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 --> 00:00:37,880
Speaker 2: Terminal and the Bloomberg Business App. David Bianco of DWS

10
00:00:38,000 --> 00:00:40,680
Speaker 2: looking ahead to next year and writing this line, while

11
00:00:40,680 --> 00:00:44,080
Speaker 2: a recession is not the base case, risks of overheating

12
00:00:44,520 --> 00:00:48,440
Speaker 2: and macroeconomic concertainty remain. David joins us now for more. David,

13
00:00:48,479 --> 00:00:51,360
Speaker 2: good morning, Good morning. Let's talk about that risk of overheating.

14
00:00:51,400 --> 00:00:53,600
Speaker 2: How very real is that risk for next year?

15
00:00:53,960 --> 00:00:56,120
Speaker 3: Well, the economy like this STI is strong. I don't

16
00:00:56,120 --> 00:00:58,240
Speaker 3: think it accelerates because things have been good in the

17
00:00:58,280 --> 00:01:01,160
Speaker 3: Probably stas not about two and a half sent GDP growth.

18
00:01:02,960 --> 00:01:07,680
Speaker 3: It's inflation being sticky, particularly because of services. That's a risk.

19
00:01:08,000 --> 00:01:10,280
Speaker 3: So that's perhaps an overheating risk. The other thing is

20
00:01:10,600 --> 00:01:15,120
Speaker 3: excessive fiscal spending. Now that's why with best in markets

21
00:01:15,120 --> 00:01:17,160
Speaker 3: not just markets. You know, the equity side has been

22
00:01:17,240 --> 00:01:20,360
Speaker 3: very excited about Trump ever since the win. But this

23
00:01:20,440 --> 00:01:22,920
Speaker 3: is good news for the bottom market. The Secretary Treasury

24
00:01:23,640 --> 00:01:26,680
Speaker 3: to come is concerned about the deficits. That's welcome news.

25
00:01:26,880 --> 00:01:29,759
Speaker 3: And the message of three three three, that's that's good

26
00:01:29,760 --> 00:01:30,600
Speaker 3: messaging so far.

27
00:01:30,720 --> 00:01:33,199
Speaker 2: So let's get to the three three three three percent growth,

28
00:01:33,440 --> 00:01:36,080
Speaker 2: three percent deficit. And I think also it's three million

29
00:01:36,120 --> 00:01:39,160
Speaker 2: bounds a day of all equivalents, not just oil aill equivalents,

30
00:01:39,160 --> 00:01:40,840
Speaker 2: And I think that's a really important point. Do you

31
00:01:40,880 --> 00:01:42,800
Speaker 2: think that could be met? You think that can be achieved?

32
00:01:42,920 --> 00:01:43,080
Speaker 4: Right?

33
00:01:43,120 --> 00:01:46,480
Speaker 3: So three percent real GDP growth is within reach for

34
00:01:46,560 --> 00:01:49,880
Speaker 3: the US economy with the right balance of things like

35
00:01:49,960 --> 00:01:55,120
Speaker 3: tariff's versusy regulation and lower taxes. Three million barrels over

36
00:01:55,200 --> 00:01:58,000
Speaker 3: a few years time, additional to the about fourteen million

37
00:01:58,360 --> 00:02:01,280
Speaker 3: that's I would argue that's well within but that would

38
00:02:01,360 --> 00:02:05,360
Speaker 3: hurt profits. But it's within reach. Now the three percent deficit,

39
00:02:06,240 --> 00:02:10,400
Speaker 3: that's out of reach. But I'm glad he's reaching forward

40
00:02:10,520 --> 00:02:12,560
Speaker 3: and pointing to it. And I think the bomb market's

41
00:02:12,560 --> 00:02:16,000
Speaker 3: excited to hear Secretary Treasury being concerned about these deficits.

42
00:02:16,160 --> 00:02:19,200
Speaker 1: How do you translate ideas and a muddied set of

43
00:02:19,320 --> 00:02:21,760
Speaker 1: signals from some of the cabinet members who have gotten

44
00:02:21,760 --> 00:02:25,160
Speaker 1: selected Scott Best catering to the market friendly crowd, others

45
00:02:25,160 --> 00:02:29,040
Speaker 1: catering to the vaccine skeptic crowd, others possibly talking about

46
00:02:29,120 --> 00:02:31,520
Speaker 1: ripping up the Justice Department. How do you put this

47
00:02:31,600 --> 00:02:34,440
Speaker 1: together to understand whether you need to change your forecast

48
00:02:34,480 --> 00:02:36,720
Speaker 1: for next year, whether Washington is just going to basically

49
00:02:36,760 --> 00:02:39,200
Speaker 1: tamp down any extremes and keep things the way they are.

50
00:02:39,280 --> 00:02:40,160
Speaker 4: Well, it's still early on.

