WEBVTT - Trump Tariff Threat, Retail Earnings 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:12.119 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.200 --> 0:00:14.920 weekdays at ten am Eastern on Apple car Playing and 0:00:15.040 --> 0:00:17.919 broyd Outo with the Bloomberg Business App. Listen on demand 0:00:17.960 --> 0:00:22.280 wherever you get your podcasts, or watch us live on YouTube. 0:00:22.840 --> 0:00:25.680 Sure our typic story. The geopolitical story of the day 0:00:25.880 --> 0:00:30.000 is tarris President like Trump looking at post tariffs on 0:00:30.000 --> 0:00:32.800 a lot of our leading partnershare. Brendamurray joins his Bloomberg 0:00:32.800 --> 0:00:35.400 Global Trade editor. Hey Brendan, you're the expert on trade. 0:00:35.760 --> 0:00:37.800 What do you make of this story here about TIFFs? 0:00:39.159 --> 0:00:41.280 Well, for those of us who covered Trump's first term, 0:00:41.440 --> 0:00:44.600 this was a bit of a flashback to a time 0:00:44.680 --> 0:00:47.360 when you might get a message from your boss at 0:00:47.440 --> 0:00:50.120 eight o'clock a night saying he's done it again. And 0:00:50.760 --> 0:00:55.600 sure enough, the incoming president tweeted some tariff threats last 0:00:55.680 --> 0:00:58.840 night to the three biggest US trading partners, China, Canada, 0:00:58.880 --> 0:01:02.960 and Mexico. The ones that stood out were the cand 0:01:03.160 --> 0:01:06.760 for the twenty five percent tariffs on mechs, everything from 0:01:06.760 --> 0:01:10.000 Mexico and everything from Canada, which would essentially throw the 0:01:10.080 --> 0:01:16.760 US economy into a tailspin blow up NAFTA and its successor, USMCA. 0:01:17.000 --> 0:01:19.920 So that's what I didn't understand is Trump negotiated the 0:01:20.000 --> 0:01:24.400 USMCA in twenty twenty when signed it with Mexico and Canada, 0:01:24.440 --> 0:01:26.400 So why would he blow up his own agreement. 0:01:27.520 --> 0:01:32.120 Yeah, you know, that's a good question, because these threats 0:01:32.200 --> 0:01:38.479 aren't intended necessarily to be promises that eventually get fulfilled. 0:01:38.800 --> 0:01:42.240 They are threats, they are bluffs, and you know they're 0:01:42.280 --> 0:01:46.720 meant to drive the other party to the negotiating table. 0:01:46.840 --> 0:01:50.040 So he will have plenty of advice. If this goes 0:01:50.120 --> 0:01:54.840 to you know, January twentieth, then he's still threatening this, 0:01:55.240 --> 0:01:58.600 He'll have a lot of advisors around him saying, you know, 0:01:58.640 --> 0:02:00.760 you're going to destroy the US audio industry if you 0:02:00.800 --> 0:02:03.240 do this. So you know, there's there's a lot of 0:02:03.240 --> 0:02:06.880 time between now and the inauguration day. You know, maybe 0:02:06.880 --> 0:02:09.800 there's some negotiation that can come out of it. That 0:02:10.080 --> 0:02:13.560 you know that he's already gotten a call from Justin 0:02:13.600 --> 0:02:18.880 Trudeau in Canada. The Mexican leader said said just a 0:02:18.880 --> 0:02:21.920 few minutes ago that Mexico will respond with his own threats, 0:02:22.000 --> 0:02:25.080 and she said, you know, the main exporters from Mexico 0:02:25.120 --> 0:02:28.880 to the US are General Motors Stillantis and Ford Motor Company. 0:02:28.960 --> 0:02:31.480 So you know there's the big you know, the big 0:02:31.560 --> 0:02:34.720 auto companies there. So so we'll see what happens. But 0:02:35.280 --> 0:02:37.720 you know, markets had a reaction, but it's nothing too 0:02:38.520 --> 0:02:42.720 too drastic. Yep twelve eighteen hours afterwards. 0:02:42.840 --> 0:02:45.000 Hi, Brendan, thank you so much. We appreciate it. Brenda Murray. 0:02:45.080 --> 0:02:48.079 He's Global trade editor for Bloomberg News, joining us from 0:02:48.320 --> 0:02:50.720 London via zoom So. I think some of the reporting 0:02:50.760 --> 0:02:53.840 I've seen today alex is potentially using tariffs as a 0:02:53.880 --> 0:02:56.840 bargaining chip for other issues down the line. 0:02:57.000 --> 0:03:00.160 Literally, it's a dajav of twenty sixteen exactly right. 