Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim Stenebec from Bloomberg Radio.
Speaker 1: All right, everybody, we're going to continue with some of
Speaker 1: what we just talked about in our simulcast Carol Masser
Speaker 1: along with Katie Greifeld live here on Bloomberg Business Week,
Speaker 1: on Bloomberg Radio, on YouTube, and on Bloomberg Originals, because,
Speaker 1: as we said, right, one of the key focal points
Speaker 1: for the markets for investors this week, Katie is Jay
Speaker 1: Powell heading to Capitol Hill two days of testimony. He'll
Speaker 1: have his statement and then he's going to get a
Speaker 1: slew questions right from members up on Capitol Hill, and
Speaker 1: we'll see what he has to say with us with
Speaker 1: some more thoughts on. This is Janelle Marte. She is
Speaker 1: Bloomberg News Economics and Federal Reserve reporter, joining us via
Speaker 1: zoom from New York City. Johannelle, good to have you
Speaker 1: here with Katie and myself. So we just talked about
Speaker 1: this with our TV colleague because we've all been over it.
Speaker 1: How is it that you guys are thinking about and
Speaker 1: how you are thinking about it? Specifically about what Jay
Speaker 1: Powell will be doing over the next couple of days.
Speaker 1: So Hi there, It's going to be a really important
Speaker 1: couple of days here that we will hear from how
Speaker 1: because it's probably going to be his last public remarks
Speaker 1: before the meeting, right, So I think what we're going
Speaker 1: to be watching or words expected of How is for
Speaker 1: him to echo what we've been seeing and hearing from
Speaker 1: some of his colleagues on the beat. So the message
Speaker 1: has really been, first of all, that they're not done
Speaker 1: raising interest rates. More rate increases to come, and I
Speaker 1: think some people have also been pointing out that they
Speaker 1: think interest rates or that they're prepared to take interest
Speaker 1: rates hire if we continue to see economic data come
Speaker 1: in really hot. Right, So we have seen really blockbuster
Speaker 1: jobs reports and inflation data shoring that it's elevated. And
Speaker 1: thankfully the Fed will have a few key reports coming
Speaker 1: in before they make that decision, and that's going to
Speaker 1: be very key to what they end up doing and
Speaker 1: also to what they signal in terms of the how
Speaker 1: high they think rates will have to go. So if
Speaker 1: we expect to hear from you know, classic Jerome Pal tomorrow,
Speaker 1: very measured, very thoughtful. I am curious, So what the
Speaker 1: bigger risk is here? What is the more likely risk
Speaker 1: at least you know, from the market's perspective, you know,
Speaker 1: is there a bigger risk that Jerome Pal accidentally sounds
Speaker 1: dovish or accidentally sounds hawkish once we actually start getting
Speaker 1: some questions. So I think the tone from what we've
Speaker 1: been getting from FED officials has been more hawkish than dovish,
Speaker 1: especially in the past month, where you know, maybe we
Speaker 1: thought six weeks ago that the economy was starting to slow,
Speaker 1: that inflation was coming down, and actually the last a
Speaker 1: couple of sense and data reports have shown us that
Speaker 1: the economy remains really strong, there's still a lot of
Speaker 1: demand for workers, and inflation is not slowing down at
Speaker 1: the pace that people expected. So I think the tone
Speaker 1: has been hawkish. I think we're likely to see more
Speaker 1: hawkishness from Howell, but again the message probably being that
Speaker 1: they're going to look at the data again, these key
Speaker 1: reports coming in before they make their decision, and what
Speaker 1: they don't want is for markets to start to believe
Speaker 1: that inflation is going to always stay this way for
Speaker 1: inflation expectations to become an anchor. So that's really the
Speaker 1: message that they've been trying to deliver is that we're
Speaker 1: going to do what it needs to have. We're going
Speaker 1: to do whatever it needs to be done to get
Speaker 1: inflation back down to our target. All right, So it
Speaker 1: sounds like, to be fair, it's a little bit more
Speaker 1: of the same, right, Yeah, we're sticking at that two
Speaker 1: percent target. We are going to continue to be data depended.
Speaker 1: We're gonna keep raising rates until we get it right.
Speaker 1: So I feel like it's going to be more of
Speaker 1: the same. Is there anything new that we could get
Speaker 1: in terms of tone or message, Joannelle from J Powell, Well,
Speaker 1: we do want to hear to see how he will
Speaker 1: be interpreting the data that comes in and when they
Speaker 1: need again in March. You have to remember, they'll be
Speaker 1: updating their projections for how high they think great rates
Speaker 1: will have to go. So we will be listening for
Speaker 1: any indication that the dot plot as it's called, is
Speaker 1: going to show higher terminal rates. So I think we're
Speaker 1: going to be listening for those kinds of clues, and
Speaker 1: the FED has at this meeting that very important tool.
