WEBVTT - Borthwick Looks for Weaker Dollar, Sees Strong China Currency 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.159 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:29.880 SoundCloud and at Bloomberg dot com. Well, let's talk about 0:00:29.920 --> 0:00:32.599 what's going on in currency markets right now with Douglas 0:00:32.600 --> 0:00:35.080 both work. He is Managing director, head of FX at 0:00:35.159 --> 0:00:39.160 Chapter Lane and Company. Doug Borthwick always a pleasure dollar 0:00:39.280 --> 0:00:42.760 Euro one oh seven. The Federal Reserve raises rates, but 0:00:42.880 --> 0:00:46.600 the dollar weekends tell us. I think that the Federal 0:00:46.640 --> 0:00:49.400 Reserve raising rates priced in pretty much over the last 0:00:49.680 --> 0:00:52.680 three or four weeks, and so there's an expectation that 0:00:52.840 --> 0:00:55.400 was already there. What people are really looking at is 0:00:55.440 --> 0:00:58.560 the statements on the comments that came out from the Fed, 0:00:59.120 --> 0:01:01.520 and I think there are nota in that. People realize 0:01:01.560 --> 0:01:04.280 that the Fed raised rates even though growth is still 0:01:04.360 --> 0:01:07.840 not where it should be, and so there's an expectation 0:01:07.880 --> 0:01:10.479 that rather than having more rate rises going forward, there 0:01:10.480 --> 0:01:12.720 may be less. I think on top of that, though 0:01:12.760 --> 0:01:16.280 you've got this overall layering that comes from the Trump administration, 0:01:16.360 --> 0:01:18.200 where they're out there talking about how they want a 0:01:18.240 --> 0:01:21.080 weaker dollar. And I think that what you're seeing this 0:01:21.120 --> 0:01:23.000 week is you've seen the Secretary of State go out 0:01:23.040 --> 0:01:25.039 to Asia talk to them, and since she's been out there, 0:01:25.040 --> 0:01:27.640 you've seen Dolly and start to come off considerably. You've 0:01:27.640 --> 0:01:30.760 seen in Europe, you've seen the German Deputy financements are 0:01:30.760 --> 0:01:33.160 talking about how to higher euro isn't that bad and 0:01:33.160 --> 0:01:35.399 they'd like to see higher rates in Europe. And so 0:01:35.440 --> 0:01:37.240 there's a little bit of a change here in terms 0:01:37.240 --> 0:01:39.959 of both interest rates but also where people think currency 0:01:40.040 --> 0:01:42.839 should be. Certainly, with the Fed raised rates by twenty 0:01:42.880 --> 0:01:45.120 five basis points, but now Europe is talking about maybe 0:01:45.240 --> 0:01:47.520 ending their chewi and raising their rates as well, so 0:01:47.600 --> 0:01:51.000 that cancels some of the effects. But also if the Fed, 0:01:51.240 --> 0:01:54.080 if the US administration was to look for a weaker dollar, 0:01:54.720 --> 0:01:57.000 they'll be looking forward against the currencies that they have 0:01:57.320 --> 0:01:59.960 obviously the largest deficits against. You've seen Dollar Mexico come 0:02:00.080 --> 0:02:03.440 done considerably, You've seen Dolla Enne come off, and you're 0:02:03.440 --> 0:02:06.080 also seeing the Euro start to rally. On Our belief 0:02:06.160 --> 0:02:08.040 is that you're going to see at the G twenty 0:02:08.120 --> 0:02:11.240 meeting this weekend, there's going to be considerable discussion about 0:02:11.280 --> 0:02:15.240 currencies pressed forward by the new Treasury Secretary, and that's 0:02:15.280 --> 0:02:18.959 going to cause some movement in that they're going to 0:02:19.040 --> 0:02:23.240 be no longer approving countries going out there and weakening 0:02:23.280 --> 0:02:26.560 their currency for the for the pure sense of to 0:02:26.600 --> 0:02:29.120 get more trade. If that happens, you'll see Dolly inn 0:02:29.160 --> 0:02:31.480 come off. You expected the eurogo bid, You just actually 0:02:31.760 --> 0:02:34.480 Dolla Mexico go lower. And I think that what they're 0:02:34.520 --> 0:02:36.760 doing is they're setting the table for a Plaza cord 0:02:36.800 --> 0:02:40.520 two point oh perhaps at Mara Lago next week, sorry, 0:02:40.560 --> 0:02:43.960 next month, when the Chinese premier is coming over. Doug, 0:02:44.040 --> 0:02:46.240 I want to pass through some of the things you 0:02:46.280 --> 0:02:48.680 were saying, because you made a lot of fascinating points. 