0:03:01.760 --> 0:03:05.640 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:03:05.720 --> 0:03:09.239 weekdays at ten am Eastern on applecar Play and Android 0:03:09.280 --> 0:03:12.040 Auto with the Bloomberg Business at You can also listen 0:03:12.160 --> 0:03:15.240 live on Amazon Alexa from our flagship New York station, 0:03:15.639 --> 0:03:19.560 Just say Alexa play Bloomberg eleven thirty right. 0:03:19.600 --> 0:03:20.799 Headed back to the market here. 0:03:20.880 --> 0:03:23.960 It is earning's craziness, particularly when it comes to retail. 0:03:24.000 --> 0:03:26.200 We got tons of news out here. Mary Ross, Gilbert 0:03:26.200 --> 0:03:29.400 Bloomberg Intelligence and your equity analyst is joining us in 0:03:29.440 --> 0:03:31.359 some of those retail earnings. 0:03:31.480 --> 0:03:34.040 Can we talk about Ross stores. 0:03:33.919 --> 0:03:34.880 For excuse me? Coles? 0:03:34.880 --> 0:03:37.480 Coles, right, Coles? What happened here? With Coles? 0:03:37.640 --> 0:03:40.280 I get the weather situation, but I mean, is it 0:03:40.320 --> 0:03:42.480 a real thing or is this the excuse of the weather? 0:03:44.400 --> 0:03:44.600 No? 0:03:44.920 --> 0:03:47.480 So with Coles, it wasn't a weather thing at all. 0:03:47.600 --> 0:03:51.160 It was an execution issue. So the company reported COMP 0:03:51.240 --> 0:03:55.680 sales down nine point three percent. What that means is 0:03:55.720 --> 0:03:59.960 that their core business, the core apparel categories, they were 0:04:00.200 --> 0:04:03.840 in the double digits because so four beauty sales on 0:04:03.880 --> 0:04:07.200 a comp basis were up nine percent. So what happened 0:04:07.200 --> 0:04:09.480 in the quarter? What was the miss? It was on 0:04:09.520 --> 0:04:12.440 the private label side. So as the company was bringing 0:04:12.480 --> 0:04:18.040 in some new categories, including two hundred toys r US 0:04:18.120 --> 0:04:21.120 shops in the quarter that they opened. Plus they have 0:04:21.320 --> 0:04:25.520 some home decors impulse items that they've brought in, and 0:04:25.720 --> 0:04:30.039 in so doing, they drew back on their private label 0:04:30.760 --> 0:04:34.240 and then also petites and that really cost them dearly 0:04:34.279 --> 0:04:37.720 in the quarter. Since then they haven't made improvements and 0:04:37.760 --> 0:04:40.080 they saw toward the end of the quarter a five 0:04:40.160 --> 0:04:44.520 hundred basis points improvement in the comp sales decline. But 0:04:45.320 --> 0:04:50.160 this basically led to them naming a new CEO. They 0:04:50.160 --> 0:04:54.000 have brought in Ashley Buchanan as CEO. He's with Michael 0:04:54.080 --> 0:04:58.080 Stores and he's known for improving the profitability and turning 0:04:58.120 --> 0:05:01.840 that business around. He also has had stints at Walmart 0:05:02.320 --> 0:05:06.599 as the chief merchant of US e commerce and also 0:05:06.800 --> 0:05:09.960 the CEO of that e comm business in Walmart, So 0:05:10.000 --> 0:05:12.000 he really brings a lot to the party. 0:05:12.360 --> 0:05:15.360 Wow, there's a lot of moving parts there at Cohl's 0:05:15.440 --> 0:05:18.320 And as you mentioned, you know what the big issue 0:05:18.360 --> 0:05:20.880 is execution. What did the company say, If anything, it's 0:05:20.880 --> 0:05:24.520 about their core underlying demand out there. I mean, what 0:05:24.560 --> 0:05:26.800 do they did? You give it any read on the consumer? 