Speaker 1: So even if they do decide to stick with twenty
Speaker 1: five basis points, which is what the market is expecting
Speaker 1: and what many officials have been saying that they prefer
Speaker 1: if they suggest that they're prepared to take or it's
Speaker 1: hire by showing that the dot plot, then they can
Speaker 1: still sends a very hot restage to us. Would it
Speaker 1: be like if they said they could go now back
Speaker 1: to fifty, that would be it would be huge, right,
Speaker 1: that would be a different message, like this whole idea
Speaker 1: of maybe going higher longer, Like I get it, like
Speaker 1: I feel like it's a sliding scale, right, do you
Speaker 1: feel like it's a little bit of a sliding scale potentially, Yeah,
Speaker 1: But if they jumped all of a sudden and said,
Speaker 1: well we might be able to we might need to
Speaker 1: do fifty at a meeting like that to me would
Speaker 1: be a bit of a shock, I think. So if
Speaker 1: you think about what's presiden, yeah, it would I mean,
Speaker 1: it would certainly be a shock. I would say, it's
Speaker 1: not what the market is effecting, though the market has
Speaker 1: it priced in a small chance of that happening, and
Speaker 1: some officials, of course, have said the hockage. Officials have
Speaker 1: said that they wanted to be on the table. But
Speaker 1: again I think it's been clear from what we've heard
Speaker 1: that this measured approach, this twenty five basis point increment
Speaker 1: at this level, where where where it's are at this point,
Speaker 1: is what most of the artificials will prefer. However, I
Speaker 1: mean I don't think it's been taken off the table completely.
Speaker 1: And so again we'll be walking to see where we
Speaker 1: get from the economic data, not really this before this meeting,
Speaker 1: but in the coming meetings. So we're talking a lot
Speaker 1: about interest rates, which makes sense, that is, you know,
Speaker 1: their primary lever talk to us though about quantitative tightening,
Speaker 1: because in the background of all of this you do
Speaker 1: have the Fed's balance sheet shrinking. What is the thinking there,
Speaker 1: you know, should we expect Powell to get some questions
Speaker 1: on that dis quantitative tightening? Last three, at the end
Speaker 1: of twenty twenty three, what's the current thinking around the
Speaker 1: balance sheet? That's a really good point. So the FED
Speaker 1: has been reducing its balance sheet in their background, as
Speaker 1: they like to say, by up to ninety billion dollars
Speaker 1: a month, and it seems to be going fairly well. However,
Speaker 1: reserves the reserves to help at that big banks puld
Speaker 1: that the FED those reserves have been draining and there's
Speaker 1: been a lot of liquidity held in the reverse repot facility,
Speaker 1: which is a program that lets financial firms park some
Speaker 1: money with the fat overnight. So there's a little bit
Speaker 1: of concern among some people in the market that if
Speaker 1: this money is kind of stays in the reverse repot program,
Speaker 1: but you know, and reserves continue to drink, that the
Speaker 1: FED might then have to change course if we see
Speaker 1: reserves fall too low. But what we've heard from a
Speaker 1: BET official so far is that they they're aware of
Speaker 1: what's going on in the markets, they're watching it, and
Speaker 1: that they're prepared to make changes if necessary, but that
Speaker 1: for so far the program seems to be running smoothly.
Speaker 1: They're continuing with the balance sheet runoff, but they hope
Speaker 1: it will stay according to Plant. Of course, we could
Speaker 1: hear from some politicians, not policymakers, politicians on Capitol Hill,
Speaker 1: you know, questioning howl about that. And some people are
Speaker 1: obviously are not huge fans of the fed's big balance
Speaker 1: sheet because they see that it's been influencing maybe even
Speaker 1: the housing market in an unfair way, or they don't
Speaker 1: like the fad having you know so much, you know,
Speaker 1: snapping up so many assets. So I mean, it's certainly
Speaker 1: something that you'll get questions about, but for now, the
Speaker 1: message chest seemed to be that it's working. Janelle does
Speaker 1: does the strength in a continued strength, I should say,
Speaker 1: in the labor market, um plus the bounce back that
Speaker 1: we've seen in the equity market. Certainly again this month
Speaker 1: kind of give Jay Powell some breathing room to be
Speaker 1: more hawkish. As you guys were talking about earlier. It
Speaker 1: might so clearly there is some concern that the higher
Speaker 1: interest rates could hurt the labor market, could cause people
Speaker 1: to lose their jobs, and that might be something that
Speaker 1: we or it is something we've heard about the Democrats
Speaker 1: for example, who are you know, reminding power for example
Speaker 1: that hey, you also have a maximum employment man dates,
Speaker 1: So while you're worried about inflation, let's make sure that
Speaker 1: we don't cause undue pain to the economy. But if
Speaker 1: you get those kind of remarks, you'll be coming in
Speaker 1: and wonder worth you un employment rate it's at three
Speaker 1: point four percent, And again he said, we're seeing some
Speaker 1: of our rebound and equity markets, So I think that
Speaker 1: works in his favor. In that sense, But I think
Speaker 1: that he in some other sense that that they're watching wages,
Speaker 1: they're watching labor markets, and then you know, they are
Speaker 1: expecting probably some weakness in the labor market to take
Speaker 1: place before they can get their inflatient targets down to
Speaker 1: two percent. All right, couldn't leave it on that note.
