1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:34,440 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Joining 5 00:00:34,520 --> 00:00:37,600 Speaker 1: us now a constructive credit Swiss maintaining a positive view 6 00:00:37,760 --> 00:00:40,720 Speaker 1: on global equities with a preference for emerging markets. Let's 7 00:00:40,720 --> 00:00:43,960 Speaker 1: talk to James Sweeney show we credit Swiss is chief economists. 8 00:00:43,960 --> 00:00:46,800 Speaker 1: Good morning to James. Good morning. Why the optimism, why 9 00:00:46,840 --> 00:00:49,280 Speaker 1: the preference for global equity still because of growth? I 10 00:00:49,320 --> 00:00:51,920 Speaker 1: mean we have we have global growth running above trends. 11 00:00:51,920 --> 00:00:53,840 Speaker 1: It's been doing so for two and a half years, 12 00:00:53,880 --> 00:00:56,120 Speaker 1: and that should continue. I think the big problem has 13 00:00:56,160 --> 00:01:00,240 Speaker 1: been dollar strength and policy concerns and bad Paul see 14 00:01:00,240 --> 00:01:02,440 Speaker 1: in in a bunch of specific countries. To what degree 15 00:01:02,480 --> 00:01:04,560 Speaker 1: do you think the U s economy has decoupled from 16 00:01:04,600 --> 00:01:06,520 Speaker 1: the rest of the world. Well, when you look from 17 00:01:06,560 --> 00:01:10,000 Speaker 1: a short term perspective, industrial production growth recently in the 18 00:01:10,080 --> 00:01:12,319 Speaker 1: US has been running above four and the rest of 19 00:01:12,360 --> 00:01:15,679 Speaker 1: the world, you know, significantly lower. Europe and China have 20 00:01:15,720 --> 00:01:17,960 Speaker 1: slowed a little bit um in the last four or 21 00:01:18,000 --> 00:01:20,080 Speaker 1: five months, but we actually expect them to rebound. We 22 00:01:20,080 --> 00:01:22,200 Speaker 1: expect the rest of the world to rebound. We expect 23 00:01:22,240 --> 00:01:24,360 Speaker 1: the US to actually slow a little bit, so that 24 00:01:24,520 --> 00:01:26,920 Speaker 1: differential that you see in p M I S, for example, 25 00:01:26,920 --> 00:01:28,640 Speaker 1: over the last six months, we actually think it's gonna 26 00:01:28,640 --> 00:01:31,119 Speaker 1: start going the other way now, and that above trend 27 00:01:31,160 --> 00:01:33,399 Speaker 1: global growth as a whole is set to continue. Does 28 00:01:33,400 --> 00:01:35,840 Speaker 1: that shape or define how you allocate capital in the 29 00:01:35,840 --> 00:01:37,800 Speaker 1: back haunt for this year? Yes, it does, I mean 30 00:01:37,840 --> 00:01:40,600 Speaker 1: the yeah, I mean we're we're always thinking ahead on 31 00:01:40,680 --> 00:01:43,440 Speaker 1: where the next turn is on industrial production, in particular 32 00:01:43,480 --> 00:01:46,520 Speaker 1: because we expect all of the lead indicators at the 33 00:01:46,560 --> 00:01:49,520 Speaker 1: market overreacts to p M S and such to move 34 00:01:49,640 --> 00:01:51,800 Speaker 1: that way and the surprise and disease to follow that way. 35 00:01:51,840 --> 00:01:54,800 Speaker 1: So that's very important. We expect positive data surprises from 36 00:01:54,840 --> 00:01:57,480 Speaker 1: the Euro Area. It's just seems that the big triit 37 00:01:57,560 --> 00:02:00,360 Speaker 1: so far in twent is by America, and we saw 38 00:02:00,360 --> 00:02:02,320 Speaker 1: in the Bank of America Mary Lynch survey, the fund 39 00:02:02,320 --> 00:02:04,840 Speaker 1: manager servant that was released yesterday that certainly the fund 40 00:02:04,880 --> 00:02:07,120 Speaker 1: managers are allocating to that story. Do you think you 41 00:02:07,160 --> 00:02:11,240 Speaker 1: need to reallocate elsewhere and drop your exposure to the US. 42 00:02:11,360 --> 00:02:14,200 Speaker 1: I mean, there's the first element of buy America is 43 00:02:14,240 --> 00:02:16,320 Speaker 1: that the tech sector lives here. And when you look 44 00:02:16,360 --> 00:02:18,800 Speaker 1: at what's happening in the tech sector, you're getting explosive 45 00:02:18,800 --> 00:02:21,320 Speaker 1: returns because you're getting explosive earnings and you don't have 46 00:02:21,400 --> 00:02:25,080 Speaker 1: valuations really going crazy at this at this point. So 47 00:02:25,240 --> 00:02:28,600 Speaker 1: if you could look at America X tech, uh, then 48 00:02:28,680 --> 00:02:31,040 Speaker 1: you know, maybe allocating a little bit away from America 49 00:02:31,080 --> 00:02:32,920 Speaker 1: and towards the rest of the world right now would 50 00:02:32,919 --> 00:02:35,679 Speaker 1: would make some sense. But um, but I but I 51 00:02:35,760 --> 00:02:37,560 Speaker 1: think you can't leave tech out. But that gets to 52 00:02:37,600 --> 00:02:41,079 Speaker 1: the FED. Any idea of the meny America's Chery Yelling 53 00:02:41,200 --> 00:02:46,120 Speaker 1: clearly had slack as a lead describer of an American economy. 54 00:02:46,639 --> 00:02:48,840 Speaker 1: We have a FED that has to deal with the 55 00:02:48,880 --> 00:02:52,480 Speaker 1: tech boom and its tangential excellence and the rest of 56 00:02:52,520 --> 00:02:58,079 Speaker 1: America given the political tone, flat on their back. That's 57 00:02:58,120 --> 00:03:02,720 Speaker 1: not in able bernanc or or in uh, you know 58 00:03:02,960 --> 00:03:06,200 Speaker 1: the other core macro textbooks. It's not a manque right. Yeah, 59 00:03:06,240 --> 00:03:08,560 Speaker 1: it's true, but it's also not new. I mean, we've 60 00:03:08,600 --> 00:03:11,600 Speaker 1: had we've had kind of meager wage growth, lower down 61 00:03:11,639 --> 00:03:14,480 Speaker 1: the income distribution for some time and what we've seen 62 00:03:14,600 --> 00:03:18,680 Speaker 1: lately is that the labor market has tightened up at 63 00:03:18,680 --> 00:03:20,519 Speaker 1: the kind of middle and the and the lower ends, 64 00:03:20,560 --> 00:03:23,480 Speaker 1: but it has not led to sharply rising wage growth. 65 00:03:23,480 --> 00:03:26,240 Speaker 1: And if you're getting two three percent wage growth at 66 00:03:26,240 --> 00:03:28,360 Speaker 1: a level of wages which you're not very happy with, 67 00:03:28,400 --> 00:03:30,880 Speaker 1: the chances are you're not thrilled, and that that's where 68 00:03:30,880 --> 00:03:33,240 Speaker 1: it is right now. But income growth, labor income growth 69 00:03:33,240 --> 00:03:36,080 Speaker 1: for the US as a whole, is strong and has accelerated. 