WEBVTT - Most of Tesla's Value Lies in Its Expectations, Denning Says 0:00:00.080 --> 0:00:02.040 P and L is brought to you by proper Cloth, 0:00:02.120 --> 0:00:05.120 a leader in men's custom shirts, with proprietary smart sized 0:00:05.120 --> 0:00:08.720 technology and top rated customer service. Ordering a custom shirt 0:00:08.760 --> 0:00:11.680 has never been easier. Visit proper cloth dot com to 0:00:11.760 --> 0:00:19.960 order your first custom shirt today. Welcome to the Bloomberg 0:00:20.000 --> 0:00:22.599 P and L Podcast. I'm Pim Fox. Along with my 0:00:22.640 --> 0:00:25.759 co host Lisa Abramowitz. Each day we bring you the 0:00:25.800 --> 0:00:29.360 most important, noteworthy, and useful interviews for you and your money, 0:00:29.360 --> 0:00:31.680 whether you at the grocery store or the trading floor. 0:00:32.080 --> 0:00:35.479 Find the Bloomberg P and L Podcast on iTunes, SoundCloud 0:00:35.640 --> 0:00:45.600 and at Bloomberg dot com. Tesla reported earnings yesterday after 0:00:45.640 --> 0:00:48.879 the bell and what they delivered up was very pleasing 0:00:49.080 --> 0:00:52.480 to traders, at least initially in after hours, but they've 0:00:52.520 --> 0:00:55.400 kind of backed away from some of those bets now. 0:00:55.440 --> 0:00:56.960 I want to bring in somebody who knows much more 0:00:56.960 --> 0:00:58.640 about this than I do, Liam Denning. He is a 0:00:58.640 --> 0:01:01.480 Bloomberg gad Fly columnist, and you wrote a column that 0:01:01.560 --> 0:01:06.440 highlighted one number in particular, nine hundred and seventy million dollars. 0:01:06.440 --> 0:01:09.240 That's the amount of cash the Tesla burned through in 0:01:09.240 --> 0:01:12.600 the last three months of two thousand sixteen. So what 0:01:12.680 --> 0:01:14.760 was your biggest takeware? Was this your biggest takeaway from 0:01:15.080 --> 0:01:17.600 from the Tesla earnings? I mean, yeah, that's really the 0:01:17.600 --> 0:01:20.840 only number that that counts with Tesla any any time. 0:01:20.880 --> 0:01:25.160 I mean the earnings themselves. They were distorted this quarter 0:01:25.240 --> 0:01:28.880 by the acquisition of Solar City UM. And in any case, 0:01:29.000 --> 0:01:33.800 whether Tesla beats earnings MSS earnings, there is zero correlation 0:01:33.959 --> 0:01:36.640 between that and what happens to the stock price the 0:01:36.680 --> 0:01:39.000 next day. I've gone back and checked it. There's none. 0:01:39.319 --> 0:01:45.520 Why because the key issue here is UM is Tesla's 0:01:45.560 --> 0:01:49.840 cash flow and its ability to realize this ever expanding 0:01:49.920 --> 0:01:53.360 vision that Elon Musk lays out. If you look at 0:01:53.360 --> 0:01:57.040 any valuation model for Tesla, most of the value resides 0:01:57.160 --> 0:01:59.640 in what people expect it to be doing. You know, 0:01:59.720 --> 0:02:01.840 five of our ten years from now, you know, whether 0:02:01.880 --> 0:02:08.520 it's producing millions of vehicles or you know, installing solar 0:02:08.600 --> 0:02:13.880 roofs or building its fifth giga factory. The the constant 0:02:13.919 --> 0:02:20.079 need for cash necessitates a strong message of growth and transformation. 0:02:20.120 --> 0:02:21.960 And that's kind of what I meant when I said, 0:02:22.480 --> 0:02:26.240 you know, investors take Elon Musk seriously. They don't take 0:02:26.320 --> 0:02:30.080 him literally, that's a good that's a good distinction to make. Liam. 0:02:30.440 --> 0:02:33.280 I was looking at the f A page because I 0:02:33.320 --> 0:02:37.440 love it of Tesla, and I note the free cash 0:02:37.480 --> 0:02:40.600 flow has a wonderful minus sign next to it. As 0:02:40.639 --> 0:02:42.840 you just mentioned, at least for the year one point 0:02:42.880 --> 0:02:48.120 four billion. As a matter of fact, how much