 1: a more defensive posture that's going to be fueled by policy,
Speaker 1: in other words, a degree of certainty that the markets
Speaker 1: might not otherwise provide. And I'm speaking specifically of infrastructure. Okay,
Speaker 1: what do you think will be the worst performing asset class?
Speaker 1: Of what's the big loser? I think it's going to
Speaker 1: be utilities. Interesting, I think it's going to be utilities.
Speaker 1: And the primary reason I say that is because UM
Speaker 1: with utilities pricing is largely baked in. There's very little
Speaker 1: alpha out there that you can harvest that is going
Speaker 1: to be priced into a market where there's going to
Speaker 1: be a lot of liquidity and there's going to be
Speaker 1: a lot of money slashing around on the market. It's
Speaker 1: not going to be looking for dividends, right Well, so
Speaker 1: on the flip side, what's going to be the absolute
Speaker 1: best performing asset class? I love infrastructure, for UM, love
Speaker 1: heavy construction. UH continue to be very, very engaged in
Speaker 1: real estate space. I think in spite of the fact
Speaker 1: that we're seeing pockets I think it's you're seeing pockets
Speaker 1: of over I would suggest inflation in some real estate markets,
Speaker 1: but I think that's also fueling a wider growth in
Speaker 1: real estate demand and exposure in terms of investment. So
Speaker 1: secondary and third tertiary markets are seeing real benefit. Now,
Speaker 1: do you think we're actually gonna get a trade deal
Speaker 1: that's actually on paper that somebody can see. Are we're
Speaker 1: just gonna get tweets? We're going to get a trade
Speaker 1: deal and is going to be a significant tailwind to
Speaker 1: the global narrative. And that's that's the that's that's the thing.
Speaker 1: It's it's really how the globe looks at what the
Speaker 1: opportunity is in trade again. Yeah, narrative is the key operative.
Speaker 1: It's not clear what that will do, but the narrative
Speaker 1: matters because it matters for business confidence. We saw it
Speaker 1: in the fourth quarter last year. It really narrator mat
Speaker 1: On the flip side, yea, all narrative terrible than narrative wonderful.
Speaker 1: Now we're narrative pretty good. Peter Kenny, thank you so
Speaker 1: much for being with us. Peter Getty, founder and Strategic
Speaker 1: Boards illusion Um, founder of Strategic Board Solutions, joining us
Speaker 1: here in our interactive broker studios. Well, have you ever
Speaker 1: stepped back and thought, where does all the world's garbage
Speaker 1: got a lot? I never did until I saw a
Speaker 1: recent Wall Street Journal article talking about it and they
Speaker 1: said most of it has been going to China historically.
Speaker 1: But now I was China saying, gee, maybe not anymore.
Speaker 1: Julia Atwood, head of Advanced Materials for Bloomberg any f
Speaker 1: joins us to chat about this. She's in our Paris
Speaker 1: office today, Lucky for Julia. So Julia, this was an
Speaker 1: interesting story. Again, A lot of trash historically has gone
Speaker 1: to China for processing. Then I get starting last year
Speaker 1: they said, we're not really interested in your trash what's
Speaker 1: the story here, Hi guys, thanks for having me. Yeah,
Speaker 1: the story is really interesting ing, especially because China is
Speaker 1: kind of half of it, and then the circular economy
Speaker 1: is the other half of it. So what China said was,
Speaker 1: we don't want your trash anymore because it's too dirty,
Speaker 1: it's too poorly sorted, and we think of it as
Speaker 1: toxic waste. So they have basically said, we are moving
Speaker 1: towards advanced manufacturing. We want to make the really difficult stuff.
Speaker 1: We don't need any more waste plastic to use to
Speaker 1: make toys or simpler products. So they called it their
Speaker 1: National Sword Policy, and it was really about how they're
Speaker 1: changing their manufacturing focus and the quality of what they
Speaker 1: were getting from other countries. Julia, I think about this
Speaker 1: all the time, in part because I'm trying to understand.
Speaker 1: Let's say you get take out Chinese food and you're
Speaker 1: going to recycle the plastic containers. How much do you
Speaker 1: have to wash them in order to have them properly recycled.
Speaker 1: I know this is crazy to to be talking about this,
Speaker 1: but it's actually it goes to the fundamental heart of
Speaker 1: this right m M. It does absolutely, because it's a
Speaker 1: totally different story if you've got something that's really clean
Speaker 1: and really well sorted, because then recyclers can get a
Speaker 1: high value product out of it at the end. Um
Speaker 1: So the recyclers would tell you, my god, put it
Speaker 1: in the dishwasher, have it clean, sterilized, and put it
Speaker 1: into a completely separate bin. So they want something perfect.
