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Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best of economics, finance, investment and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com
Speaker 1: and of course on the Bloomberg Let me go down
Speaker 1: to Charles Powell. He's remember the House of Lords. Joins
Speaker 1: us from our studios in London, where Tom Keen is
Speaker 1: all week and Lord Power. Let me just get you
Speaker 1: to react to to what we've seen today. Of course
Speaker 1: we've got data on manufacturing, industrial production as well the
Speaker 1: trade gap in the UK. Give me your reaction to
Speaker 1: what we've heard from the BOE today. Well, mine is
Speaker 1: not a particular skill. Three, I'm not. I'm unsurprised. As
Speaker 1: the short answer, I didn't expect to see interest rates
Speaker 1: go up. I think a month before an election would
Speaker 1: be any way quite sporting to try and do something
Speaker 1: like that, even though across the bank of being it
Speaker 1: is independent. So no, it sounds to be thoroughly sensible
Speaker 1: as any man. Let me let me get your your
Speaker 1: your sense of word things stand with Brexit. At this
Speaker 1: point we have a negotiations continuously press ahead of the
Speaker 1: snap election on the eighth of June. Give us at
Speaker 1: your perspective on what campaigning is like at this point.
Speaker 1: The import of this election that we face here in
Speaker 1: less than a month's time. Now, well, it's quite clear
Speaker 1: the reason that Mrs May called an election was to
Speaker 1: strengthen her hand in the negotiations over Brexit. She had
Speaker 1: quite a narrow majority in the House of Commons and
Speaker 1: merely sixteen votes, and not everyone in the party would
Speaker 1: agree with everything she wants to do, so she needed
Speaker 1: a bigger majority, and so she's staking all on getting
Speaker 1: that bigger majority. We shall see four weeks today whether
Speaker 1: she succeeds. But the opinion polls seem to be fairly
Speaker 1: strongly in her favor. The b we here reducing its
Speaker 1: growth forecast at to one point nine from two percent
Speaker 1: for so long after the weight In the wake of
Speaker 1: that Brexit vote, the first Brexit vote, uh, so, many
Speaker 1: economists were telling us that the effects on the economy
Speaker 1: were more muted than many expected. What's your sense of
Speaker 1: growth right now in the UK? Are we seeing a
Speaker 1: Brexit effect in a way that we didn't in the
Speaker 1: immediate aftermath of that vote. I'm not sure how much
Speaker 1: of it is really affected by Brexit. I think the
Speaker 1: growth rate was bound to sort of wobbles a little bit,
Speaker 1: but it hasn't wobbled greatly. I'd still be pretty optimistic
Speaker 1: about Britain and the run up to Brexit, and I
Speaker 1: think that also the European economies are doing better. Um
Speaker 1: So I'm unexcited. Let's put it like that. I'm untroubled.
Speaker 1: I'm unperturbed. I'm not flapping about Brexit. How about the
Speaker 1: corporate migration we've heard so much about over these last
Speaker 1: couple of weeks. We've had various banks outline plans to
Speaker 1: send a few dozen, a few hundred employees elsewhere. How
Speaker 1: worried are you about the prospects of that A flight
Speaker 1: from the city of London. Well, I'm frankly not terribly worried.
Speaker 1: I've never thought London was a great financial center because
Speaker 1: we were in the European Union. I mean, we were
Speaker 1: a great financial center like New York's a great financial
Speaker 1: center because of what we are, because of the policy,
Speaker 1: of the policies, the economic life of this country, the traditions,
Speaker 1: great experience of the city Europe have very little to
Speaker 1: do with it. I think banks are taking some sensible
Speaker 1: precautionary measures, check a few guys over there in Europe
Speaker 1: to get the necessary licenses and so on. But don't
Speaker 1: don't talk now about really locating on a massive scale.
Speaker 1: It would be pointless. I mean, Frankfurt and Paris are
Speaker 1: not going to be world financial centers. They really are not.
Speaker 1: I mean, more people work in the square miles of
Speaker 1: the city of London live in the whole of Frankfort.
Speaker 1: So it's it's all very relative. Lord power with us
Speaker 1: Charles Powell, member of the House of Lords, from a
Speaker 1: private secretary and advisor on Foreign Affairs and defense to
Speaker 1: Lady Thatcher here on Bloomberg Surveillance, Tom Keen with us
Speaker 1: now at from London, you're more approximate to threaten Neeedle Street,
Speaker 1: of course than then. I watch your reaction to the
Speaker 1: news that we got this boarding time taking British accent lesson.
Speaker 1: So I'm gonna try to come back to New York
Speaker 1: with an appropriate and proper British accent. We are honored
Speaker 1: to have you with us, out Lord Power, with your
Speaker 1: public service to the nation of long ago and far away.