is 0:02:48.120 --> 0:02:52.639 there any estimate how much they're going to need? Um? Well, 0:02:52.720 --> 0:02:55.880 it's you know, it's looking like they're gonna need a 0:02:55.919 --> 0:02:57.920 lot well not a lot of god, but I mean 0:02:58.200 --> 0:03:01.400 are we talking? I mean because obviously you know, Well, 0:03:01.400 --> 0:03:03.840 the reason that the reason it's interesting also is because 0:03:03.880 --> 0:03:08.600 Elon Musk of course owns what about of the company, 0:03:09.120 --> 0:03:12.760 So what is what is the most what he wants 0:03:12.840 --> 0:03:15.200 is probably most likely to happen. Well, the way to 0:03:15.200 --> 0:03:19.880 think about it is this, so, um, you know, revenue 0:03:20.000 --> 0:03:22.440 cash flow, Yeah, but cash flow from operations in the 0:03:22.520 --> 0:03:26.680 last quarter was about minus you know, four hundred someone 0:03:26.680 --> 0:03:30.400 between four hundred and five hundred million UM. Their guidance 0:03:30.600 --> 0:03:33.320 for CAPEX just for the first half of this year 0:03:33.440 --> 0:03:36.280 is somewhere between two and two and a half billion, 0:03:36.800 --> 0:03:40.720 So that means net net they're probably going to burn 0:03:40.920 --> 0:03:44.240 through I would say somewhere between two and a half 0:03:44.280 --> 0:03:46.520 and three and a half billion in the first half 0:03:46.560 --> 0:03:49.000 of the year. And that kind of makes sense because 0:03:49.080 --> 0:03:52.240 they're about to launch the Model three, which is there 0:03:53.040 --> 0:03:56.040 they're kind of mass market ev that's where they try 0:03:56.040 --> 0:03:59.480 and get from producing you know, eight thousand cars a 0:03:59.560 --> 0:04:02.080 year up to more like five or six thousand. Well, 0:04:02.120 --> 0:04:04.320 let me just offer this note. This comes from our 0:04:04.360 --> 0:04:06.960 colleague Corey Johnson, who you know, coming up on a 0:04:07.040 --> 0:04:10.960 Bloomberg Markets PM, he said. A year ago. Chief executive 0:04:10.960 --> 0:04:15.040 Elon Musk stated on their Q four earnings call that 0:04:15.160 --> 0:04:17.880 quotes something I'm personally quite excited about is that we 0:04:17.960 --> 0:04:22.000 expect to be positive cash flows starting next month and 0:04:22.040 --> 0:04:27.159 then continuing into Q two and beyond. Well, analysts don't agree. 0:04:27.200 --> 0:04:30.200 I'm looking at the expectation for fiscal year two thousand, 0:04:30.240 --> 0:04:34.280 seventeen h that was a year ago, all right, Well, 0:04:34.320 --> 0:04:38.160 that didn't didn't come looking at a sort of an 0:04:38.160 --> 0:04:42.080 expectation among analysts of negative basically a hundred and seventy 0:04:42.080 --> 0:04:44.719 billion dollars, right, Um, But I would go back to 0:04:44.800 --> 0:04:47.480 the original message, which is that none of it matters, 0:04:47.560 --> 0:04:50.320 which is right, you know, he can say whatever. He 0:04:50.440 --> 0:04:53.600 was missed. Sales forecast its original sales guidance for the 0:04:53.680 --> 0:04:58.039 last three years running, and it's got a market cap 0:04:58.080 --> 0:05:01.479 which is almost the same as as awards. That will 0:05:01.520 --> 0:05:05.000 give them the wherewithal to go out and sell more equity, 0:05:05.120 --> 0:05:08.000 to raise more money. And as long as they keep 0:05:09.040 --> 0:05:13.320 pushing out a message of growth and transformation, and as 0:05:13.360 --> 0:05:16.560 long as enough investors believe in it, then they can 0:05:16.640 --> 0:05:19.720 keep raising money to keep pushing towards it. Okay, So 0:05:19.760 --> 0:05:24.080 what could happen to disrupt this virtuous chain of events? Okay, 0:05:24.200 --> 0:05:27.680 so it's hard to say specifically, but I think what 0:05:27.760 --> 0:05:33.080 would have to happen