0:05:28.360 --> 0:05:31.160 Yeah, I mean the reason why they missed on the 0:05:31.200 --> 0:05:33.799 private label is because those are more open price point 0:05:33.880 --> 0:05:38.240 items and that their core consumer is sort of that 0:05:38.440 --> 0:05:43.200 lower to low middle income consumer. So they're earning under 0:05:43.320 --> 0:05:47.000 fifty thousand, under seventy five thousand, and well they will 0:05:47.120 --> 0:05:51.080 draw on some higher end consumers. The core consumer is 0:05:51.160 --> 0:05:55.520 really they have less discretionary income in this environment, and 0:05:55.560 --> 0:05:57.760 then there's so many other choices out there with off 0:05:57.839 --> 0:06:01.280 price mass merchants. We had great numbers that came out 0:06:01.320 --> 0:06:05.359 of Walmart, and they're apparel category doing well, so I 0:06:05.400 --> 0:06:07.799 think that's where they've had the miss. But they've really 0:06:08.040 --> 0:06:11.680 stepped up engagement with their core consumer and they're seeing 0:06:11.720 --> 0:06:15.360 that that's really, you know, helping the sales. 0:06:15.400 --> 0:06:19.040 There is this just a matter of say Walmart. I 0:06:19.080 --> 0:06:21.080 mean TJX is a little bit different. But let's just 0:06:21.120 --> 0:06:24.239 say Walmart doing really well with over one hundred thousand 0:06:24.240 --> 0:06:25.320 and under one hundred thousand. 0:06:25.360 --> 0:06:28.479 They're a one stop shop. Is it really a Walmart story. 0:06:28.680 --> 0:06:31.760 No, it's not really a Walmart story. It's really it's 0:06:31.760 --> 0:06:38.960 a Cohle's execution story. That's really what happened. What about Abercrommie, Ah, 0:06:39.279 --> 0:06:43.000 here's a different story. Abercrombie and Fitch hits it out 0:06:43.000 --> 0:06:46.960 of the ballpark it again with comp sales up sixteen percent. Hollister, 0:06:47.480 --> 0:06:50.400 which is their gen Z brand, was up twenty one percent. 0:06:50.680 --> 0:06:55.400 Analysts were expecting eleven percent. This company did not say 0:06:55.520 --> 0:06:58.640 weather was an issue for them. They said that they 0:06:58.680 --> 0:07:02.359 always believe that they need have balanced categories so that 0:07:02.440 --> 0:07:03.679 weather isn't a factor. 0:07:04.200 --> 0:07:05.880 And of course it is a global. 0:07:05.520 --> 0:07:09.159 Business and they were doing well across all markets, including China, 0:07:09.320 --> 0:07:11.560 so they were also up in China as well. So 0:07:11.680 --> 0:07:16.280 Abercrombie has a very different story, just superb execution. They 0:07:16.320 --> 0:07:20.040 have all the categories that their customers want. They introduced 0:07:20.120 --> 0:07:22.920 Your Personal Best YPB, which is kind of like a 0:07:23.000 --> 0:07:27.440 Lululemon alternative for their customer at more amenable price points, 0:07:27.920 --> 0:07:31.400 and it's second full year of that business and it's 0:07:31.680 --> 0:07:35.680 continuing to grow. So they're giving their consumers what they 0:07:35.720 --> 0:07:38.680 want and it's showing up in the results. So quite 0:07:38.680 --> 0:07:40.200 a different story with Abercrombie. 0:07:41.360 --> 0:07:43.520 So the stock's off five percent, but I see that 0:07:43.560 --> 0:07:45.560 the stock was up sixty six percent year to date. 0:07:45.600 --> 0:07:49.240 So is just a little profit taking today for Abercrombie. 0:07:48.720 --> 0:07:53.000 Investors, Yeah, probably a little breather. I think they're going 0:07:53.080 --> 0:07:55.280 to continue to execute going forward. And then when you 0:07:55.320 --> 0:07:58.680 think of the big headlines right now with tariffs with 0:07:58.760 --> 0:08:03.640 abercrombiere teriff exposure for imports coming from China into the 0:08:03.760 --> 0:08:06.480 US is only like five to six percent of sales, 0:08:06.880 --> 0:08:09.880 and they could also dial that back further if necessary. 0:08:10.720 --> 0:08:15.120 Well when it comes to an overall macro takeaway. So 0:08:15.160 --> 0:08:17.680 that's the unquestioned right, we don't know what the tariff 0:08:17.680 --> 0:08:20.240 situation is going to be. What is our Macro read 0:08:20.280 --> 0:08:22.400 on the retail names that you cover, because as you 0:08:22.440 --> 0:08:25.520 made it clear, like the cols is execution, So can 0:08:25.560 --> 0:08:26.960 we really take something away. 0:08:28.200 --> 0:08:29.480 What's your broader take here? 0:08:30.840 --> 0:08:33.680 Well, based on most of the companies that have reported 0:08:33.760 --> 0:08:37.480 so far, weather has definitely had an impact. So for example, 0:08:37.520 --> 0:08:40.560 we also had Burlington Stores, which is in the off 0:08:40.600 --> 0:08:43.120 price space and it's one of the fastest growing because 0:08:43.120 --> 0:08:46.280 it's so small and they're opening up about one hundred 0:08:46.320 --> 0:08:50.760 stores every year, and their comp sales rose just one percent. 