0:02:48.760 --> 0:02:51.840 Number one, perhaps the feed is taking a backseat to 0:02:52.400 --> 0:02:55.440 the policies of President Trump. The fact that Rex Tillerson 0:02:55.480 --> 0:02:58.440 has been going around and meeting with UH foreign officials. 0:02:58.480 --> 0:03:00.840 We are looking at the end strength and against the dollar. 0:03:01.480 --> 0:03:03.960 The pound is strengthening a lot against the dollar, and 0:03:04.000 --> 0:03:06.600 I'm wondering if the pound is not probably the target 0:03:06.639 --> 0:03:11.760 here but UH in Asia, how exactly would conversations with 0:03:11.840 --> 0:03:14.679 Rex Tillerson and some of the leaders of those countries 0:03:15.000 --> 0:03:19.000 directly and immediately trickle out into currency movements. Well, I 0:03:19.040 --> 0:03:21.640 think it's a quick pro quo in that, you know, 0:03:21.919 --> 0:03:24.520 when the Trump administration came in, they struck a very 0:03:24.560 --> 0:03:26.440 hard line, they said, you know, why should we be 0:03:26.480 --> 0:03:29.360 out there policing your waters And since then they've managed 0:03:29.400 --> 0:03:31.720 to clock it back somewhat. But I think that by 0:03:31.760 --> 0:03:34.320 having that fear out there allows these negotiating room, which 0:03:34.320 --> 0:03:37.400 is suddenly the President Trump obviously likes. By negotiating room, 0:03:37.440 --> 0:03:38.640 you say to them, look, we don't want you to 0:03:38.640 --> 0:03:41.840 stop interviewing in your currency markets. In return, will end 0:03:41.880 --> 0:03:44.120 up being your policeman and continued to pay for our 0:03:44.120 --> 0:03:46.240 bases out there and to look after you and protect 0:03:46.280 --> 0:03:48.600 you from North Korea, for example. And so I think 0:03:48.600 --> 0:03:51.640 that there is there's a direct correlation there between you know, 0:03:51.840 --> 0:03:54.240 USUS essentially using the big stick in one hand, but 0:03:54.320 --> 0:03:57.360 then speaking softly in the other. The softly speaking is 0:03:57.600 --> 0:03:59.960 right now in the currency market, spend the big swift 0:04:00.040 --> 0:04:04.119 and is thus sending out carriers out to that region. Douglas, 0:04:04.160 --> 0:04:05.680 I wonder if you could just talk a little bit 0:04:05.680 --> 0:04:11.520 about Italy and the sort of contradiction between how Italian 0:04:11.560 --> 0:04:14.320 seemed to view using the Euro and perhaps the French 0:04:14.440 --> 0:04:17.440 or other members of the European Union, and maybe just 0:04:17.440 --> 0:04:20.840 put it in the context of the Dutch elections. Well, 0:04:20.880 --> 0:04:24.120 I think that everyone uses for for someone like Italy 0:04:24.160 --> 0:04:26.760 that's more in the fringe in terms of normally if 0:04:26.760 --> 0:04:28.599 they didn't have the Euro, that have much much higher 0:04:28.600 --> 0:04:31.000 interest rates than they do right now. I think France 0:04:31.080 --> 0:04:33.599 is closer to the center and closer to where Germany is, 0:04:33.640 --> 0:04:35.920 and the administration would be high, but maybe not quite 0:04:35.960 --> 0:04:38.440 as low as they are right now. But certainly all 0:04:38.560 --> 0:04:41.360 countries in Europe benefit from being part of the Euro 0:04:41.480 --> 0:04:44.240 because they get that Germany part which lies them to 0:04:44.279 --> 0:04:46.960 have much much lower rates. But now that can be 0:04:47.000 --> 0:04:49.600 constrictive at times as well, which the UK certainly, though 0:04:49.640 --> 0:04:51.800 not part of the Euro, is noting as part of 0:04:51.839 --> 0:04:53.840 the EU, and that it means you give up a 0:04:53.880 --> 0:04:56.520 lot of sovereignty. And I think that the Italians probably 0:04:56.640 --> 0:04:58.640 rather a little bit more sovereignty these days. If they 0:04:58.640 --> 0:05:01.160 want to get the industry going, they probably rather much 0:05:01.200 --> 0:05:04.160 weaker currency, so they could sort of rev up their um, 0:05:04.320 --> 0:05:07.200 their their their economies. But you also have you know, 0:05:07.320 --> 0:05:10.159 lots of different sex coming out. There are are are facts, 0:05:10.680 --> 0:05:13.480 are a new positions, are are in each of the 0:05:13.520 --> 0:05:15.720 markets that are moving towards more of a nationalist state. 