Speaker 1: Does the United Kingdom speak to the leadership of Europe
Speaker 1: now as they spoke to the leadership twenty and thirty
Speaker 1: years ago? Is the same dialogue and discourse or will
Speaker 1: it be different? Well, many of the themes are the same,
Speaker 1: and of course in some areas not covered by the
Speaker 1: European Union, by which I mean particularly defense and security,
Speaker 1: the dialogue will go on unchanged. Obviously, ever matters about
Speaker 1: our membership of the EU, it's a different sort of
Speaker 1: dialogue and it's in a difficult phase. You would have
Speaker 1: read the reports of the famous dinner between Prime Minister
Speaker 1: Theresa May and the President of the European Commissioner, Mr
Speaker 1: Yunka talking about us from pretty much of a punch
Speaker 1: up which went on that. I think that's because we're
Speaker 1: in the phase before the real negotiation staff when both
Speaker 1: sides are sort of squaring up. They're strutting around the ring,
Speaker 1: beating their chests, flexing their muscles. The serious stuff hasn't
Speaker 1: started yet. Did John money do that. I mean, I
Speaker 1: just find the cadence today totally different than what I
Speaker 1: studied of your well, John money is even before my time.
Speaker 1: But of course I think the point I would make
Speaker 1: on that, because there's an ideological belief in European Union
Speaker 1: amongst the original countries of the European Community, they really
Speaker 1: subscribe to a belief and a principle. Much of that
Speaker 1: is evaporated over the years. You can't get twenty eight
Speaker 1: countries thinking and feeding exactly the same as the original six.
Speaker 1: The general aim of closer European Union is officially there,
Speaker 1: it's written on all the documents, but I don't believe
Speaker 1: anyone really believes in Sydney wore as a practical outcome. Cooperation, yes,
Speaker 1: maybe tighter cooperation between smaller groups of countries within the
Speaker 1: twenty seven or eight, but not the full the full work.
Speaker 1: So that's just not going to happen. It's under estimation then,
Speaker 1: has as the experiment itself failed. No, I certainly don't
Speaker 1: think it's sailed. Obviously, one of the main principles, one
Speaker 1: of the main hopes for it was it would prevent
Speaker 1: any future war in the middle of Europe, and that
Speaker 1: I think but further away from hoever, thank god, I
Speaker 1: need to rip up the script. Am I allowed to
Speaker 1: do that? I mean, you know, I'm watching Bank of
Speaker 1: England here and I'm I'm trying to get it up
Speaker 1: here on my Bloomberg terminal. There we go. It took
Speaker 1: me a while to type in the keyboard. Is different.
Speaker 1: Sterling is lower with a real drop and this of
Speaker 1: course has to do with GDP forecast and higher inflation
Speaker 1: as well. What's your first regulation of sterling two dollar?
Speaker 1: Was it four to one? Yes? It was full to one.
Speaker 1: I was in at the time because the US can
Speaker 1: talk to hear about that. You were there for water
Speaker 1: again And yes, at the time when when the US
Speaker 1: came out of gold currency started seventy three, Yeah, I
Speaker 1: was sitting there in Washington. This is your first radio announcement.
Speaker 1: I know the BBC. You can be four ft back
Speaker 1: from the mic there, You've got to be a little closer.
Speaker 1: But but how do you how do you adjust to
Speaker 1: the generational sterling devaluation We've seen I think people who
Speaker 1: have become cylical about it over the years. We've had
Speaker 1: so many fluctuations in the UK. When you think back
Speaker 1: to the sort of inflation we experienced in the nineteen
Speaker 1: seventies and early people see this by comparison as a
Speaker 1: calm time, steady time. I think the initial drop of
Speaker 1: sterling after after the vote on brixit was a bit
Speaker 1: of a shock, but not an unexpected shock. Really people
Speaker 1: would have thought that would happen, and it has advantages
Speaker 1: to It's helped our export figures really quite considerably. So
Speaker 1: there's no sense of PANDAE cattle the person is losing control.
Speaker 1: Things are going pretty well. This has been wonderful. My
Speaker 1: next trip back to London, I'll drag David Gurrow with
Speaker 1: you and we would love to speak to you and
Speaker 1: Daniel Jurgen together. I think that would be just a
Speaker 1: really special Danielson would be great to be We can't
Speaker 1: stand you or Lord Paul. Thank you so much, Charles
Speaker 1: Paul with his public service during the major Thatcher administrations
Speaker 1: and in Dr Jurgen, if you're listening, we would love
Speaker 1: to make that happen right now. We can do that
Speaker 1: right now. Joining us now, James Davids a Fletcher School,
Speaker 1: Tough University. We speak to the Admiral about leadership differently
Speaker 1: than we would have spoken to him two or three
Speaker 1: or four days ago, Admirals Davids. I'm reading Eric Larabee's
Speaker 1: incredible one volume on FDR and his Oval Office. Somehow
Speaker 1: I can't fathom FDR keeping the American press out of
Speaker 1: a photo op in the Oval Office. I mean, these
Speaker 1: are unique times. Your interpretation of what you've observed from
Speaker 1: the White House in the last two days, well, I'm worried.