0:08:50.880 --> 0:08:54.600 Analysts were expecting two point two percent, but they said, look, 0:08:55.320 --> 0:08:58.880 winter weather categories make up about fifteen percent of our 0:08:58.920 --> 0:09:01.040 sales in the third quarter, so if you strip it out, 0:09:01.360 --> 0:09:04.199 our comp sales were really up four percent. So they 0:09:04.240 --> 0:09:07.360 are saying, hey, we were prepared for the weather, and 0:09:07.640 --> 0:09:12.680 we didn't get it until really until we moved into November. 0:09:12.840 --> 0:09:17.160 So I think most of the companies that have reported, 0:09:17.200 --> 0:09:20.680 including TJX, which had great numbers, but they also missed 0:09:20.720 --> 0:09:22.480 a little on the comp sales and it was due 0:09:22.520 --> 0:09:26.959 to weather. So that's been the underlying, I think factor, 0:09:26.960 --> 0:09:28.920 and I think we'll probably hear it coming out of 0:09:28.920 --> 0:09:32.040 Nordstrom when they report after the clothes today too, but 0:09:32.120 --> 0:09:36.120 we do think that Nordstrom could beat estimates, but we'll 0:09:36.160 --> 0:09:37.200 see when they report later. 0:09:37.559 --> 0:09:40.040 Mary, when all is said and done here this holiday season, 0:09:40.080 --> 0:09:41.760 how do you think it's going to turn out from 0:09:41.800 --> 0:09:43.040 a top line number. 0:09:44.240 --> 0:09:47.480 I'm very optimistic. I think the consumer has proven to 0:09:47.520 --> 0:09:52.360 be very resilient and if you have highly desirable apparel, 0:09:53.240 --> 0:09:55.520 you're going to get the sales. And clothing is a 0:09:55.520 --> 0:09:59.920 big category for the holidays, so it's the second largest, 0:10:00.160 --> 0:10:04.320 you know, second to let's say, electronics, So I think 0:10:04.880 --> 0:10:06.640 it's going to perform well. If you look at a 0:10:06.640 --> 0:10:09.440 lot of the holiday dressing that's out there, it's pretty exciting. 0:10:09.480 --> 0:10:12.280 We now have cool weather that is set in in 0:10:12.360 --> 0:10:15.439 most parts of the country. That's good news. That's going 0:10:15.480 --> 0:10:18.959 to draw sales. And that's actually based on our consumer 0:10:19.080 --> 0:10:23.320 survey that we conducted recently. The number one driver second 0:10:23.360 --> 0:10:27.720 to discounts is weather. The change in weather. The change 0:10:27.760 --> 0:10:31.800 in weather does cause consumers to go out and spend 0:10:31.840 --> 0:10:33.120 money on new clothes. 0:10:33.240 --> 0:10:34.760 So, like, we make fun of it, but it's real, 0:10:35.000 --> 0:10:36.840 I guess. I mean, I never see the weather thing 0:10:36.880 --> 0:10:39.280 on earnings release. I'm like, uh huh, so sure, all right, 0:10:39.280 --> 0:10:41.600 thanks a lot. We really appreciate Mary Ross Gilbert joining 0:10:41.640 --> 0:10:43.079 us from a Boomberg Intelligence. 0:10:44.520 --> 0:10:48.400 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:48.480 --> 0:10:51.120 weekdays at ten am Eastern on fo card Playing and 0:10:51.280 --> 0:10:54.200 broyd Outo with the Bloomberg Business App. Listen on demand 0:10:54.240 --> 0:10:58.880 wherever you get your podcasts, or watch us live on YouTube. 0:10:59.080 --> 0:11:03.200 Peter Chair Joints, US head of Macro Strategy Academy Securities. Hey, Peter, 0:11:03.600 --> 0:11:06.640 you and your team you woke up Wednesday, November sixth, 0:11:06.800 --> 0:11:08.959 the morning after the election and when it became a 0:11:09.080 --> 0:11:12.120 parent that president like Trump was going to be the 0:11:12.120 --> 0:11:14.600 next president and that we would have a Republican control 0:11:14.640 --> 0:11:17.400 of Congress. To what extent if any, did that alter 0:11:17.559 --> 0:11:20.520 the way you guys think about investments going forward? 