is some sort of real disruption 0:05:33.360 --> 0:05:36.640 to something like the Model three. Now it's looking like 0:05:37.440 --> 0:05:41.680 the guidance for the Model three's production, I mean that 0:05:41.720 --> 0:05:43.840 looks pretty shaky to me. The numbers that they were 0:05:43.880 --> 0:05:47.719 putting out last night. We haven't even seen a fully 0:05:47.800 --> 0:05:51.000 functioning pre production model yet. Doesn't look like we're gonna 0:05:51.040 --> 0:05:54.640 see one before production is supposed to start in July. 0:05:54.880 --> 0:05:57.320 So if some if there was some real setback to that, 0:05:57.800 --> 0:06:00.280 then I think that might shake people's confidence. I think 0:06:00.320 --> 0:06:02.919 the other thing is as time rolls on, we're seeing 0:06:02.960 --> 0:06:09.120 more competitors like GM for BMW launched their own electric vehicles. 0:06:09.160 --> 0:06:12.039 I mean, GM has pretty much beaten Tesla to the 0:06:12.080 --> 0:06:14.560 punch with the Bolt, which is going to be the 0:06:14.560 --> 0:06:18.400 main competitor to the Model three. And I think over time, 0:06:18.440 --> 0:06:21.560 although right now Tesla is seen as the force for 0:06:21.720 --> 0:06:24.360 change in the auto's market, at some point there is 0:06:24.400 --> 0:06:26.839 going to be the reality of having lots of other 0:06:26.839 --> 0:06:29.960 competitors who are also able to offset their risk with 0:06:30.040 --> 0:06:33.719 other cars producing their own electric vehicles. Thank you very much, 0:06:33.800 --> 0:06:37.640 Liam Denning, Bloomberg Gadfly columns. Shares of Tesla data about 0:06:37.680 --> 0:06:51.280 five and a half percent. I want to turn to 0:06:51.360 --> 0:06:55.480 Krishna Mamani, chief investment officer at Oppenheimer Funds UH, to 0:06:55.520 --> 0:06:57.359 talk a little bit about what are you seeing in 0:06:57.360 --> 0:07:00.320 the bar market specifically. I want to start Krishna with 0:07:00.400 --> 0:07:03.760 comments that we heard today from US Treasury Secretary Steve 0:07:03.839 --> 0:07:09.800 Minution basically expressing great interest frankly and issuing longer dated 0:07:09.920 --> 0:07:12.680 US treasuries. This would be the fifty year or possibly 0:07:12.680 --> 0:07:16.760 even a hundred year UH treasuries. What's what's your feeling 0:07:16.800 --> 0:07:19.520 on this? Do you think this is realistic? I think 0:07:19.640 --> 0:07:23.720 from a demand perspective, so in any policy change, you 0:07:23.760 --> 0:07:25.840 have to kind of focus on whether there will be 0:07:25.880 --> 0:07:28.240 some buyer for the security. But you're a buyer, right, 0:07:28.440 --> 0:07:30.840 I'm a buyer, and I think there are lots of 0:07:30.840 --> 0:07:35.080 people who are buyers of really long bonds special fuer quality. 0:07:35.240 --> 0:07:39.080 So you would buy a fifty year US treasure absolutely, 0:07:39.080 --> 0:07:42.240 because if you if you have really long term liabilities 0:07:42.440 --> 0:07:46.000 that you're looking to extinguish and extinguished with really high 0:07:46.040 --> 0:07:49.840 quality assets, there really isn't a better instrument available. So 0:07:49.960 --> 0:07:53.000 do you have a sense of what premium you would 0:07:53.040 --> 0:07:56.640 need for a fifty year treasury over a thirty year 0:07:56.640 --> 0:07:58.600 treasury or a ten year treasury in order to make 0:07:58.600 --> 0:08:01.880 it worthwhile? So I guess would be that that premium 0:08:02.040 --> 0:08:06.400 is probably smaller than most of us anticipate. And the 0:08:06.440 --> 0:08:11.720 reason for that is because the the convexity characteristics which 0:08:11.800 --> 0:08:16.240 is a technical term to say the the the price 0:08:16.280 --> 0:08:21.240 appreciation and appreciation qualities of really long bonds is very 