Speaker 1: I think everyone is. Um I'll sort of pin my
Speaker 1: hopes on hr McMaster, who kind of General McMaster, who
Speaker 1: wrote an extraordinary book, Dereliction of Duty, the subject of
Speaker 1: which is the need to speak truth to power. It's
Speaker 1: about the Joint chiefs during the Vietnam War and how
Speaker 1: they failed in their duty dereliction of duty to the
Speaker 1: President of the United States. Uh. It is important in
Speaker 1: these times that people are unafraid to walk into the
Speaker 1: Oval Office and tell the President when he is embarking
Speaker 1: on a dangerous course. And I think we are in
Speaker 1: those times. So I'm hopeful that Hr McMaster's voice will
Speaker 1: be heard. Do those of a military tinge need to
Speaker 1: speak up? I mean, I understand the discourse of voices
Speaker 1: need to be heard. I mean the movies would tell
Speaker 1: me that the Secretary Defense wanders into the office and says,
Speaker 1: excuse me, sir. Does that happen? Absolutely? And that's okay.
Speaker 1: We have to respect the institutions, but that respect has
Speaker 1: to flow both ways. Tom. In other words, those who
Speaker 1: hold positions of power must respect them, and those who
Speaker 1: are subordinate must respect those in power. But there has
Speaker 1: to be confrontation behind closed doors so that our leaders
Speaker 1: do not take missteps. You mentioned hr McMaster, the head
Speaker 1: of the NSC. There was more reporting this week from Eli,
Speaker 1: like our colleague here at Bloomberg among others, talking about
Speaker 1: a potential divide among the NSC again, maybe some tension
Speaker 1: between the president and an hr McMaster. What's your reaction
Speaker 1: to that? Do do you get the sense that that continues?
Speaker 1: And how worrisome is that to you? Uh, It's worrisome,
Speaker 1: but it is not in my view definitives. From what
Speaker 1: I can source, hr McMaster continues to have the confidence
Speaker 1: of the President. He has regular interaction with him. I
Speaker 1: think his voice will be heard. Now, let's say said
Speaker 1: hr McMaster is the National Security Advisor. He's opening most
Speaker 1: emphatically on Russia, China, North Korea, these domestic issues. I
Speaker 1: think we have to turn to the Chief of Staff
Speaker 1: Rance previous and hope that he is speaking proof to power.
Speaker 1: What's the message from what we've seen unfold here over
Speaker 1: these last couple of days to other members of this
Speaker 1: administration positions of power? Does that seem like those positions
Speaker 1: are more tenuous somehow? Yes, you serve at the pleasure
Speaker 1: of the president, But it seems like under this administration
Speaker 1: that can change rather quickly. It's pretty remarkable to see
Speaker 1: both the National Security Advisor fired as well as the
Speaker 1: FBI director in the first hundred and twelve days of
Speaker 1: an administration. So sure, any job that you're holding in
Speaker 1: this admit stration must feel more tenuous today than it
Speaker 1: did four days ago. On the other hand, that is
Speaker 1: the nature of the system and the nature of the
Speaker 1: executive branch. The president has power, and people serve at
Speaker 1: the pleasure of the president. When you hit a policy
Speaker 1: you cannot abide, you have the option to resign. Let's
Speaker 1: hope we don't get to that point where people are
Speaker 1: walking out the doors. Um At mustavidez. Can you bring
Speaker 1: Doris Karren's Goodwin's team of rivals over to something as
Speaker 1: fractious as the Senate? I mean they're above it all.
Speaker 1: They don't need to read Doris Karen's Goodwin or the
Speaker 1: Senator McConnell and the rest do They a team of rivals?
Speaker 1: And uh, I think that we have not seen that
Speaker 1: in quite a while. Frankly, you'd have to go back
Speaker 1: in modern times perhaps to the Reagan tip O'Neill famous linkages.
Speaker 1: But on the Senate side, Um, typically we've seen collegiality,
Speaker 1: but over the decades. But now, Tom, you're absolutely right,
Speaker 1: we see the horses pulling in distinctly different directions. That's
Speaker 1: to me extremely worrisome because the founding fathers built the
Speaker 1: Senate to provide stability, to pride, compromise, to rise above
Speaker 1: the petty issues. It's not happening. What did you make
Speaker 1: of that moment yesterday when the Oval Office tour swung open,
Speaker 1: and sitting there in was Henry Kissinger, A middle of
Speaker 1: the conversation we've had about the parallels right or wrong
Speaker 1: to what happened in nineteen three, talking of the optics
Speaker 1: that you're you're witnessing here from this administration, Well, uh,
Speaker 1: really extraordinarily bad optics. I mean, you know, sort of
Speaker 1: what's happening can run on a scale from UH Director Comb.