Speaker 1: Joan al Marte Blueberg News Economics and Federal Reserve reporter,
Speaker 1: joining us via zoom from New York City ahead of
Speaker 1: Jay Palill getting ready to march up to Capital Hill
Speaker 1: for two days of testimony. What's kind of front and
Speaker 1: center for you. I'm interested, of course, to hear his
Speaker 1: comments on inflation, as we were just talking about. He's
Speaker 1: probably gonna stick to the script. But if you look
Speaker 1: at some of the measures of inflation expectations, I like
Speaker 1: to look at break evens in the bond market, those
Speaker 1: market based measures, they've been moving higher. You think about
Speaker 1: this big sell off that we've had across the treasury curve,
Speaker 1: A lot of that is coming from the break evens component.
Speaker 1: So the bond market is once again bracing for higher inflation.
Speaker 1: It's still very much top of mind. It seems like
Speaker 1: that immaculate disinflation narrative has sort of died off. So
Speaker 1: I mean, anytime Jerome Pale speaks, even if it's expected
Speaker 1: to stick to script, he's expected to say the same thing.
Speaker 1: It's still a big event, absolutely, and this is going
Speaker 1: to be it then before the next FED meeting in
Speaker 1: terms of what we hear from him. You know, you
Speaker 1: also had Libra cracking five percent for the first time,
Speaker 1: so a big global rate and I just think about
Speaker 1: the ECB's governing council member Robert Holtzman saying he backs
Speaker 1: half point interest rate hikes at every meeting through July.
Speaker 1: So it's a global story. And I think about the
Speaker 1: global impact of central banks continuing to raise rates. Carol Master,
Speaker 1: Katie Greifeld wet our Bloomberg Radio. You're listening to the
Speaker 1: Bloomberg Business Podcast. Catch us live week days from two
Speaker 1: to five pm Easter on Bloomberg Radio. The Bloomberg Business
Speaker 1: a band you two. You can also listen live to
Speaker 1: our flagship New York station, Just say Alexa play Bloomberg
Speaker 1: elve and thirty. A lot of news, as you know,
Speaker 1: we've been talking about it already coming out of China overnight,
Speaker 1: most notably China's annual National People's Congress. The first Inspasioning
Speaker 1: brought an abrupt end to three years of crippling COVID
Speaker 1: zero restrictions has begun with a modest target for economic
Speaker 1: growth and few hints of past stimulus extravagance. There's other headlines,
Speaker 1: but let's get right to our guest. So it's great
Speaker 1: to have with us to really weed through all of
Speaker 1: the headlines. Eddie Brown former editorial director of Bloomberg New Economy.
Speaker 1: He's spent three decades in Asia as both China editor
Speaker 1: and calumnist for The Wall Street Journal. He leads the
Speaker 1: China Hub. He is a partner at Brunswick Group, and
Speaker 1: he joins us via zoom in New York City. Andy,
Speaker 1: good to have you here with Katie Greifeld and myself.
Speaker 1: How are you. I'm doing well, just got back from
Speaker 1: a trip to Beijing and Shanghai. It's great to be
Speaker 1: with you, Carol and Katy. Well, great to have you here.
Speaker 1: So tell us, because there's a bunch of headlines overnight,
Speaker 1: you know, putting out a growth forecast. What's front and center,
Speaker 1: and we'll tell us about your trip and kind of
Speaker 1: what was the mood and kind of general conversation. Yeah, upbeat.
Speaker 1: You know, consumption is up. Beijing is chop flo full
Speaker 1: of cars, impossible to move around the city. The shops
Speaker 1: are full, the restaurants are doing a roaring business. Shanghai similarly,
Speaker 1: but the airport pretty much deserted. The external part of
Speaker 1: the economy has not picked up. Problems with flights, problems
Speaker 1: with visas, very few foreigners in Beijing. That's not expected
Speaker 1: to pick up until sometime around the summer. That's interesting. Yeah,
Speaker 1: the fact that, you know, there's a lot of movement
Speaker 1: within the country, but in terms of people coming in
Speaker 1: and out, maybe not so much. Let's get to some
Speaker 1: of the numbers that came out overnight, because I feel
Speaker 1: like that really set the tone for trading both in
Speaker 1: Europe and at the start of the US session. So
Speaker 1: we look at the economic growth target around five percent
Speaker 1: for the year. I know that was a bit disappointing
Speaker 1: in terms of, you know, what people were expecting. How
Speaker 1: surprised were you to see a five percent handle? You know,
Speaker 1: I wasn't surprised in the slightest. I think it reflects
Speaker 1: two things. First of all, they wanted to set an
Speaker 1: undemanding target that they felt confident. They feel confident they
Speaker 1: can actually meet that's important for credibility, because they missed
Speaker 1: the growth target last year by a mile because of
Speaker 1: zero COVID. That's the first thing that I think. More
Speaker 1: to the point, it reflects the reality that China faces
Speaker 1: an awesome set of challenges, really tough, tough problems. I mean,
Speaker 1: the property market is still in the doll drums. That's
Speaker 1: twenty five percent of the economy. Local governments are bankrupt
Speaker 1: because they've spent all of their all of their budget
Speaker 1: on COVID testing and COVID quarantines and so on. Exports
Speaker 1: are drying up because of economic slowdown in the US, Europe,
Speaker 1: other advanced economies, and of course the US is killing
Speaker 1: China's high tech economy with these bands on semiconductors and
Speaker 1: sanctions against literally hundreds of some of China's leading tech companies.