51
00:02:40,200 --> 00:02:42,960
Speaker 3: We're still learning so much about these policies. But I'm

52
00:02:43,000 --> 00:02:46,280
Speaker 3: a markets guy, best in some markets person, so we're

53
00:02:46,280 --> 00:02:50,720
Speaker 3: feeling good today. But this is an environment where who's

54
00:02:50,800 --> 00:02:53,080
Speaker 3: to say where these policies are going to go and

55
00:02:53,120 --> 00:02:55,720
Speaker 3: the right mix and balance of them, and how other

56
00:02:56,280 --> 00:02:59,320
Speaker 3: countries in the world respond to our policies, particular things

57
00:02:59,360 --> 00:03:02,600
Speaker 3: like tariffs. Is still a risky geopolitical world. So on

58
00:03:02,600 --> 00:03:06,160
Speaker 3: one hand, oil prices might go down because of domestic supply,

59
00:03:06,320 --> 00:03:09,440
Speaker 3: but that's still under geopolitical threat. So are forecasting to

60
00:03:09,440 --> 00:03:12,160
Speaker 3: be flexible and markets are likely going to be voluid

61
00:03:12,280 --> 00:03:14,480
Speaker 3: over the coming year, but probably still upward.

62
00:03:14,840 --> 00:03:18,040
Speaker 1: Is this Treasury secretary pick though, really crucial when it

63
00:03:18,040 --> 00:03:20,880
Speaker 1: comes to pinning the treasury market in particular, sort of

64
00:03:20,919 --> 00:03:23,560
Speaker 1: pinning bond yields with somebody at the helm who is

65
00:03:23,639 --> 00:03:26,600
Speaker 1: going to be very trained on what exactly the markets say.

66
00:03:27,040 --> 00:03:29,760
Speaker 3: Well, well, the candidates were all good candidates, so you

67
00:03:29,800 --> 00:03:31,680
Speaker 3: know this is there. I don't think there's alarm in

68
00:03:31,720 --> 00:03:34,560
Speaker 3: this area, but I do think that this is a

69
00:03:34,600 --> 00:03:38,120
Speaker 3: selection that people like myself say, this makes sense. This

70
00:03:38,240 --> 00:03:42,520
Speaker 3: is a thoughtful person and experience with markets. And one

71
00:03:42,560 --> 00:03:44,440
Speaker 3: of the things that you know Secretary Treasury does is

72
00:03:44,480 --> 00:03:48,760
Speaker 3: help deal with problems, particularly problems and markets for problems

73
00:03:48,760 --> 00:03:53,280
Speaker 3: with funding. Keeping confidence in the in the US bomb

74
00:03:53,320 --> 00:03:56,920
Speaker 3: market is an important thing. So right person for the job.

75
00:03:57,000 --> 00:03:59,760
Speaker 5: He's been very critical of Secretary Yallen in terms of

76
00:03:59,760 --> 00:04:02,400
Speaker 5: when comes to the front end and these bond auctions,

77
00:04:02,440 --> 00:04:04,400
Speaker 5: do you think he will push that out to longer

78
00:04:04,480 --> 00:04:05,040
Speaker 5: day to debt?

79
00:04:05,840 --> 00:04:07,440
Speaker 3: If you go back a couple of years ago, a

80
00:04:07,480 --> 00:04:10,040
Speaker 3: few years ago, one ten year treasury years were where

81
00:04:10,040 --> 00:04:13,240
Speaker 3: they were one percent, you know, everybody has to wonder

82
00:04:13,280 --> 00:04:15,280
Speaker 3: why didn't you take more advantage of that, why didn't

83
00:04:15,280 --> 00:04:19,080
Speaker 3: you do it? Mortgage borrowers did, But that's hindsight, and

84
00:04:19,880 --> 00:04:22,719
Speaker 3: from here, I think the key is making sure that

85
00:04:23,160 --> 00:04:25,360
Speaker 3: efforts are made to bring the deficit down or probably

86
00:04:25,400 --> 00:04:27,880
Speaker 3: be seven to eight percent next year, but bring it down.

87
00:04:28,320 --> 00:04:30,760
Speaker 3: I think the deficit is almost like a very high

88
00:04:30,800 --> 00:04:33,800
Speaker 3: pe multiple on a stock, and the only way to

89
00:04:33,880 --> 00:04:37,120
Speaker 3: keep markets calm about that is deliver growth. So that's

90
00:04:37,160 --> 00:04:39,599
Speaker 3: why I think delivering growth and that three percent on

91
00:04:39,680 --> 00:04:41,599
Speaker 3: real GDP growth is also an important part of that

92
00:04:41,640 --> 00:04:42,599
Speaker 3: three point strategy.

