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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: To find Bloomberg Surveillance on Apple Podcast, sun Cloud, Bloomberg

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Speaker 1: dot Com and of course on the Bloomberg terminal. It

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Speaker 1: is such an honor, and this is before the news

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Speaker 1: of yesterday on a missile, and this is south of Belarus,

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Speaker 1: on the Polish border with Ukraine, that you get to

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Speaker 1: turn Paul Sweeney as I have this morning to Elliott

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Speaker 1: Ackerman of the Marine Corps, and now James Travitas of

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Speaker 1: the U. S. Naval Academy and his service to the

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Speaker 1: nation as Supreme Commander of NATO as well. Almost Tavidis,

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Speaker 1: thank you so much for joining us this morning. There

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Speaker 1: is in her book two thousand thirty four, my book

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Speaker 1: of this summer a few years ago, folks. I can't

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Speaker 1: say enough about about it. On the first page of

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Speaker 1: the South China Sea. How many times over her career

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Speaker 1: has she stood as she did now on the bridge

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Speaker 1: of a ship, observing this miracle of stillness. There was

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Speaker 1: a stillness in Poland yesterday. That appears to be violated

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Speaker 1: by chance. How afraid should we be of exhaustion a

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Speaker 1: war that goes on and a war that goes on

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Speaker 1: to the winter where chance overtakes us. We gotta wake

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Speaker 1: up call yesterday. And it turned out as well as

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Speaker 1: it possibly could have. Tom, Um, let's face it, that

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Speaker 1: could have been a deliberate attack by Russia. It would

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Speaker 1: be crazy for Putin to start a war with NATO,

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Speaker 1: particularly by firing missiles into a field in Poland, but

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Speaker 1: could have been deliberate. It could have been in a

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Speaker 1: Russian offensive missile that went extremely stupid, and we've seen

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Speaker 1: several instances of that. Turns out apparently it's it's a

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Speaker 1: Ukrainian air defense missile, entirely justified in its use. But

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Speaker 1: here's the point, Tom. Wars sometimes start on incidents that

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Speaker 1: people overreact to move too quickly. I think, Tom, you

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Speaker 1: and I are old enough to remember the Tonkin Gulf

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Speaker 1: incident kind of preciprocated Vietnam or the assassination of an

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Speaker 1: archduke that starts World War One. I wasn't there for that,

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Speaker 1: than you are you sure? In any event, Um, we

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Speaker 1: gotta wake up call about how dangerous this situation is,

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Speaker 1: and we are to pay attention. And you are expert

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Speaker 1: in this. Paul Sweeney wants to jump in here, but

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Speaker 1: very quickly, Admiral, our solution in America is our modern

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Speaker 1: technocracy are technocratic engineering. We've got the toys, we got

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Speaker 1: the radar, we've got the planes. But that doesn't work

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Speaker 1: in a ward, does it. You gotta have the technology.

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Speaker 1: But I would argue, we got people, We know what

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Speaker 1: we're doing. We have been in a lot of combat operations.

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Speaker 1: Our opponents Russia looking like they're flailing badly here. China

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Speaker 1: hasn't been in a sustained war since the nineteen fifties. Um,

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Speaker 1: we have a strong advantage in our people. We are

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Speaker 1: to be confident in that, and we are to understand

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Speaker 1: that hopefully that creates real deterrence against these other powers. Admiral, So,

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Speaker 1: given what we kind of feared yesterday, which might have

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Speaker 1: been an escalation of some sort against what appears to

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Speaker 1: be a brutal winter coming up and who knows how

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Speaker 1: to play out, should we be thinking about ways to

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Speaker 1: give Mr putin Away out of this thing, Because from

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Speaker 1: his perspective, he's got to recognize that this is at

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Speaker 1: best just a stalemate. He should be awakening. But I think, uh, Paul,

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Speaker 1: he wants to play a couple of cards. Yet he

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Speaker 1: wants to wait and see how the winter comes out.

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Speaker 1: You know, as the Europeans struggle with high energy costs

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Speaker 1: and a cold winner is it a warm winner. He

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Speaker 1: wants to see if there's impact there. And he is

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Speaker 1: also waiting to see how divisive are politics here are

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Speaker 1: in the United States. I think the mid terms probably

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Speaker 1: gave him some pause. That was not a good outcome

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Speaker 1: for him, and I think as the winner goes on, um,

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Speaker 1: I think the Europeans are gonna stand pretty strong. So

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Speaker 1: point being, yes, this thing will end up in a negotiation.