0:05:16.160 --> 0:05:17.839 They look at what Trump's done in the United States 0:05:17.880 --> 0:05:19.720 and they think maybe this is our turn, you know. 0:05:19.760 --> 0:05:21.440 They look at the UK leaving the EU and they 0:05:21.440 --> 0:05:24.120 think maybe this is our turn. They point to immigration, 0:05:24.160 --> 0:05:26.200 they say, maybe this is our turn. But then you 0:05:26.240 --> 0:05:28.760 get the election, you know, last night, and obviously and 0:05:28.839 --> 0:05:31.040 it came out and maybe they know that the right 0:05:31.080 --> 0:05:33.840 wing side didn't get in quite as many votes as 0:05:33.839 --> 0:05:36.159 they expected to, and so it seem as a little 0:05:36.160 --> 0:05:38.080 bit of a fizzle, which obviously helps the euro to 0:05:38.160 --> 0:05:41.320 rally by its dirty pips since that dnaiment came out. 0:05:41.760 --> 0:05:43.560 So and then there's a lot of there's a lot 0:05:43.560 --> 0:05:45.919 of different things, you know. Scotland also as part of 0:05:45.920 --> 0:05:48.320 this whole discussion, Scotland then turns round and says we'd 0:05:48.360 --> 0:05:51.120 like to leave the UK, but at the same time 0:05:51.160 --> 0:05:53.160 we'd like to be part of the EU. Well, it's 0:05:53.200 --> 0:05:54.760 not going to be allowed by a lot of countries 0:05:54.839 --> 0:05:58.320 in in Europe because they don't want different areas within 0:05:58.360 --> 0:06:00.360 their countries to splinter r and say we want to 0:06:00.440 --> 0:06:04.320 do the same thing real quick thirty seconds. Doug, out 0:06:04.320 --> 0:06:06.480 of all of this uncertainty, what's the one currency that 0:06:06.520 --> 0:06:07.839 you think is going to move the most in the 0:06:07.880 --> 0:06:10.640 next six months. I think that everyone believes the Chinese 0:06:10.640 --> 0:06:12.000 currency is going to weaken. I think it's going to 0:06:12.040 --> 0:06:14.960 strengthen considerably. I think it's going to strengthen consivably because 0:06:14.960 --> 0:06:16.719 I think you're gonna see the Euro move higher, dollar 0:06:16.800 --> 0:06:19.000 yen move a lot lower. I think that on the 0:06:19.040 --> 0:06:20.919 back of that, because the Chinese currency is based on 0:06:20.960 --> 0:06:23.880 a basket, yourency the Chinese currency strengthened, especially given that 0:06:23.960 --> 0:06:26.520 there's a lot of positioning out there right now that 0:06:26.560 --> 0:06:30.160 has short China as opposed to along China. Fascinating. Thank 0:06:30.200 --> 0:06:32.599 you so much for joining us, Doug Barthwick with a 0:06:32.640 --> 0:06:37.120 contrarian call for a strengthening Chinese currency. He's managing director 0:06:37.160 --> 0:06:40.000 and head of f X at Chapter Lane and Company. 0:06:40.360 --> 0:06:42.880 UH and we're looking at a dollar that is weakening 0:06:42.920 --> 0:06:47.440 against most other currencies from Asia to Europe. After the 0:06:47.440 --> 0:06:50.760 Federal Reserve spoken as the u AS goes out and 0:06:50.800 --> 0:06:53.359 tries to sort of change the conversation with respect to 0:06:53.760 --> 0:07:09.640 currency manipulation. The ticker for the Bank of America, Mary 0:07:09.760 --> 0:07:14.640 lynch U s issuers of high yield retail bonds is 0:07:14.840 --> 0:07:18.200 really apropos. It's hurt h u r T and it 0:07:18.280 --> 0:07:21.520 works very well because these bonds have been in a 0:07:21.560 --> 0:07:24.040 world of hurt so far this year. They are the 0:07:24.040 --> 0:07:27.080 worst performing bonds in the high old bond market. And 0:07:27.080 --> 0:07:29.080 I want to bring in someone who knows a lot 0:07:29.080 --> 0:07:30.920 more about this, Jenna g. N Nelly. She is a 0:07:30.960 --> 