93
00:04:42,720 --> 00:04:45,000
Speaker 5: That three point strategy though, and you said that the

94
00:04:45,040 --> 00:04:46,480
Speaker 5: one thing you don't think he's going to be able

95
00:04:46,520 --> 00:04:48,960
Speaker 5: to accomplish is cutting the deficit by three percent, but

96
00:04:49,000 --> 00:04:51,919
Speaker 5: he says by twenty three percent. Yeah, by twenty twenty eight. Though,

97
00:04:52,240 --> 00:04:54,120
Speaker 5: if you were to get a deficit reduction by two

98
00:04:54,160 --> 00:04:56,239
Speaker 5: to three percent, how long do you think it would take.

99
00:04:57,040 --> 00:04:58,480
Speaker 3: To get the deficit all the way down to three

100
00:04:58,520 --> 00:05:02,719
Speaker 3: percent under the entitlements we have. It's very unlikely. Lot's ever,

101
00:05:03,320 --> 00:05:07,000
Speaker 3: it's unlikely in my view if it's achieved over a

102
00:05:07,040 --> 00:05:10,799
Speaker 3: handful of years or within the next four years. DeBie,

103
00:05:10,839 --> 00:05:13,279
Speaker 3: Weston and Hamilton will go down in history has great

104
00:05:13,320 --> 00:05:14,120
Speaker 3: Secretary Jursdays.

105
00:05:14,160 --> 00:05:17,280
Speaker 2: Administrations running seven percent deficits at a time when unemployment's

106
00:05:17,279 --> 00:05:20,400
Speaker 2: close to four and GDP is really robust. The idea

107
00:05:20,440 --> 00:05:22,160
Speaker 2: that we can get down to three anytime soon? Is

108
00:05:22,160 --> 00:05:22,599
Speaker 2: it worthy?

109
00:05:22,640 --> 00:05:22,760
Speaker 1: Go?

110
00:05:23,400 --> 00:05:24,040
Speaker 2: Is it achievable?

111
00:05:24,120 --> 00:05:26,000
Speaker 1: Yeah? Well, this is the reason why people are skeptical

112
00:05:26,040 --> 00:05:28,240
Speaker 1: of it. Whether someone can actually try to achieve it

113
00:05:28,279 --> 00:05:31,159
Speaker 1: is also another question. What is your most contrarian call

114
00:05:31,360 --> 00:05:33,440
Speaker 1: going into next year given that a lot of the

115
00:05:33,600 --> 00:05:36,400
Speaker 1: goals to reduce the deficit and also to keep growth

116
00:05:36,440 --> 00:05:38,160
Speaker 1: of three percent seem unattainable.

117
00:05:38,839 --> 00:05:41,720
Speaker 3: Yeah, being contrarian or even being skeptical has not been

118
00:05:41,839 --> 00:05:44,680
Speaker 3: very useful the past few years. So what I look

119
00:05:44,760 --> 00:05:49,359
Speaker 3: for are we're are good fundamentals still at a price

120
00:05:49,400 --> 00:05:52,719
Speaker 3: that I won't bicker with, and I would say for

121
00:05:52,760 --> 00:05:56,000
Speaker 3: the coming year that that's still financials. I wouldn't bicker

122
00:05:56,080 --> 00:06:00,560
Speaker 3: with those valuations quickly for big banks. Healthcare as an

123
00:06:00,560 --> 00:06:02,640
Speaker 3: area that I think has still been overlooked for a

124
00:06:02,680 --> 00:06:05,440
Speaker 3: long time because it's so much excitement and technology and digital,

125
00:06:05,680 --> 00:06:09,360
Speaker 3: but very good earnings growth there, great long term prospects

126
00:06:09,800 --> 00:06:14,000
Speaker 3: in tangible assets, innovation, very on demanding valuation. So healthcare,

127
00:06:14,080 --> 00:06:17,760
Speaker 3: financials and capital goods companies. That's what I like. So

128
00:06:17,800 --> 00:06:20,520
Speaker 3: one of the things is that more oil perhaps lower

129
00:06:20,520 --> 00:06:23,720
Speaker 3: oil prices, but it's good for everything combustion, whether it's

130
00:06:23,760 --> 00:06:28,440
Speaker 3: oil services, refiners, but also diesel engines, natural gas turbines

131
00:06:28,440 --> 00:06:30,000
Speaker 3: and jet engines, things like that.

132
00:06:30,080 --> 00:06:32,839
Speaker 1: Healthcare stocks have actually been down since the election because

133
00:06:32,839 --> 00:06:35,040
Speaker 1: of some of the picks and some of the questions

134
00:06:35,080 --> 00:06:38,080
Speaker 1: around how these departments are going to be overhauled. Do

135
00:06:38,120 --> 00:06:39,760
Speaker 1: you lean into that at all or do you basically

136
00:06:39,800 --> 00:06:40,920
Speaker 1: see it as an opportunity.

137
00:06:41,160 --> 00:06:43,240
Speaker 3: We see it as an opportunity. I mean, the healthcare

138
00:06:43,279 --> 00:06:47,240
Speaker 3: sector has generated really good earnings growth through bigger challenges

139
00:06:47,279 --> 00:06:51,080
Speaker 3: than this, including already the negotiated drug prices.