70 00:03:36,160 --> 00:03:38,120 Speaker 1: That's very important, and that's what the is gonna respond to. 71 00:03:38,360 --> 00:03:41,520 Speaker 1: This is so important what Dr Sweeney just said. There 72 00:03:41,800 --> 00:03:47,120 Speaker 1: there's this distinction between an aggregate analysis and the individual analysis. 73 00:03:47,200 --> 00:03:50,680 Speaker 1: I think of Jason Furman's wonderful work on this. Explain 74 00:03:50,720 --> 00:03:53,800 Speaker 1: to our audience how we can say wage growth is 75 00:03:53,920 --> 00:03:59,000 Speaker 1: terrible and yet gross labor income is Is it a 76 00:03:59,000 --> 00:04:02,240 Speaker 1: a great vector to and a great level. Yeah, labor 77 00:04:02,280 --> 00:04:05,160 Speaker 1: income is simple. You add up everybody's paychecks and you 78 00:04:05,200 --> 00:04:07,880 Speaker 1: say how much money is the household sector getting paid? 79 00:04:07,920 --> 00:04:10,360 Speaker 1: The the that has been growing at around four point 80 00:04:10,400 --> 00:04:15,120 Speaker 1: four percent nominal terms. Since the audience listening this goes 81 00:04:15,160 --> 00:04:17,000 Speaker 1: you're out of your mind. Well, it's been growing at 82 00:04:17,000 --> 00:04:19,200 Speaker 1: four and a half, as I said, and recently it's 83 00:04:19,200 --> 00:04:22,159 Speaker 1: actually accelerated a little bit. Now, wage growth or or 84 00:04:22,200 --> 00:04:24,839 Speaker 1: aggregate labor income growth comes from wage growth, and it 85 00:04:24,839 --> 00:04:27,720 Speaker 1: comes from growth and hours worked, and hours worked obviously 86 00:04:27,800 --> 00:04:30,440 Speaker 1: is driven mostly by jobs growth. And so what we've 87 00:04:30,440 --> 00:04:32,559 Speaker 1: seen was we've had good jobs growth for a time 88 00:04:32,680 --> 00:04:35,360 Speaker 1: that's now tightened the labor market, including a from low end. 89 00:04:35,600 --> 00:04:37,920 Speaker 1: So you may be expect to see more wage growth, 90 00:04:38,360 --> 00:04:40,120 Speaker 1: but we've seen a little bit more wage growth. We 91 00:04:40,160 --> 00:04:43,320 Speaker 1: haven't seen that wage growth. Just so you know, oh wise, 92 00:04:43,400 --> 00:04:48,159 Speaker 1: one that this is called the pharaoh effect, where hours 93 00:04:48,240 --> 00:04:52,800 Speaker 1: work takes over is a partial differential, and Pharaoh's I 94 00:04:52,800 --> 00:04:55,359 Speaker 1: mean he's working like a ninety two hour week, and 95 00:04:55,400 --> 00:04:59,920 Speaker 1: that alone moves the needle along with you only work 96 00:05:00,680 --> 00:05:02,920 Speaker 1: just just the eighty nine hours. Well, that's because you've 97 00:05:02,920 --> 00:05:06,640 Speaker 1: got other properties, including the real yield. James, James Sweeney 98 00:05:06,640 --> 00:05:08,960 Speaker 1: doesn't care about any of this. Well I do, actually, 99 00:05:09,000 --> 00:05:10,720 Speaker 1: because it's one of the things that happens late in 100 00:05:10,760 --> 00:05:15,000 Speaker 1: the cycle is that ours were working, James, So what 101 00:05:15,040 --> 00:05:16,880 Speaker 1: will happen at at some point you'll get so good 102 00:05:16,880 --> 00:05:19,640 Speaker 1: at your job, you'll have so many job offers that 103 00:05:19,839 --> 00:05:22,080 Speaker 1: you'll just your wages will go up and you're working, 104 00:05:22,839 --> 00:05:25,919 Speaker 1: he'll leave. No, No, you have to give him the race, James. 105 00:05:26,360 --> 00:05:28,279 Speaker 1: You don't have to give him a race because of 106 00:05:28,320 --> 00:05:30,400 Speaker 1: his offers. Hang on a minute, I like where this 107 00:05:30,480 --> 00:05:33,480 Speaker 1: conversations going. You trying to negotiate for you. There's an 108 00:05:33,600 --> 00:05:37,000 Speaker 1: email from the Brooks Falls in Alaska from Alfred new James. 109 00:05:37,960 --> 00:05:40,800 Speaker 1: We should say, don't turn away from the grizzly bears. 110 00:05:41,040 --> 00:05:43,880 Speaker 1: I mean he just dropped his cell phone. Take if 111 00:05:43,920 --> 00:05:46,160 Speaker 1: I could afford to take you away from credit sweets 112 00:05:46,200 --> 00:05:48,240 Speaker 1: and how you was my agent, I would before we 113 00:05:48,320 --> 00:05:51,200 Speaker 1: let you go. I want to give I want to 114 00:05:51,200 --> 00:05:53,240 Speaker 1: get your dollar cool and we're close to a ninety 115 00:05:53,320 --> 00:05:56,080 Speaker 1: seven handle this morning. Want the x Y. What's your 116 00:05:56,080 --> 00:05:59,200 Speaker 1: base case now, James? Yeah. We we actually think that 117 00:05:59,279 --> 00:06:02,320 Speaker 1: the dollar is going to sell off because global growth 118 00:06:02,400 --> 00:06:04,960 Speaker 1: is going to stay strong, and we expect upside surprises 119 00:06:05,000 --> 00:06:07,120 Speaker 1: coming from Europe, and we think European interest rates are 120 00:06:07,120 --> 00:06:09,720 Speaker 1: going to rebound and uh and and that the dollar 121 00:06:09,760 --> 00:06:12,039 Speaker 1: move is basically overshot. We also see this as a 122 00:06:12,120 --> 00:06:14,120 Speaker 1: as a e M crisis. We're in a panic, and 123 00:06:14,200 --> 00:06:16,000 Speaker 1: usually in a panic, you know you're gonna go the 124 00:06:16,000 --> 00:06:18,800 Speaker 1: other way. So the market pressure honor to one to 125 00:06:18,880 --> 00:06:21,279 Speaker 1: make some of the correct economic choices is high. But 126 00:06:21,320 --> 00:06:25,039 Speaker 1: what you just said, they're so important. You're assuming the 127 00:06:25,120 --> 00:06:30,240 Speaker 1: panic gets solved. That has worked before. Stan Fisher's classic 128 00:06:30,240 --> 00:06:34,880 Speaker 1: book Out is an example. Can it get solved now 129 00:06:35,520 --> 00:06:41,360 Speaker 1: given the realities of American politics and their extension abroad. Well, 130 00:06:41,480 --> 00:06:44,640 Speaker 1: I mean, you know this is this is a Turkish issue, 131 00:06:44,720 --> 00:06:47,200 Speaker 1: not not a US issue. I mean, and and really 132 00:06:47,240 --> 00:06:49,919 Speaker 1: what Turkey needs to do is to tighten fiscal and 133 00:06:49,960 --> 00:06:53,159 Speaker 1: monetary policy and take some orthodox policy steps in order 134 00:06:53,160 --> 00:06:56,320 Speaker 1: to step in this crisis. So, um, I'm not sure 135 00:06:56,560 --> 00:07:01,240 Speaker 1: the political theater between our leadership and their leadership