0:07:34.600 high yield analyst and also focuses on retail and gaming 0:07:35.040 --> 0:07:37.000 at City Group, and she joins us here in our 0:07:37.000 --> 0:07:40.559 Bloombrig eleven three oh student studio. Jenna, We're so glad 0:07:40.600 --> 0:07:42.200 you could be here, And I want to start with 0:07:42.240 --> 0:07:45.840 the idea, uh that we've seen all of these losses, 0:07:45.880 --> 0:07:50.160 we've seen mounting bankruptcies and the expectation of more Where 0:07:50.200 --> 0:07:53.360 are we in this cycle? How much more pain are 0:07:53.400 --> 0:07:56.880 we going to see in retailers? Hi, Lisa, thanks so 0:07:56.960 --> 0:07:59.320 much for having me in today. Um having to be here, 0:07:59.680 --> 0:08:01.680 you know, I I think that's you know, a great question, 0:08:01.720 --> 0:08:03.800 and I would say that although there are a lot 0:08:03.840 --> 0:08:06.240 of investors out there that are thinking this might be 0:08:06.280 --> 0:08:08.440 the opportunity and the time to jump in. And I 0:08:08.480 --> 0:08:10.520 do still think that there is more pain to be had. 0:08:10.760 --> 0:08:13.600 I mean, we remain underweight the sector. UM. And I 0:08:13.640 --> 0:08:15.320 think that when you look at a lot of the 0:08:15.440 --> 0:08:19.160 issues that investors are concerned about right now, especially for 0:08:19.240 --> 0:08:22.320 some of these larger LBO candidates, about potential for you know, 0:08:22.360 --> 0:08:25.840 moving assets, looking at loose covenants. UM. You know, more 0:08:25.880 --> 0:08:30.200 macro issues like border adjustment, taxes, arising cost environment UM, 0:08:30.240 --> 0:08:32.240 and really some of the bigger secular issues that we're 0:08:32.240 --> 0:08:37.600 facing like increasing online print penetration, changing consumer preferences. UM. 0:08:37.640 --> 0:08:39.800 There's a whole host of things center investors, you know, 0:08:39.880 --> 0:08:41.679 need to be worried about. It's coming out them from 0:08:41.679 --> 0:08:44.000 every angle. So I think we're still going to continue 0:08:44.000 --> 0:08:45.880 to see these play out in two thousands seventeen. And 0:08:45.920 --> 0:08:49.000 some of the LBO companies that you're talking about, even 0:08:49.040 --> 0:08:53.559 Marcus Jake, Crude Toys, r Us Claire's, Jimberry, many more. Uh, 0:08:53.720 --> 0:08:55.520 how many of these do you expect to go bankrupt? 0:08:56.000 --> 0:08:58.120 Oh that's a good question. I mean, look, the reality 0:08:58.160 --> 0:09:00.120 has a lot of them don't actually have liquid the 0:09:00.200 --> 0:09:02.600 issues as it stands right now. UM. You know, when 0:09:02.600 --> 0:09:05.400 you think about Nieman, UM, you know, even if Claire's 0:09:05.440 --> 0:09:07.720 has some time left, Jimbury, you know, could be a 0:09:07.760 --> 0:09:10.440 two thousand and seventeen event, but they do still have 0:09:10.520 --> 0:09:13.120 liquidity and you know a lot of the maturity runways 0:09:13.160 --> 0:09:15.080 for at least the next one to two years. Um, 0:09:15.160 --> 0:09:17.040 So I think we'll see restructuring. I mean a lot 0:09:17.080 --> 0:09:18.960 of them, you still have you look at the sponsors. 0:09:19.000 --> 0:09:20.679 They haven't taken a lot of money out of these 0:09:20.760 --> 0:09:22.439 l b o s, right, so they're gonna do everything 0:09:22.440 --> 0:09:24.440 that they can kind of kick the can down the 0:09:24.520 --> 0:09:26.439 road and do some sort of an exchange with the 0:09:26.480 --> 0:09:29.080 bond holders to really do everything they possibly can to 0:09:29.080 --> 0:09:32.000 avoid bankruptcy and preserve their equity cushion. So I don't 0:09:32.040 --> 0:09:33.640 think we're actually going to see a ton for some 0:09:33.679 --> 0:09:36.120 of these bigger names in two thousand and seventeen. Maybe 0:09:36.120 --> 0:09:38.640 down the road, um, but we have some time. But 0:09:38.720 --> 0:09:41.000 so if that's the case, they're basically going to squeeze 0:09:41.000 --> 0:09:44.200 everything out of everywhere but the equity holders, which means 0:09:44.520 --> 0:09:47.520 the bond