Speaker 1: So Andy, you know this is a government as you
Speaker 1: well know that they do kick in the stimulus when needed.
Speaker 1: As you said, they've spent a lot of money already.
Speaker 1: Will they not if things start to come and get
Speaker 1: into trouble, will they not jump started again with more stimulus?
Speaker 1: You know that game is over. It's so played out.
Speaker 1: They're getting less and less bang for their buck. When
Speaker 1: it comes to infrastructures, China simply doesn't need more infrastruct
Speaker 1: sure or that much more infrastructure, at least at this
Speaker 1: stage of its development. The housing markets, they say, so
Speaker 1: that's that was the normal playbook, right, I mean, you know,
Speaker 1: you kind of fire up the furnaces, get the steel
Speaker 1: mills rolling again, bill bridges and opera houses and highways
Speaker 1: and apartment blocks. That doesn't work. It's going to be
Speaker 1: the consumer that does the heavy lifting this time around,
Speaker 1: which for the global economy translates something like great for LVMH,
Speaker 1: great for Diagio, great for all the consumer luxury companies
Speaker 1: sell and their their business, by the way, is going
Speaker 1: gangbusters in China right now and cascading down not just
Speaker 1: the first tier cities, second tier cities, but also now
Speaker 1: down to the third tier cities. Very strong consumer rebound.
Speaker 1: Not so good if you're a HBHP or a VALE.
Speaker 1: And that I mean the fact that they really want
Speaker 1: the consumer to drive this. You have to wonder what
Speaker 1: the inflationary effects are there, the sort of ripple effects
Speaker 1: of that could look like. But talk to us a
Speaker 1: little bit about that focus on the consumer. I mean,
Speaker 1: how does China, how does Beijing actually, you know, make
Speaker 1: sure it's the consumer that's driving that growth. You know,
Speaker 1: they have to turn around the drivers. Now it's all
Speaker 1: about the consumer. And to do that, they're going to
Speaker 1: have to retool their whole economy. They're going to have
Speaker 1: to put basically, put more money in people's pockets, and
Speaker 1: that is going to mean a redistribution of income away
Speaker 1: from local governments, away from the state sector, towards the household.
Speaker 1: Now that could be indirect. It could mean, you know,
Speaker 1: pumping more money into education, into healthcare, into childcare, or
Speaker 1: it could mean outright grants. But one way or another,
Speaker 1: China has to shift the drivers of growth decisively, you know.
Speaker 1: And some of the other headlines that came out, Andy,
Speaker 1: I'm sure you saw them. China looking to boost high
Speaker 1: end manufacturing, that's one thing, and then also kind of
Speaker 1: leaning on and putting more pressure on their own private
Speaker 1: sector to play a bigger role in establishing technology independence.
Speaker 1: So they are leaning on a lot of different areas
Speaker 1: to kind of jump start their economy. Yeah, the private sector,
Speaker 1: this is the interesting one. And really it's the contradiction
Speaker 1: that right at the heart of Jimping's plan to revive
Speaker 1: the economy, and to revive the economy, they have to
Speaker 1: revive the confidence of the private sector. These guys create
Speaker 1: just about all the new jobs in China, and they've
Speaker 1: been pummeled for the last three years, pommeled by the
Speaker 1: COVID lockdowns, by the assault on the private sector, on
Speaker 1: the big tech platforms, on whole industries like after school education,
Speaker 1: on the real estate sector. Some of the big developers
Speaker 1: in an extreme distress. So so that simple. But at
Speaker 1: the same time, Sijimping wants the party in control of everything,
Speaker 1: top down control, and that is going to be a
Speaker 1: big feature of the next five years of Si Jingping's governance. Now,
Speaker 1: the private sector looking at that and saying, Okay, where
Speaker 1: do we fit in? Where do we fit in here?
Speaker 1: They don't believe that the punishment is over. They like
Speaker 1: the ratterick, this rattering about yeah, we believe in you guys,
Speaker 1: private sector. The markets are open and so on, but
Speaker 1: they're not seeing any action right now, and they're very skeptical.
Speaker 1: Of course, we've seen a big boom in the reopening
Speaker 1: trade in the market. What I'm hearing from Chinese fund
Speaker 1: managers Chinese entrepreneurs from at least some of them is
Speaker 1: this is an opportunity to sell, and some of them
Speaker 1: are telling me it's a lost chance to sell. Wow, Okay,
Speaker 1: interesting because I was thinking about, all right, you know,
Speaker 1: we're hearing all these headlines, saw these headlines ever the weekend.