Speaker 1: Why they want something perfect? Why can't we come up
Speaker 1: with technology that just does that? I mean, because that's
Speaker 1: if that's the huge obstacle between reusing and not reusing. Uh,
Speaker 1: you know, it's going to take a whole lot of education, luck,
Speaker 1: and probably failure to get this right. Why can't we
Speaker 1: just come up with better technology? Well, we have because
Speaker 1: I think a lot of people have realized that trying
Speaker 1: to convince a mass of consumers is difficult, and you
Speaker 1: want to be thinking about asking companies to do something
Speaker 1: because they're kind of a point source for all of
Speaker 1: these products. So there are better technologies on the sorting side,
Speaker 1: whether you're using robotics or computer vision to pick out
Speaker 1: the right plastic. But what's also really interesting is that
Speaker 1: the packaging makers themselves are going back and looking at
Speaker 1: the re design of saying what can I do to
Speaker 1: be better. And then there are some companies who are
Speaker 1: just sidestepping the whole thing completely, looking into new processes
Speaker 1: like chemical recycling that can deal with a few more contaminants.
Speaker 1: There are a bunch of ways that we can sidestep
Speaker 1: these problems through better technology. Can you give us a
Speaker 1: sense of how, I don't know if how the world
Speaker 1: has done in terms of recycling, or maybe how the
Speaker 1: western developed world has done. I mean, over the last
Speaker 1: ten or twenty years, is the world recycling materially more
Speaker 1: than it used to? Not? Really, it depends on which
Speaker 1: country you pick. The really stand out example of the
Speaker 1: people who have done very well with their recycling is
Speaker 1: actually South Korea. And the reason why they did so
Speaker 1: well is because they introduced something called the pay as
Speaker 1: you throw scheme that they actually got charged by the
Speaker 1: amount of waste per household they were generating, rather than
Speaker 1: having a flat fee buried somewhere in your taxes that
Speaker 1: you can't see now in Europe. In the US, we've
Speaker 1: actually seen some recycling rates starting to go down because
Speaker 1: it's just getting too expensive for municipalities to do. So
Speaker 1: what's the US going to do with China now rejecting
Speaker 1: our recycling well, what I think is the most interesting
Speaker 1: part of this whole question is how other parts of
Speaker 1: the supply chain have started to get involved. So China
Speaker 1: saying we're not going to take plastic waste made all
Speaker 1: the waste managers sit up and take notice. But what's
Speaker 1: happening at the other end of the supply chain is
Speaker 1: consumer companies are coming under pressure to be more sustainable
Speaker 1: and recycle more because of all the terrible images of
Speaker 1: plastic waste in the ocean. So what started to happen,
Speaker 1: especially in the US, is these brand owners have said,
Speaker 1: we can't be held responsible for this, we have to
Speaker 1: start making investments. So we recently saw an Espresso give
Speaker 1: over a million dollars to a recycling company to install
Speaker 1: a new line to cycle those little aluminum pods for
Speaker 1: your coffee. So the waves managers are kind of sitting
Speaker 1: around saying, Okay, when do I get my million dollars? Like,
Speaker 1: when is the brand coming to the rescue to help
Speaker 1: us fix our recycling infrastructure. Coca Cola, Pepsi, Corred Doctor
Speaker 1: Pepper together they're putting a hundred million dollars into better
Speaker 1: curbside recycling. So really it's the companies that are leaving
Speaker 1: leading it, not the policy makers. All right, just a
Speaker 1: quick question. If the garbage isn't going to China, where
Speaker 1: is it going. A lot of it is actually being
Speaker 1: stored in Japan. They just have massive storage facilities that
Speaker 1: are holding onto the waist and hoping prices are going
Speaker 1: to increase because most scrap is actually traded and there's
Speaker 1: a little bit of light at the end of the
Speaker 1: tunnel because we're starting to see prices for the kind
Speaker 1: of plastics that go into detergent bottles actually being higher
Speaker 1: than new material. So the markets are going to rebound.
Speaker 1: Julia Atwood, thank you so much. Really interesting. Julia Atwood,
Speaker 1: head of Advanced Materials for Bloomberg, the benef Bloomberg New
Speaker 1: Energy Finance. She is normally based in New York, but
Speaker 1: in Paris today. And I gotta say I think about
Speaker 1: it all the time. You started by asking how often
Speaker 1: do you think about it? And I think about it
Speaker 1: all the time because I think about how much to
Speaker 1: clean each item, and then if you end up washing
Speaker 1: it with a lot of water, is that ineffective or effective?
Speaker 1: I mean, I know I sound really tortured when I
Speaker 1: when I go into this, but I think about it.