holders will be potentially really bad for all 0:09:47.559 --> 0:09:50.480 of the debt owners in these companies. That's the fear. 0:09:50.640 --> 0:09:52.280 That is the fear, and that has been you know, 0:09:52.320 --> 0:09:54.560 I'd say, the one of the big topics so far 0:09:54.679 --> 0:09:58.120 here to date is you know, covenants, covenants, covenants, um 0:09:58.160 --> 0:10:00.880 everyone I think you know, it started with Player's last summer, 0:10:00.880 --> 0:10:04.320 I mean, and and then J Crew um with with um, 0:10:04.440 --> 0:10:08.079 you know, the moving of IP assets where everyone's exploring 0:10:08.080 --> 0:10:10.559 it now as a possibility for all these companies, UM, 0:10:10.600 --> 0:10:13.160 you know Nemon Marcus looking at their covenants and saying 0:10:13.200 --> 0:10:15.040 what assets could they move? They just you know, announced 0:10:15.080 --> 0:10:17.600 the other day that they are doing something of this nature, 0:10:17.640 --> 0:10:20.880 moving assets into an unrestricted subsidiary for the purpose of 0:10:20.880 --> 0:10:23.920 of dealing with bond holders. So, UM, we're seeing loans, 0:10:24.000 --> 0:10:27.240 especially in retail, you know, under some pressure. Uh. And 0:10:27.240 --> 0:10:30.079 and there's a concern that look there in these documents 0:10:30.120 --> 0:10:32.800 there are um, I don't want to say, not loopholes, 0:10:32.800 --> 0:10:36.880 but certainly flexibility to um you know, to to move 0:10:36.920 --> 0:10:38.920 assets out to the detriment of the creditors. So we're 0:10:38.920 --> 0:10:40.680 seeing that in levels. And it's one of the biggest 0:10:40.679 --> 0:10:45.000 concerns on investor's mind right now. It's the supply available 0:10:45.040 --> 0:10:47.800 for the kind of investor that you are dealing with, 0:10:47.920 --> 0:10:51.880 because you know, supply begets demand in many cases in 0:10:52.000 --> 0:10:55.120 terms of yes, I mean I think look generally, um, 0:10:55.200 --> 0:10:57.160 you know, the supply of of bonds out there. I mean, 0:10:57.320 --> 0:11:01.560 we've definitely seen more sellers than buyers in retail, especially 0:11:01.559 --> 0:11:03.360 in most real money accounts. And you think about it, 0:11:03.400 --> 0:11:07.360 more traditional investors versus hedge funds. Traditional guys have been 0:11:07.559 --> 0:11:10.400 um largely underweight for most of two thousand and sixteen, 0:11:10.400 --> 0:11:12.880 and then even into two thousand and seventeen, we've had 0:11:12.920 --> 0:11:15.080 a lot of hedge funds and more distress players I'd 0:11:15.120 --> 0:11:20.080 say hovering but not quite stepping in pulling the trigger. 0:11:20.360 --> 0:11:22.400 No one, no one pulling the trigger, but some are 0:11:22.520 --> 0:11:24.880 increasingly pulling the trigger on the opposite bet. I mean, 0:11:25.240 --> 0:11:28.280 you're talking Genna about how it's very common discussion about 0:11:28.280 --> 0:11:30.280 how much pain has been in the retailers. And there 0:11:30.320 --> 0:11:32.680 was a story on the Bloomberg just a few days 0:11:32.679 --> 0:11:35.000 ago about how the big short now is in commercial 0:11:35.000 --> 0:11:39.120 mortgage backed securities that are tied to retail properties. Also, 0:11:39.160 --> 0:11:41.959 we're seeing short interest on retail reads rise to the 0:11:42.040 --> 0:11:46.319 highest level in more than two years. Is now the time? 0:11:46.480 --> 0:11:48.080 Is this the big short? Is now the time to 0:11:48.400 --> 0:11:50.480 short sell this stuff? Well, you know, I think it's 0:11:50.520 --> 0:11:52.880 the first time that we've ever had actually heard any 0:11:52.920 --> 0:11:56.200 commentary from the retailers where they're staying there starting to 0:11:56.200 --> 0:11:58.880 see rent relief. Right, We've been everyone's been asking about 0:11:58.880 --> 0:12:00.839 this trade probably for the last two or three years. 0:12:00.920 --> 0:12:02.520 How could the rots be doing so well and the 0:12:02.559 --> 0:12:04.840 retailers be doing so poorly. It doesn't make any sense. 0:12:04.880 --> 0:12:07.400 And for the first time we're hearing the retailers say, look, 0:12:07.400 --> 0:12:09.520 we are starting to get some relief. We're starting to 0:12:09.559 --> 0:12:13.199 see more favorable clauses when we are extending their leases. 0:12:13.280 --> 0:12:16.160 But that being said, um, you know, the average lease life, 0:12:16.200 --> 0:12:17.920 you know, you're still looking at five to ten years 0:12:17.920 --> 0:12:19.920 for a lot of these guys, and so it's going 0:12:19.960 --> 0:12:22.680 to be measured in terms of the timing of the closures. 0:12:22.920 --> 0:12:25.280 It's going to be more concentrated in the lower end malls. 0:12:25.280 --> 0:12:26.959 When you think about the dispersion of A, B and 0:12:27.000 --> 0:12:28.960 C malls, the C malls are really there are a 0:12:29.000 --> 0:12:30.680 third of the malls in this country, right, and so 0:12:30.720 --> 0:12:33.640 it's gonna definitely be more concentrated towards those. When you 0:12:33.640 --> 0:12:35.320 think about the closures that we're going to be seeing 0:12:35.320 --> 0:12:37.960 a Macy's in J. C. Penny. That's where these you know, 0:12:38.000 --> 0:12:40.680 the anchor stores are going to be concentrated again, it's 0:12:40.679 --> 0:12:43.319 going to take time to play out. Um, And you know, 0:12:43.320 --> 0:12:44.880 I don't want to say it's a crowded trade, but 0:12:45.080 --> 0:12:47.719 I don't. But um, it's certainly been a popular one 0:12:47.800 --> 0:12:49.199 and one that you know, I think a lot of 0:12:49.240 --> 0:12:51.280 investors have tried to express a view. And you don't 0:12:51.280 --> 0:12:53.520 have to say it's so popular. It's not crowded, it's 0:12:53.559 --> 0:12:56.360 just popular. But gently just to be clear, so SEA 0:12:56.400 --> 0:12:58.280 malls are the ones that are sort of lower tier 0:12:58.320 --> 0:13:00.720 and lower end and A or this, yeah, more luxury, 0:13:00.760 --> 0:13:02.680 and B is in the middle exactly. I think the 0:13:02.720 --> 0:13:06.120 perception is that traffic has been um just week across 0:13:06.160 --> 0:13:09.040 the board, but when you look at the dispersion, UM, 0:13:09.080 --> 0:13:11.360 A malls have really held up pretty well, I would say, 0:13:11.360 --> 0:13:14.520 I mean, occupancy rates are still very strong. Um, you know, 0:13:14.559 --> 0:13:17.720 the traffic to those malls is still reasonable, maybe flat 0:13:17.720 --> 0:13:20.920 to download single digit. It's definitely been more concentrated in 0:13:20.960 --> 0:13:24.679 the lower end where you're seeing um, you know, occupancies 0:13:24.760 --> 0:13:28.200 decline and um the traffic you know, um, you know, 0:13:28.280 --> 0:13:29.559 you know week or we've we've heard from a few 0:13:29.559 --> 0:13:31.959 different retailers that when you think about the dispersion of comps, 0:13:32.360 --> 0:13:34.880 um it could be anywhere from two to three percentage 0:13:34.880 --> 0:13:37.040 points for an A versus B versus C mall. So 0:13:37.080 --> 0:13:38.920 if you're a mall, you're down to you you're down 0:13:38.920 --> 0:13:40.880 for in your be mall, and you're you know you're 0:13:40.880 --> 0:13:43.040 down six and your semall just I mean, it's not 0:13:43.160 --> 0:13:45.040 a perfect rule of thumb, but we've heard to that 0:13:45.120 --> 0:13:47.439 you know that degree for different retailers, which is why 0:13:47.440 --> 0:13:49.760 you're seeing such negative comps for a lot of these guys. 0:13:50.200 --> 0:13:52.040 Thank you very much for coming in and spending time 0:13:52.040 --> 0:13:53.680 with us. We look forward to having you again in 0:13:53.679 --> 0:13:57.240 the future. Jenner Gnelli is the high Yield Analysts for 0:13:57.360 --> 0:14:13.319 retail and gaming from City Group. Thank you very much well. 0:14:13.360 --> 0:14:16.679 The Bank of England today held its benchmark interest rates steady, 0:14:16.880 --> 0:14:20.840 but signaled that an increase may not be far off. Indeed, 0:14:20.880 --> 0:14:25.160 one official dissenting in favor of higher borrowing costs, and 0:14:25.240 --> 0:14:28.440 others saying that it might not be long before they 0:14:28.520 --> 0:14:31.160 do the same. Here to tell us more about the 0:14:31.280 --> 0:14:34.880 decision and also a look at European politics and economy 0:14:34.960 --> 0:14:38.640 is Jamie Murray. He is chief European, Middle East and 0:14:39.000 --> 0:14:42.920 Africa economist for Bloomberg Intelligence, and he joins us from 0:14:42.960 --> 0:14:45.760 our London studio, Jamie, thanks very much for being with us. 0:14:45.760 --> 0:14:48.800 Tell us about the Bank of England rate decision, well, 0:14:49.040 --> 0:14:52.440 I think the markets have probably correctly interpreted it as 0:14:52.520 --> 0:14:56.240 more hawkish than previous statements, and it took most people 0:14:56.240 --> 0:15:00.120 by surprise. One thing I would say is that this 0:15:00.240 --> 0:15:04.600 may not last that long because the member that elected 0:15:04.600 --> 0:15:07.000 to lift rates is only going to be on the 0:15:07.040 --> 0:15:10.920 Monitary Policy Committee until June before she is replaced. And 0:15:11.160 --> 0:15:14.560 we expressed in Forbes that's right, yes, so we expect 0:15:14.640 --> 0:15:16.520 the one. We don't know who's going to replace it. 0:15:16.600 --> 0:15:19.000 It could be could be anyone um. And the other 0:15:19.040 --> 0:15:21.320 thing to bear in mind is that the Bank of 0:15:21.320 --> 0:15:24.160 England is making this contingent on what happens to the 0:15:24.240 --> 0:15:27.280 data now. So far the data is surprised. On the upside, 0:15:27.320 --> 0:15:30.280 growth has been stronger, inflation has been roughly where most 0:15:30.320 --> 0:15:33.800 people expected it to be given what's happened to Sterling. Now, 0:15:33.880 --> 0:15:36.200 if that continues, then yes we could be in for 0:15:36.960 --> 0:15:40.320 earlier rate hike. But our view is that the economy, 0:15:40.440 --> 0:15:42.320 or at least the data will begin to sour little 0:15:42.320 --> 0:15:45.760 bits GDP growth will slow as that exchange rate effect 0:15:45.800 --> 0:15:50.400 starts to squeeze real incomes and lift inflation. Well, Jamie, 0:15:50.600 --> 0:15:52.280 when you talk about the border market and how it 0:15:52.280 --> 0:15:55.000 responded him in two year yields in the UK more 0:15:55.080 --> 0:15:59.000 than doubled in response to the Bank of England's decision 0:15:59.480 --> 0:16:02.240 UM to not do anything but sort of the hawk 0:16:02.320 --> 0:16:05.880 ish tone, and Paul Dobson, Bloomberg team leader here noted 0:16:06.000 --> 0:16:09.400 on the Market's live blog that the smoking gun from 0:16:09.400 --> 0:16:11.800 the BOE minutes that made the market sit up and 0:16:11.840 --> 0:16:15.120 pay attention was with inflation rising sharply and only mixed 0:16:15.160 --> 0:16:19.240 evidence and slowing activity domestically. Some members noted that would 0:16:19.240 --> 0:16:22.360 take relatively little further upside news on the prospects for 0:16:22.400 --> 0:16:24.800 activity or inflation for them to consider that a more 0:16:24.840 --> 0:16:28.360 immediate reduction and policy support might be warranted. In other words, uh, 0:16:28.400 --> 0:16:31.000 they would be more willing to go ahead and hike 0:16:31.120 --> 0:16:34.400 rates faster with just a little bit more news that 0:16:34.440 --> 0:16:36.640 would that would that would edify this sense of of 0:16:36.800 --> 0:16:40.720 inflation rising. Yes, so I completely agree with Paul's assessment there. 0:16:40.920 --> 0:16:43.760 The thing is that we I'm not expecting the data 0:16:43.800 --> 0:16:47.320 to show that source of improvement. The wages data came 0:16:47.360 --> 0:16:52.280 in remarkably weak just this week. UM. The and despite 0:16:52.320 --> 0:16:55.080 the fact that unemployment is falling to very low levels, 0:16:55.200 --> 0:16:59.960 so there's no evidence whatsoever that domestically generated inflation is rising. 0:17:00.040 --> 0:17:01.440 And that's what the Bank of England needs to be 0:17:01.440 --> 0:17:04.000 looking at. Well, if that's what they need to be 0:17:04.160 --> 0:17:06.040 looking at, I wonder if you could provide a little 0:17:06.040 --> 0:17:10.560 bit of context for Brexit, the ongoing negotiations and then 0:17:10.720 --> 0:17:14.240 dive into Dutch politics. For us, well, we're up to 0:17:14.280 --> 0:17:18.200 with Brexit is that that's the Article fifty is likely 0:17:18.240 --> 0:17:21.120 to be triggered towards the end of this month. It's 0:17:21.160 --> 0:17:24.640 been delayed slightly by some adjustments to the bill going 0:17:24.640 --> 0:17:28.479 through the House of Lords, and this means that Britain 0:17:28.600 --> 0:17:31.639 will be on an official exit path from the EU 0:17:31.800 --> 0:17:33.840 and will have two years from the end of this 0:17:33.880 --> 0:17:37.400 March to reach an agreement with the rest of the EU. 0:17:37.480 --> 0:17:42.280 If it doesn't, then all likelihood Britain will default sort 0:17:42.280 --> 0:17:45.159 of World Trade Organization rules, which should mark a very 0:17:45.200 --> 0:17:47.800 sharp increase in tariffs and a lot of goods being 0:17:47.960 --> 0:17:51.600 bought and sold between US and the UK and the EU. 0:17:52.520 --> 0:17:56.399 So that's we're up to with Brexits. My feeling is 0:17:56.480 --> 0:17:58.919 that I think it's most people's feeling is that the 0:17:58.920 --> 0:18:02.080 negotiations are going to be incredibly challenging. There's not a 0:18:02.160 --> 0:18:06.680 loss of There's not a lot of things going for 0:18:06.760 --> 0:18:09.439 Britain in this respect. Goodwill could we say not a 0:18:09.440 --> 0:18:13.439 lot of good will between Europe. That's exactly the word 0:18:13.920 --> 0:18:16.720 escapes me a couple of moments ago. So yeah, there 0:18:16.760 --> 0:18:19.439 is not much good will. Um So, my my feeling 0:18:19.480 --> 0:18:22.240 is that the rest of the U has no incentive 0:18:22.359 --> 0:18:25.480 to show goodwill to Britain because the more it does that, 0:18:25.640 --> 0:18:29.359 the lower the hurdle of other countries to leave. Is 0:18:29.359 --> 0:18:32.320 it encouraging to the outcome of the Dutch elections, the 0:18:32.320 --> 0:18:36.520 fact that the liberal candidate one and the sort of 0:18:36.600 --> 0:18:41.160 populist anti Islam candidate was pushed aside? Does this sort 0:18:41.200 --> 0:18:44.480 of give people a stronger feeling of less political risk 0:18:44.800 --> 0:18:48.040 right now in European markets? I think in markets it 0:18:48.280 --> 0:18:50.840 probably is having that effects. I'm not sure whether that's 0:18:50.960 --> 0:18:55.320 the right interpretation of it. Though the Dutch election was 0:18:55.680 --> 0:19:00.840 quite unique in that had had the extremest party one 0:19:01.440 --> 0:19:04.960 the the they had no chance of governing. Really that 0:19:05.080 --> 0:19:07.840 is not the case so much in other places in 0:19:08.000 --> 0:19:11.160 the Eurozone. Now, what I would say is that each 0:19:11.160 --> 0:19:13.560 of these countries is remarkably different, and it's very easy 0:19:13.600 --> 0:19:15.720 to lump them all together. So it's easy to imagine. 0:19:16.040 --> 0:19:19.040 The typical distinction is core versus Prephery. So you have 0:19:19.400 --> 0:19:22.040 the Netherlands, France and Germany and one group and then 0:19:22.119 --> 0:19:25.480 you have the Italy, the Spains, the Greases and the other. Now, 0:19:25.800 --> 0:19:29.639 actually there's significant differences even within those categories. So in 0:19:30.000 --> 0:19:33.240 let's take in the Netherlands. In the Netherlands, only five 0:19:34.160 --> 0:19:39.080 of under thirty five's voted for the extremest party. In France, however, 0:19:39.240 --> 0:19:41.960 one third looked like they're going to vote for Le Pen. 0:19:42.440 --> 0:19:45.879 Now this is this is a real difference in the 0:19:45.640 --> 0:19:49.480 in not in demographic makeup, in among those groups who 0:19:49.560 --> 0:19:52.960 is voting that it's completely upside down for between France 0:19:53.000 --> 0:19:55.080 and the Netherlands. Does it get you frustrated when you 0:19:55.200 --> 0:19:58.320 hear people like us in the United States talk about 0:19:58.359 --> 0:20:00.360