Speaker 1: But I think about, you know, the missing you know,
Speaker 1: top investment banker in China, and I feel like from
Speaker 1: day to day you can get news out of China
Speaker 1: that says wait, Chinese you know, officials want more oversight
Speaker 1: of various industries, and I feel like sometimes it changes
Speaker 1: from day to day and I don't know quite what
Speaker 1: to trust at this point. Bottom line, Andy, I mean
Speaker 1: the Chinese government, as you said, more oversight, no doubt
Speaker 1: about it, more oversight more of of course, we haven't
Speaker 1: talked about the big government reorganization that is going to
Speaker 1: be under way. This is where C. Jimping gets his
Speaker 1: third term as president, a ceremonial title. Really he already
Speaker 1: has real power through his position as ahead of the party,
Speaker 1: and of course he got pretty much unlimited tenure in
Speaker 1: that job at the end of last year, and now
Speaker 1: he's going to put all of his loyalists in the
Speaker 1: key positions within the state apparatus. That means the Premier,
Speaker 1: the Vice executive Vice Premier in charge of the economy,
Speaker 1: the head of the Central bank, finance, ministry, judiciary, and
Speaker 1: so on and so forth. But they're all going to
Speaker 1: be working very much under this top down party led system.
Speaker 1: C jimping. The overall direction of travel is very clear.
Speaker 1: He wants to harden the he wants to build up
Speaker 1: the country's technological base because he believes there's going to
Speaker 1: be a long term, arduous struggle against the United States,
Speaker 1: and he wants the party to be in charge of that.
Speaker 1: And frankly, the private sector are going to have to
Speaker 1: get with the program. And I just swim make sure
Speaker 1: I heard it right. Did you say people were saying
Speaker 1: like this is the last time to get out of
Speaker 1: the market, the Chinese market just quickly. Yeah. People are
Speaker 1: not convinced that this is sustainable. And what they've all
Speaker 1: been predicting is sure there's going to be a relief
Speaker 1: rebound when they finally lift CUP, which they've done lifted
Speaker 1: COVID zero. But some of the people that I'm talking
Speaker 1: to as saying, we don't have long term confidence a
Speaker 1: market rebound now is a chance to sell. All right, well,
Speaker 1: we certainly have seen that play out in the Chinese trade.
Speaker 1: Here of those ADRs in the US coming off some
Speaker 1: of their highs Andy thank you. As Owey's Andy Brown,
Speaker 1: partner at Brunswick Group joining us Zoom from New York City,
Speaker 1: understands the Chinese market. As we said, spent some thirty
Speaker 1: years in Asia's both China editor and calmness the Wall
Speaker 1: Street Journal and former Bloomberg colleague. As former editorial director
Speaker 1: at Bloomberg New Economy China, I feel like it's a
Speaker 1: big question mark. This is Bloomberg business Week Inside from
Speaker 1: the reporters and editors who bring you America's most trusted
Speaker 1: business magazine, plus global business, finance and tech news. The
Speaker 1: Bloomberg Business Week Podcast with Carol Messer and Tim Stenebec
Speaker 1: from Bloomberg Radio. All Right, so, Katie, we've talked about
Speaker 1: some pretty heavy stuff, just talk crypto, we've talked fed.
Speaker 1: We thought we'd just kind of take a step back
Speaker 1: here and take a look into something like the global
Speaker 1: toy market, because it's massive. It reached early one hundred
Speaker 1: and seventy one billion in twenty twenty two, so last
Speaker 1: year and by one forecast by Imark Group forecast to
Speaker 1: reach two hundred and sixty seven point nine billion by
Speaker 1: twenty twenty eight, So good voice to talk about it.
Speaker 1: Elizabeth Werner is a QVC guesthout, someone who has followed
Speaker 1: and tracked the global toy industry. She joins us via
Speaker 1: zoom from Maryland. Elizabeth, good to have you here with
Speaker 1: Katie and myself. You did just attend Fest West, which
Speaker 1: I don't know. I wasn't very familiar with it, but
Speaker 1: it is a massive toy trade show. Tell us a
Speaker 1: little bit about what you saw, because I feel like
Speaker 1: it's coming on the heels of a disappointing forecast from
Speaker 1: Hasbro that we got last month. So tell us about
Speaker 1: kind of the mood and what was being talked about. Yeah, so, actually,
Speaker 1: thank you for having me. First of all, the mood
Speaker 1: was really great and really festive. It's really been great
Speaker 1: for us as an industry to get back together in person,
Speaker 1: so I think that was part of the excitement. There
Speaker 1: were over five hundred manufacturers from around the world displaying
Speaker 1: toys for this year, and we saw some great things,
Speaker 1: a lot of great trends, whether it be more diversity
Speaker 1: and inclusivity for our children to learn more about that
Speaker 1: when they're young. Of course, lots of loads and loads
Speaker 1: of products that come from movies and television shows teaching
Speaker 1: our children more about social emotional learning. A lot of
Speaker 1: great products for that, of course, collectibles, gaming. So there
Speaker 1: are a lot of fun things that we saw there
Speaker 1: and a lot of excitement. It's so interesting for me
Speaker 1: to have this conversation because I just spent the weekend
Speaker 1: with my niece who's a year old, and my nephew
Speaker 1: who is a year and a half old. So I
Speaker 1: heard a lot about Bluie. I heard a lot about
Speaker 1: Coco Melon. When you say, you know there's this focus
Speaker 1: around favorite TV, favorite movie characters, name some names here.