Speaker 1: He did a bad job. The President was within his
Speaker 1: rights to fire him over to hey, it's a conspiracy
Speaker 1: because Comy was investigating the Russians. What we what we
Speaker 1: know for sure is the optics of this are hideous.
Speaker 1: And it's not just Kissinger in the link to water Gate.
Speaker 1: Who was the previous visitor in the White House, Lavara,
Speaker 1: the secret Foreign Minister of Russia. So just badly mishandled.
Speaker 1: Just coincidentally, early or in the day, I had a
Speaker 1: chance to be with former Secretary Kissinger, and I'll tell
Speaker 1: you he is on his game, and he told me
Speaker 1: he would be talking to the President about China, North
Speaker 1: Korea and the European Union in Russia. The President could
Speaker 1: not get better advice based on everything I know in
Speaker 1: my interactions even earlier in the day with Dr Kissinger.
Speaker 1: The President of Turkey is going to be watched in
Speaker 1: next week. That's President air Duan. What do you make
Speaker 1: of the the list of leaders with whom the President
Speaker 1: has been engaged? Of course, he's invited President to Tarte
Speaker 1: of the Philippines to come to the White House as well.
Speaker 1: When you when you look at all the leaders around
Speaker 1: the world, and then all the leaders that he's invited
Speaker 1: to the White House. What do you make of that list? It's, uh,
Speaker 1: it's kind of a mixed picture. I'm extremely concerned about
Speaker 1: the idea that we would invite the Turte of the
Speaker 1: Philippines to the White House. He is he's not the
Speaker 1: kind of character that we want sitting with the President
Speaker 1: of the United States. UM. I was also st that's
Speaker 1: the awkwardness of the interaction. For example, is Angela Merkel
Speaker 1: the Chancellor of Germany. UM So he's arranged the spectrum
Speaker 1: in terms of who he's inviting who's actually bringing in.
Speaker 1: The key is what are the personal relationships he's building,
Speaker 1: the most important of which will be with President g
Speaker 1: One more quick question you want to get you on
Speaker 1: your day at Fletcher What are the what are the
Speaker 1: personal relationships as president needs to uh develop with General Madison,
Speaker 1: with Mr Tillerson. He's got to be in an absolute
Speaker 1: mind milk with two of them. And here's some good news.
Speaker 1: The two of them, Tillerson and Madis are working very
Speaker 1: very closely together, meeting frequently and also with Secretary of
Speaker 1: Homeland Security John Kelly. That's a powerful trio. If he
Speaker 1: means on them for advice, and he continues to reach
Speaker 1: outside to people like Dr Kissinger. I think he'll be
Speaker 1: on a good course at least on the international side
Speaker 1: of his portfolio. Alright, great to speak with you as
Speaker 1: always there. Emirald James Tefrita is heading up to the
Speaker 1: Dirks and Senate Office Building to testify before the Senate
Speaker 1: Armed Services commit He joined us on our phone lines.
Speaker 1: Tom always great to hear his perspective. The Dean of
Speaker 1: the Fletchery School Slam Diplomacy at Tofts University. Brought you
Speaker 1: by Bank of America. Mary Lynch. Dedicated to bringing our
Speaker 1: clients insights and solutions to meet the challenges of a
Speaker 1: transforming world. That's the power of global connections. Mary Lynch, Pierce,
Speaker 1: Feeder and Smith Incorporated Member s I p C. There's
Speaker 1: something new from Bloomberg. It's called Lens. Starting right now,
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Speaker 1: In addition, see all the bios of the key people
Speaker 1: into the story. It's called lens, and it is just that,
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Speaker 1: story you may be reading. Again, Lens brings you the
Speaker 1: power of Bloomberg's news and data. Download or io s
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Speaker 1: Store to try lens out. Learn more at Bloomberg dot
Speaker 1: com slash lens. David Garray in New York, Tom Keene
Speaker 1: in London. As I fumble here on the Bloomberg, typing
Speaker 1: k W one commodity, trying hard to get my hard
Speaker 1: red winter wheat up on the Bloomberg, a man who
Speaker 1: can help me do that is one Dennis Gartman, of course,
Speaker 1: of the Gartman lettered. Let's let's let's get this out
Speaker 1: of the way first. How is hard red winter wheat doing, Dennis,
Speaker 1: It's boring, Lee boring, It's doing very little. Actually the
Speaker 1: crop is doing fine. There There were problems last week
Speaker 1: with excess rain. But in people one might scoff about
Speaker 1: software or hard read winter week. But it is the
Speaker 1: stuff of which bread is made, and bread is still
Speaker 1: the staff of life and dreams. Bread and dreams, yes,
Speaker 1: and and the and of dreams. Absolutely so if the
Speaker 1: crop is doing fine. Thanks very much, Dan, it's great
Speaker 1: to talk with you. As always, will move move on
Speaker 1: down out the matter. As we've been talking throughout the
Speaker 1: morning all day yesterday about what we've seen in Washington,
Speaker 1: the firing of James Comey, the now former director of
Speaker 1: the FBI, and the fallout from that, and we've seen
Speaker 1: precious little response here in the market. You note in
Speaker 1: your in your letter yesterday that that might be news
Speaker 1: in and of itself. Why is that the case? Do
Speaker 1: you think? Well, it is astonishing how everybody's talking about it.