0:11:21.559 --> 0:11:23.600 You know, I think for us there's two things about 0:11:23.600 --> 0:11:25.000 it right One, what's it going to do on the 0:11:25.000 --> 0:11:28.480 geopolitical landscape? What's it going to do on the domestic landscape? 0:11:28.600 --> 0:11:30.680 And what will that do then for our investments? And 0:11:30.720 --> 0:11:33.680 I think really it takes us to really being all 0:11:33.679 --> 0:11:36.439 in on commodities. We think commodities, whether it's rare, earth's, 0:11:36.440 --> 0:11:39.880 critical minerals, oil, are going to be supported by this government. 0:11:40.040 --> 0:11:41.920 I think you're going to see some activity in the chips. 0:11:42.000 --> 0:11:44.320 I think you're going to see kind of a national 0:11:44.360 --> 0:11:47.600 security type level thing where one we impose some tariffs, 0:11:47.640 --> 0:11:52.360 maybe strategically, but also we actually provide some supplements and 0:11:52.440 --> 0:11:54.880 some boost to the companies that we need to do 0:11:54.920 --> 0:11:57.440 things domestically. And I think one of the big things 0:11:57.440 --> 0:12:00.240 that's going to change is not in my backyard. We're 0:12:00.240 --> 0:12:02.040 going to review a lot of the rules that have 0:12:02.040 --> 0:12:04.040 been in place over the last ten to fifteen years 0:12:04.360 --> 0:12:05.880 that were done when there was a luxury that the 0:12:05.960 --> 0:12:08.120 US was the sole superpower that are going to be 0:12:08.160 --> 0:12:10.920 rethought a little bit in terms of, hey, China's and 0:12:10.960 --> 0:12:13.640 economic superpower. They're fighting with us. What are we going 0:12:13.679 --> 0:12:14.280 to do about it? 0:12:14.920 --> 0:12:17.640 Well, Peter was interesting though when you mentioned commodities, is 0:12:17.679 --> 0:12:19.959 that the result of all this can also be a 0:12:20.000 --> 0:12:22.720 stronger dollar, which could be negative for commodities. 0:12:22.720 --> 0:12:24.280 How do you square those two things? 0:12:24.880 --> 0:12:27.000 So, in fact, I think you're right. I don't think 0:12:27.000 --> 0:12:30.200 commodities themselves are going to do particularly well, but the 0:12:30.200 --> 0:12:33.000 commodity related companies will do very well. Right, They're going 0:12:33.080 --> 0:12:34.480 to be allowed to produce more, They're going to be 0:12:34.520 --> 0:12:36.680 allowed to make profits. So I think you want to 0:12:36.720 --> 0:12:38.680 continue to play in those stocks. I look at XL, 0:12:38.840 --> 0:12:41.280 for example, on the energy space that has continued to 0:12:41.280 --> 0:12:43.920 do well, even while oil itself hasn't done well. So 0:12:43.960 --> 0:12:45.760 this is much more a play in the companies themselves 0:12:45.800 --> 0:12:47.520 because they're going to be able to produce more. And 0:12:47.559 --> 0:12:50.760 I think anyone who does services should do very well. 0:12:50.800 --> 0:12:52.320 So I think that's the play. It's not in the 0:12:52.320 --> 0:12:55.360 commodities itself, It's in the commodity related stocks. 0:12:55.760 --> 0:13:01.920 Peter Reed overnight we had a bunch of tariff discussion 0:13:01.960 --> 0:13:04.280 coming from the President and elect. How do you think 0:13:04.320 --> 0:13:08.120 about tariffs and does that impact maybe sectors you look 0:13:08.160 --> 0:13:09.400 at around the world. 0:13:10.600 --> 0:13:13.839 So right now, I'm not overly concerned about tariffs. I 0:13:13.840 --> 0:13:16.480 think Wall Street coming into the election just took every 0:13:16.480 --> 0:13:19.000 worse thing you know than you know. Trump on the 0:13:19.040 --> 0:13:21.400 campaign trails set about tariffs and came up with these 0:13:21.480 --> 0:13:23.840 kind of ridiculous assumptions. How I see it as he 0:13:23.920 --> 0:13:26.360 is trying to negotiate this, and I think one change 0:13:26.400 --> 0:13:28.480 we have to remember is Trump is going to say 0:13:28.520 --> 0:13:31.200 this right up until the last minute. Right he can't say, hey, 0:13:31.240 --> 0:13:33.560 don't worry about this, I'm just faking to get them 0:13:33.600 --> 0:13:35.400 to the table, because that would lose all the power. 