140
00:06:51,120 --> 00:06:51,960
Speaker 5: Now we know that with.

141
00:06:51,960 --> 00:06:54,840
Speaker 3: A Republican sweep they'll probably make some changes to some

142
00:06:54,880 --> 00:06:58,280
Speaker 3: of these policies. But healthcare spending is going up and

143
00:06:58,320 --> 00:07:01,359
Speaker 3: the innovation that we see at most medicine makers and

144
00:07:01,400 --> 00:07:04,360
Speaker 3: even medical device makers, we're encouraged with that, and the

145
00:07:04,440 --> 00:07:05,640
Speaker 3: valuations are undermanding.

146
00:07:05,680 --> 00:07:07,120
Speaker 2: Hey David, it's good to see you and see you

147
00:07:07,120 --> 00:07:17,160
Speaker 2: in person as well. Thank you. Defin Bianco there of DWS,

148
00:07:20,120 --> 00:07:23,160
Speaker 2: Adrian Ye of Barclay's writing this gamp is our top

149
00:07:23,280 --> 00:07:26,160
Speaker 2: retail idea for a cyclical recovery into twenty twenty five

150
00:07:26,400 --> 00:07:30,000
Speaker 2: as it shifts from solidifying operations to growth mode. Adrian

151
00:07:30,080 --> 00:07:32,360
Speaker 2: joins us now for more. Welcome to the program. Let's

152
00:07:32,360 --> 00:07:34,440
Speaker 2: start with GAB. Can you tell us what you think

153
00:07:34,480 --> 00:07:36,760
Speaker 2: they're getting right at the moment what's leading to this

154
00:07:36,800 --> 00:07:37,600
Speaker 2: big share game.

155
00:07:38,960 --> 00:07:43,160
Speaker 4: So what they're getting right is the value equation for

156
00:07:43,280 --> 00:07:45,720
Speaker 4: the consumer. So if you look at the retailers that

157
00:07:45,760 --> 00:07:48,360
Speaker 4: are sort of winning in this environment, it's those who

158
00:07:48,360 --> 00:07:52,320
Speaker 4: are like Walmart, TJX, the off pricers told me in

159
00:07:52,320 --> 00:07:55,440
Speaker 4: this particular case, and they truly are kind of giving

160
00:07:55,480 --> 00:07:59,200
Speaker 4: back real value to the consumer. With regard to the

161
00:07:59,280 --> 00:08:03,640
Speaker 4: Gap brand. Within the Gap organization, they're also finally starting

162
00:08:03,680 --> 00:08:07,080
Speaker 4: to hit their stride on connecting with the consumer. So

163
00:08:07,440 --> 00:08:10,400
Speaker 4: it's been at least a couple of decades probably. You know,

164
00:08:10,480 --> 00:08:12,600
Speaker 4: last time that we saw them do positive comps at

165
00:08:12,640 --> 00:08:15,600
Speaker 4: the Gap brand was twenty eleven and twelve when it

166
00:08:15,640 --> 00:08:18,200
Speaker 4: was kind of a skinny leg craze. And I think

167
00:08:18,280 --> 00:08:21,520
Speaker 4: part of it is that really focused on the fundamentals.

168
00:08:21,560 --> 00:08:25,280
Speaker 4: They've got the sub they've solidified their store based the

169
00:08:25,360 --> 00:08:29,600
Speaker 4: cost basis, and we also for lack of you know,

170
00:08:30,000 --> 00:08:32,600
Speaker 4: other things. They also have a silhouette shift that is

171
00:08:32,720 --> 00:08:34,800
Speaker 4: a debt and base one and it's in their favor.

172
00:08:35,960 --> 00:08:38,720
Speaker 1: So you talk about creating value, and I think about

173
00:08:38,800 --> 00:08:42,120
Speaker 1: the sort of pairing that idea the lowest prices with

174
00:08:42,320 --> 00:08:46,760
Speaker 1: style and getting influencers to get wide legged genes that

175
00:08:46,960 --> 00:08:49,800
Speaker 1: look like they are in vogue and get them out

176
00:08:49,840 --> 00:08:54,160
Speaker 1: to the masses. What does value mean? Who isn't creating value?

177
00:08:55,280 --> 00:08:58,640
Speaker 4: Yeah, that's a great question. And we like to separate

178
00:08:59,040 --> 00:09:03,720
Speaker 4: value versus cheap. So value is price paid for quality receives.