Speaker 1: There are two things everybody's talking about. One, the Cobe incident,
Speaker 1: and to the lack of volatility. Utterly everywhere in all
Speaker 1: the markets, there is a total lack of volatility. And
Speaker 1: perhaps until and you can write this down, volatility will
Speaker 1: return when it returns, and it won't return until a
Speaker 1: moment before then. It will return when nobody cares any
Speaker 1: longer about it, when it has been when it has
Speaker 1: ceased to be a topic of conversation. And probably the
Speaker 1: the COMI incident, now that people understand that it was
Speaker 1: probably an ungentlemanly manner in which it was done. One
Speaker 1: doesn't fire people via node. One fires people across the desk,
Speaker 1: But other than that it probably was understandable. So in
Speaker 1: the long term of things, not not much effect, to
Speaker 1: be honest. A book that you and I love Dennis Gartman,
Speaker 1: Reminiscence of a stock Operator. You were around when Edward
Speaker 1: le Favre wrote it, um Edwin LaFave wrote it. Here's
Speaker 1: a quote. The desire for constant action, irrespective of underlying
Speaker 1: conditions is responsible for many losses in Wall Street, even
Speaker 1: among the professionals. That's a quote from another time. What
Speaker 1: do you do to enjoy not losing money when it's
Speaker 1: this boring? Trying to stay upon the sidelines to the
Speaker 1: best of one's ability, trying trying to buy break ups
Speaker 1: to the upside, trying to sell break up of the downside,
Speaker 1: trying to find the charred patterns that one finds interesting
Speaker 1: that where the fundamentals are are also moving in the
Speaker 1: same direction, but on balance keeping one's powder dry. It is,
Speaker 1: it really is astonishing, how boring is the movement from
Speaker 1: the up from the lower left of the upper right.
Speaker 1: And it shall continue tom It is always enjoying, enjoyable.
Speaker 1: Dennis Gartment. To do a panel or speech with one
Speaker 1: g Kamensky. Gary Kaminsky with all of his work over
Speaker 1: the years on making a nut losing money, and he
Speaker 1: brought up a Dennis Gartment concept. Explain to our audience
Speaker 1: anti Martin gel theory, where you buy more of something
Speaker 1: when it begins to go up, you don't buy more
Speaker 1: something and double down, etcetera, etcetera. Explain that to our audience.
Speaker 1: It's it's a very simple concept in life. If you
Speaker 1: do more of the things that are working and less
Speaker 1: of the things that are not. As I say in
Speaker 1: speech after speech, gentleman, if you take flowers to your
Speaker 1: girlfriend or your wife more often and you get lucky
Speaker 1: more often, take her flowers on a more consistent basis,
Speaker 1: and be nicer. Do the things that are working. Yes,
Speaker 1: it's true. Do the things that are working, and try
Speaker 1: your best to do less of the things that are not.
Speaker 1: If you buy a stock at fifteen and it goes
Speaker 1: to twenty, the market's telling you that you're right, do
Speaker 1: more of it. If you buy a stock at fifteen
Speaker 1: and it goes to ten, the market, the collective wisdom
Speaker 1: and the stupidity of everyone trading, it's telling you that
Speaker 1: you're wrong. Why would you do more of something that
Speaker 1: has been going wrong. So it's a very simple notion.
Speaker 1: The difference I think between pros and amateurs is that
Speaker 1: pros will buy new highs. Amateurs are always trying to
Speaker 1: buy new lows. This is not a business. I've said
Speaker 1: this time and time again, and when I deviate from
Speaker 1: an eye er. This is not a business of buying
Speaker 1: low and selling higher. This is a business of buying
Speaker 1: high and selling higher. This is a business of being
Speaker 1: of shorting something that's already made a new low, because
Speaker 1: in all likelihood it shall go even lower. Ask Mr
Speaker 1: Ackman about the the What what happened as he continued
Speaker 1: to buy Valiant all the way down from what three
Speaker 1: dollars to share and he finally sold out at ten.
Speaker 1: Do more of that which is working, less of that
Speaker 1: which is not, and it will serve you very well.
Speaker 1: Dennis will come back with you. But I'm running down here.