0:13:35.640 --> 0:13:37.400 He does have the benefit that he actually did put 0:13:37.440 --> 0:13:40.320 tariffs on in twenty eighteen, which at the time a 0:13:40.320 --> 0:13:43.000 lot of econdoms said were awful. We said, we're just 0:13:43.120 --> 0:13:45.319 we weren't starting a trade war. We were only fighting 0:13:45.320 --> 0:13:48.000 back for the first time. None of those economists complained 0:13:48.000 --> 0:13:50.840 in twenty twenty two, when there's twenty twenty when Biden 0:13:50.920 --> 0:13:52.720 left those tariffs on. So I think this is more 0:13:52.800 --> 0:13:55.560 negotiating employee. We'll bring China to the table, We'll bring Canada, 0:13:55.600 --> 0:13:58.240 mex to the table. I think with China it's pretty 0:13:58.240 --> 0:14:00.679 easy negotiations right now. I think think there will be 0:14:01.000 --> 0:14:03.520 we can't give in on anything on high tech. We 0:14:03.600 --> 0:14:05.640 can give in on things like food, and we will 0:14:05.679 --> 0:14:07.280 try and work with them, and China is probably going 0:14:07.360 --> 0:14:09.040 to have to absorb some of the costs of whatever 0:14:09.080 --> 0:14:12.040 get implemented. Is there economies not so well, I would 0:14:12.080 --> 0:14:15.360 say discussions around the world. It's Mexico that just seems 0:14:15.400 --> 0:14:17.600 we should be thinking more about tariffs and more about 0:14:17.800 --> 0:14:19.960 how do we really work with Mexico to create a 0:14:20.040 --> 0:14:24.360 robust environment or an industrial manufacturing base that we can utilize. 0:14:24.440 --> 0:14:27.920 Right Yes, exactly ex staring that that base won't be 0:14:28.000 --> 0:14:31.120 really going away. How does this all then translate to 0:14:31.120 --> 0:14:34.120 the bond market, right, Because in terms of narrative storytelling, 0:14:34.680 --> 0:14:37.520 the story was, ooh, Scot percent, we like him, that's 0:14:37.560 --> 0:14:39.720 going to be good for treasury, that we want to 0:14:39.760 --> 0:14:42.680 buy treasuries a lot, and yields go down. Then today, oops, 0:14:42.760 --> 0:14:45.440 we have tariffs. Maybe that is distressing. We're going to 0:14:45.520 --> 0:14:48.280 sell a little bit in the belly. That's the narrative. 0:14:48.320 --> 0:14:49.760 What's the correct narrative? 0:14:50.440 --> 0:14:52.400 So I think at four fifty it was pretty obvious 0:14:52.440 --> 0:14:54.560 even four to forty five you should be buying treasuries. 0:14:54.760 --> 0:14:57.480 I think we get down to ten four, ten, four fifteen, 0:14:57.920 --> 0:15:00.800 partly because I think people got ahead of themselves on deficits, 0:15:00.840 --> 0:15:03.000 they got ahead of themselves on terrorists, and some of 0:15:03.000 --> 0:15:05.240 that's getting walked back. But I also look very closely 0:15:05.280 --> 0:15:07.960 at positioning. You have spec short interest is very high 0:15:07.960 --> 0:15:09.920 in treasuries. You have a lot of the CTAs are 0:15:09.920 --> 0:15:12.960 allegedly pretty short treasuries. You'd even seen kind of retail 0:15:13.000 --> 0:15:15.280 coming out of some of the long and duration. So 0:15:15.320 --> 0:15:17.920 I think people kind of got whipsawd are badly positioned. 0:15:17.960 --> 0:15:19.520 So I think you get to four to ten, maybe 0:15:19.560 --> 0:15:22.080 four fifteen, that range on tens, and then you want 0:15:22.080 --> 0:15:24.640 to start shorting again because the story won't be rosy 0:15:24.680 --> 0:15:27.160 next year. But people price them way too much, way 0:15:27.200 --> 0:15:27.600 too early. 0:15:28.720 --> 0:15:29.160 Credit risk. 0:15:29.200 --> 0:15:30.880 How much credit risk, if any, do you want to take? 0:15:30.920 --> 0:15:33.160 Because I note that the best performance in fixed income 0:15:33.200 --> 0:15:35.920 has been US high yield and US leverage A loans. 