179
00:09:04,040 --> 00:09:05,760
Speaker 4: So when you go to an off pricer or even

180
00:09:05,880 --> 00:09:07,920
Speaker 4: if you go to Old Navy, you know, you think

181
00:09:07,960 --> 00:09:11,160
Speaker 4: that you're getting, you know, you're paying something, and you

182
00:09:11,160 --> 00:09:13,920
Speaker 4: don't mind paying fifty dollars for something that you think

183
00:09:14,000 --> 00:09:16,560
Speaker 4: is probably worth more than that seventy five or one

184
00:09:16,600 --> 00:09:19,200
Speaker 4: hundred dollars even in off price. But what you do

185
00:09:19,320 --> 00:09:22,760
Speaker 4: care about is paying, you know, cheap prices for something

186
00:09:22,800 --> 00:09:25,000
Speaker 4: that you think is worth exactly.

187
00:09:24,600 --> 00:09:25,480
Speaker 1: That or less.

188
00:09:25,880 --> 00:09:29,120
Speaker 4: Right, And that's the huge differentiator here in this especially

189
00:09:29,120 --> 00:09:33,199
Speaker 4: in this environment where CPI inflation across all these different

190
00:09:33,200 --> 00:09:36,400
Speaker 4: products is eating away at that wallet. The consumers really

191
00:09:36,480 --> 00:09:39,120
Speaker 4: looking for somebody who's going to provide them the ability

192
00:09:39,160 --> 00:09:40,920
Speaker 4: to stretch their dollar and stretch.

193
00:09:40,640 --> 00:09:43,000
Speaker 1: Their wallet, Adrian, something that we woke up to this

194
00:09:43,080 --> 00:09:46,160
Speaker 1: morning with suddenly in renewed focus on shipping costs and

195
00:09:46,200 --> 00:09:47,800
Speaker 1: how that can come back to bite and for an

196
00:09:47,840 --> 00:09:52,160
Speaker 1: e commerce type of organization, which a lot of these

197
00:09:53,040 --> 00:09:58,880
Speaker 1: retailers seem to be coming. How important is minimizing shipping costs?

198
00:09:58,880 --> 00:10:01,600
Speaker 1: How much is that becoming an increasing drag on some

199
00:10:01,640 --> 00:10:02,760
Speaker 1: of the companies you cover.

200
00:10:04,080 --> 00:10:07,480
Speaker 4: So the e commerce piece of it exactly that last

201
00:10:07,520 --> 00:10:10,280
Speaker 4: mile delivery what you're talking about, we should think about

202
00:10:10,320 --> 00:10:15,280
Speaker 4: those like wages, they just perpetually go up. Remember the

203
00:10:16,000 --> 00:10:17,880
Speaker 4: essence of kind of that shipping is going to be

204
00:10:17,920 --> 00:10:20,640
Speaker 4: an employee base where their wages are going up, whether

205
00:10:20,679 --> 00:10:24,080
Speaker 4: it's ups or FedEx, et cetera, any of these delivery companies.

206
00:10:24,280 --> 00:10:26,160
Speaker 4: So you can kind of think about that as a

207
00:10:26,200 --> 00:10:30,480
Speaker 4: permanent inflator. And the way to combat that, frankly, because

208
00:10:30,520 --> 00:10:33,720
Speaker 4: it's very much a variable expense is to get ever

209
00:10:33,840 --> 00:10:37,160
Speaker 4: smarter and ever better about your inventory management, trying to

210
00:10:37,160 --> 00:10:39,720
Speaker 4: buy and see what demand is and sell at full price.

211
00:10:39,920 --> 00:10:41,840
Speaker 4: So it's a really really tough you know, you know,

212
00:10:41,880 --> 00:10:45,080
Speaker 4: equation there, But just as on their store side, the

213
00:10:45,120 --> 00:10:48,960
Speaker 4: store payroll will permanently go up. It's just about operating

214
00:10:49,160 --> 00:10:52,679
Speaker 4: your entire omni channel business much more efficiently.

215
00:10:52,960 --> 00:10:54,719
Speaker 2: Drian just wanted to finish on this. I know it's

216
00:10:54,720 --> 00:10:56,559
Speaker 2: not a company under your converage, so I won't name

217
00:10:56,640 --> 00:10:58,600
Speaker 2: it by name. We'll just talk about the story in

218
00:10:58,640 --> 00:11:02,320
Speaker 2: general terms. There's a company this morning where a single

219
00:11:02,360 --> 00:11:06,840
Speaker 2: employee was responsible for small package delivery expense accounting intentionally

220
00:11:06,880 --> 00:11:10,720
Speaker 2: made these massive, erroneous entries to hide about one hundred

221
00:11:10,720 --> 00:11:14,400
Speaker 2: and fifty million dollars worth of expenses. How unusual is

222
00:11:14,440 --> 00:11:16,640
Speaker 2: it for something like that to happen in a company

223
00:11:16,720 --> 00:11:16,920
Speaker 2: like this?

224
00:11:18,280 --> 00:11:23,040
Speaker 4: It is, you know, it's a breakdown of the disciplines.