0:08:21.320 --> 0:08:26.200 good and from a from a liability extinguishment standpoint, the 0:08:26.240 --> 0:08:29.480 demand is quite solid. So I think that premium would 0:08:29.520 --> 0:08:32.880 be much less than what we think uh it would be, 0:08:32.960 --> 0:08:35.920 and much less than what the differences between ten years 0:08:35.920 --> 0:08:38.400 and thirty years today. As much as I would like 0:08:38.520 --> 0:08:41.040 to say that I'm going to be around in fifty years, 0:08:41.080 --> 0:08:42.960 I got to say that there are chances that I 0:08:43.080 --> 0:08:46.480 might not. So why would you buy something that is 0:08:46.520 --> 0:08:54.240 going to be subject to the vagaries of inflation, global instability? Uh, 0:08:54.440 --> 0:08:57.000 in order to satisfy a current And I don't mean 0:08:57.040 --> 0:09:00.120 you personally, but I mean to satisfy a current and 0:09:00.480 --> 0:09:03.760 hole in the portfolio because number one, you can't think 0:09:03.760 --> 0:09:06.760 of anything better to buy. Second, you need to keep 0:09:06.760 --> 0:09:08.959 your job, and no one's gonna fire you for buying 0:09:09.040 --> 0:09:12.040 us treasuries. You're gonna say, here, I bought them. It 0:09:12.120 --> 0:09:15.160 matches our liability. But you know, I'm not gonna be 0:09:15.240 --> 0:09:18.680 around when this thing blows up. So that's that's funny 0:09:18.720 --> 0:09:21.680 that you say that. But you you you have to recognize, 0:09:22.040 --> 0:09:24.880 uh that while you and I may not be around 0:09:24.920 --> 0:09:28.320 in fifty years, there are pension plans. No, no, no, 0:09:28.400 --> 0:09:30.640 I got I. I understand all that. But I mean, 0:09:30.679 --> 0:09:32.320 if you're to tell me that you were to buy 0:09:32.360 --> 0:09:34.960 a thirty year let's say it's thirty years right now 0:09:35.600 --> 0:09:37.920 at three percent, you mean to tell me that in 0:09:38.120 --> 0:09:40.800 thirty years you're not going to take a hit in 0:09:40.960 --> 0:09:44.199 terms of what it is. Maybe your new customer base 0:09:44.400 --> 0:09:46.520 wants in terms of a return, because if you're an 0:09:46.520 --> 0:09:52.679 insurance company, you're matching future liabilities future new customers. Sure, so, 0:09:52.760 --> 0:09:56.040 but I today I have some liabilities that I need 0:09:56.120 --> 0:10:00.880 to fund and demonstrate to the accountants that my liability 0:10:01.040 --> 0:10:05.920 is fully funded. So you're limited in what you can exactly. Okay, alright, Well, 0:10:06.080 --> 0:10:08.719 moving moving on to something else that Minution said. He 0:10:08.760 --> 0:10:11.080 said that he thinks it's completely feasible that the U 0:10:11.160 --> 0:10:13.960 S should see three percent or even higher growth. That's 0:10:14.040 --> 0:10:18.360 up from two rate or less. Frankly, now, first of all, 0:10:18.400 --> 0:10:20.240 do you agree with this assessment? And second of all, 0:10:20.280 --> 0:10:23.199 if this is true, what bond is going to get 0:10:23.240 --> 0:10:28.680 hit hardest? So I I think that's that's really more 0:10:28.720 --> 0:10:31.840 hope than reality in my view. Alright, And so you 0:10:31.920 --> 0:10:35.679 don't think that's true in the current environment, The likelihood 0:10:35.720 --> 0:10:39.600 that we get to higher than three percent growth rate 0:10:39.679 --> 0:10:42.800 anytime soon, I'm not holding my breath, you know. It's 0:10:42.840 --> 0:10:45.360 it's not it's not to say that it couldn't happen, 0:10:45.960 --> 0:10:49.120 but for it to happen, a whole lot of policy 0:10:49.120 --> 0:10:52.760 initiatives have to come into play. And policy initiatives like 0:10:53.080 --> 0:10:57.160 significantly higher level of fiscal deficit, which I don't think 0:10:57.200 --> 0:11:01.079 the Republican administration, at least