0:15:36.880 --> 0:15:39.120 Yeah, I think you continue to take credit risk. And 0:15:39.160 --> 0:15:41.560 I've looked at it from two standpoints. One is, at 0:15:41.560 --> 0:15:44.040 the high quality end, I think more and more people 0:15:44.080 --> 0:15:46.880 are overweight, you know, short dated corporates versus t bows. Right, 0:15:46.920 --> 0:15:48.360 you still don't know what's going to happen with debt 0:15:48.360 --> 0:15:50.320 ceiling things like that. And then at the long end, 0:15:50.400 --> 0:15:52.360 you have this really neat competition, right, you have all 0:15:52.360 --> 0:15:54.960 this private credit pushing in. And then I think you 0:15:55.000 --> 0:15:56.760 saw a lot of banks pull back on their lending 0:15:56.760 --> 0:15:59.160 after Silicon Valley Bank. So what they've had to do 0:15:59.200 --> 0:16:01.000 is now catch up, so they're lending. So you have 0:16:01.000 --> 0:16:03.360 a lot of support for this, and you know, I'd 0:16:03.360 --> 0:16:05.120 be more worried about the leverage loan than the high 0:16:05.160 --> 0:16:07.120 yield bond market. I think you know one thing I 0:16:07.120 --> 0:16:09.360 really get frustrated. I see a lot of charts ten, fifteen, 0:16:09.400 --> 0:16:12.920 twenty year charts on high yield. It's so not the 0:16:13.000 --> 0:16:14.960 right thing to look at. The high yield market used 0:16:14.960 --> 0:16:17.360 to be very small, issuers companies that you didn't know. 0:16:17.680 --> 0:16:20.160 Almost every issue in the highield market now is big. 0:16:20.320 --> 0:16:22.920 They have public equity. It's hard to get surprised, so 0:16:22.960 --> 0:16:25.920 I think that makes sense. Leverage loans, I think are 0:16:25.920 --> 0:16:27.520 a little bit you know, where you have more one 0:16:27.560 --> 0:16:29.920 off trades. So I would be probably moving out of 0:16:30.000 --> 0:16:33.080 leverage loans focused on, you know, the high yield. I think, 0:16:33.800 --> 0:16:36.480 you know, some of the business development corporations could be interesting, 0:16:36.640 --> 0:16:38.400 but I'm very comfortable credit here right now. 0:16:38.440 --> 0:16:40.880 Still, Peter's so great to catch up with you. 0:16:41.040 --> 0:16:43.280 I mean, it's like any question you ask if you 0:16:43.280 --> 0:16:45.200 have an opinion and answer, and they're usually right. All right, 0:16:45.240 --> 0:16:47.760 Peter Cheer ahead of Macro Strategy at Academy Security. 0:16:47.800 --> 0:16:49.600 Thank you so much. Really appreciate that. 0:16:51.120 --> 0:16:55.000 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:16:55.080 --> 0:16:58.600 weekdays at ten am Eastern on applecar Play and Android 0:16:58.640 --> 0:17:01.800 Auto with the Bloomberg Misiness. You can also listen live 0:17:01.920 --> 0:17:05.360 on Amazon Alexa from our flagship New York station. Just say, 0:17:05.440 --> 0:17:08.040 Alexa playing Bloomberg eleven thirty. 0:17:09.040 --> 0:17:12.400 Let's pust some biotech here. So you have amgine sinking 0:17:12.840 --> 0:17:17.080 after its weight loss drug. Maybe wasn't as good as expected, 0:17:17.080 --> 0:17:19.080 I mean, though it's still delivered some solid results. You 0:17:19.119 --> 0:17:22.600 also have a Novo Nordisk and Eli Lilly rising potentially 0:17:22.720 --> 0:17:25.399 the Biden administration proposing that Medicare and Medicaid covered the 0:17:25.400 --> 0:17:26.200 obesity drugs. 0:17:26.240 --> 0:17:27.040 So who do we go to? 0:17:27.080 --> 0:17:29.639 We go to Sam sam Fazelli, Bloomberg Intelligence director of 0:17:29.680 --> 0:17:34.639 Research for Global Industries and a senior pharmaceutical analyst. Hey, Sam, 0:17:34.680 --> 0:17:36.520 how real is this Biden proposal? 0:17:36.560 --> 0:17:36.960 Do you think? 