Speaker 1: I need to know what's in vogue. Yes, so you
Speaker 1: name two of the very big ones. But you absolutely
Speaker 1: cannot forget Paw Patrol for that age as well. Yes, so,
Speaker 1: Paw Patrols actually celebrating its tenth anniversary. So listen to this.
Speaker 1: Paw Patrol is airing in one hundred and eighty countries
Speaker 1: in thirty languages, and is in three hundred and fifty
Speaker 1: million homes. So we are talking about popularity not just here,
Speaker 1: but worldwide, and some of the really fun items that
Speaker 1: are coming out this year, of course come directly from
Speaker 1: the show. So the kids watch the episodes and then
Speaker 1: part of their development imagination is taking those scenes and
Speaker 1: reenacting them. So one of the items that I brought
Speaker 1: with me today the Paw Patrol Aqua Pups Whale Patroller.
Speaker 1: This looks awesomely from the show. Yes, so much fun.
Speaker 1: It comes with chase and chases actual vehicle as well,
Speaker 1: which can be put into this actual larger vehicle. We
Speaker 1: could push a button and out it will launch right
Speaker 1: through the front. So the kids are gonna have hours
Speaker 1: and hours of endless play with this fun item. Totally
Speaker 1: want it. I'm just gonna put it out there, Elizabeth.
Speaker 1: I want to go back there do some kind of
Speaker 1: bread and butter ideas when it comes to you talked
Speaker 1: about a lot of enthusiasm out there, and I talked
Speaker 1: about Hasbro, which came out last month with a gloomy
Speaker 1: twenty twenty three forecast, and they talked about inflation dragging
Speaker 1: down demand. They're looking at consumers pocketbook and they're saying, Okay,
Speaker 1: they only have so much to spend. So I am
Speaker 1: curious about some of these big macro ideas, inflation being one,
Speaker 1: supply chains, which is something that's certainly pinched to supply
Speaker 1: chains during the pandemic. How did they come up or
Speaker 1: what's being talked about when you dive into those two areas. Yeah,
Speaker 1: absolutely so. With inventory, one of the things that we
Speaker 1: found was, of course there were supply chain issues throughout
Speaker 1: the pandemic, but once those supply chain issues sort of
Speaker 1: fixed themselves, a lot of inventory came in. And at
Speaker 1: that point when all that inventory came in and the
Speaker 1: pandemic was slowing down a bit, there was a backup
Speaker 1: of inventory everywhere, and so all of the various retailers
Speaker 1: were finding that they had to get rid of this
Speaker 1: extra inventory before they could bring new inventory in, and
Speaker 1: so that backup was really a major problem in the industry.
Speaker 1: So we are hoping now as that inventory they're going
Speaker 1: through that inventory, we'll be able to bring new inventory
Speaker 1: in and see some of these great new items for
Speaker 1: the upcoming year. And of course inflation has been talked
Speaker 1: about a lot as well. The one thing that the
Speaker 1: toy industry is hoping is that families are going to
Speaker 1: continue to spend more time at home together because of inflation,
Speaker 1: it's harder to travel, do things out of the house,
Speaker 1: and hopefully continue to engage in play and a lot
Speaker 1: of fun with their families. Let me just ask you
Speaker 1: about one other thing big geopolitical China US relations. So
Speaker 1: much is made overseas in Asia, and I just wonder
Speaker 1: how that is maybe impacting where supply chains are when
Speaker 1: it comes to the manufacturing of toys. We know so
Speaker 1: much has happened over in China and Asia specifically. Yeah,
Speaker 1: so it's true, and a lot of the toys are
Speaker 1: made there, but toys are being made all over Southeast Asia,
Speaker 1: South America, and I think that we'll have to see
Speaker 1: as we move forward with the tensions with China how
Speaker 1: that is going to affect our inventory. But right now
Speaker 1: things are still moving along as planned. And Elizabeth, you
Speaker 1: mentioned that, you know, one of the focused at Toy
Speaker 1: f West was collectibles. What are kids collecting these days?
Speaker 1: Because when I was a child, it was beanie babies,
Speaker 1: maybe some tomagachis as well. What's what's really popular right now?
Speaker 1: That's right. We also had crazy Bones. I don't know
Speaker 1: if you remember those, but they look like you know,
Speaker 1: little tiny oval friends. And we had Pokemon cards. Well,
Speaker 1: right now, the collectibles are all miniature in size, not all,
Speaker 1: but a large large majority of them. Kids are collecting
Speaker 1: normal things that they would see in everyday life, but
Speaker 1: in mini form. And one of those I have right here.