is 136 00:07:01,279 --> 00:07:03,440 Speaker 1: the same as what the bond market wants. And I 137 00:07:03,480 --> 00:07:05,480 Speaker 1: think that's a very important distinction. Are you surprised to 138 00:07:05,520 --> 00:07:08,159 Speaker 1: see you wrote dollar down here at one? Yeah, I 139 00:07:08,160 --> 00:07:10,520 Speaker 1: mean I think it's a it's a sharp move, but 140 00:07:10,720 --> 00:07:14,160 Speaker 1: it's it's Um, it's related to the fact that we're 141 00:07:14,160 --> 00:07:17,040 Speaker 1: in a little Turkey crisis at the moment. I'm just 142 00:07:17,080 --> 00:07:21,000 Speaker 1: trying to work out what drives European and Asian growth higher, 143 00:07:21,000 --> 00:07:23,480 Speaker 1: what delivers the upside? Surprise? Is it a policy resol 144 00:07:24,080 --> 00:07:27,080 Speaker 1: when you look organic? Just tell me it's organic. I mean, 145 00:07:27,080 --> 00:07:29,360 Speaker 1: the bottom line is if you look at the underlying 146 00:07:29,440 --> 00:07:32,720 Speaker 1: pace of capex in Europe is in real terms, and 147 00:07:32,760 --> 00:07:36,440 Speaker 1: you look at the underlying pace in retail consumer spending, um, 148 00:07:36,480 --> 00:07:39,760 Speaker 1: they're strong, They're they're strong. And so what we do 149 00:07:39,960 --> 00:07:43,440 Speaker 1: is we compare in detail what's happening to manufacturing activity 150 00:07:43,840 --> 00:07:47,760 Speaker 1: to those sources of manufacturing demand from businesses and from firms. 151 00:07:47,960 --> 00:07:51,600 Speaker 1: If the demand sources are fine and manufacturing activity has 152 00:07:51,680 --> 00:07:56,560 Speaker 1: recently been very weak times out of a hundred, industrial 153 00:07:56,560 --> 00:07:59,000 Speaker 1: production is about to rebound. And so in the three 154 00:07:59,040 --> 00:08:03,840 Speaker 1: months to March or April, European industrial production actually contracted 155 00:08:03,880 --> 00:08:06,680 Speaker 1: by three or four percent. So demand is running well, 156 00:08:06,840 --> 00:08:09,960 Speaker 1: factory activity has slowed. It's a short term moment to move. 157 00:08:10,360 --> 00:08:12,680 Speaker 1: P m I has come down with it. The market overshoots, 158 00:08:12,720 --> 00:08:15,920 Speaker 1: the ECB overreacts and gives you forward guidance for a year, 159 00:08:15,960 --> 00:08:18,480 Speaker 1: and then factory activity picks back up again because the 160 00:08:18,520 --> 00:08:21,280 Speaker 1: consumers are spending money and the businesses are investing, and 161 00:08:21,280 --> 00:08:23,600 Speaker 1: when you look at the hard data, that's what's happening. 162 00:08:23,840 --> 00:08:27,520 Speaker 1: James Sweeney with some real optimism, they're sophisticated optimism, thank 163 00:08:27,520 --> 00:08:45,400 Speaker 1: you so much. With credit sweets. Their chief economist, Stephen 164 00:08:45,440 --> 00:08:48,760 Speaker 1: Cook is at the Council on Foreign Relations out of 165 00:08:49,000 --> 00:08:52,000 Speaker 1: Vassar with parchment from JOHNS. Hopkins and his doctorate at 166 00:08:52,000 --> 00:08:56,000 Speaker 1: the University of Pennsylvania. We are honored to have him 167 00:08:56,000 --> 00:08:58,680 Speaker 1: for a half hour this morning to really dive into 168 00:08:58,720 --> 00:09:01,720 Speaker 1: some of the nuances here Bay, basically to slow the 169 00:09:01,800 --> 00:09:06,400 Speaker 1: show down and actually talk about the underpinnings of what's 170 00:09:06,440 --> 00:09:10,920 Speaker 1: going on in Turkey. His must read is False Dawn, 171 00:09:11,440 --> 00:09:14,840 Speaker 1: just simply because of events, it's become the book of 172 00:09:14,920 --> 00:09:17,439 Speaker 1: the moment. Stephen Cook. Wonderful to have you with us. 173 00:09:17,760 --> 00:09:21,840 Speaker 1: If you wrote False Dawn on this Wednesday morning, how 174 00:09:21,880 --> 00:09:25,360 Speaker 1: would it be different than when you wrote it? Well, 175 00:09:25,400 --> 00:09:29,360 Speaker 1: I couldn't write it in a Wednesday morning, but thanks Tom. 176 00:09:29,400 --> 00:09:32,400 Speaker 1: I think that many of the arguments that I set 177 00:09:32,400 --> 00:09:34,720 Speaker 1: forth in False One, particularly when it comes to Turkey 178 00:09:34,760 --> 00:09:38,839 Speaker 1: and the and the transformation of Turkey into an elected autocracy, 179 00:09:40,280 --> 00:09:44,959 Speaker 1: are our strengthened by what's been happening with the lyric 180 00:09:45,000 --> 00:09:47,839 Speaker 1: crisis and the and the and the related crisis in 181 00:09:48,000 --> 00:09:51,520 Speaker 1: US Turkey relations um. What has happened in Turkey is 182 00:09:51,640 --> 00:09:56,160 Speaker 1: essentially self inflicted wounds as the result of a leader 183 00:09:56,240 --> 00:10:01,200 Speaker 1: whose political calculations and political interests are UH bound up 184 00:10:01,320 --> 00:10:05,320 Speaker 1: in UH pumping up the economy with low interest rates 185 00:10:05,400 --> 00:10:07,680 Speaker 1: and then blaming the United States when the day of 186 00:10:07,679 --> 00:10:11,080 Speaker 1: residing comes. Dr Cook John Ferrell has got all sorts 187 00:10:11,080 --> 00:10:12,960 Speaker 1: of wisdom questions, But I want to cut to the 188 00:10:12,960 --> 00:10:17,760 Speaker 1: American chase. What is different this time is the posture, 189 00:10:17,880 --> 00:10:23,920 Speaker 1: stands cadence dialogue of our American president. What what's the 190 00:10:24,040 --> 00:10:28,079 Speaker 1: change you need to see from President Trump to affect 191 00:10:28,240 --> 00:10:32,040 Speaker 1: a better outcome in Turkey? Well, I think we are 192 00:10:32,080 --> 00:10:37,040 Speaker 1: seeing a change in Cone and Um from one perspective, 193 00:10:37,120 --> 00:10:41,480 Speaker 1: certainly for the better. The previous two administrations, the George W. 194 00:10:41,559 --> 00:10:45,880 Speaker 1: Bush's administration and Barack Obama's administration, had been too passive, 195 00:10:45,960 --> 00:10:49,920 Speaker 1: too willing to overlook Turkish bad behavior for the sake 196 00:10:50,080 --> 00:10:53,640 Speaker 1: of a strategic relationship. I think that President Trump has 197 00:10:53,800 --> 00:10:56,920 Speaker 1: taken a look at the accumulation of things that the 198 00:10:56,960 --> 00:11:00,280 Speaker 1: Turks had done to undermine American policy and in American 199 00:11:00,360 --> 00:11:03,960 