Speaker 1: I have to buy buy flowers. What else should I
Speaker 1: be buying at this point? What's another? One's another opportunity
Speaker 1: to work work argue at this point by by aluminum
Speaker 1: by ball bearings. Everybody laughs at me for the for
Speaker 1: the concept of buying America's largest ball bearing manufacturer. But
Speaker 1: what's more incumbent in economic growth than than the things
Speaker 1: that are absolutely important to machinery. Machines can't run without
Speaker 1: ball bearings, and nobody's paying attention to it except American's
Speaker 1: large at a ball bearing manufacturer keeps going to new highs.
Speaker 1: Let's get some economic analysis in real time here, Dennis PPI,
Speaker 1: there up point three more than than was surveyed. What's
Speaker 1: your read on the numbers we just got today? Those
Speaker 1: are rather impressive numbers. Clearly the set wants to see
Speaker 1: higher inflation and it's finally getting it. I think what's
Speaker 1: even more important than the p p I number, which
Speaker 1: was was well above expectations, and the two point five
Speaker 1: x food and energy for the year over year is
Speaker 1: very is well above expectations. But what's interesting is the
Speaker 1: jobless claims number keeps plunging. To use a uh Tom's term,
Speaker 1: making newer and lower low is a two thirty six thousand.
Speaker 1: The jobs market is getting very tight out there. We
Speaker 1: simply don't have we we we are running out of
Speaker 1: laborers on a very quick basis, and you're going to
Speaker 1: start to see labor rates begin to tip up, I
Speaker 1: think rather quickly. So in the inflation numbers is really
Speaker 1: quite surprising. Uh. The the the claims number is even
Speaker 1: more surprising. And I think inflation is now on the
Speaker 1: on the horizon. Let's pivot back to London here. We
Speaker 1: also got inflation data quarterly inflation data from the BOE
Speaker 1: this morning. Is Tom mentioned we've seen diminution in in
Speaker 1: sterling this morning. Uh, Tom, Joey the long and getting
Speaker 1: killed on it. What's your outlook for sterling? Dennis? You know,
Speaker 1: at it's very hard for me to be barish of
Speaker 1: sterling relative to the US dollar. If if, if the
Speaker 1: the the euro continues to weekend, and I think that
Speaker 1: Euro probably shall it may drag Sterling down. But quite honestly,
Speaker 1: I think that we've seen the worst as far as
Speaker 1: the cable is concerned. So if you made me do something,
Speaker 1: if I have had a gun held in my head
Speaker 1: and I had to buy or sell cable right here,
Speaker 1: the sterling right here, I'd rather be a buyer than
Speaker 1: a seller. But you'd have to hold a gun to
Speaker 1: my head to make me do it. We've gotten quiet,
Speaker 1: Dennis Gartman on dollar. We had a big leap couple
Speaker 1: of years ago, and yeah, it's been just sort of
Speaker 1: training range, but maybe not as range about as oil.
Speaker 1: But there it is, is is that the big surprise
Speaker 1: to come where the optimism gartment has on the US economy.
Speaker 1: By definition, you get a stronger dollar. I think that
Speaker 1: the propensity shall be for the dollar to get, if
Speaker 1: not dramatically stronger, at least the reasonably stronger over the
Speaker 1: course of the next several years. There we we will
Speaker 1: tighten monetary policy long before anybody else shall. Our economy
Speaker 1: is doing reasonably well, thank you, compared to most any
Speaker 1: other economy anywhere around the world. So on balance, all
Speaker 1: things being otherwise equal, calm, the dollar has to go higher,
Speaker 1: not lower. Bringing your most recent note here, Dennis, say
Speaker 1: you highlight euro Swissy in light of the election in France.
Speaker 1: What are you looking for there in that cross? You
Speaker 1: know what has been happening that it's very fascinating that
Speaker 1: the Swiss National Bank is really almost the world's largest
Speaker 1: macro hedge fund. The Swiss National Bank has been trying
Speaker 1: its best and had not been succeeding until the election
Speaker 1: results of last week in trying to keep the Swiss
Speaker 1: Franc weak. Suddenly since the election, which puts to bed
Speaker 1: the risks of the Euro collapsing and falling apart. Uh.
Speaker 1: Suddenly the Swiss franc has has weakened rather dramatically relative
Speaker 1: to to the Euro. The Swiss have been selling Swiss francs,
Speaker 1: creating Swiss francs, buying euros, buying dollars, buying in and
Speaker 1: taking those currencies and buying stocks. They are now one
Speaker 1: of the world's largest shareholders, rivaling rivalry, rivaling the the
Speaker 1: Norwegian UH government fund. And it's astonishing. Nobody's paying much
Speaker 1: attention to you back. Do you assume, Mr Gartman? Do
Speaker 1: you assume that ends ugly? All these these things, things
Speaker 1: such as that almost always end ugly. But for right
Speaker 1: now they've got the wind at their back, at least
Speaker 1: for the last week. Let's give them credit for that.