0:17:38.320 --> 0:17:42.800 Well, Alex, the thirty five billion dollar number was floated 0:17:42.800 --> 0:17:45.480 a little while ago. As to the cost of this 0:17:45.560 --> 0:17:49.440 to the system over nine years, it's not exactly a 0:17:49.520 --> 0:17:53.399 large number, right. If you could genuinely get a significant 0:17:53.480 --> 0:17:56.000 number of people at the sort of ages that they 0:17:56.000 --> 0:18:00.879 are in the Medicare program, reduced their risk of invascular disease, 0:18:00.960 --> 0:18:04.320 reduce the risk of sleep happena, the kidney disease, which 0:18:04.359 --> 0:18:06.680 is what these drugs do, I think that's a win. 0:18:07.119 --> 0:18:09.879 So I think this is a really good possibility for 0:18:09.920 --> 0:18:12.600 it to happen. Obviously, President Biden wants it to happen. 0:18:13.080 --> 0:18:16.280 The question really is whether the next administration is going 0:18:16.320 --> 0:18:18.400 to try and reverse it or would there be appetite 0:18:18.440 --> 0:18:19.280 to continue with it. 0:18:20.520 --> 0:18:23.720 All right, we're speaking weight loss drugs. What happened to 0:18:23.800 --> 0:18:26.840 am jen? It's rare that I see these guys swinging 0:18:26.880 --> 0:18:27.280 miss here. 0:18:29.000 --> 0:18:33.840 Well, so, Paul, I think there was. We've seen this 0:18:34.280 --> 0:18:38.040 movie place over and over again. Companies say we've got 0:18:38.040 --> 0:18:41.199 a great obesity drug, and let's be honest. You know, 0:18:41.240 --> 0:18:46.200 twenty percent weight loss isn't bad and side effect profile okay, 0:18:46.200 --> 0:18:48.120 maybe a little bit worse, but this was a dose 0:18:48.240 --> 0:18:52.520 escalation trial, et cetera, et cetera. The problem is everybody 0:18:52.560 --> 0:18:54.960 gets that sort of level of efficacy. How are you 0:18:55.000 --> 0:18:58.159 going to compete against the might of No One nor 0:18:58.200 --> 0:19:01.760 Disk and Lily when they come to market where they've 0:19:01.760 --> 0:19:06.240 got all those indications just talked about sleep apnea, cardivascular 0:19:06.320 --> 0:19:12.000 risk reduction, kidney osteoarthritis, and they've been on the market 0:19:12.000 --> 0:19:15.000 for X number of years and over noticed with the 0:19:15.040 --> 0:19:18.840 diabetes indication included over and well over a decade. So 0:19:19.240 --> 0:19:21.640 how do you compete? You need better data than that 0:19:21.920 --> 0:19:25.120 and somebody might say, okay, well it's a once a 0:19:25.400 --> 0:19:29.480 month drug. Well really once a month versus once every 0:19:29.480 --> 0:19:31.919 week with the pen that you don't even notice you using. 0:19:32.480 --> 0:19:34.240 I think that's what a lot of people would say. 0:19:34.640 --> 0:19:37.840 So that's where the issue is. They needed to really 0:19:37.960 --> 0:19:41.959 hit a home run and they ran a there and 0:19:41.960 --> 0:19:42.840 also run instead. 0:19:44.040 --> 0:19:45.800 So do you think they're gonna so what's going to 0:19:45.840 --> 0:19:47.440 take for them to not do an also round. 0:19:49.080 --> 0:19:51.360 I'm pretty sure they're going to continue to do the trials. 0:19:52.080 --> 0:19:55.879 Maybe they'll find that they can extend to every quarter 0:19:56.400 --> 0:19:58.760 instead of every month. Then that becomes a little bit 0:19:58.760 --> 0:20:01.520 more interesting potentially. But at the end of the day, 0:20:01.840 --> 0:20:03.840 a lot of these drugs we still we saw it 0:20:03.880 --> 0:20:06.360 with rash, we saw it to a degree with AstraZeneca. 0:20:06.880 --> 0:20:08.680 They come up with the excitement, how we've got a 0:20:08.720 --> 0:20:11.480 new drug. Although at least Rushi and Asentica have some 0:20:11.640 --> 0:20:14.320 oral versions. I think these guys maybe are also looking 0:20:14.320 --> 0:20:18.919 at a rural versions. Uh and the news comes there 0:20:19.040 --> 0:20:22.560 go oh okay, so what does it take. It needs 0:20:22.600 --> 0:20:23.919 to be significantly. 0:20:23.400 --> 0:20:27.439 Different, So about the oral version taking via pill just 0:20:27.520 --> 0:20:29.840 asking for a friend, by by the way, what are 0:20:29.840 --> 0:20:31.600