Speaker 1: Every time there's some plastic container, it's like, well, how
Speaker 1: much effort should you put into making it spotless? It's interesting,
Speaker 1: you know here at Bloomberg and all the Bloomberg offices
Speaker 1: around the world really really focused on recycling and really
Speaker 1: take the time to have all the separate bins and
Speaker 1: separated and we have all the compostable things. I just
Speaker 1: wonder what other companies and what are the households, to
Speaker 1: what degree are they taking it? I just don't know. Well,
Speaker 1: and at what point do you just bring your own dish?
Speaker 1: I mean, I'm serious, Like, at what point do we
Speaker 1: just stop with the disposable stuff? I don't know. Interesting questions.
Speaker 1: Holiday shopping starting to wrap up here. We have Christmas
Speaker 1: in a few days Hanakah starting on Sunday. Let's get
Speaker 1: a sense of how things are out there in retail land.
Speaker 1: We welcome my good friend Jim Fallon, editorial director for
Speaker 1: Woman's where Daily joins us here in our Bloomberg Inner
Speaker 1: Active Broker studio, braving the cold of New York City.
Speaker 1: So Jim, give us a sense here where you know,
Speaker 1: we kind of came into the holiday shopping season cautiously optimistic.
Speaker 1: I heard numbers of you know, kind of fourish percent
Speaker 1: growth in terms of retail sales around the holidays. What
Speaker 1: are you finding? Basically, those those forecasts ended up being accurate.
Speaker 1: It looks like it's going to be about four percent growth,
Speaker 1: maybe even a little higher. We were cautiously optimistic. I
Speaker 1: think the jobs picture, the overall strength of the economy,
Speaker 1: fed into a consumer optimism that really hasn't waned. But
Speaker 1: I think what's happened is that the shopping happened early,
Speaker 1: then there was a lull, and now you'll see this weekend,
Speaker 1: the store is busy on this Super Saturday, last Saturday
Speaker 1: before Christmas. When we came into this holiday shopping season,
Speaker 1: one of the things I heard was, Oh, it's going
Speaker 1: to be a short, compressed holiday shopping season. Thanksgiving came late,
Speaker 1: and so on and so forth. Is that gonna be
Speaker 1: a big issue? Do you think when the total dollars accounted,
Speaker 1: I think the dollars will be the amount that was
Speaker 1: going to be spent. So I think it is. I
Speaker 1: mean for the retailers, it's an issue for the retailers
Speaker 1: less the consumer. The consumer is going to shop how
Speaker 1: much they have six days less, but they're not really
Speaker 1: conscious of it. It's a tighter pipeline for the for
Speaker 1: the retailers to get their markdowns in and so forth,
Speaker 1: but the overall dollar number won't be reduced because there's
Speaker 1: six shop fewer shopping days. Yeah, that's one of the
Speaker 1: things that I've learned as I spent more and more
Speaker 1: time looking at retail It's not just getting people in
Speaker 1: the door to buy stuff, for getting them to click
Speaker 1: the buy stuff, it's what kind of promotions you had
Speaker 1: to offer to get that traffic, whether it's foot traffic
Speaker 1: or e traffic. Any sense that promotions which are neg
Speaker 1: if for retailer's margins are running any higher than lower
Speaker 1: the normal margin. Promotions are a little higher this year.
Speaker 1: They were earlier. Again, retailers started promoting even before Thanksgiving
Speaker 1: and Black Friday. So what's happening is that the Christmas
Speaker 1: shopping period is getting extended into early November even for
Speaker 1: some retailers, and mark promotions are a little higher this year,
Speaker 1: so margins will probably be impacted. Plus you have things
Speaker 1: like free shipping that have to go into the cost
Speaker 1: of it and so forth. So what are people buying
Speaker 1: this year? Is it? Is it just kind of the
Speaker 1: electronic gadgets or is it fashion? What are people buying?
Speaker 1: It's the normal, it's electronic gadgets, it's you know, it's
Speaker 1: the AirPod, It's that kind of thing. Fashion is the normal,
Speaker 1: sweater is cold weather gear, et cetera. There isn't There
Speaker 1: hasn't really been a breakout fashion item that drives consumers
Speaker 1: to the store in quite a few seasons, and that
Speaker 1: again has been an issue for retailers. So it's interesting.
Speaker 1: I'm not sure if this is quite your belly wick,
Speaker 1: but toys UM toys r Us no longer in business
Speaker 1: where the moms and get these toys. Walmart picked up
Speaker 1: a lot of that business. Target has has picked up
Speaker 1: some of it. Um Amazon of course, So I think
Speaker 1: I think those people recognize even as Toys rs was struggling,
Speaker 1: that they needed to rush to fill in the gaps,
Speaker 1: so they all they all expanded their toy offering. So
Speaker 1: we all know that retail sales really over the last
Speaker 1: ten plus years, maybe even more, shifting pretty dramatically from
Speaker 1: the bricks and mortar to e commerce, Amazon and so
Speaker 1: on and so forth. How are the retailers doing trying
Speaker 1: to make that migration from you know, bricks and mortars
Speaker 1: solely to maybe what I've heard as a term omni channel.