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Speaker 1: I think it probably head stored negotiation after the winter,

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Speaker 1: when both sides are facing real exhaustion. Putin because he

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Speaker 1: runs out of resources, Zelinsky because the patients the resources

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Speaker 1: of the West become harder to obtain. I think that

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Speaker 1: drives both parties potentially to negotiation early next marine. Let's

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Speaker 1: hope so Emial Stevids. Thank you so much again, Elliott

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Speaker 1: Ackerman and James Travidas. The book is two thousand thirty four.

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Speaker 1: It has my highest highest recommend dation. Elliott Ackerman joins

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Speaker 1: us to say he's former White House fellow US Marine

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Speaker 1: Corps veteran, is to miss the point of my book

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Speaker 1: of the Summer a number of summers ago. The book

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Speaker 1: is two thousand thirty four, a novel of the next World,

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Speaker 1: except the next world is coming ever closer. Eliott Ackerman,

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Speaker 1: thank you so much for joining us today. Let me

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Speaker 1: start with the basic reconninance, reconnaissance issues of a missile attack.

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Speaker 1: Do we have, as the West, or as America, or

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Speaker 1: as NATO, do we have intelligence systems from space or

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Speaker 1: from ground that know where various and sundry missiles move?

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Speaker 1: We do. Generally speaking. What we have is what's called

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Speaker 1: counter battery radar. So you can uh with with basic math,

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Speaker 1: figure out the trajectory of these missiles, the direction of impact,

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Speaker 1: and where they have come from. So, I mean, that's

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Speaker 1: basically how we've seen NATO very quickly figure out that

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Speaker 1: this missile that landed in Poland was in fact launched

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Speaker 1: from Ukraine. The dystopian nature of your book two thousand

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Speaker 1: thirty four, without giving the plot away, is that when

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Speaker 1: adversaries come together, the biggest problem is mistakes. The biggest

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Speaker 1: problem is risks as you perceive Ukraine and Russia into

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Speaker 1: the winter. Is that the problem. They're worn out, Their

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Speaker 1: exhausted systems are failing. They're just close. So like your book,

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Speaker 1: things fall apart rapidly. Well, exactly, you hit the nail

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Speaker 1: right on the head that you know, wars are escalatory

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Speaker 1: by nature, and once you enter uh this escalatory cycle, Uh,

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Speaker 1: it's us picks up and picks up, and each incident

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Speaker 1: becomes increasingly dangerous. You know. That's why we see the

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Speaker 1: Secretary General of NATO caution, caution in calm, because all

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Speaker 1: sides don't want to see the war in Ukraine spill

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Speaker 1: outside of the borders of Ukraine, which would be disastrous,

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Speaker 1: and that calm wasn't there yesterday The Foreign Minister of

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Speaker 1: Ukraine put this tweet out fourteen hours ago. I want

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Speaker 1: to read it at because I think it's important. He said,

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Speaker 1: Russia now promotes a conspiracy theory that it was allegedly

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Speaker 1: a missile of Ukrainian air defense that found on the

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Speaker 1: Polish territory, which is not true. Now we should by

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Speaker 1: Russian propaganda or amplify its message. Hasn't that just been

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Speaker 1: totally contradicted by the NATO Secretary General just moments ago.

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Speaker 1: Well it has and it's you know, it's an important

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Speaker 1: reminder that, you know, although Russia is waging an illegal

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Speaker 1: war in Ukraine, and although the Western nator are supporting

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Speaker 1: the Ukrainian people, it obviously has to be well within

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Speaker 1: a rational context. We can't go fly off handle each

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Speaker 1: time that there is an incident or the war spills

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Speaker 1: over in unfortunate ways. So I think NATO is doing

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Speaker 1: the right thing. Um, you know, I don't necessarily, I

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Speaker 1: wouldn't necessarily say the Ukrainians are are doing the wrong thing,

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Speaker 1: but I think you can expect, you know, they are

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Speaker 1: in a crisis situation that they reality they've been living

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Speaker 1: in since February, an existential war fought on their land, uh,

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Speaker 1: and we need to be good partners and helping them

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Speaker 1: manage that war and hopefully bring it to a successful conclusion.

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Speaker 1: Does it Botherly, the Elliott that perhaps Russia has a

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Speaker 1: bit more leverage because they're backed into a corner and

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Speaker 1: it's Vladimir Putin's pride and he could act in a

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Speaker 1: more rash way because he doesn't really care what the

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Speaker 1: West does to him at this point, because of just

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Speaker 1: simply their reluctance to engage in a conflict. Sure, I

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Speaker 1: think that you know that is obviously uh a point

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Speaker 1: that that we need to weigh. You know, Russia is

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Speaker 1: backed into a corner prutent, it would see, doesn't have

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Speaker 1: that much left to lose. Um, if you want to

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Speaker 1: look at the nation that really has nothing left to lose,

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Speaker 1: it's I mean it's Ukraine. I mean, Ukraine is fighting

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Speaker 1: for its very existence, it's very life. The thing that

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Speaker 1: concerns me the most is that I think we, by we,

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Speaker 1: I mean sort of a collective West, have in the

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Speaker 1: last decade or two of warfare, gotten into a psychology

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Speaker 1: where wars are very long. They're photos of five ten

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Speaker 1: as we sign up against an even twenty year periods.

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Speaker 1: The war in Ukraine is a different type of war.

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Speaker 1: It's a bit of a throwback. When I've been there

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Speaker 1: to cover the war, I mean, their air raids are

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Speaker 1: running down to bomb shelters. It feels like a twentieth

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Speaker 1: century war. And it's a ward that needs to be

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Speaker 1: resolved really in the next year or two. And if

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Speaker 1: the war bleeds over into three, four or five ten years,

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Speaker 1: that only advantages the Russians. And the wonderful to hear

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Speaker 1: from you, as always said at him in that I

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Speaker 1: can stay unequivocally on the island of Manhattan. There is

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Speaker 1: no one steeped Inness and Dana Telsey CEO, Chief Research Officer,

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Speaker 1: Telsey Advisory Group kind of get Bear Stearns years ago.

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Speaker 1: And Dana, I want you to fifty seven and fifth Avenue,

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Speaker 1: give us one little window into your childhood at Bergdorf

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Speaker 1: Bergdorf Goodman. Give us just one little moment there in

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Speaker 1: your childhood. I think the moment at Bergdorf Goodman comes

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Speaker 1: from my grandmother working at Bergdorf Goodman and going in

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Speaker 1: and seeing that on the house wears floor, seeing all

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Speaker 1: the different Christmas trees and holiday decorations they have. It

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Speaker 1: changes every year, and it's a wow. Every year. We're

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Speaker 1: coming off a pandemic that your grandparents never could have

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Speaker 1: imagined it was over in nineteen No, it was not.

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Speaker 1: What does the holiday season look like this year? I

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Speaker 1: think the holiday season, for the most part, is going

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Speaker 1: to be about gathering. I think people want to be

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Speaker 1: together more than they ever have in the past. But

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Speaker 1: I think it's still a challenge holiday season economically. Yes,

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Speaker 1: three tail sales figures came out, but you have a

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Speaker 1: real bifurcation between the high end and the low end.

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Speaker 1: The high end still spending, but the growth rate of

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Speaker 1: that high end spend is moderating from what it had

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Speaker 1: been in the past. And what we need. You need

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Speaker 1: new product and who's delivering new product. You and I

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Speaker 1: talked about the Trunk's exhibition at Louis Vuitton on Madison Avenue.

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Speaker 1: That's new. You look at Deckers and they have new

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Speaker 1: Uggs platform shoes that are taking off on running. If

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Speaker 1: you don't have the waffle soul, that is pretty good too.

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Speaker 1: But that's the luxury sector. This is the people who

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Speaker 1: have discretionary spending. We just saw from the targets of

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Speaker 1: the world. Maybe that's not the case for the vast

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Speaker 1: majority of other people. What is your takeaway in terms

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Speaker 1: of the discretionary spending ability in mass from the Target

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Speaker 1: and Walmart earnings, It's cautious when you think about the

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Speaker 1: inflation hairy headwinds that they have. They don't have the

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Speaker 1: same spending power that they did before, especially when food

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Speaker 1: is going up as as much as it did. You

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Speaker 1: look where the value is. Everyone's competing on promotion today,

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Speaker 1: which is different than three hundred and sixty five day

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Speaker 1: years ago. But you look at t J access numbers

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Speaker 1: today which are better than expected, and frankly, even the guidance,

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Speaker 1: it was nice to see how they're setting up. They're

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Speaker 1: getting better brands at more value prices, and so is

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Speaker 1: there some share shifts that's going on and is off

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Speaker 1: price returning. It's a great point, especially because we saw,

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Speaker 1: for example, Walmart gain share in the grocery store sector,

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Speaker 1: which actually buffered a lot of their sales right because

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Speaker 1: people are still buying food and you're seeing that, where

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Speaker 1: do you expect to see the big share shifts? How

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Speaker 1: much do you see consolidation among the strongest players and

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Speaker 1: the loser is really losing even bigger. I think overall,

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Speaker 1: when we're thinking about the changes that are going on,

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Speaker 1: who has the assortment and who has value? I think

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Speaker 1: one of the surprises tomorrow could be Macy's and I

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Speaker 1: think they've been more innovative than they have been in

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Speaker 1: the past, and I think we're gonna see some improvement there.

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Speaker 1: I think overall we're seeing on the specialty apparel side,

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Speaker 1: there's newness there. You look at a Ritzia who's been

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Speaker 1: taking share and I think the issues at the gap

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Speaker 1: continue to remain headwinds. I think they are shared donors,

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Speaker 1: not share gainers in the in the near term. And

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Speaker 1: I think when we do have all of the changes

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Speaker 1: that are happening, you take a look at urban outfitters

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Speaker 1: with anthropology and free people, where I think that a

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Speaker 1: little bit higher income and women are buying. I think

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Speaker 1: there's a benefit there. The teen retailers are having issues

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Speaker 1: because they don't have the discretionary spend, so it's a

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Speaker 1: it's a share shift. And let's not forget inventory levels.

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Speaker 1: We have too much inventory. No one is getting rid

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Speaker 1: of it as fast as they would like, and that's

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Speaker 1: going to mean a bargain for the consumer. So where's

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Speaker 1: the value in equity here? I want to go back

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Speaker 1: to the central statement, which, as we talk about and

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Speaker 1: Lisa needs a pair of statement sunglasses, very important UH

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Speaker 1: to have in a recession. Do you go long luxury

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Speaker 1: which is already richly priced, or do you find value

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Speaker 1: in troubled big box or something else. I don't know.

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Speaker 1: One of the things I'm seeing with so many of

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Speaker 1: my stocks at fifty two week lows. I think investors

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Speaker 1: are doing their homework on the names preparing for twenty

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Speaker 1: three and twenty four. The tail when next year is

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Speaker 1: about lower freight rates, the headwind is weird. Give me

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Speaker 1: a single best buy here, you're with us or no

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Speaker 1: one's watching. Come on, Andy's single best buy right now.

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Speaker 1: When I think the names out there that are interesting,

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Speaker 1: I mean I like t j X for what they

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Speaker 1: can continue to deliver. But I think there's other names

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Speaker 1: that are interesting also when I think of names like

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Speaker 1: Loi est Lauder just delivered. If you have to look

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Speaker 1: at some of the value names out there and what

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Speaker 1: could be a change, I think Abercrombie and Fitch. I

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Speaker 1: think the newness that they're the other day and what

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Speaker 1: did you think I was kidding? Okay, I'm going to

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Speaker 1: line up to go in an A and F. You

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Speaker 1: don't have to line up, you can walk in and

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Speaker 1: you're gonna get you say ladder, But tom Ford and

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Speaker 1: that's what we're talking about, the biggest purchase in its history.

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Speaker 1: I am wondering there is this theory out there put

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Speaker 1: forward by the likes of Morgan Stanley, that at some

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Speaker 1: point there'll be a tipping point next year and these

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Speaker 1: will be the names that will benefit the most is

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Speaker 1: there going to be a roll up in between? Will

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Speaker 1: there be some sort of consolidation or bankruptcies that have

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Speaker 1: not yet been experienced. I think you'll continue to see

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Speaker 1: some of the acquisitions take place in consolidation, but I

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Speaker 1: think you're also going to see the vestures some of

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Speaker 1: the companies that maybe not having had performed as well

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Speaker 1: and want to focus on brands that are working. You

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Speaker 1: look at a Wolverine Worldwide, for example, where the maryl

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Speaker 1: business is their strength. They may not need all the

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Speaker 1: other brands in their portfolio. So I think you're gonna

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Speaker 1: see both. And I also think you may see a

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Speaker 1: change up in terms of the physical locations becoming more important.

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Speaker 1: I think stores are the new gathering spots and pandemic

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Speaker 1: did is they basically brought together that people want to socialize,

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Speaker 1: and frankly, you look at as the pandemic hopefully goes

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Speaker 1: into the rear view that yes, you are seeing people

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Speaker 1: shop at stores. It's one of the changes for Holiday

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Speaker 1: China to the rescue. That's a big theme that's out there,

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Speaker 1: isn't it doesn't work, not yet. I'm still seeing China

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Speaker 1: being being a tough place for a lot of my brands.

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Speaker 1: I think it's not until twenty three. Bring Joe Pelman

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Speaker 1: next time. Dana Telson where Advisory Group AMY with SILVERMA

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Speaker 1: joined just now, I Couity, Derivative Strategistic obviously Capital Markets Amy.