Speaker 1: Actually this is the MGA mini Verse. Now, MGA has
Speaker 1: a load of very popular brands, l Ol Surprise, Brats,
Speaker 1: little types. Well, they've taken all of those and they
Speaker 1: put them into miniature form, little tiny pieces, some of
Speaker 1: them about the size of a quarter. What's exciting about
Speaker 1: this line. Several of them have lots of fun accessories.
Speaker 1: But the make it any food is a huge trend.
Speaker 1: So I don't know if you've seen on social media,
Speaker 1: but people making little tiny food is something that has
Speaker 1: been followed. Well. Now our kids and yes adults are
Speaker 1: actually making little tiny food. Now this food is inedible,
Speaker 1: but it will come with all the components. You're going
Speaker 1: to make the food, whether it might be donuts or
Speaker 1: cupcakes or pie, maybe a shake, you're actually going to
Speaker 1: create that food. And this is something that the kids
Speaker 1: are collecting. They want all of it, and it's something
Speaker 1: that we're really looking forward to this year sixty seven
Speaker 1: on Lol Surprise, the official store and just found it online.
Speaker 1: Elizabeth fun Stuff. Thank you so much. Be well, Elizabeth Warrener.
Speaker 1: She's QBC guest host, toy industry follower, knows so much
Speaker 1: about it. Joining Sva Zoom from Maryland. Carol Masser Allow
Speaker 1: with Katie Greifeld, And this is Bloomberg Radio. You're listening
Speaker 1: to the Bloomberg Business Week Podcast. Catch us live weekdays
Speaker 1: from two to five pm. Easter Bomberg Radio, the Bloomberg
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Speaker 1: to our flagship New York station Just Say Alexa play
Speaker 1: Bloomberg e Love and Dirty block a journal Now. But
Speaker 1: you let me drive? Oh no, no, no no no, who's
Speaker 1: going to drive? Honey? Please? I'll do the riding gravels.
Speaker 1: Let me. I want to drive. It's good question. Drive.
Speaker 1: This is the Drive to the clothes Well Brier up,
Speaker 1: jog down on Bloomberg Radio. All right, everybody, just about
Speaker 1: seventeen and a half minutes left in today's trading session.
Speaker 1: Carol Master along Katie Grifled live here on Bloomberg Business
Speaker 1: Week in our Interactor Broker studio on YouTube on Bloomberger
Speaker 1: Originals and Katie bouncing around way off our highs of
Speaker 1: the session, in fact, just off our lows when it
Speaker 1: comes to the equity trade, and certainly watching what's going
Speaker 1: on in treasuries, we're bouncing up higher as well that
Speaker 1: two years Charlie mentioned four eighty eight. We are so
Speaker 1: close to four percent really across the curve. You look
Speaker 1: at the SMP five hundred though, like you mentioned, up
Speaker 1: just a tenth of a percent. It's really hanging onto
Speaker 1: gains there as Yeah, seventeen minutes from the bell, let's
Speaker 1: get some more on the action with Mark Barrabou. He
Speaker 1: is head of Global Equity over at Jennison Associates. He
Speaker 1: joined us now on Zoom from Massachusetts. Mark, it's great
Speaker 1: to have you with us at the start of what's
Speaker 1: expected to be a pretty big week. We have Jerome
Speaker 1: Pal tomorrow, we have the jobs report on Friday. What
Speaker 1: are you looking for? Is there anything that could happen
Speaker 1: this week that would change the needle for you? I
Speaker 1: don't think so. I mean, we have a pretty state environment,
Speaker 1: pretty steady state environment right now. Right I think the
Speaker 1: market agrees that Fed's going to gradually move rates from here,
Speaker 1: probably not that much. The economy has been really strong
Speaker 1: over the last six months, job growth here to Day's
Speaker 1: d it's a thousand. So it's a pretty good environment fundamentally,
Speaker 1: although things are slowing at the margin in certain places.
Speaker 1: So I think we all just have to be patient.
Speaker 1: And so I was saying a little bit earlier about
Speaker 1: the jobs report on Friday, I think this is the
Speaker 1: first jobs report where I've been more excited to see
Speaker 1: the revision than I am to see the actual number,
Speaker 1: Because you remember what we got in January's report, half
Speaker 1: a million jobs out of I don't know, felt like nowhere.
Speaker 1: What are you looking for in Friday's payrolls print? Are
Speaker 1: you like me? Are you not too excited about the headline? Yeah?
Speaker 1: I'm not too excited about the headline. I think we've
Speaker 1: been in a very strong job market for quite some
Speaker 1: time now. Employers are looking for people everywhere, seemingly but
Speaker 1: Silicon Valley. So it's a pretty good environment out there, right,
Speaker 1: I'm not too excited about it one way or the other.
Speaker 1: All right, Okay, So that's an interesting perspective. Having said that,
Speaker 1: you manage the PGIM Jenison Global Opportunities fun it's beating
Speaker 1: nearly all of its peers are the past five years
Speaker 1: returning annually on average almost nine percent. You're also involved
Speaker 1: in the management of the International Opportunities Fund. Also at
Speaker 1: performing over the past five years, you definitely take You
Speaker 1: also are involved in the emerging markets equity funds. So
Speaker 1: a global perspective, an international perspective. When you look at
Speaker 1: the markets right now, where do you want to commit
Speaker 1: new money? Is it outside the United States or inside
Speaker 1: the United States? Oh, I think it's a collection of everything.