Speaker 1: position in the Middle East UH and decided that the 200 00:11:04,000 --> 00:11:07,360 Speaker 1: Turks have gone too far with the taking of Pastor 201 00:11:07,440 --> 00:11:10,599 Speaker 1: Andrew Brunson as well as something that gets lost in 202 00:11:10,640 --> 00:11:14,319 Speaker 1: all the commentary fifteen to twenty other Turkish Americans. Those 203 00:11:14,320 --> 00:11:17,520 Speaker 1: are Turks with American citizenship who are in Turkish jails 204 00:11:17,559 --> 00:11:21,120 Speaker 1: on trumped up terrorism charges. Uh. So, I think that 205 00:11:21,760 --> 00:11:25,640 Speaker 1: this issue has become a flashpoint for the broader relationship 206 00:11:25,720 --> 00:11:28,760 Speaker 1: and the problems in the broader relationships. Steven, is hard 207 00:11:28,760 --> 00:11:33,360 Speaker 1: for some people to reconcile that a NATO ally is 208 00:11:33,400 --> 00:11:40,160 Speaker 1: not a reliable partner. How do you reconcile those two things, Stephen? Well, Uh, 209 00:11:40,520 --> 00:11:44,199 Speaker 1: Turkey is not the only problematic NATO partner, but it 210 00:11:44,280 --> 00:11:47,720 Speaker 1: is I think an outlier in how far it has 211 00:11:47,760 --> 00:11:52,600 Speaker 1: gone in UH development of its relations with Russia, how 212 00:11:52,640 --> 00:11:56,120 Speaker 1: far it has gone to undermine, uh, the American fight 213 00:11:56,200 --> 00:11:59,480 Speaker 1: against the Islamic State in Syria, how far it has 214 00:11:59,520 --> 00:12:04,040 Speaker 1: gone to help the Iranians evade sanctions that are designed 215 00:12:04,040 --> 00:12:07,679 Speaker 1: to contain and arrest the development of its nuclear program. Um. 216 00:12:07,679 --> 00:12:12,320 Speaker 1: Those are just three of larger issues, um that are 217 00:12:12,400 --> 00:12:14,960 Speaker 1: roiling the relationship. I think they're the most important ones, 218 00:12:15,000 --> 00:12:17,560 Speaker 1: but of course there are others. Everyone has been able 219 00:12:17,600 --> 00:12:21,480 Speaker 1: to capitalize in the fact that, because of his rhetoric, 220 00:12:21,920 --> 00:12:26,480 Speaker 1: a stupefying eight of Turks believed that the United States 221 00:12:26,520 --> 00:12:30,480 Speaker 1: was complicit in the failed Coupe Deta in July, and 222 00:12:30,880 --> 00:12:34,520 Speaker 1: large numbers also believe that the current dispute between the 223 00:12:34,520 --> 00:12:37,360 Speaker 1: two countries that in the current dispute between the two countries, 224 00:12:37,400 --> 00:12:41,120 Speaker 1: the United States is engaged in economic warfare on Turkey. 225 00:12:41,200 --> 00:12:44,680 Speaker 1: So to your point, with the last two administrations being 226 00:12:45,000 --> 00:12:49,520 Speaker 1: perhaps far too passive and ignoring the behavior of President Urduan, 227 00:12:50,080 --> 00:12:53,000 Speaker 1: what is the correct tool to use to address the 228 00:12:53,040 --> 00:12:56,839 Speaker 1: behavior of Turkey And does economic sanctions get it done 229 00:12:57,320 --> 00:13:00,679 Speaker 1: or does that just fuel this nationalism that erupting at 230 00:13:00,679 --> 00:13:04,880 Speaker 1: the moment in the country. UH. I think that it's 231 00:13:04,920 --> 00:13:11,200 Speaker 1: important to recognize that aired One responds to pressure. The 232 00:13:11,280 --> 00:13:16,439 Speaker 1: Turks shot down a Russian bomber that had briefly crossed 233 00:13:16,440 --> 00:13:21,920 Speaker 1: its airspace and route to Syria. In President Putin really 234 00:13:21,960 --> 00:13:25,400 Speaker 1: put the screws to the Turks. Angela Merkel, the Chancellor 235 00:13:25,400 --> 00:13:30,720 Speaker 1: of Germany, was quite upset over the arrest of a 236 00:13:30,800 --> 00:13:35,320 Speaker 1: German Turkish journalists and threats to German journalists in Turkey. 237 00:13:35,440 --> 00:13:40,000 Speaker 1: UH and threatened President air Duan with business ties and 238 00:13:40,040 --> 00:13:43,800 Speaker 1: business ties between Turkey and Germany are extremely important. This 239 00:13:44,240 --> 00:13:47,240 Speaker 1: UH encouraged President ed One to do the right thing 240 00:13:47,960 --> 00:13:52,320 Speaker 1: on a variety of issues. I think that with the 241 00:13:53,040 --> 00:13:55,560 Speaker 1: politicking that aired One is doing, he is seeking to 242 00:13:55,600 --> 00:13:59,959 Speaker 1: buy himself some time politically and cushioned himself from an 243 00:14:00,040 --> 00:14:02,680 Speaker 1: insulate himself from these problems. But I think that the logic, 244 00:14:03,040 --> 00:14:06,280 Speaker 1: while the logic of Turkish politics right now is outstripping 245 00:14:06,280 --> 00:14:09,520 Speaker 1: the logics on the market, at some point he's going 246 00:14:09,600 --> 00:14:13,400 Speaker 1: to run out of nationalist rhetoric and the market is 247 00:14:13,440 --> 00:14:16,719 Speaker 1: going to force changes on the Turk. Stephen Cook, with 248 00:14:16,760 --> 00:14:19,520 Speaker 1: as a constant for relations, thrilled to have him here 249 00:14:19,520 --> 00:14:22,280 Speaker 1: for a length the interview this morning, Dr Cook the 250 00:14:22,320 --> 00:14:25,600 Speaker 1: Boss versus twenty miles long. It seems longer than that, 251 00:14:25,640 --> 00:14:28,160 Speaker 1: But it's not if you go out the north side 252 00:14:28,200 --> 00:14:31,240 Speaker 1: that nobody in the West pays attention to. There is 253 00:14:31,280 --> 00:14:34,680 Speaker 1: a black sea. What's the dynamic right now that Mr 254 00:14:34,720 --> 00:14:38,720 Speaker 1: Putin can take advantage of given this crisis? Oh well, 255 00:14:38,960 --> 00:14:43,480 Speaker 1: certainly President Putin has sought to take advantage to the 256 00:14:43,520 --> 00:14:47,320 Speaker 1: tension between US Turkey relations. They've He's been doing that 257 00:14:47,400 --> 00:14:50,080 Speaker 1: for some time, as the as the Turks were forced 258 00:14:50,120 --> 00:14:54,880 Speaker 1: to respond to him after shooting down their plane and 259 00:14:54,920 --> 00:14:57,280 Speaker 1: after the United States made it clear that it wasn't 260 00:14:57,280 --> 00:15:00,560 Speaker 1: going to get more deeply involved in Syria. The Turks 261 00:15:00,600 --> 00:15:05,000 Speaker 1: went to Moscow to secure their interests. Certainly, President Putin 262 00:15:05,120 --> 00:15:08,880 Speaker 1: is seeking to take advantage of the problems in the 263 00:15:08,960 --> 00:15:11,120 Speaker 1: US Church relations as well as problems with the U 264 00:15:11,120 --> 00:15:15,000 Speaker 1: S relations with other countries. Uh. The Black Seed, though, 265 00:15:15,200 --> 00:15:18,480 Speaker 1: is something that makes the Turks very, very very nervous. 