225
00:11:23,440 --> 00:11:27,400
Speaker 4: It is pretty unusual, frankly typically. I mean, let's put

226
00:11:27,400 --> 00:11:30,200
Speaker 4: it into perspective that one hundred and fifty million is

227
00:11:30,240 --> 00:11:32,760
Speaker 4: on about four point three billion dollars worth of total

228
00:11:32,760 --> 00:11:36,400
Speaker 4: delivery expenses. So it's a number, it's a real number

229
00:11:36,440 --> 00:11:39,120
Speaker 4: since twenty twenty one, but it's about three percent of

230
00:11:39,160 --> 00:11:41,840
Speaker 4: their delivery expenses. Not a great look for you know,

231
00:11:41,920 --> 00:11:45,640
Speaker 4: said company. But what I will say that there's a

232
00:11:45,720 --> 00:11:47,600
Speaker 4: lot that goes on. You know, I've been in the

233
00:11:47,600 --> 00:11:50,840
Speaker 4: retail industry that P and L has thousands of lines

234
00:11:50,880 --> 00:11:53,760
Speaker 4: in it and thousands of employees that you have to

235
00:11:53,880 --> 00:11:57,240
Speaker 4: assume are doing the right thing. And I think that

236
00:11:57,400 --> 00:11:59,680
Speaker 4: there is a there was a breakdown in this particular

237
00:11:59,679 --> 00:12:02,640
Speaker 4: instant of the oversight in that department, for sure.

238
00:12:02,960 --> 00:12:05,200
Speaker 2: Dan, appreciate your views on that story as well. Thanks

239
00:12:05,240 --> 00:12:18,400
Speaker 2: for being with us. Drin Gident Fankles No, John will No,

240
00:12:18,480 --> 00:12:19,200
Speaker 2: it's good to see you.

241
00:12:19,200 --> 00:12:19,719
Speaker 6: Good to see you.

242
00:12:19,800 --> 00:12:21,560
Speaker 2: Do you think that's the scenario we will be facing

243
00:12:21,720 --> 00:12:22,440
Speaker 2: in twenty five?

244
00:12:22,679 --> 00:12:25,640
Speaker 6: I think so. I think so. I think there's you know,

245
00:12:25,679 --> 00:12:29,679
Speaker 6: some euphoria obviously, Uh, we got the red wave. Everyone's

246
00:12:29,720 --> 00:12:33,199
Speaker 6: looking to the to the pro uh positive parts of

247
00:12:33,559 --> 00:12:36,600
Speaker 6: the policy. But we're going to get into a situation where,

248
00:12:36,679 --> 00:12:40,280
Speaker 6: like I said, you know, the FED is easing into strength. Uh,

249
00:12:40,360 --> 00:12:43,719
Speaker 6: you know, you have these fiscal issues, uh, tariffs, I

250
00:12:43,760 --> 00:12:46,120
Speaker 6: think will be a big risk event. So I think

251
00:12:46,120 --> 00:12:48,680
Speaker 6: those concerns come up in the first half of next year.

252
00:12:48,800 --> 00:12:50,880
Speaker 2: So what are you advocating full into next year?

253
00:12:51,080 --> 00:12:53,440
Speaker 6: Yeah, so I think I would probably take some risk

254
00:12:53,520 --> 00:12:57,080
Speaker 6: off the table coming into next year. I also think

255
00:12:57,080 --> 00:13:00,439
Speaker 6: the dollar will continue to grind higher. I think that

256
00:13:00,520 --> 00:13:02,719
Speaker 6: it's sort of the the US will continue to be

257
00:13:02,840 --> 00:13:07,120
Speaker 6: the cleanest dirty shirt, and I think we'll have probably

258
00:13:07,200 --> 00:13:10,920
Speaker 6: lower global growth if we do get that tariff policy implemented.

259
00:13:11,400 --> 00:13:13,880
Speaker 1: This might be a dumb question, what is risk? What

260
00:13:14,000 --> 00:13:16,280
Speaker 1: counts is that because some people are talking about risk

261
00:13:16,720 --> 00:13:19,400
Speaker 1: in stocks, other people are saying risk is in duration

262
00:13:19,679 --> 00:13:22,520
Speaker 1: and the chance that maybe there isn't necessarily any kind

263
00:13:22,520 --> 00:13:24,520
Speaker 1: of controlling force and the deficit, and that you do

264
00:13:24,640 --> 00:13:27,800
Speaker 1: end up, like Francis Donald said, with even rate hikes

265
00:13:27,840 --> 00:13:28,880
Speaker 1: by the end of next year.

266
00:13:29,200 --> 00:13:31,480
Speaker 6: Yeah, so I think the biggest risk is in the

267
00:13:31,520 --> 00:13:36,120
Speaker 6: long end of the curve. I think duration is you know,

268
00:13:36,240 --> 00:13:38,520
Speaker 6: that's what you want to focus on taking off. I

269
00:13:38,520 --> 00:13:42,240
Speaker 6: think equities, you know, they had a big rally right now.