the Republican Congress is really 0:11:01.160 --> 0:11:03.480 very much in the mood mood to do without that. 0:11:03.720 --> 0:11:06.040 The likelihood that we get three percent, in my mind, 0:11:06.120 --> 0:11:09.160 is virtually zero. And yet you do still think that 0:11:09.800 --> 0:11:12.800 benchmark borrowing costs in the US will rise enough to 0:11:12.880 --> 0:11:18.040 legitimize or justify uh favoring leverage loans or other floating 0:11:18.120 --> 0:11:22.240 rate debt correct well, so the floating rate debt market 0:11:22.400 --> 0:11:26.040 is really not just about your view on where rates 0:11:26.040 --> 0:11:29.400 are going. That certainly helps, but I think what you 0:11:29.480 --> 0:11:32.920 have to factor in is the fact that floating rate 0:11:33.080 --> 0:11:39.960 yields are comparable to high yield yields, and therefore the 0:11:39.960 --> 0:11:43.560 the end they are senior. So the downside in loans 0:11:43.760 --> 0:11:47.840 is significantly less than what it is in high yield bonds, 0:11:48.200 --> 0:11:51.800 and as a result, I think in the current market environment, 0:11:51.880 --> 0:11:54.400 loans is the best asset class in all of all 0:11:54.480 --> 0:11:58.400 of credit. Having said that, you know the interest rate 0:11:58.440 --> 0:12:01.360 component of loans is a side benefit rather than the 0:12:01.400 --> 0:12:05.280 primary driver of the value and loans, thank you very much, 0:12:05.400 --> 0:12:08.920 very interesting. Christian Memony is the chief investment officer at 0:12:08.960 --> 0:12:12.840 Oppenheimer funds uh. He is based here in New York 0:12:12.880 --> 0:12:15.400 and joining us in our eleven three OHD studios. Thank 0:12:15.440 --> 0:12:26.960 you very much for being here. P and L is 0:12:26.960 --> 0:12:29.199 brought to you by proper Cloth, the leader in men's 0:12:29.240 --> 0:12:32.720 custom shirts. At proper cloth dot com, ordering custom shirts 0:12:32.760 --> 0:12:35.760 has never been easier. Create your custom shirt size by 0:12:35.800 --> 0:12:39.520 answering ten easy questions, select from over five d fabrics 0:12:39.559 --> 0:12:42.760 to suit your personal taste. Shirts start from eighty five 0:12:42.760 --> 0:12:45.640 dollars and are delivered in just two weeks with proper 0:12:45.679 --> 0:12:49.720 Cloths perfect fit guarantee. Remakes are completely free and expert 0:12:49.760 --> 0:12:53.360 staff are standing by to help. For premium quality, perfect 0:12:53.400 --> 0:12:57.920 fitting shirts, visit proper cloth dot com Custom shirts made smarter. 0:13:06.559 --> 0:13:09.839 When you think of appliances, Lisa Bramwitz, do you think 0:13:10.200 --> 0:13:12.839 of J. C. Penny? Yes, I do you do? I 0:13:12.960 --> 0:13:16.079 do well. I'm glad you do because this was a 0:13:16.120 --> 0:13:19.800 category that they well, they exited at one point and 0:13:19.880 --> 0:13:23.400 now um they are back in the world of appliances, 0:13:23.400 --> 0:13:25.199 so you must have a very good memory. Here to 0:13:25.240 --> 0:13:28.880 tell us more. Craig Johnson, President Customer Growth Partners. They're 0:13:28.880 --> 0:13:31.960 based in New Canaan, Connecticut. Craig, always a pleasure. Thanks 0:13:31.960 --> 0:13:34.199 for coming into the studio, tell us about j C. 0:13:34.400 --> 0:13:38.040 Penny and whether there is any way they can offset 0:13:38.120 --> 0:13:43.000 that weak store traffic and also the negative soft apparel 0:13:43.040 --> 0:13:46.559 trends that a lot of retailers are facing. Well, him 0:13:46.559 --> 0:13:49.240 and Lisa, great to be with you all today. Um, yeah, 0:13:49.440 --> 0:13:52.240 j C. Penney has been doing a lot better under 0:13:52.280 --> 0:13:56.160 the still fairly new CEO, Robert Allison. Uh, he came 0:13:56.160 --> 0:13:58.960 out of out of home Depology, you might