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Speaker 1: Can we kill this amount up the last week? And

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Speaker 1: what do you make of this Runnie we've seen from

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Speaker 1: the nast act to the SMP. Yeah, I think melt

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Speaker 1: up is an accurate way to describe it. Look, it

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Speaker 1: feels like a lifetime ago, but you know one week

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Speaker 1: ago is when we got that CPI number, and options

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Speaker 1: were you know, somewhat of a culprit outside of fundamental information.

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Speaker 1: About one third of all SMP options that traded that

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Speaker 1: day were for that expiration on that Wednesday, and that

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Speaker 1: certainly exacerbates some of the moves you see. Now we've

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Speaker 1: gotten to a point, John, in terms of positioning where

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Speaker 1: you know, essentially investors are are selling calls and and

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Speaker 1: basically just watching a grind up. So you know, they

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Speaker 1: were very worried about participating in that upside. But we

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Speaker 1: haven't seen reinitiation of even new levels from here, so

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Speaker 1: I think from the options perspective, they kind of think, again,

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Speaker 1: it's a melt up, but not a rip up. I mean,

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Speaker 1: I'm gonna go to your research note where you mentioned

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Speaker 1: bitcoin and your study of the bitcoin moves and all

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Speaker 1: the uproar that's ensued, and I want to go to

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Speaker 1: quantitative finance and this concept of drift of moving tick

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Speaker 1: by tick in a time series. Does bitcoin trade like apple?

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Speaker 1: Does bitcoin trade in a time series like a given

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Speaker 1: bond or a given foreign exchange pair? What does the

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Speaker 1: drift look like for bitcoin? Yeah, you know, look for

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Speaker 1: for something like bitcoin and crypto in general does so

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Speaker 1: there's obviously not as long a time series as there

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Speaker 1: are for other assets. But the way it trades when

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Speaker 1: you look at it historically and you look at realized

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Speaker 1: correlations is it's just another risk asset. And certainly given

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Speaker 1: the information that came out of FTX and everything that's

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Speaker 1: going on, you know, people want to know what direction

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Speaker 1: it's going. And I will say similar to all other

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Speaker 1: risk assets, Tom, you know, on the downside, it tends

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Speaker 1: to be more correlated. So we're seeing decently strong correlations,

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Speaker 1: you know, as the market had sold off and it

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Speaker 1: still remains strong, but it doesn't you know, on the upside,

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Speaker 1: it actually tends to diverge more than downside. All things

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Speaker 1: tend to go to one when things are you know,

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Speaker 1: selling off very hard. And we've been talking about how

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Speaker 1: incredible the swoon and bitcoin has been, but you point

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Speaker 1: to the other side of things that actually it's been

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Speaker 1: quite resilient, just the crypto space in general. Given the

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Speaker 1: entire collapse overnight of an entire firm, I wonder if

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Speaker 1: there's a broader message about the markets and just how

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Speaker 1: resilient and how invested a lot of institutions are, not

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Speaker 1: in the crypto space, but more broadly, and the reluctance

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Speaker 1: to really retrench in a meaningful way. Yeah, it's a

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Speaker 1: great question. And look a few months ago we we

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Speaker 1: spoke with both Sam Bank and Fried and Brett Harrison,

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Speaker 1: who was the president of FTS at the time. And

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Speaker 1: I think one thing that's underappreciated Lisa about what they

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Speaker 1: were doing was was not only on the crypto side,

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Speaker 1: but there were huge implications for just market structure, for

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Speaker 1: just normal markets, for futures, for derivatives. And the other

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Speaker 1: thing I would say is, you know, like given where

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Speaker 1: the CFTC proposals likely and now it's probably not going

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Speaker 1: to pass, or at least regulators are going to look

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Speaker 1: at things differently. But the resilience to me seemed to

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Speaker 1: speak of kind of the institutional adoption that did happen

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Speaker 1: because there was a lot of interest at the time,

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Speaker 1: and you know, we'll see how that changes. But institutions,

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Speaker 1: and this has been a theme that they talked about

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Speaker 1: a lot, was institutions continue adopt, continue to investigate, and

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Speaker 1: continue to have heads of digital and I don't know

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Speaker 1: that that would change even with where FDS is now.

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Speaker 1: I'm a wonderful a half from you, brilliant and so

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Speaker 1: whites Amy with Silverman that MC capitol, mar This is

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Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live

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Speaker 1: weekdays from seven to ten am Eastern on Bloomberg Radio

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Speaker 1: the terminal. I'm I'm keen in. This is Bloomer