266 00:15:19,040 --> 00:15:22,320 Speaker 1: That may still be an area of cooperation between the 267 00:15:22,360 --> 00:15:25,000 Speaker 1: United States and Turkey. I don't think anybody's really looking 268 00:15:25,040 --> 00:15:27,320 Speaker 1: at a breach in the relationship between the two countries, 269 00:15:27,720 --> 00:15:32,000 Speaker 1: but I think a change is uh, and it's it's 270 00:15:32,000 --> 00:15:34,120 Speaker 1: it's it's the kind of relationship where we will be 271 00:15:34,160 --> 00:15:36,440 Speaker 1: able to cooperate where we can get out of each 272 00:15:36,440 --> 00:15:39,320 Speaker 1: other's way in other places and have to avove each 273 00:15:39,320 --> 00:15:42,120 Speaker 1: other when our interests dictate very quickly here and we'll 274 00:15:42,160 --> 00:15:45,359 Speaker 1: come back in a more general discussion to percolating today 275 00:15:45,560 --> 00:15:50,600 Speaker 1: is Turkish capitalism, Turkish business advising. Mr Erta Wad, let's 276 00:15:50,600 --> 00:15:53,920 Speaker 1: get going from where you sit in international relations. What 277 00:15:54,000 --> 00:15:59,480 Speaker 1: is the relation of Turkish big business to the Erduan regime. Well, 278 00:15:59,480 --> 00:16:02,280 Speaker 1: it depends on which big business in Turkey we're talking about. 279 00:16:02,280 --> 00:16:05,600 Speaker 1: If we're talking about the kind of traditional big business 280 00:16:05,720 --> 00:16:09,320 Speaker 1: based in the western part of the country's associated with 281 00:16:09,320 --> 00:16:12,840 Speaker 1: with big families. UH. That is a business community that 282 00:16:12,920 --> 00:16:18,920 Speaker 1: has had UH a wary, mistrustful, more difficult relationship with 283 00:16:19,320 --> 00:16:21,960 Speaker 1: UH with President aired One because they are considered to 284 00:16:22,000 --> 00:16:25,239 Speaker 1: be kind of old establishment and air Duan is distrustful 285 00:16:25,520 --> 00:16:28,320 Speaker 1: of of those people. Then there's a big business that 286 00:16:28,360 --> 00:16:32,040 Speaker 1: has grown up around uh Arduana over the course of 287 00:16:32,040 --> 00:16:34,840 Speaker 1: the last fifteen years or even pre date the emergence 288 00:16:34,960 --> 00:16:37,880 Speaker 1: of the Justice and Development Party. UH. These are the 289 00:16:37,960 --> 00:16:40,760 Speaker 1: kind of core constituency of the Justice and Development Party 290 00:16:40,800 --> 00:16:44,840 Speaker 1: emerging from Central Anatolia. Those people have very good relations 291 00:16:44,880 --> 00:16:48,080 Speaker 1: with the Justice and Development Party. Here's the deal, though, 292 00:16:48,480 --> 00:16:52,440 Speaker 1: you have to have good ties with the government in 293 00:16:52,560 --> 00:16:57,280 Speaker 1: order to do business in Turkey. So everybody, everybody understands 294 00:16:57,360 --> 00:17:02,880 Speaker 1: that they can't openly cross UH one. Well, let's do this. 295 00:17:02,960 --> 00:17:05,400 Speaker 1: Stephen Cook with us with the Council on Foreign Relations. 296 00:17:05,480 --> 00:17:08,520 Speaker 1: I can't say enough about his effort. The False Dawn 297 00:17:09,119 --> 00:17:11,880 Speaker 1: John of a year ago, A long, long, long year ago, 298 00:17:12,359 --> 00:17:15,240 Speaker 1: just a spectacular book, linking all of the Middle East, 299 00:17:15,280 --> 00:17:19,480 Speaker 1: not just Turkey into UH. The disappointments that we've seen 300 00:17:19,880 --> 00:17:22,280 Speaker 1: across the political economics. We'll come back in a broader 301 00:17:22,280 --> 00:17:36,480 Speaker 1: discussion with Dr Cook here. We are thrilled to bring 302 00:17:36,480 --> 00:17:39,879 Speaker 1: you on the Stephen Cook of the Council on Foreign Relations. Stephen, 303 00:17:40,000 --> 00:17:44,360 Speaker 1: at all studies I've seen the Middle East is about demographics, 304 00:17:44,400 --> 00:17:49,480 Speaker 1: in the overwhelming reality of the youth and the lack 305 00:17:49,680 --> 00:17:53,600 Speaker 1: of understanding of history of so many millions in the 306 00:17:53,600 --> 00:17:56,560 Speaker 1: Middle East. Does Turkey have the same problem? Does Turkey 307 00:17:56,600 --> 00:18:00,080 Speaker 1: have the same demographic structure is the other countries in 308 00:18:00,119 --> 00:18:03,040 Speaker 1: your book the False Dawn? Turkey is a very young 309 00:18:03,080 --> 00:18:06,439 Speaker 1: country as well. There are only two countries in the 310 00:18:06,440 --> 00:18:10,920 Speaker 1: region that have average days that is even approaching thirty. 311 00:18:11,040 --> 00:18:15,080 Speaker 1: Uh So, the difference between Turkey and other countries is 312 00:18:15,119 --> 00:18:18,880 Speaker 1: that Turkey actually has a real economy. It has problems 313 00:18:18,880 --> 00:18:22,080 Speaker 1: with its economy, but it does have a manufacturing base. 314 00:18:22,160 --> 00:18:25,840 Speaker 1: It does it is connected and integrated to Europe, which 315 00:18:25,880 --> 00:18:29,200 Speaker 1: is one of the concerns that people have right now. 316 00:18:29,240 --> 00:18:31,280 Speaker 1: A lot of these other countries don't really have much 317 00:18:31,280 --> 00:18:33,320 Speaker 1: in the way of an economy. Thus you have young 318 00:18:33,359 --> 00:18:36,920 Speaker 1: people who who are quite idle. Uh not so much 319 00:18:36,960 --> 00:18:39,600 Speaker 1: the case in Turkey, Okay, but in Turkey and the 320 00:18:39,680 --> 00:18:42,679 Speaker 1: stereotypes here, folks, come on, let's admit it, folks, as 321 00:18:42,680 --> 00:18:46,760 Speaker 1: we talked to Dr Cook. People listening is knowledge of 322 00:18:46,760 --> 00:18:49,879 Speaker 1: Turkey is from Russia. Would love the James Bond movie 323 00:18:50,160 --> 00:18:53,040 Speaker 1: from a few years ago, Stephen, take us away from 324 00:18:53,040 --> 00:18:57,800 Speaker 1: our silly stereotypes of Turkey. If I go west from Istanbul, 325 00:18:58,280 --> 00:19:03,080 Speaker 1: when do I hit Europe? Or is Turkey Europe? Well, 326 00:19:03,119 --> 00:19:05,040 Speaker 1: it depends on where you're standing in is Stumble. You 327 00:19:05,119 --> 00:19:06,960 Speaker 1: can stand in is Stumble and you are in Europe, 328 00:19:07,000 --> 00:19:08,720 Speaker 1: and then you can stand in another place in is 329 00:19:08,760 --> 00:19:14,160 Speaker 1: Stumble and you're in Asia. Istanble is an extraordinarily cosmopolitan city. 330 00:19:14,359 --> 00:19:17,280 Speaker 1: People from all walks, all parts of the world, all 331 00:19:17,359 --> 00:19:19,719 Speaker 1: kinds of cuisines. It is a city of great history. 