Speaker 1: But Tom, you and I have been around a long time.
Speaker 1: Things like that usually end in a in a very
Speaker 1: ugly fashion. When shall that happen? Your guess is as
Speaker 1: good as mine, but it probably shall. Let's been here
Speaker 1: to the equities markets in the time we have left
Speaker 1: with you, just about a minute left with you, Dennis Gartman,
Speaker 1: how are you feeling about US equities right now? Still
Speaker 1: a bullmarket, isn't it? As I've said for months and months,
Speaker 1: in a bullmarket, and only prepositions you can have really
Speaker 1: aggressively long, pleasantly long, or neutral. At this point, you're
Speaker 1: supposed to be pleasantly long. It is a bull market,
Speaker 1: and every time I hear on call on the side
Speaker 1: of selling it, I regret it. Let's get out in
Speaker 1: front of the Garment Letter tomorrow. We're going to have
Speaker 1: our David Abits join us here. Howard. It is an
Speaker 1: extraordinary morning for all of retail as they witness the
Speaker 1: further collapse of Macy's. It is a down six ball
Speaker 1: market from the seventies, it's down some twelve percent today.
Speaker 1: I don't have the chart right in front of me
Speaker 1: right now, Dennis, retail, do you just get out of
Speaker 1: the way? Is that the Gartment advice? You have no choice,
Speaker 1: do you? It's retail has been has been distraught and destroyed.
Speaker 1: Amazon has changed the environment completely. It is even putting
Speaker 1: pressure upon of all places, Walmart. So mom and Pop
Speaker 1: may survive, but the middle side stores it is. It
Speaker 1: is a terrible and dangerous place. So if you have
Speaker 1: no choice, get out, Dennis. Thank you so much, Dennis Gartment.
Speaker 1: The Gartment Letter, we do not have the gartment letter
Speaker 1: to ship to you by carrier pigeon. We protect the
Speaker 1: copyright of all of our guests today. David Kerry, New York,
Speaker 1: I'm talking Keenan, London, England and now joining us is
Speaker 1: someone who understands retail and understands real estate. Whether it's
Speaker 1: River Ridge in Lynchburg, Virginia, landmarkt and Alexandria, Virginia, Good
Speaker 1: Morning FM in Washington, maybe it's out at Northgate Durham,
Speaker 1: North Carolina, or maybe it's you know, thank you, Silver
Speaker 1: City Galeria taught in Massachusetts, Howard. Davidovitz has been to
Speaker 1: them all. Howard, a workout like Macy's is about real estate,
Speaker 1: isn't it. Well, it's certainly a big part of it
Speaker 1: because the stores are too big. You also have to
Speaker 1: use the real estate to generate new capital to reinvigorate
Speaker 1: the business. They're doing that. Uh, there're in the process
Speaker 1: of monetizing a lot of it. Stores have to be downside,
Speaker 1: stores have to be closed. The core problem is that
Speaker 1: a number of years ago Macy's doubled their size and
Speaker 1: what the main company they both did about sixteen billion
Speaker 1: at the time. It was a disastrous decision because they
Speaker 1: got second rate stores in second rate malls. Macy's at
Speaker 1: the time was number one and number two in every city,
Speaker 1: and they raced out and what the main company to
Speaker 1: double their size. When you look back on it, and
Speaker 1: of course I said it at the time everywhere. Uh,
Speaker 1: it was a disastrous decision and they did it, and
Speaker 1: now they're paying a price, you know, I I we
Speaker 1: were talking about the Harold Squares store just a few
Speaker 1: moments ago. How much longer this company can hold on
Speaker 1: to that? What would it mean to Macy's for Macy's
Speaker 1: to have to get rid of that piece of real state. Well,
Speaker 1: they're never going to get rid of that. That's what
Speaker 1: you just said is impossible. It won't happen. Here's what
Speaker 1: will happen in Harold Square is the same thing they're
Speaker 1: doing in Chicago. It's the same thing they're doing in Minneapolis.
Speaker 1: The store is way too big. What they can do
Speaker 1: is monetize it by finding a way to have multi
Speaker 1: use development, office, hotel, and that's exactly what they will
Speaker 1: do and it's exactly what it so they'll end up.
Speaker 1: You can't. I mean, a million square foot store is
Speaker 1: nush and that's what they got, so they'll end up
Speaker 1: with a half a million square footstore or four dred
Speaker 1: thousand square footstore, which is plenty big. It's enormous, and
Speaker 1: that's what that's what they'll do it Harold Square. I'll
Speaker 1: raise a mountain of money and they'll downsize the store.
Speaker 1: They will never get at Herald Square. Are we still
Speaker 1: building malls anywhere in this country? Are there any malls
Speaker 1: under construction? What is the mall of two thousand seventeen?