Speaker 1: How is that going? Are there winners and losers or
Speaker 1: is everybody kind of struggling? It's there are definitely winners.
Speaker 1: What you're seeing is, you know, the Walmarts and the
Speaker 1: targets of the world are winning in that with the
Speaker 1: buy online, pick up in store so called bopus or
Speaker 1: click and collect um. But if you look at Walmart,
Speaker 1: it's market capitalization has increased by a hundred billion dollars
Speaker 1: to years, so they're beginning to figure that out, and
Speaker 1: they're beginning to use their stores as as many distribution
Speaker 1: centers target the same. So those very much our winners.
Speaker 1: Retailers such as Macy's are still sort of figuring it
Speaker 1: out um to a certain extent, but again they're getting there,
Speaker 1: but it's a challenge, and I think I think the
Speaker 1: omni channel world world almost has to disappear because it's
Speaker 1: just retail now. The consumer wants to buy it where
Speaker 1: they where they want to buy it, and want to
Speaker 1: pick it up or get it however they want to.
Speaker 1: There's always those in my town where I live in Jersey,
Speaker 1: there's always those shop local days. And the signs and
Speaker 1: not shop local, which we we certainly try to do,
Speaker 1: but the reality is they can't really make those investments
Speaker 1: to get us to where we think we ought to be,
Speaker 1: which is I want it now and I want to
Speaker 1: anywhere I want to get. So what is small? And
Speaker 1: that's kind of where the you know, the real retail
Speaker 1: is it down at the you know, the local level.
Speaker 1: What are the local retailers trying to do here? I
Speaker 1: think the local retailers play up the personalization attitude. We
Speaker 1: know our customer, we know what you want. Oh, come
Speaker 1: in and buy. I got this specifically for you, this
Speaker 1: is your size, ETCETERA product differentiation to a big extent
Speaker 1: um and service. I mean, I think that even if
Speaker 1: it's if it's a Walmart or it's a major retailer,
Speaker 1: you're not going to get that personal service. You're walking
Speaker 1: into the store and they say, how are you? How
Speaker 1: your children house? Whatever? That's the edge they can play.
Speaker 1: I can tell you Tom Keen is heartbroken that Barneys
Speaker 1: is going bankrupt. What do you take away from that?
Speaker 1: I mean that was a great brand, high end. What
Speaker 1: happened there, It was high end to a certain extent.
Speaker 1: Online killed it. I mean a lot of those products
Speaker 1: became available through the Netta portes, the matches, fashion, et cetera.
Speaker 1: You could you could literally sit I mean, Barney's had
Speaker 1: its own website. The move uptown to Madison Avenue, even
Speaker 1: in the nineties was probably a misjudgment of the business,
Speaker 1: given the rents that they had to pay and so forth.
Speaker 1: Then issue killed it and it was just keeping up
Speaker 1: with your customer. I think that the product became widely available,
Speaker 1: and they also became so high end that they didn't
Speaker 1: have a sort of lower tier that would drive a
Speaker 1: lot of foot traffic through the store. What is your
Speaker 1: sense of just the department store concept. Is that completely
Speaker 1: dying or is there a place for I'm looking to
Speaker 1: Cross Street, Bloomingdale's, Macy's, what's the future. I mean, they've
Speaker 1: been predicting the death of the department store since the seventies,
Speaker 1: so you know, clearly it depends on the department store.
Speaker 1: I think there's still a place for them. American department
Speaker 1: stores are in the middle of reinventing themselves. But if
Speaker 1: you go to a lot of the European department stores
Speaker 1: or even Asian department stores, they're packed. If you go
Speaker 1: to a Salvages in London. That store is packed, it's
Speaker 1: offering very exclusive product, it's offering, you know, everything from
Speaker 1: a bakery to a t store to a flower shop,
Speaker 1: et cetera. The more those stores expand into those kinds
Speaker 1: of things, and again, horrible word, but the experiential type retail,
Speaker 1: there is very much still a place for them. Still
Speaker 1: over We still overstored in this country though we had that,
Speaker 1: I mean, I've heard by as much as yes, I mean,
Speaker 1: I mean again back into the eighties, we've been overstored
Speaker 1: compared to other places. All right, Tim Fallon, thanks so
Speaker 1: much for joining us. Jim Fallon's editorial director for Women's
Speaker 1: Wear Daily, joining us here in a Bloomberg Interactive broker studio.
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
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Speaker 1: on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm
Speaker 1: on Twitter at Lisa A. Bram Woit's one before the podcast.
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio