1
00:00:00,120 --> 00:00:06,800
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:11,640 --> 00:00:15,440
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

3
00:00:15,480 --> 00:00:18,680
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

4
00:00:18,720 --> 00:00:22,280
Speaker 2: for insight from the best in markets, economics, and geopolitics

5
00:00:22,400 --> 00:00:24,920
Speaker 2: from our global headquarters in New York City. We are

6
00:00:24,920 --> 00:00:27,680
Speaker 2: live on Bloomberg Television weekday mornings from six to nine

7
00:00:27,720 --> 00:00:31,280
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

8
00:00:31,320 --> 00:00:33,960
Speaker 2: anywhere else you listen, and as always on the Bloomberg

9
00:00:34,040 --> 00:00:37,479
Speaker 2: Terminal and the Bloomberg Business app. Two weeks away from

10
00:00:37,520 --> 00:00:40,920
Speaker 2: a Federal Reserve raid decision two weeks tomorrow, Lindsey Piegser

11
00:00:40,920 --> 00:00:43,160
Speaker 2: of Stiphail writing, the Fed should be on the verge

12
00:00:43,200 --> 00:00:46,000
Speaker 2: of a pause in policy adjustment. While Fed officials are

13
00:00:46,080 --> 00:00:48,879
Speaker 2: anxious to provide less firm policy after fourteen months at

14
00:00:48,920 --> 00:00:52,080
Speaker 2: peak levels, the risk of unwinding policy too soon or

15
00:00:52,120 --> 00:00:55,480
Speaker 2: too fast is a recognition of inflationary pressures and a

16
00:00:55,520 --> 00:00:58,040
Speaker 2: reversal of the progress already made.

17
00:00:58,120 --> 00:00:59,279
Speaker 3: Lindsay joins us now for more.

18
00:00:59,320 --> 00:01:01,160
Speaker 4: Lindsey Gimonic, good morning, Thank you for having me.

19
00:01:01,200 --> 00:01:03,440
Speaker 3: What did you make a governor Walla? Yes, well, I.

20
00:01:03,400 --> 00:01:05,759
Speaker 4: Think this is really the general theme of what we're

21
00:01:05,760 --> 00:01:08,120
Speaker 4: hearing from FED officials as of late. They're setting the

22
00:01:08,160 --> 00:01:11,880
Speaker 4: bar noticeably higher for a potential pause, saying it's no

23
00:01:12,000 --> 00:01:15,160
Speaker 4: longer about a strong or solid economy, but it's about

24
00:01:15,200 --> 00:01:19,280
Speaker 4: the data outperforming expectations, or as we heard from Goulesby

25
00:01:19,400 --> 00:01:23,000
Speaker 4: last week, it's about a potential economy overheating. So I

26
00:01:23,080 --> 00:01:25,600
Speaker 4: do think that the FED is gearing up and excuse

27
00:01:25,640 --> 00:01:28,119
Speaker 4: me to push through a third round rate cut in December.

28
00:01:28,480 --> 00:01:30,920
Speaker 4: But as we turn the calendar page next year, if

29
00:01:30,959 --> 00:01:33,679
Speaker 4: the data remains as strong as it is, if the

30
00:01:33,720 --> 00:01:38,240
Speaker 4: economy continues to prove remarkably solid, as Chairman Pouell described it,

31
00:01:38,959 --> 00:01:40,720
Speaker 4: I do think they're going to be backed into a

32
00:01:40,760 --> 00:01:43,240
Speaker 4: corner and forced to take a potential policy pause.

33
00:01:43,319 --> 00:01:45,040
Speaker 2: Near got to watch you what kind of data would

34
00:01:45,080 --> 00:01:48,080
Speaker 2: change the conversation. I think Governor Walla compared fighting inflation

35
00:01:48,160 --> 00:01:50,520
Speaker 2: to a UFC fight in the Ancticon yesterday. I'm not

36
00:01:50,520 --> 00:01:53,200
Speaker 2: sure how helpful that is for people or not. What

37
00:01:53,280 --> 00:01:54,440
Speaker 2: kind of number would it take?

38
00:01:55,000 --> 00:01:58,440
Speaker 4: Well, remember, looking out to Friday's non farm paywall reports,

39
00:01:58,480 --> 00:02:00,680
Speaker 4: the strength is going to be out sized, or at

40
00:02:00,720 --> 00:02:03,360
Speaker 4: least we expect that but that's going to be offsetting

41
00:02:03,400 --> 00:02:06,280
Speaker 4: the weakness that we saw the month prior. So even

42
00:02:06,320 --> 00:02:09,280
Speaker 4: a number two D two hundred and twenty thousand, I

43
00:02:09,320 --> 00:02:11,680
Speaker 4: don't think that's going to be enough to deter the

44
00:02:11,680 --> 00:02:14,440
Speaker 4: FED from pushing through that December rate cut.

45
00:02:15,040 --> 00:02:15,400
Speaker 3: MMA.

46
00:02:15,560 --> 00:02:16,280
Speaker 5: I think it was.

47
00:02:16,560 --> 00:02:20,160
Speaker 1: It was marginally yes, I think it was. Yeah, thank you,

48
00:02:20,200 --> 00:02:22,200
Speaker 1: that's good. I just I'm still trying to wrap my

49
00:02:22,240 --> 00:02:25,480
Speaker 1: head around the hard words that he had about getting

50
00:02:25,639 --> 00:02:28,760
Speaker 1: inflaced in a headlock and driving it to the ground

51
00:02:28,880 --> 00:02:30,880
Speaker 1: in the last round to the actual.

52
00:02:30,560 --> 00:02:31,720
Speaker 3: Okay, we're still going to cut rates.

53
00:02:31,720 --> 00:02:33,920
Speaker 1: I mean, it sort of raises this question, how much

54
00:02:33,960 --> 00:02:37,160
Speaker 1: do you think that they are still underestimating the inflationary

55
00:02:37,200 --> 00:02:40,160
Speaker 1: pressure in an economy where it's not about the labor

56
00:02:40,200 --> 00:02:42,440
Speaker 1: market as much anymore as the inflation read that we

57
00:02:42,480 --> 00:02:43,320
Speaker 1: get the following week.

58
00:02:43,480 --> 00:02:47,000
Speaker 4: Well, that's exactly right. The concern of this emerging weakness

59
00:02:47,000 --> 00:02:50,480
Speaker 4: in the labor market prompted that outsize fifty bases point

60
00:02:50,520 --> 00:02:53,920
Speaker 4: cut in September. We didn't see that weakness come to fruition,

61
00:02:54,160 --> 00:02:56,600
Speaker 4: and so then they followed through with another twenty five

62
00:02:57,000 --> 00:02:59,560
Speaker 4: simply because I think they were worried about having egg

63
00:02:59,600 --> 00:03:02,360
Speaker 4: on their face or admitting a policy error being too

64
00:03:02,440 --> 00:03:05,600
Speaker 4: aggressive the month prior. But to your point, they don't

65
00:03:05,639 --> 00:03:08,240
Speaker 4: have inflation in a choke hold. They need to keep

66
00:03:08,280 --> 00:03:10,640
Speaker 4: their eye on the ball because the past several months

67
00:03:11,000 --> 00:03:15,120
Speaker 4: inflation has really moved to the sideways with no further

68
00:03:15,320 --> 00:03:18,760
Speaker 4: improvement to speak of. So at this point, yes, we

69
00:03:18,840 --> 00:03:22,320
Speaker 4: have made discernible progress down from peak levels, but we

70
00:03:22,360 --> 00:03:24,760
Speaker 4: still have that last mile to go, and now is

71
00:03:24,800 --> 00:03:26,280
Speaker 4: not the time for the FED to give up on

72
00:03:26,320 --> 00:03:26,720
Speaker 4: that goal.

73
00:03:26,919 --> 00:03:29,880
Speaker 1: Jum was asking earlier about this discussion arou our neutral rate,

74
00:03:30,080 --> 00:03:32,400
Speaker 1: saying that there is quite a ways to go before

75
00:03:32,440 --> 00:03:36,240
Speaker 1: you actually get to truly a neutral rate. At the

76
00:03:36,280 --> 00:03:38,880
Speaker 1: same time that some of us are struggling to see

77
00:03:38,920 --> 00:03:42,160
Speaker 1: the restrictiveness in terms of rates other than a couple

78
00:03:42,160 --> 00:03:45,040
Speaker 1: of pockets for a couple of segments of the population,

79
00:03:45,720 --> 00:03:48,520
Speaker 1: do you see us as anywhere close to restrictive.

80
00:03:48,760 --> 00:03:50,880
Speaker 4: So that's a good distinction that we need to be made,

81
00:03:50,920 --> 00:03:55,000
Speaker 4: because right now policy still is very firm and changing conditions.

82
00:03:55,040 --> 00:03:59,760
Speaker 4: Further improvement and disinflation does warrant less firm policy as

83
00:03:59,800 --> 00:04:03,840
Speaker 4: we move towards neutral and the data normalize, but we

84
00:04:03,960 --> 00:04:07,000
Speaker 4: need to do so at a very slow and tempered pace.

85
00:04:07,400 --> 00:04:09,760
Speaker 4: So I don't think the question is do we justify

86
00:04:09,840 --> 00:04:12,240
Speaker 4: further rate cuts. I do see further rate cuts on

87
00:04:12,280 --> 00:04:16,320
Speaker 4: the horizon, but the pathway, the pace to that lower

88
00:04:16,440 --> 00:04:19,640
Speaker 4: level of FED funds needs to be very controlled as

89
00:04:19,680 --> 00:04:22,839
Speaker 4: to not overshoot or undermine the progress that we've already

90
00:04:22,920 --> 00:04:24,799
Speaker 4: seen made on the inflation front.

91
00:04:24,880 --> 00:04:27,080
Speaker 6: So how many cuts can you actually see next year

92
00:04:27,279 --> 00:04:32,240
Speaker 6: when they have to recalibrate for potentially tariffs, tax cuts,

93
00:04:32,240 --> 00:04:34,719
Speaker 6: and a whole host of new policies coming out of Washington.

94
00:04:34,760 --> 00:04:37,080
Speaker 4: Well, assuming they do push through the December cut, that's

95
00:04:37,120 --> 00:04:39,520
Speaker 4: the third round cut, I see three more cuts in

96
00:04:39,640 --> 00:04:43,039
Speaker 4: twenty five on a quarterly basis, so one twenty five

97
00:04:43,040 --> 00:04:45,760
Speaker 4: basis point cut per quarter, getting us to three and

98
00:04:45,839 --> 00:04:48,599
Speaker 4: three quarters by the third quarter. And I think that's

99
00:04:48,640 --> 00:04:52,480
Speaker 4: a reasonable neutral level. Now, of course, some policy issues

100
00:04:52,560 --> 00:04:56,600
Speaker 4: may limit the downside potential if we do see tariffs

101
00:04:56,640 --> 00:05:00,159
Speaker 4: or sizeable tax cuts lead to further inflationary pressures. But

102
00:05:00,200 --> 00:05:03,000
Speaker 4: that's a big question mark. The inflationary pressures that we're

103
00:05:03,040 --> 00:05:07,200
Speaker 4: assuming under those scenarios could very easily be offset if

104
00:05:07,279 --> 00:05:11,360
Speaker 4: we saw sizable reductions in government spending or other areas,

105
00:05:11,720 --> 00:05:14,800
Speaker 4: and so it still is questionable the net outcome from

106
00:05:14,800 --> 00:05:18,880
Speaker 4: the incoming administration. But right now, ceteris parabis, I do

107
00:05:18,960 --> 00:05:22,000
Speaker 4: expect three additional rate cuts next year, taking us to

108
00:05:22,040 --> 00:05:24,560
Speaker 4: a neutral rate of about three seventy five if.

109
00:05:24,440 --> 00:05:27,440
Speaker 6: We get the December cut. How hawkish do you think

110
00:05:27,480 --> 00:05:30,400
Speaker 6: the tone might be from Powell, because he's looking into

111
00:05:30,800 --> 00:05:32,320
Speaker 6: a lot of unknowns for next year.

112
00:05:32,320 --> 00:05:34,360
Speaker 4: How much more hawkish you mean? At this point, he's

113
00:05:34,400 --> 00:05:38,840
Speaker 4: talking about a remarkably solid economy, remarkably strong labor market,

114
00:05:39,120 --> 00:05:42,480
Speaker 4: So he's really laid the groundwork for a pretty solid

115
00:05:42,480 --> 00:05:46,320
Speaker 4: assessment of current conditions, again keeping that door wide open

116
00:05:46,440 --> 00:05:49,120
Speaker 4: for a near term policy pause as soon as they

117
00:05:49,120 --> 00:05:50,080
Speaker 4: deem it appropriate.

118
00:05:50,360 --> 00:05:51,279
Speaker 3: And again if.

119
00:05:51,120 --> 00:05:55,160
Speaker 4: December data comes in within expectations, I think the Fed

120
00:05:55,200 --> 00:05:58,200
Speaker 4: continues to follow through with a third round cut, but

121
00:05:58,320 --> 00:06:01,719
Speaker 4: they've already set the table for potential pause given the

122
00:06:01,760 --> 00:06:04,640
Speaker 4: strength that we're seeing in the consumer, in business investment,

123
00:06:05,000 --> 00:06:07,720
Speaker 4: even in housing, and that sticky nature of inflation.

124
00:06:08,040 --> 00:06:10,599
Speaker 1: So John has been trying to draw a parallel between

125
00:06:10,640 --> 00:06:14,040
Speaker 1: JJ and Ping and rowpower today, a single.

126
00:06:13,800 --> 00:06:16,400
Speaker 3: Parallel, one similarity. Okay, carry on, would you want me

127
00:06:16,440 --> 00:06:17,480
Speaker 3: to explain that similarity?

128
00:06:17,520 --> 00:06:20,719
Speaker 2: No, it's Okay, if you just join it, I'm not insane,

129
00:06:21,000 --> 00:06:23,560
Speaker 2: you might think I am. There is one similarity. They've

130
00:06:23,600 --> 00:06:26,240
Speaker 2: got to wait to calibrate policy, to work out what

131
00:06:26,240 --> 00:06:28,400
Speaker 2: the policy changes will be in the United States.

132
00:06:28,400 --> 00:06:29,600
Speaker 3: That's the single similarity.

133
00:06:29,680 --> 00:06:32,720
Speaker 1: Do they and that's my question, Lindsey, do they have

134
00:06:32,800 --> 00:06:36,120
Speaker 1: to Does j Powell have to wait to understand what

135
00:06:36,160 --> 00:06:39,720
Speaker 1: the policies are similar to Jijiinping, who has to wait

136
00:06:39,800 --> 00:06:40,640
Speaker 1: to understand what.

137
00:06:40,560 --> 00:06:43,000
Speaker 5: Policies are well calendar to wait.

138
00:06:43,400 --> 00:06:45,599
Speaker 4: I think that's been part why they want to push

139
00:06:45,640 --> 00:06:49,240
Speaker 4: through this policy, this third round reduction in December before

140
00:06:49,279 --> 00:06:51,599
Speaker 4: we get some of the details of these policies that

141
00:06:51,640 --> 00:06:55,080
Speaker 4: will be associated with the incoming administration. But again, when

142
00:06:55,080 --> 00:06:58,320
Speaker 4: that calendar page turns to twenty twenty five, if we're

143
00:06:58,360 --> 00:07:01,520
Speaker 4: still talking about the strength that the data, that's where

144
00:07:01,520 --> 00:07:03,760
Speaker 4: the patience needs to come in. That's where we need

145
00:07:03,800 --> 00:07:07,000
Speaker 4: to see the FED take a pause, move to the sidelines,

146
00:07:07,040 --> 00:07:10,120
Speaker 4: and allow the data to continue to evolve to dictate

147
00:07:10,160 --> 00:07:11,280
Speaker 4: the best course of policy.

148
00:07:11,360 --> 00:07:13,760
Speaker 2: It's also not obvious to me how inflationary terrorists will

149
00:07:13,800 --> 00:07:16,640
Speaker 2: actually be given the first round experience, how they be

150
00:07:16,680 --> 00:07:19,160
Speaker 2: calibrated this time. West Fargo put out their outlook for

151
00:07:19,160 --> 00:07:21,080
Speaker 2: twenty twenty five this morning has said the most concerning

152
00:07:21,080 --> 00:07:25,080
Speaker 2: effective TARIFST is on growth and not necessarily inflation. Working

153
00:07:25,160 --> 00:07:27,720
Speaker 2: that out is actually not that obvious for next year

154
00:07:27,720 --> 00:07:28,120
Speaker 2: and beyond.

155
00:07:28,160 --> 00:07:30,520
Speaker 1: There are a number of arguments that are legitimate saying

156
00:07:30,560 --> 00:07:34,160
Speaker 1: that actually terrorists are disinflationary and that actually the more

157
00:07:34,200 --> 00:07:36,800
Speaker 1: inflationary impulse is going to come from the immigration if

158
00:07:36,840 --> 00:07:39,440
Speaker 1: there are a significant deportation. So it's a policy mix,

159
00:07:39,480 --> 00:07:41,600
Speaker 1: it's a sequencing. It's just in terms of how they

160
00:07:41,680 --> 00:07:44,920
Speaker 1: actually are carried out, all have a very big difference

161
00:07:44,960 --> 00:07:46,600
Speaker 1: depending on how it goes.

162
00:07:46,680 --> 00:07:48,920
Speaker 3: Lindy, it's good to see you, catch up. Good to

163
00:07:48,920 --> 00:07:50,760
Speaker 3: have you in New York. Thank you, Lindsay PX. The

164
00:07:51,040 --> 00:08:02,480
Speaker 3: ho staful just tend to retail.

165
00:08:02,600 --> 00:08:05,160
Speaker 2: Let's squeeze this in adn't be explaining a cyber Monday

166
00:08:05,200 --> 00:08:08,920
Speaker 2: splurge forecast and consumers spend thirteen zero point five billion

167
00:08:08,960 --> 00:08:11,680
Speaker 2: dollars Oliver Chain of TD Coments saying, well, we see

168
00:08:11,680 --> 00:08:14,960
Speaker 2: some selective opportunity for consumer holiday spending this year by

169
00:08:15,000 --> 00:08:17,600
Speaker 2: and launch. The consumer remains choiceful and it is carefully

170
00:08:17,640 --> 00:08:21,520
Speaker 2: balancing needs versus once. Olivi Chan joins US now for more. Oliver,

171
00:08:21,560 --> 00:08:23,680
Speaker 2: Welcome to the program, sir. I want to start with luxury,

172
00:08:23,680 --> 00:08:25,360
Speaker 2: as we often do with you. I want to ask

173
00:08:25,360 --> 00:08:28,240
Speaker 2: you a simple question. If luxury goes on sale, is

174
00:08:28,280 --> 00:08:30,720
Speaker 2: it even luxury?

175
00:08:31,280 --> 00:08:33,720
Speaker 7: Well, that is a good, great question in terms of

176
00:08:33,720 --> 00:08:37,160
Speaker 7: the balance of luxury and exclusivity. The best brands john

177
00:08:37,240 --> 00:08:40,000
Speaker 7: don't go on sale, and those include Louis Vuitton and

178
00:08:40,120 --> 00:08:43,640
Speaker 7: d Or so that brand does not go on sale.

179
00:08:43,720 --> 00:08:47,440
Speaker 7: Other brands that have been struggling, including Gucci, we are

180
00:08:47,520 --> 00:08:51,520
Speaker 7: seeing markdowns in the department store channel has been under pressure,

181
00:08:51,920 --> 00:08:55,200
Speaker 7: so we're not recommending those stocks, which include Macy's and

182
00:08:55,320 --> 00:08:58,440
Speaker 7: Nordstrom and others, and that's been something to watch.

183
00:08:58,559 --> 00:09:01,040
Speaker 5: The consumer remains focused on value.

184
00:09:01,120 --> 00:09:04,360
Speaker 7: As you know, Walmart has been a top idea and

185
00:09:04,440 --> 00:09:07,720
Speaker 7: Walmart is really executing well with lots of great deals

186
00:09:07,760 --> 00:09:11,959
Speaker 7: across food and consumables. Luxury is something to watch still,

187
00:09:12,000 --> 00:09:15,960
Speaker 7: and as you mentioned earlier, the situation in China is

188
00:09:16,120 --> 00:09:19,520
Speaker 7: more anemic growth as well, and that's something to consider,

189
00:09:19,600 --> 00:09:22,880
Speaker 7: and consumer confidence has been volatile. On the one hand,

190
00:09:23,040 --> 00:09:25,920
Speaker 7: we have very low unemployment as well as a trillion

191
00:09:26,000 --> 00:09:29,800
Speaker 7: dollars of savings on the sidelines, but consumers are being

192
00:09:29,880 --> 00:09:33,600
Speaker 7: choiceful and watching and not buying everything in sight, really

193
00:09:33,600 --> 00:09:36,440
Speaker 7: looking for the best bargains, and the best luxury brands

194
00:09:36,720 --> 00:09:37,960
Speaker 7: do remain full price.

195
00:09:38,200 --> 00:09:41,280
Speaker 2: I appreciate your ability to jump between Gucci and Walmart.

196
00:09:41,360 --> 00:09:42,960
Speaker 2: If we can just stay on Gucci, Oliver, and then

197
00:09:43,000 --> 00:09:44,960
Speaker 2: we can move on. I want to sit on Gucci.

198
00:09:44,960 --> 00:09:46,719
Speaker 2: I think this is important. I'm going to get in

199
00:09:46,800 --> 00:09:49,800
Speaker 2: some hot water here, but here goes the kind of

200
00:09:49,840 --> 00:09:51,800
Speaker 2: people that buy Gucci, the kind of people that want

201
00:09:51,800 --> 00:09:54,000
Speaker 2: you to know they've bought Gucci, and I think that's

202
00:09:54,040 --> 00:09:56,720
Speaker 2: really important. They want the beut with a big Gucci

203
00:09:56,760 --> 00:09:59,600
Speaker 2: emblem on it, and I just wonder how incompatible South

204
00:09:59,640 --> 00:10:02,400
Speaker 2: wealth and quiet luxury is with that particular brand.

205
00:10:04,000 --> 00:10:05,079
Speaker 5: Well, we got to have both.

206
00:10:05,120 --> 00:10:08,160
Speaker 7: What's really happening at Gucci now is a return to

207
00:10:08,280 --> 00:10:11,480
Speaker 7: timelessness and also elevation with a new designer.

208
00:10:11,720 --> 00:10:13,160
Speaker 5: We really like what he's doing.

209
00:10:13,280 --> 00:10:17,200
Speaker 7: However, these turnarounds take time, and we think it'll take

210
00:10:17,240 --> 00:10:20,240
Speaker 7: a year in terms of rebooting the brand and also

211
00:10:20,360 --> 00:10:24,120
Speaker 7: harmonizing service levels across the globe. They're also adding a

212
00:10:24,120 --> 00:10:26,840
Speaker 7: lot of creative john to this. They'll be bigger and

213
00:10:26,920 --> 00:10:28,439
Speaker 7: better shows and storytelling.

214
00:10:28,720 --> 00:10:31,720
Speaker 5: That's what really needs to happen at Gucci at the moment.

215
00:10:31,880 --> 00:10:36,199
Speaker 7: Quiet luxury, thinking about timelessness, elevated materials, that's really working

216
00:10:36,600 --> 00:10:40,000
Speaker 7: in a way that luxury consumer is looking for value

217
00:10:40,040 --> 00:10:42,559
Speaker 7: and items that they can use throughout.

218
00:10:42,640 --> 00:10:44,280
Speaker 5: But it's a little bit boring.

219
00:10:44,559 --> 00:10:48,439
Speaker 7: And conversely, a quiet luxury can be an excuse for

220
00:10:48,920 --> 00:10:49,679
Speaker 7: no innovation.

221
00:10:50,000 --> 00:10:52,800
Speaker 5: What if that's true? So we really need to have both.

222
00:10:52,840 --> 00:10:55,079
Speaker 7: We need to have the exuberance and we need to

223
00:10:55,120 --> 00:10:57,559
Speaker 7: have the fashion, and we need to have the quiet luxury.

224
00:10:57,600 --> 00:11:00,160
Speaker 7: So a little bit of logo in the future be

225
00:11:00,280 --> 00:11:01,840
Speaker 7: quite positive for Gucci.

226
00:11:02,320 --> 00:11:03,559
Speaker 5: Love it a little bit of logo.

227
00:11:03,720 --> 00:11:06,000
Speaker 1: So from logo back to Walmart, I'll talk about that.

228
00:11:06,120 --> 00:11:08,800
Speaker 1: I am curious about how you have seen this outperformance

229
00:11:08,800 --> 00:11:12,880
Speaker 1: and an ongoing basis this holiday shopping season from the

230
00:11:12,920 --> 00:11:16,040
Speaker 1: online systems, and basically this has been the trend for

231
00:11:16,120 --> 00:11:20,280
Speaker 1: a long time. How does this challenge companies at a

232
00:11:20,320 --> 00:11:22,560
Speaker 1: time when it is less profitable for them to sell

233
00:11:22,600 --> 00:11:26,320
Speaker 1: online where they have big physical stores that aren't necessarily

234
00:11:26,360 --> 00:11:28,440
Speaker 1: getting the same kind of foot traffic as they have

235
00:11:28,880 --> 00:11:29,720
Speaker 1: in prior years.

236
00:11:30,800 --> 00:11:33,720
Speaker 7: Retailers have to do everything everywhere, all at once. So

237
00:11:33,760 --> 00:11:37,600
Speaker 7: the name of the game is channels such as curbside pickup,

238
00:11:38,160 --> 00:11:40,040
Speaker 7: where you're doing more of the work in terms of

239
00:11:40,080 --> 00:11:40,839
Speaker 7: the last mile.

240
00:11:41,320 --> 00:11:42,480
Speaker 5: Also, as you think.

241
00:11:42,320 --> 00:11:45,840
Speaker 7: About technology at large, the future of retail includes digital

242
00:11:45,920 --> 00:11:49,880
Speaker 7: advertising as well as artificial intelligence, and then growing these

243
00:11:49,920 --> 00:11:54,280
Speaker 7: marketplace models to have third party sellers, very similarly to Amazon.

244
00:11:54,679 --> 00:11:56,800
Speaker 5: So you're retaining a lot.

245
00:11:56,679 --> 00:12:00,120
Speaker 7: Of the productivity of the box and you're becoming less

246
00:12:00,200 --> 00:12:04,560
Speaker 7: unprofitable and online, and that's happening at Walmart over time.

247
00:12:04,960 --> 00:12:08,640
Speaker 7: It's a bigger challenge at Target, which is losing money online.

248
00:12:09,080 --> 00:12:12,840
Speaker 7: The prospect for Walmart to become e commerce profitable that

249
00:12:12,920 --> 00:12:16,040
Speaker 7: will happen within one to two years, in part because

250
00:12:16,080 --> 00:12:20,680
Speaker 7: they have so much scale in their increasing delivery density. Also,

251
00:12:20,960 --> 00:12:24,000
Speaker 7: consumers of all kinds are choosing to pay.

252
00:12:23,800 --> 00:12:25,240
Speaker 5: For express shipping.

253
00:12:25,600 --> 00:12:28,760
Speaker 7: That's happening as well, and Walmart's getting a higher household

254
00:12:28,840 --> 00:12:32,440
Speaker 7: income consumer. So this really is difficult, but it all

255
00:12:32,480 --> 00:12:36,000
Speaker 7: needs to work together. And digital advertising is a very

256
00:12:36,080 --> 00:12:38,720
Speaker 7: high margin business seventy percent plus margins.

257
00:12:39,040 --> 00:12:41,520
Speaker 1: I'll big of an advantage do the likes of Walmart

258
00:12:41,559 --> 00:12:44,000
Speaker 1: and am as at another large retailers that have these

259
00:12:44,040 --> 00:12:47,000
Speaker 1: sort of multi channel businesses have When it comes to

260
00:12:47,040 --> 00:12:50,080
Speaker 1: the likes of tariffs, which pretty much universally we're expecting

261
00:12:50,080 --> 00:12:53,720
Speaker 1: to hear about early next year to have them implemented.

262
00:12:54,240 --> 00:12:55,280
Speaker 5: Across the sector.

263
00:12:55,320 --> 00:12:57,920
Speaker 7: In terms of the analysis, the earnings per share hits

264
00:12:57,960 --> 00:13:00,160
Speaker 7: will be mid to high single digits.

265
00:13:00,400 --> 00:13:01,040
Speaker 5: In terms of.

266
00:13:01,080 --> 00:13:03,920
Speaker 7: Themes and stocks to play, you know you own those

267
00:13:03,960 --> 00:13:07,640
Speaker 7: with the most scale. Walmart also has a history of

268
00:13:07,720 --> 00:13:13,120
Speaker 7: working quite aggressively with suppliers on managing prices, so we

269
00:13:13,320 --> 00:13:16,200
Speaker 7: like the prospects of Walmart. The big question and the

270
00:13:16,200 --> 00:13:20,480
Speaker 7: big opportunity and the big unintended consequence of terroriffs will

271
00:13:20,480 --> 00:13:24,840
Speaker 7: be passing this cost on to consumers, which may yield inflation,

272
00:13:25,280 --> 00:13:26,040
Speaker 7: So we'll see.

273
00:13:26,600 --> 00:13:27,920
Speaker 5: We think as much as.

274
00:13:27,760 --> 00:13:30,360
Speaker 7: Fifteen to ninety percent will need to be passed on

275
00:13:30,400 --> 00:13:32,240
Speaker 7: to consumers, and it's something to watch.

276
00:13:32,600 --> 00:13:35,000
Speaker 5: But you're gonna want to own those with scale and.

277
00:13:35,000 --> 00:13:38,000
Speaker 7: Walmart and Costco definitely failed the bill here.

278
00:13:37,960 --> 00:13:40,000
Speaker 6: Oliver, I'd love to talk about department stores. I know

279
00:13:40,360 --> 00:13:43,440
Speaker 6: you're not too excited about Macy's. Are there any department.

280
00:13:43,120 --> 00:13:43,840
Speaker 5: Stores you like?

281
00:13:44,360 --> 00:13:46,080
Speaker 6: And do you think they're going to have to lean

282
00:13:46,080 --> 00:13:48,240
Speaker 6: into more sales leading up to Christmas? I mean, open

283
00:13:48,280 --> 00:13:50,640
Speaker 6: my email this morning and I got burdof Goodman saying

284
00:13:50,679 --> 00:13:53,840
Speaker 6: extended one more day for the cyber sale. Does Cyber

285
00:13:53,880 --> 00:13:56,480
Speaker 6: Monday even exist anymore? Is it just cyber Week?

286
00:13:57,520 --> 00:14:01,440
Speaker 7: Well, it's definitely the cyber month and T minus forty

287
00:14:01,480 --> 00:14:04,800
Speaker 7: in terms of the events have started earlier and they're

288
00:14:04,800 --> 00:14:08,600
Speaker 7: more spread out and people aren't trampling each other anymore.

289
00:14:08,640 --> 00:14:11,000
Speaker 5: It's not as exciting as it used to be, so

290
00:14:11,280 --> 00:14:12,240
Speaker 5: that's happening.

291
00:14:12,280 --> 00:14:16,080
Speaker 7: And also lots of markdowns on the markdowns definitely. As

292
00:14:16,080 --> 00:14:18,920
Speaker 7: we think about department stores, we like Nord from Rack,

293
00:14:19,040 --> 00:14:21,480
Speaker 7: but what does that mean. It means department stores are

294
00:14:21,560 --> 00:14:25,080
Speaker 7: changing to be more off price and offer value there

295
00:14:25,120 --> 00:14:28,000
Speaker 7: and Nord from Rac did a pretty good job. We're hopeful,

296
00:14:28,080 --> 00:14:31,800
Speaker 7: but the big problem is getting younger customers in stores

297
00:14:31,880 --> 00:14:35,120
Speaker 7: and store traffic. The other nature of competition is changing

298
00:14:35,240 --> 00:14:39,080
Speaker 7: rapidly in apparel with Shean and TMU and ultra fast

299
00:14:39,160 --> 00:14:43,520
Speaker 7: fashion in the tiktokification of retail. Thinking about social selling,

300
00:14:43,600 --> 00:14:47,120
Speaker 7: that's something department stores are facing. The future is more

301
00:14:47,240 --> 00:14:51,800
Speaker 7: exclusive products, so Macy's is upgrading their private brands. That

302
00:14:51,840 --> 00:14:55,040
Speaker 7: should be a positive for getting younger consumers as well

303
00:14:55,040 --> 00:14:56,960
Speaker 7: as older consumers back in store.

304
00:14:57,480 --> 00:15:00,880
Speaker 2: Ali appreciate your time, sir, OUTIVI Chen there a TD Cowan,

305
00:15:11,320 --> 00:15:13,720
Speaker 2: Steve England are of standard charted rights. And the following

306
00:15:13,960 --> 00:15:16,280
Speaker 2: the question is what is core Trump and what is

307
00:15:16,320 --> 00:15:19,000
Speaker 2: tactical Trump. Core Trump is not wanting to see US

308
00:15:19,080 --> 00:15:22,360
Speaker 2: prestige and US interests put at risk. Tactical Trump is

309
00:15:22,400 --> 00:15:25,520
Speaker 2: a threat of tariffs to see what concessions he can obtain.

310
00:15:25,880 --> 00:15:28,600
Speaker 2: Steve joined us now for more save let's talk about

311
00:15:28,600 --> 00:15:32,160
Speaker 2: those threats. Are they credible threats? And do you and

312
00:15:32,160 --> 00:15:34,160
Speaker 2: to the people that you speak to every single day,

313
00:15:34,480 --> 00:15:36,560
Speaker 2: believe that he'd follow through on them.

314
00:15:37,240 --> 00:15:39,560
Speaker 8: I believe and I think they believe that will follow

315
00:15:39,640 --> 00:15:43,800
Speaker 8: through on them if he doesn't get satisfaction, you know,

316
00:15:43,840 --> 00:15:47,400
Speaker 8: in terms of changing policies and getting some visible concessions

317
00:15:47,440 --> 00:15:51,440
Speaker 8: from from other countries. The question does does he actually

318
00:15:51,520 --> 00:15:55,840
Speaker 8: want to slap on the tariffs on Canada, Mexico other

319
00:15:55,920 --> 00:15:58,240
Speaker 8: allies or does he he just does he just want

320
00:15:58,280 --> 00:16:02,720
Speaker 8: them to adjust their policies and kind of be more

321
00:16:02,720 --> 00:16:07,040
Speaker 8: friendly towards buying US products. And that's probably the case,

322
00:16:07,280 --> 00:16:13,280
Speaker 8: I think, you know, more than protectionism. He's probably doing

323
00:16:13,320 --> 00:16:16,280
Speaker 8: what you could call a protection racket, which is going

324
00:16:16,360 --> 00:16:20,560
Speaker 8: to them in advance of his being in power and saying, look, if.

325
00:16:21,360 --> 00:16:23,520
Speaker 9: You want to avoid trouble, this is what you've got

326
00:16:23,520 --> 00:16:23,760
Speaker 9: to do.

327
00:16:24,040 --> 00:16:26,600
Speaker 8: And if you you know, if you cooperate, then you

328
00:16:26,600 --> 00:16:27,720
Speaker 8: know things will be fine.

329
00:16:28,120 --> 00:16:29,920
Speaker 9: And I think that that's his preferred direction.

330
00:16:30,000 --> 00:16:33,320
Speaker 8: We'll have to see how, you know, how far they

331
00:16:33,320 --> 00:16:36,480
Speaker 8: are willing to go, and exactly what he does once

332
00:16:36,800 --> 00:16:40,840
Speaker 8: he gets into into office, and whether you know, he

333
00:16:40,920 --> 00:16:46,160
Speaker 8: focuses on you know, countries that are large trading partners,

334
00:16:46,200 --> 00:16:49,280
Speaker 8: or whether he focuses on China more directly because of

335
00:16:49,320 --> 00:16:52,000
Speaker 8: the national security ISSUECCS.

336
00:16:52,000 --> 00:16:54,640
Speaker 1: See how strong is too strong for the dollar given

337
00:16:54,680 --> 00:16:57,200
Speaker 1: some of the policies that we've heard from President elect

338
00:16:57,240 --> 00:16:59,360
Speaker 1: Donald Trump. And I say this as we already see

339
00:16:59,760 --> 00:17:03,400
Speaker 1: some at sports from the US really fall off significantly,

340
00:17:03,440 --> 00:17:06,440
Speaker 1: and at a time where this has been a president

341
00:17:06,600 --> 00:17:08,880
Speaker 1: who has waffled a bit when it comes to whether

342
00:17:08,920 --> 00:17:10,879
Speaker 1: he wants a strong or a week dollar.

343
00:17:12,720 --> 00:17:15,520
Speaker 8: Yeah, and I think there's a reason to waffle because

344
00:17:16,000 --> 00:17:20,359
Speaker 8: on the one hand, you you, dollar dominance is a

345
00:17:20,400 --> 00:17:24,160
Speaker 8: tremendous privilege and a trevendous advantage and enhances the US's

346
00:17:24,400 --> 00:17:28,919
Speaker 8: role both financially and politically in the world. You know,

347
00:17:29,040 --> 00:17:31,880
Speaker 8: everyone talks about service of reaction to the tariff threat.

348
00:17:31,920 --> 00:17:34,280
Speaker 8: But if I was a US exporter or even a

349
00:17:34,359 --> 00:17:37,439
Speaker 8: US farmer and seeing the dollar, you know, run up

350
00:17:37,440 --> 00:17:38,920
Speaker 8: to one o five, you know, it was one o

351
00:17:39,080 --> 00:17:42,600
Speaker 8: nine against the the euro before you know Trump election

352
00:17:42,640 --> 00:17:44,840
Speaker 8: at started going up. And if I was a manufacturer

353
00:17:44,880 --> 00:17:47,600
Speaker 8: who is depending on exports, I'd say, where, you know,

354
00:17:48,000 --> 00:17:51,080
Speaker 8: where's my tariff or where's my subsidy? Where's my protection?

355
00:17:51,680 --> 00:17:54,119
Speaker 8: Because that segment is going to be damaged. So I

356
00:17:54,160 --> 00:17:58,560
Speaker 8: think that there, you know, everybody, I think there's something

357
00:17:58,600 --> 00:18:00,920
Speaker 8: to be said for a strong dollar, you know, and

358
00:18:01,119 --> 00:18:04,720
Speaker 8: often it's a sign, a positive sign that capital is

359
00:18:04,720 --> 00:18:08,240
Speaker 8: flowing into your country for good reasons. But I think

360
00:18:08,240 --> 00:18:11,679
Speaker 8: that that remains to be seen. And just to finish

361
00:18:11,680 --> 00:18:16,200
Speaker 8: this thought, I think the judgment on the Trump economic

362
00:18:16,240 --> 00:18:18,480
Speaker 8: policy is not going to be done on the basis

363
00:18:18,520 --> 00:18:19,080
Speaker 8: of tariffs.

364
00:18:19,119 --> 00:18:21,240
Speaker 9: It's going to be done on the basis of.

365
00:18:21,160 --> 00:18:25,080
Speaker 8: How successful they are in terms of cutting governments spending

366
00:18:25,200 --> 00:18:29,439
Speaker 8: and doing the sort of structural and productivity enhancing reforms

367
00:18:29,480 --> 00:18:33,440
Speaker 8: that the Scott Bessant and the dilg team are promising.

368
00:18:33,480 --> 00:18:37,240
Speaker 8: Because if they're successful in that, the dollar will be strong.

369
00:18:37,480 --> 00:18:40,119
Speaker 8: But it won't matter if they're unsuccessful, then that the

370
00:18:40,200 --> 00:18:42,200
Speaker 8: dollar will be weak and it won't matter.

371
00:18:42,520 --> 00:18:44,200
Speaker 6: Can we talk about the other side of the euro

372
00:18:44,320 --> 00:18:46,880
Speaker 6: dollar tree when it comes to the euro. Now we're

373
00:18:46,920 --> 00:18:50,800
Speaker 6: facing a French government on the brink of collapse. Germany

374
00:18:50,840 --> 00:18:53,240
Speaker 6: will have fresh elections at the start of next year.

375
00:18:53,560 --> 00:18:57,000
Speaker 6: Are you concerned about contagion to the rest of the Eurozone.

376
00:18:59,040 --> 00:19:03,240
Speaker 9: Well, you know there's contagion, but the issue is real.

377
00:19:03,280 --> 00:19:05,520
Speaker 8: It's not like it's you know, it wouldn't be there

378
00:19:05,600 --> 00:19:08,480
Speaker 8: if Germany won't have these problems, if if France didn't

379
00:19:08,560 --> 00:19:12,639
Speaker 8: or the other way around. The issue is that, you know,

380
00:19:12,840 --> 00:19:15,080
Speaker 8: Europe has had bad luck. You know, they're one of

381
00:19:15,119 --> 00:19:20,080
Speaker 8: their major trading partners, China. You know, domestic mand consumer demand,

382
00:19:20,200 --> 00:19:25,520
Speaker 8: demand for luxury goods has really dropped, you know, you know,

383
00:19:25,920 --> 00:19:28,359
Speaker 8: the tragedy of the war in the Ukraine has really

384
00:19:29,280 --> 00:19:35,760
Speaker 8: you know, damaged their growth prospects. Structural policy has gone nowhere,

385
00:19:37,240 --> 00:19:39,160
Speaker 8: and they're left with the ECB is the only game

386
00:19:39,240 --> 00:19:42,119
Speaker 8: in town. And that's kind of what the market is

387
00:19:42,160 --> 00:19:44,600
Speaker 8: looking at and sort of saying, either you're going to

388
00:19:44,920 --> 00:19:48,880
Speaker 8: compromise on your fiscal goals, you know, with no hope

389
00:19:48,880 --> 00:19:51,800
Speaker 8: in sight that the budgets will be balanced or you know,

390
00:19:52,080 --> 00:19:54,720
Speaker 8: be put on a sustainable path, or you're going to

391
00:19:54,760 --> 00:19:57,959
Speaker 8: have to depreciate the euro through monetary policy. And that's

392
00:19:58,160 --> 00:20:01,280
Speaker 8: you know, so depending on which is emphasized, the pressure

393
00:20:01,359 --> 00:20:02,960
Speaker 8: or either be seen in the rates market or on

394
00:20:03,119 --> 00:20:03,880
Speaker 8: the Europe.

395
00:20:03,920 --> 00:20:05,720
Speaker 2: Hi Steve got to hear from Miss Steve England and

396
00:20:05,760 --> 00:20:09,960
Speaker 2: there a standard Chanta. This is the Bloomberg Surveillance podcast,

397
00:20:10,080 --> 00:20:14,000
Speaker 2: bringing you the best in markets, economics, and geopolitics. You

398
00:20:14,000 --> 00:20:16,800
Speaker 2: can watch the show live on Bloomberg TV weekday mornings

399
00:20:16,800 --> 00:20:19,760
Speaker 2: from six am to nine am Eastern. Subscribe to the

400
00:20:19,760 --> 00:20:23,280
Speaker 2: podcast on Apple, Spotify or anywhere else you listen, and

401
00:20:23,320 --> 00:20:26,199
Speaker 2: as always on the Bloomberg Terminal and the Bloomberg Business

402
00:20:26,200 --> 00:20:26,440
Speaker 2: app