270
00:13:42,280 --> 00:13:44,480
Speaker 6: Like I mentioned before, it's it's sort of what's not

271
00:13:44,640 --> 00:13:48,000
Speaker 6: to like? But you know, when we get into next year,

272
00:13:48,040 --> 00:13:51,040
Speaker 6: it's going to say, what is there too like? Because

273
00:13:51,040 --> 00:13:54,040
Speaker 6: you're going to have overvalued equities, You're going to have

274
00:13:54,120 --> 00:13:57,040
Speaker 6: this fiscal concern moving into next year, and then you're

275
00:13:57,080 --> 00:13:58,680
Speaker 6: going to have a FED that's going to be forced

276
00:13:58,720 --> 00:14:00,000
Speaker 6: to pause its policy.

277
00:14:00,320 --> 00:14:01,760
Speaker 1: So you're not buying the best in bump.

278
00:14:02,440 --> 00:14:04,880
Speaker 6: I'm not I'm not, you know, I think again, I

279
00:14:04,920 --> 00:14:07,280
Speaker 6: don't want to go against it In the short run.

280
00:14:07,320 --> 00:14:10,000
Speaker 6: I think you kind of ride the wave, maybe you

281
00:14:10,040 --> 00:14:12,880
Speaker 6: get a Santa Claus rally, But once we get a

282
00:14:12,880 --> 00:14:15,959
Speaker 6: little doser reality into twenty twenty five, I think that's

283
00:14:16,000 --> 00:14:17,680
Speaker 6: when you want to start to take some risk off.

284
00:14:17,760 --> 00:14:20,000
Speaker 5: You say tariffs are the biggest risk. Do you view

285
00:14:20,080 --> 00:14:22,320
Speaker 5: terrors so? Do you think this administration will view terras

286
00:14:22,320 --> 00:14:25,440
Speaker 5: as a negotiating tool to reset the playing field when

287
00:14:25,440 --> 00:14:27,240
Speaker 5: it comes to free trade or do you actually think

288
00:14:27,240 --> 00:14:29,720
Speaker 5: they're going to use them as pay force for their

289
00:14:29,760 --> 00:14:32,160
Speaker 5: tax cuts, which would then mean that the sequencing has

290
00:14:32,160 --> 00:14:33,040
Speaker 5: to be in parallel.

291
00:14:33,320 --> 00:14:35,600
Speaker 6: I think it's the latter. I think that, you know,

292
00:14:35,640 --> 00:14:40,200
Speaker 6: the administration perceives teriffs as a way to pay for

293
00:14:40,320 --> 00:14:42,840
Speaker 6: some of the tax cuts that are going to come through.

294
00:14:43,640 --> 00:14:46,040
Speaker 6: But I think what they forget is that, you know,

295
00:14:46,160 --> 00:14:48,000
Speaker 6: tariffs are going to go one way. It's either going

296
00:14:48,040 --> 00:14:51,040
Speaker 6: to impact the consumer, so companies will pass the cost on,

297
00:14:51,440 --> 00:14:55,440
Speaker 6: or it will put some pressure on corporate margins. So

298
00:14:55,560 --> 00:14:59,040
Speaker 6: I think that probably is a misguided sort of focused

299
00:14:59,360 --> 00:15:02,080
Speaker 6: But I do think their perception is that it'll pay

300
00:15:02,120 --> 00:15:03,360
Speaker 6: for some of the tax cuts.

301
00:15:03,440 --> 00:15:05,720
Speaker 5: So if you if this is your base case, what

302
00:15:05,760 --> 00:15:08,280
Speaker 5: does someone like Scott beston't at the Treasury mean for

303
00:15:08,440 --> 00:15:11,080
Speaker 5: that impulse that some other members of the administration might

304
00:15:11,120 --> 00:15:12,600
Speaker 5: have when it comes to terror. Yeah.

305
00:15:12,600 --> 00:15:14,880
Speaker 6: So, I think the initial reaction is that he's more

306
00:15:14,920 --> 00:15:18,920
Speaker 6: of a pragmatist. But we have to realize that Trump

307
00:15:18,960 --> 00:15:22,360
Speaker 6: won the popular vote. So I believe from his perspective,

308
00:15:22,200 --> 00:15:25,200
Speaker 6: he thinks he has a mandate and he, as he

309
00:15:25,240 --> 00:15:28,720
Speaker 6: said before, his favorite word is tariff. So I think,

310
00:15:29,120 --> 00:15:32,240
Speaker 6: you know, bessint, you know, his perspective is he would

311
00:15:32,280 --> 00:15:35,600
Speaker 6: like to ease things in. But I feel like Trump

312
00:15:35,640 --> 00:15:37,480
Speaker 6: is going to want to implement that policy at.

313
00:15:37,440 --> 00:15:38,960
Speaker 2: These towns a bigger problem for the rest of the

314
00:15:39,000 --> 00:15:40,760
Speaker 2: world than they on the United States.