Speaker 1: The mall of two thousand seventeen doesn't exist because we're
Speaker 1: not building any enclosed mall zero. We're at level zero.
Speaker 1: We have to close malls. We have to change malls
Speaker 1: that there aren't any malls were dramatically overstored with dramatically overmalled.
Speaker 1: The whole thing doesn't make sense. There has to be
Speaker 1: a huge adjustment take place. How do we get here?
Speaker 1: How how did it make sense or how did it
Speaker 1: make sense on paper? For a time? Well, it made
Speaker 1: sense because number one, cheap money, that's what drives real estate.
Speaker 1: Number two, the crazy lunatic analysts who come on radio
Speaker 1: and televisions, who come on and immediately and ask, well,
Speaker 1: you gotta grow at this rate? You gotta do this,
Speaker 1: and that we can't give you this multiple So of
Speaker 1: course every retailer went completely bananas, dancing to the tune
Speaker 1: of growth, tremendous growth, because that's what you have to have.
Speaker 1: Blah blah, blah blah. That's how we ended up the
Speaker 1: most overstought country in the world by a factor of fool,
Speaker 1: which is absolutely astounding, dancing to wolf streets, looney tunes
Speaker 1: and private equities, crazy attitudes, and that's how we got here.
Speaker 1: Within this our is merchandizing. I'm looking at the Macy's website.
Speaker 1: It says trend shop are curated boutique of the latest arrivals,
Speaker 1: fresh off the runway. Are they cool? The big note
Speaker 1: they're not cool, and no department store is cool. They're
Speaker 1: too big to be cool. If you want to be cool,
Speaker 1: you've got to have a focused presentation in a specialty store.
Speaker 1: That's what's cool. So you can't have this gigantic edifice
Speaker 1: and be cool because young people are not going to
Speaker 1: go there. So cool is out. But here's what's in
Speaker 1: the biggest merchandizing change. Macy's is facing and and and
Speaker 1: they they've been in a statement in a massive sleep
Speaker 1: for a ten years behind is off price. For ten years,
Speaker 1: off price has been the most powerful for US and
Speaker 1: apparel in America. Norts From has double double the number
Speaker 1: of off price nords from rackings that I have nords
Speaker 1: from sacks of fit. Macy's has been asleep and they've
Speaker 1: done nothing. Nothing woke up, Get Howard. I'm looking at
Speaker 1: the Zaro website granteds in the United Kingdom, folks from
Speaker 1: London and York. Today Azara doesn't sell price, They're selling
Speaker 1: the image, the trendy, the cool. Does price work anymore?
Speaker 1: Are we exhausted by ten percent off? I don't think
Speaker 1: we're exhausted, because if we were, t J Max wouldn't
Speaker 1: be the leading apparel chain in the world. So I
Speaker 1: don't think we're exhausted by a good deal. I do
Speaker 1: think we're exhausted by over promotion that are not real promotions,
Speaker 1: which traditional department stores like Macy's specialize in, because after
Speaker 1: they give you the deal, t J Max is still
Speaker 1: less and all the shoppers know it. So I think
Speaker 1: people like promotions that are real, not fake promotions. And
Speaker 1: Macy's and older department says, I'm not naming me mean
Speaker 1: all of them specialize in fake promotions and those don't work. Uh.
Speaker 1: And Amazon is certainly gonna shake and is shaking it
Speaker 1: all up. They'll do more apparel business than May sees
Speaker 1: this year. So there's more apparel business than Macy's. Amazon,
Speaker 1: and they just started David asked a question, so hard
Speaker 1: I will say, it's in the crapper. Yeah, And Howard
Speaker 1: we started off asking about all the walking that you
Speaker 1: have to do, all the geography that you have to cover.
Speaker 1: How about virtual geography. When you look at the online
Speaker 1: stories aside from Amazon, who's doing online retailing? Well, well
Speaker 1: you want to know who's doing it, Well, the brick
Speaker 1: and water stores. If you look at Macy's penetration, they're
Speaker 1: doing business online. That's pretty damn good. Let's take the
Speaker 1: best brick and water store in the world and online,
Speaker 1: the best staples of business online eleven point two billion online.
Speaker 1: How would they do it? They're in the crapper. In
Speaker 1: other words, it didn't help them because they still have
Speaker 1: are this real estate to deal with. So no matter
Speaker 1: how johnline business you have, if you've still got all
Speaker 1: these courts and all this real estate, you're in that
Speaker 1: bank to brick and water Source eight out of the dead.
Speaker 1: Largest online companies in America are brick and Yeah, and
Speaker 1: they'll still in the tank. And they will remain in
Speaker 1: the tank. Our dividivets thank you so much and Carol
Speaker 1: master sends your kindness regards to you as uh well.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
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