332 00:19:19,960 --> 00:19:22,800 Speaker 1: It's the former imperial capital of the Ottoman Empire, which 333 00:19:22,920 --> 00:19:25,520 Speaker 1: ruled the Middle East as well as parts of Europe 334 00:19:25,560 --> 00:19:28,560 Speaker 1: for about six hundred years. If you move east, you'll 335 00:19:28,560 --> 00:19:33,280 Speaker 1: see changes in the country. Less development further out east, 336 00:19:33,320 --> 00:19:35,120 Speaker 1: but still more developed than a lot of the other 337 00:19:35,119 --> 00:19:40,240 Speaker 1: countries that are are neighboring Turkey. One of the things 338 00:19:40,280 --> 00:19:44,200 Speaker 1: about the Justice and Development Party era the last sixteen 339 00:19:44,280 --> 00:19:46,600 Speaker 1: years in Turkey is that there has been an explosion 340 00:19:46,640 --> 00:19:51,960 Speaker 1: of development of infrastructure, of transportation, options of business, of 341 00:19:51,960 --> 00:19:55,080 Speaker 1: a development of a middle class, so there has been 342 00:19:55,119 --> 00:19:58,639 Speaker 1: some good economic management. This is a more recent problem 343 00:19:58,640 --> 00:20:01,520 Speaker 1: with an overheated economy. Me based on the fact that 344 00:20:01,760 --> 00:20:06,359 Speaker 1: President air Duan needs low interest rates and growth in 345 00:20:06,480 --> 00:20:09,080 Speaker 1: order to get reelected and re elected and re elected 346 00:20:09,119 --> 00:20:12,399 Speaker 1: so he can affect the transformation of Turkey for better 347 00:20:12,520 --> 00:20:15,399 Speaker 1: or worse, and Stephen, as we know through history, this 348 00:20:15,480 --> 00:20:18,560 Speaker 1: doesn't end well. I think some people sort of waking 349 00:20:18,680 --> 00:20:22,040 Speaker 1: up if they've missed all of this. At one point, 350 00:20:22,160 --> 00:20:24,840 Speaker 1: several years ago, Turkey was on course to being an 351 00:20:24,840 --> 00:20:28,879 Speaker 1: EU member. Something politically went very very wrong. Stephen, what 352 00:20:29,160 --> 00:20:32,600 Speaker 1: was it? Yeah, it's a it's a stunning irony. Um. 353 00:20:32,880 --> 00:20:37,280 Speaker 1: By this time Turkey was to be by Turkey was 354 00:20:37,320 --> 00:20:39,399 Speaker 1: to be on the cusp of European Union membership and 355 00:20:39,480 --> 00:20:43,320 Speaker 1: joining the ultimate club of liberal democracies. Now it looks 356 00:20:43,400 --> 00:20:46,480 Speaker 1: like an elected autocracy, and I think what has happened 357 00:20:46,520 --> 00:20:49,000 Speaker 1: Now there's a debate. There's a debate within the Turkey 358 00:20:49,040 --> 00:20:52,080 Speaker 1: watching community about what happened. Some people will argue that 359 00:20:52,160 --> 00:20:54,399 Speaker 1: this was air Duan's plan all along, that he was 360 00:20:54,440 --> 00:20:57,840 Speaker 1: an authoritarian out to accumulate power from the very beginning. 361 00:20:58,280 --> 00:21:00,879 Speaker 1: Others have a more nuanced view, and I include myself 362 00:21:00,880 --> 00:21:03,440 Speaker 1: in that group, which is that a number of things 363 00:21:03,480 --> 00:21:06,400 Speaker 1: happened around two thousand seven two thousand eight in which 364 00:21:06,400 --> 00:21:09,480 Speaker 1: the Turkish establishment made it very clear they were going 365 00:21:09,520 --> 00:21:11,960 Speaker 1: to try to prevent the Justice and Development Party from 366 00:21:12,000 --> 00:21:14,399 Speaker 1: ruling and governing in the country, and as a result 367 00:21:14,440 --> 00:21:19,080 Speaker 1: you had this very harsh authoritian turn in which everyone 368 00:21:19,119 --> 00:21:23,000 Speaker 1: has tried to pulverize opponents that even one final question 369 00:21:23,080 --> 00:21:26,280 Speaker 1: unfortunately too quick. If I go down to the Mediterranean, ismir, 370 00:21:27,040 --> 00:21:29,399 Speaker 1: what is this depreciation of a lira mean? If I 371 00:21:29,440 --> 00:21:32,800 Speaker 1: walk into the Dennis restaurant, world famous, it's been there 372 00:21:32,840 --> 00:21:36,639 Speaker 1: for thirty years, what is the lyric depreciation meant to 373 00:21:36,720 --> 00:21:39,680 Speaker 1: the people that run and work at the dentist restaurant? 374 00:21:39,680 --> 00:21:44,520 Speaker 1: And Ismir, Well, everything is more expensive for the Dennis 375 00:21:45,240 --> 00:21:48,840 Speaker 1: restaurant owners uh and managers. Everything that they have to 376 00:21:48,880 --> 00:21:52,440 Speaker 1: buy to run that restaurant is much more expensive for them. 377 00:21:52,480 --> 00:21:56,680 Speaker 1: In addition, this, this tension with the United States has 378 00:21:56,720 --> 00:22:00,439 Speaker 1: the potential to depress the number of tours who are 379 00:22:00,560 --> 00:22:03,960 Speaker 1: visiting the Dennis restaurant, and tours to are carrying dollars 380 00:22:04,040 --> 00:22:06,359 Speaker 1: or euros you would buy much much more in Turkey 381 00:22:06,359 --> 00:22:08,919 Speaker 1: these days. But because of this tension, because of tension 382 00:22:08,960 --> 00:22:12,440 Speaker 1: with Europe. Uh, there are a few of you were 383 00:22:12,440 --> 00:22:14,840 Speaker 1: towards in the Turkey these days. See if kindly brought 384 00:22:14,880 --> 00:22:16,640 Speaker 1: that up because Farrell and I are doing a road trip. 385 00:22:17,400 --> 00:22:20,560 Speaker 1: That's what you did. I knew that we're pitching off 386 00:22:20,640 --> 00:22:23,680 Speaker 1: roducers to allow us to go around the world. Stephen Cook, 387 00:22:25,119 --> 00:22:27,640 Speaker 1: two countries where the currency has been battered, So we're 388 00:22:27,640 --> 00:22:30,359 Speaker 1: going to do this food currency tool. This has been wonderful. 