315
00:15:41,480 --> 00:15:43,600
Speaker 6: I don't think so. I think it's a problem for

316
00:15:43,640 --> 00:15:47,200
Speaker 6: everyone because I think naturally you're going to get retaliatory

317
00:15:47,920 --> 00:15:52,440
Speaker 6: reaction from other countries. I think when we look at

318
00:15:52,600 --> 00:15:58,480
Speaker 6: the first administration, it actually the retaliatory tariffs actually impacted

319
00:15:59,040 --> 00:16:02,960
Speaker 6: the US export disproportionately to the importers.

320
00:16:03,120 --> 00:16:06,520
Speaker 2: These are some of the fombing producing states agricultural commodities.

321
00:16:06,520 --> 00:16:08,360
Speaker 2: They were the big focus. Then should we be focused

322
00:16:08,360 --> 00:16:09,080
Speaker 2: on anything else?

323
00:16:09,560 --> 00:16:12,720
Speaker 6: I think because tariffs are across the board, I think

324
00:16:12,800 --> 00:16:15,560
Speaker 6: everything should be a focus. I think it's going to be,

325
00:16:15,720 --> 00:16:18,880
Speaker 6: you know, a real different sort of scenario. We're at

326
00:16:18,880 --> 00:16:20,280
Speaker 6: a very different started.

327
00:16:20,120 --> 00:16:23,160
Speaker 2: Expecting those blanket tariffs that have impromised on a campaign trip.

328
00:16:23,200 --> 00:16:24,520
Speaker 2: Do you think they could become reality?

329
00:16:24,680 --> 00:16:28,120
Speaker 6: I think so. He promised it. He won the popular vote.

330
00:16:28,280 --> 00:16:30,480
Speaker 6: I believe you know, that's what he campaigned on. That's

331
00:16:30,520 --> 00:16:32,600
Speaker 6: what what kind of drove him into the White House,

332
00:16:32,840 --> 00:16:35,040
Speaker 6: and I think he's going to continue to focus on

333
00:16:35,080 --> 00:16:35,560
Speaker 6: that path.

334
00:16:35,720 --> 00:16:37,160
Speaker 1: So just to sort of put a bow on it

335
00:16:37,240 --> 00:16:39,400
Speaker 1: or underscore what you're saying, is that the dose of

336
00:16:39,440 --> 00:16:42,360
Speaker 1: reality that you think will really curtail what could be

337
00:16:42,360 --> 00:16:44,080
Speaker 1: a Santa Claus rally in this melt up?

338
00:16:44,400 --> 00:16:47,160
Speaker 6: I think so. I think you know, markets are sort

339
00:16:47,200 --> 00:16:50,280
Speaker 6: of waiting for the clarity on that. I would augment that.

340
00:16:50,400 --> 00:16:55,600
Speaker 6: Obviously with just the fiscal spending, we already have structural deficits.

341
00:16:55,880 --> 00:16:58,040
Speaker 6: So all of that combined, that's something the Fed's going

342
00:16:58,120 --> 00:16:59,960
Speaker 6: to have to focus on. And when they have to

343
00:17:00,080 --> 00:17:02,520
Speaker 6: pause for that reason, they could cause some risk off.

344
00:17:02,640 --> 00:17:05,080
Speaker 5: Who's the biggest loser in a trade war?

345
00:17:05,840 --> 00:17:09,600
Speaker 6: I think the biggest loser probably I would say China

346
00:17:10,040 --> 00:17:14,800
Speaker 6: initially because their economy is already pretty weak. You know,

347
00:17:14,880 --> 00:17:18,600
Speaker 6: they've you know, planned for it. I'm assuming, but you know,

348
00:17:18,640 --> 00:17:23,120
Speaker 6: they still are in a very vulnerable position. I would

349
00:17:23,160 --> 00:17:26,600
Speaker 6: say outside of that, I think Europe is very vulnerable

350
00:17:26,640 --> 00:17:27,080
Speaker 6: as well.

351
00:17:27,359 --> 00:17:30,000
Speaker 2: No, I appreciate your time. Thank you, sir. No dexon there,

352
00:17:30,040 --> 00:17:34,320
Speaker 2: stay Street. This is the Bloomberg Surveillants podcast, bringing you

353
00:17:34,560 --> 00:17:37,960
Speaker 2: the best in markets, economics, angiet politics. You can watch

354
00:17:37,960 --> 00:17:40,720
Speaker 2: the show live on Bloomberg TV weekday mornings from six

355
00:17:40,800 --> 00:17:44,359
Speaker 2: am to nine am Eastern. Subscribe to the podcast on Apple,

356
00:17:44,640 --> 00:17:47,480
Speaker 2: Spotify or anywhere else you listen, and as always on

357
00:17:47,480 --> 00:17:54,440
Speaker 2: the Bloomberg Terminal and the Bloomberg Business Am