Speaker 1: We really we don't look at it regionally because I
Speaker 1: think that's very dangerous. Then you're relying on top down
Speaker 1: macro things and I don't think those really matter today.
Speaker 1: What really matters today is unique demand drivers for individual companies.
Speaker 1: That's what strives our investment decision making, and I think
Speaker 1: that's what's going to drive the markets this year. So
Speaker 1: that's our focus. What are unique demand drive verse mark Well,
Speaker 1: there's a few today that are pretty exciting. Let's start
Speaker 1: with number one. This huge transformational move in mobility that's
Speaker 1: both the move to electric vehicles and artificial I mean
Speaker 1: autonomous driving. That's going to be the biggest transformation we
Speaker 1: see in the next five years worldwide for any big industry.
Speaker 1: And of course the leaders here in the US Tesla.
Speaker 1: So there you get leadership here, and so all of
Speaker 1: a sudden you're making a US investment. But it's because
Speaker 1: it's they're they're the driver of the big change. So
Speaker 1: there's two interesting things there that you said. First of all,
Speaker 1: that you know, this isn't about macro, but it feels
Speaker 1: like this has been such a macro driven market over
Speaker 1: the past few months. Yeah, Tesla, Let's talk about Tesla
Speaker 1: because I don't know, it feels like if you compare
Speaker 1: it to other automakers, it's so expensive, it's so richly valued,
Speaker 1: and I mean your point is taken on the fact
Speaker 1: that it's the leader, but how do you sort of
Speaker 1: reconcile the fundamentals with where the stock is actually trading forward?
Speaker 1: Looking what PEO and Tesla, I've almost forty nine. You
Speaker 1: look at something like a GM, it's not quite seven.
Speaker 1: It's a lot of daylight there, not apples to apples.
Speaker 1: We can put that out there anyway, go ahead, March. Well, yeah, no,
Speaker 1: that's fine. If GM could grow their sales and earnings
Speaker 1: seventy percent in the next two years, they would have
Speaker 1: a high multiple too. But it can so you know,
Speaker 1: that's what the market's looking at I'm just looking at
Speaker 1: consensus numbers and it's thirty five times next year's earnings,
Speaker 1: so not too bad and sixty three percent growth in
Speaker 1: top line so over those two years, so that's pretty
Speaker 1: good and it's very profitable. As you know, the key
Speaker 1: thing for Tesla is it has the capacity, the battery
Speaker 1: capacity to meet demand today in the marketplace for electric vehicles,
Speaker 1: and the others are all playing catchup, and some of
Speaker 1: them have some very good products on the market, but
Speaker 1: they can't make enough of them to make a difference.
Speaker 1: So we think, for example, like the model why this
Speaker 1: year will challenge the Toyota Corolla for being the number
Speaker 1: one selling vehicle in the world, never mind electric It
Speaker 1: was number four last year. So that kind of demand
Speaker 1: inflection is very unique where we're at that big curve
Speaker 1: of adoption swing where you get consumers all of a
Speaker 1: sudden clamoring for these products. And of course Tesla has
Speaker 1: slash pricing, which is why the stock one of the
Speaker 1: reasons it did so poorly in the fourth quarter. But
Speaker 1: as a result, demand is responding, So you kind of
Speaker 1: want to be positioning companies that are going to deliver
Speaker 1: very strong top line regardless of what the Fed's doing.
Speaker 1: Nobody buying an EV cares what the Fed's doing. All right, Yeah,
Speaker 1: so you like Tesla. We're going to actually talk with
Speaker 1: our Doanna Hall about who covers elon and all things.
Speaker 1: Tessa just real quickly, got twenty second and video. It's
Speaker 1: been on a tear. It's at more than sixty percent.
Speaker 1: It's the AI craze. You're buying into AI. Just quickly,
Speaker 1: Oh yeah, we're buying into AI. Um. You know this
Speaker 1: may go November of last year when chat GDPGPT hit
Speaker 1: the market in such a big way, it may go
Speaker 1: down in history as the iPhone momentum. So we think
Speaker 1: artificial intelligence, you know this, this generative AI uh from
Speaker 1: these large scale language processors like like open AI. Yeah,
Speaker 1: are going to lead to huge innovations and software applications
Speaker 1: and consumer applications going forward. But it's accelerating now. It's
Speaker 1: not futuristic. It's like the metaverse, which you know who cares, right, Mark,
Speaker 1: we gotta run Mark Barrabou, he's head of Global Equity
Speaker 1: at Jennison Associates. Joining us via Zoom from Massachusetts, Carol Master,
Speaker 1: Katie Greifeld. This is Blomberg Radio. This is the Bloomberg
Speaker 1: Business Week Podcast, Apple, Spotify, and anywhere else you get
Speaker 1: your podcast. Listen live each weekday starting at two pm Eastern,
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