389 00:22:30,400 --> 00:22:33,080 Speaker 1: Stephen Cook the concert for Uscis folks. I can't say 390 00:22:33,160 --> 00:22:35,760 Speaker 1: enough about his false tone. I'll put a major push 391 00:22:35,800 --> 00:22:53,080 Speaker 1: on it out at my book side this weekend. Spending 392 00:22:53,080 --> 00:22:56,720 Speaker 1: money to make money, getting ways for people to have 393 00:22:56,800 --> 00:23:00,800 Speaker 1: thirty off their big home and furniture. Let's find out 394 00:23:00,840 --> 00:23:03,760 Speaker 1: more about how Macy's is doing with Sarah Hall zach 395 00:23:03,800 --> 00:23:07,600 Speaker 1: Oar Bloomberg opinion columnists, who knows everything about shopping at 396 00:23:07,640 --> 00:23:10,960 Speaker 1: the flagship store. Sarah, So what about Macy's. What's wrong 397 00:23:11,000 --> 00:23:14,800 Speaker 1: with spending money to make money? Well, I think that 398 00:23:15,320 --> 00:23:18,240 Speaker 1: investors maybe just realized today they got a bit ahead 399 00:23:18,240 --> 00:23:21,360 Speaker 1: of themselves. This stock had been up sixty six percent 400 00:23:21,520 --> 00:23:23,640 Speaker 1: year to day. It was one of the biggest movers 401 00:23:23,680 --> 00:23:26,240 Speaker 1: on the SMP, and you've got to be thinking to yourself, 402 00:23:26,440 --> 00:23:28,320 Speaker 1: this is a company that's right at the center of 403 00:23:28,320 --> 00:23:31,880 Speaker 1: the retail apocalypse. How is this possible? Um? And I 404 00:23:31,920 --> 00:23:34,600 Speaker 1: think it was. They had these improved results in the 405 00:23:34,640 --> 00:23:37,200 Speaker 1: holiday quarter in the first quarter, and investors got a 406 00:23:37,240 --> 00:23:40,000 Speaker 1: little carried away and they realized that today, as you said, 407 00:23:40,040 --> 00:23:43,880 Speaker 1: these improvements that they're making to survive cost money. Uh. 408 00:23:44,080 --> 00:23:46,920 Speaker 1: Free shipping is not free to retailers. It's free to you, 409 00:23:47,040 --> 00:23:49,159 Speaker 1: the shopper, but not to retailers, and they're feeling some 410 00:23:49,240 --> 00:23:51,000 Speaker 1: of the weight of that. And I think what we 411 00:23:51,040 --> 00:23:53,280 Speaker 1: saw today is that Macy's as a company that's making 412 00:23:53,320 --> 00:23:57,240 Speaker 1: modest progress but still has these existential questions about how 413 00:23:57,280 --> 00:24:01,040 Speaker 1: sustainable the department store format is in this retailing era. 414 00:24:01,359 --> 00:24:03,439 Speaker 1: I mean, you don't know whether people are actually going 415 00:24:03,520 --> 00:24:05,359 Speaker 1: to buy things in order to pick them up at 416 00:24:05,400 --> 00:24:09,240 Speaker 1: the store free or get off if you use their app, 417 00:24:09,440 --> 00:24:13,720 Speaker 1: or get off if you use a Macy's charge guard, right. 418 00:24:13,760 --> 00:24:17,399 Speaker 1: And they're trying to do some different approaches to discounting 419 00:24:17,400 --> 00:24:20,240 Speaker 1: and loyalty as well. So for example, they've revamped their 420 00:24:20,280 --> 00:24:23,480 Speaker 1: loyalty program, trying to encourage more people to join that 421 00:24:23,760 --> 00:24:26,639 Speaker 1: and to get discounts in perks through that format, and 422 00:24:26,640 --> 00:24:28,560 Speaker 1: they're trying to get away from this thing where you 423 00:24:28,600 --> 00:24:31,120 Speaker 1: stack coupon on top of coupon on top of coupon, 424 00:24:31,240 --> 00:24:33,240 Speaker 1: because they're finding that people just find that to be 425 00:24:33,280 --> 00:24:36,000 Speaker 1: confusing and befuddling, and and try to go to a 426 00:24:36,040 --> 00:24:39,320 Speaker 1: more clear, value oriented message and hope that that goes 427 00:24:39,359 --> 00:24:42,840 Speaker 1: a long way towards improving sales. Tell us about Macy's backstage. 428 00:24:43,800 --> 00:24:47,600 Speaker 1: So Macie's backstage is their effort to capitalize on this 429 00:24:47,800 --> 00:24:51,119 Speaker 1: real strength that we've seen in the off price retail sector. 430 00:24:51,400 --> 00:24:54,520 Speaker 1: T J Max Ross stores, these have been strong performing 431 00:24:54,560 --> 00:24:57,240 Speaker 1: retailers because we're seeing in the brick and boarder in 432 00:24:57,359 --> 00:25:01,560 Speaker 1: mortar environment, shoppers like this treasure, they like this uh, 433 00:25:01,640 --> 00:25:05,600 Speaker 1: you know, fishing around for a unique find. And this 434 00:25:05,680 --> 00:25:07,600 Speaker 1: is Macy's trying to put a little bit of that 435 00:25:07,760 --> 00:25:11,439 Speaker 1: DNA within their store. So they're seeing stronger spending in 436 00:25:11,480 --> 00:25:15,000 Speaker 1: the backstage departments from their existing loyal customers, and that's 437 00:25:15,000 --> 00:25:18,840 Speaker 1: helping drive comparable sales growth. My question for Macy's is 438 00:25:18,840 --> 00:25:22,520 Speaker 1: is this pulling in any new shoppers? Exactly right? And 439 00:25:22,560 --> 00:25:25,560 Speaker 1: so I worry that while yes, it is perhaps drawing 440 00:25:25,600 --> 00:25:28,400 Speaker 1: stronger spending from the customers they already have, and that's 441 00:25:28,400 --> 00:25:31,359 Speaker 1: improving comparable sales in the near term. If again, ma 442 00:25:31,440 --> 00:25:33,320 Speaker 1: see that's just survived. For the long haul, they're going 443 00:25:33,400 --> 00:25:35,480 Speaker 1: to need to bring in new new people. Sara, as usual, 444 00:25:35,520 --> 00:25:38,520 Speaker 1: you nail it to me. This is a top line exercise. 445 00:25:38,960 --> 00:25:42,280 Speaker 1: The word of the moment for corporate world is scale. 446 00:25:42,960 --> 00:25:45,560 Speaker 1: I don't see any scale here. The way they did 447 00:25:45,600 --> 00:25:50,320 Speaker 1: this was to open stores by other companies, Marshall Fields, 448 00:25:50,320 --> 00:25:52,520 Speaker 1: the whole wrap up, the whole, the roll up thing, 449 00:25:52,600 --> 00:25:55,720 Speaker 1: you know it all. I'm looking on the Bloomberg it's 450 00:25:55,840 --> 00:26:00,040 Speaker 1: zero percent revenue growth blended out. Can they actually a 451 00:26:00,240 --> 00:26:04,320 Speaker 1: legit revenue scale? I think it's going to be really 452 00:26:04,359 --> 00:26:07,119 Speaker 1: difficult to do with the format that they currently have. 453 00:26:07,400 --> 00:26:09,560 Speaker 1: And look, I think there are some interesting weapons in 454 00:26:09,600 --> 00:26:12,760 Speaker 1: their arsenal. They bought this Blue Mercury beauty chain, and 455 00:26:12,800 --> 00:26:15,080 Speaker 1: beauty has been such a hot area. You look at 456 00:26:15,080 --> 00:26:19,639 Speaker 1: the performance of uh Sephora and Alta, really strong performing retailers, 457 00:26:19,720 --> 00:26:22,480 Speaker 1: and I think Blue Mercury could easily play in that 458 00:26:22,520 --> 00:26:25,040 Speaker 1: space if they expand it more quickly. But yes, it's 459 00:26:25,080 --> 00:26:27,960 Speaker 1: really hard to envision a future where they can post 460 00:26:28,080 --> 00:26:31,800 Speaker 1: strong revenue growth based on the traditional Macy's format. Well, 461 00:26:31,960 --> 00:26:36,000 Speaker 1: just here to give you that perspective. In ten, they 462 00:26:36,040 --> 00:26:40,080 Speaker 1: were doing over twenty eight billion in sales. In the 463 00:26:40,200 --> 00:26:45,479 Speaker 1: last twelve months they did five and a half billion. 464 00:26:46,080 --> 00:26:49,080 Speaker 1: Their market cap has been cut in half. This was 465 00:26:49,080 --> 00:26:54,440 Speaker 1: a billion dollar company back in and it is now eleven. 466 00:26:54,880 --> 00:26:57,600 Speaker 1: But and Sarah, the heart of pim's good numbers there 467 00:26:58,119 --> 00:27:00,440 Speaker 1: is this is a four cents on the dollar business. 468 00:27:00,440 --> 00:27:04,480 Speaker 1: This is not Dominion Electric, you know, with a regulated eight, nine, 469 00:27:04,480 --> 00:27:08,680 Speaker 1: ten twelve net clean. I mean you can't, I would suggest, Sarah, 470 00:27:08,920 --> 00:27:14,639 Speaker 1: you can't do this flat revenue, shrinking revenues given those 471 00:27:14,880 --> 00:27:19,399 Speaker 1: ending margins. So then what does the legacy of Mr Lundgren? 472 00:27:19,480 --> 00:27:22,240 Speaker 1: What do they do? Yeah, so I think they're trying 473 00:27:22,280 --> 00:27:24,520 Speaker 1: to become a healthier business in some other ways besides 474 00:27:24,560 --> 00:27:27,560 Speaker 1: growing sales. One is through real estate transactions. So they 475 00:27:27,640 --> 00:27:31,200 Speaker 1: hired a senior executive whose sole focus is to free 476 00:27:31,200 --> 00:27:34,240 Speaker 1: of value from their real estate. In particular that Harold 477 00:27:34,240 --> 00:27:36,840 Speaker 1: Square property in New York is a real Crown jewel 478 00:27:36,880 --> 00:27:38,679 Speaker 1: that they could get a bunch of money for if 479 00:27:38,680 --> 00:27:41,480 Speaker 1: they were to then enter into a sale wee stack agreement. 480 00:27:41,680 --> 00:27:44,280 Speaker 1: So they're trying to do things like that to become healthier. 481 00:27:44,440 --> 00:27:47,440 Speaker 1: But it's all complicated. You know, they've closed a hundred stores, 482 00:27:47,760 --> 00:27:50,639 Speaker 1: and in some ways that makes them more productive, but 483 00:27:50,720 --> 00:27:53,520 Speaker 1: in other ways they say they even see on online 484 00:27:53,560 --> 00:27:57,240 Speaker 1: sales retreat in a given geographic area when they close 485 00:27:57,320 --> 00:28:00,760 Speaker 1: the store, and so it's it's certain be a complicated 486 00:28:01,640 --> 00:28:03,679 Speaker 1: they have at their door right now, Sarah, Now you 487 00:28:03,720 --> 00:28:05,480 Speaker 1: and I are going to listen to this question to 488 00:28:05,680 --> 00:28:12,040 Speaker 1: Mr Pim Fox Pim. What was Harold Square like? Well, 489 00:28:12,080 --> 00:28:15,879 Speaker 1: it had another store across the street called Gimbals, And 490 00:28:16,040 --> 00:28:18,720 Speaker 1: indeed that was always the joke that they both lost 491 00:28:18,800 --> 00:28:22,080 Speaker 1: money on everything they sold because they were in such 492 00:28:22,200 --> 00:28:25,280 Speaker 1: intense competition, but that they made it up on volume. 493 00:28:25,800 --> 00:28:28,960 Speaker 1: What was what was the holiday season? It was like 494 00:28:30,160 --> 00:28:31,840 Speaker 1: was it like that? I mean, Sarah, this it was 495 00:28:31,920 --> 00:28:33,560 Speaker 1: like the movie. It was like that. It was a 496 00:28:33,720 --> 00:28:38,840 Speaker 1: Miracle Street. Isn't that cool? Sarah? Yeah? But that's you know, antediluvian, 497 00:28:38,920 --> 00:28:41,800 Speaker 1: that's like the place the scene era. You know, I 498 00:28:41,920 --> 00:28:44,960 Speaker 1: think they still have one escalator in that Macy's Harold 499 00:28:44,960 --> 00:28:48,560 Speaker 1: Square store that it's from that area, right, the wooden escalators, 500 00:28:48,640 --> 00:28:50,520 Speaker 1: right that she used to get caught on as a 501 00:28:50,600 --> 00:28:53,240 Speaker 1: child or your father would say, if you don't behave 502 00:28:53,880 --> 00:28:57,440 Speaker 1: the escalator will eat you. Right, you were not allowed 503 00:28:57,480 --> 00:29:00,760 Speaker 1: to walk backwards on the exactly precisely what did you 504 00:29:00,800 --> 00:29:03,120 Speaker 1: get beaten at the same point as me? Sarah? Thank 505 00:29:03,120 --> 00:29:06,840 Speaker 1: you so much. Sarah starting off seriously retailer with Macy's 506 00:29:06,880 --> 00:29:09,880 Speaker 1: with a really interesting story. And I believe there's a 507 00:29:09,920 --> 00:29:13,280 Speaker 1: small combody in Arkansas reporting to borrow. Yes there is Walmart, 508 00:29:13,280 --> 00:29:15,239 Speaker 1: but even just to put a little cap on this 509 00:29:16,080 --> 00:29:19,320 Speaker 1: Lord and Taylor, which is also another big flagship store 510 00:29:19,440 --> 00:29:22,680 Speaker 1: up the street. Yeah, you know they're shutting the store. 511 00:29:22,760 --> 00:29:24,400 Speaker 1: I did not know. Yeah, they're shutting the store and 512 00:29:24,440 --> 00:29:28,920 Speaker 1: it's going to become a we work project where people 513 00:29:28,960 --> 00:29:31,360 Speaker 1: can at work. Well the building we're sitting in here 514 00:29:31,360 --> 00:29:38,320 Speaker 1: at the Mr quorback Alexander's all this, Graham and stress. Yes, 515 00:29:38,560 --> 00:29:49,280 Speaker 1: An s Man. Thanks for listening to the Bloomberg Surveillance podcast. 516 00:29:49,680 --> 00:29:54,680 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 517 00:29:54,760 --> 00:29:59,080 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 518 00:29:59,160 --> 00:30:03,040 Speaker 1: Keane before the podcast. You can always catch us worldwide. 519 00:30:03,480 --> 00:30:04,560 Speaker 1: I'm Bloomberg Radio.