recall, and 0:13:59.120 --> 0:14:02.520 so he knows a lot about major appliances now. Um, 0:14:02.559 --> 0:14:05.880 they extualed the major pints is like thirty plus years ago, 0:14:06.080 --> 0:14:08.000 but they've always been in small pints is kitchen, the 0:14:08.080 --> 0:14:12.000 pints as and so forth. Um, and so they're looking 0:14:12.360 --> 0:14:14.480 that is one of the things they're looking at to 0:14:14.559 --> 0:14:16.800 increase the productivity of the store floor. The floor is 0:14:16.840 --> 0:14:20.680 still jc pnny stores are still way under productive where 0:14:20.680 --> 0:14:23.720 they used to be some years back. And they're working 0:14:23.760 --> 0:14:26.040 on the Internet. That helps. They're doing much better on 0:14:26.120 --> 0:14:28.160 that than they used to be. I used to do. 0:14:28.600 --> 0:14:30.720 And um, major plinants is is not gonna be a 0:14:30.720 --> 0:14:34.280 panacea because for major appliances, I would argue a little 0:14:34.280 --> 0:14:37.040 bit there at least it's not it's not top of 0:14:37.040 --> 0:14:40.920 mind for most customers. Most major plants sales are what 0:14:41.000 --> 0:14:43.480 are known as duress sales when the old unit conks out. 0:14:43.520 --> 0:14:45.480 When the old unit conks out, you're probably gonna go 0:14:45.960 --> 0:14:48.280 to Loads, which is number one in market share. Maybe 0:14:48.320 --> 0:14:51.240 Sears Home Depot or best Buy. J. J. Penney just 0:14:51.800 --> 0:14:55.600 doesn't pop up, then Greg just zooming out a little bit. 0:14:55.840 --> 0:14:58.760 This is peak earnings week for the retailers, and it 0:14:58.840 --> 0:15:01.640 comes at a time when a lot of people are 0:15:01.640 --> 0:15:06.200 writing off retailers as uh soon to be victims of 0:15:06.520 --> 0:15:11.000 the Amazon boom and the online move to shopping. And 0:15:11.080 --> 0:15:15.240 yet we're seeing Beats Coals this morning beat expectations. We 0:15:15.240 --> 0:15:18.880 saw Macy's beat expectations earlier this week. Does this point 0:15:19.000 --> 0:15:22.360 to signs of recovery in your opinion? Well, the fact 0:15:22.400 --> 0:15:28.640 that they beat pretty dour expectations doesn't always bode well. 0:15:28.680 --> 0:15:31.560 In other words, it's it's maybe a moral victory at 0:15:31.600 --> 0:15:35.520 most best to have only negative two point comps as 0:15:35.600 --> 0:15:39.520 calls we boarded they can get right right exactly. But 0:15:40.120 --> 0:15:44.640 I distinguished between the department store sector and the apparel sector, 0:15:45.240 --> 0:15:47.960 which have been the most troubled, and department stores are 0:15:48.000 --> 0:15:51.480 mostly apparel and accessory stores mostly for women that you 0:15:51.560 --> 0:15:53.680 will have a home section and so forth. But it's 0:15:53.720 --> 0:15:57.320 mostly apparel, and that whole sector is declining. It's so 0:15:57.400 --> 0:15:59.840 much slower share of market that used to be department 0:15:59.840 --> 0:16:03.240 sto as a generation ago. Um Uh used to have 0:16:03.240 --> 0:16:05.800 ten percent of the retail market. Now it's sounded one 0:16:05.840 --> 0:16:08.320 point six. So you do the math. That is not 0:16:08.800 --> 0:16:10.520 that is not a good thing. But other parts of 0:16:10.600 --> 0:16:13.160 retail off price apparel, such as t j X, which 0:16:13.160 --> 0:16:16.080 had fairly decent numbers, Ross and Burlington, which is reported 0:16:16.080 --> 0:16:18.560 in the next you know week ten days, they'll do 0:16:18.680 --> 0:16:22.000 very very well. Um and and there's been a major 0:16:22.120 --> 0:16:25.560 rotation to home um, whether it's home improvement or the 0:16:25.560 --> 0:16:28.640 homeport instance. Players w Wayfair just reported this morning, did 0:16:28.720 --> 0:16:31.320 you know very strong numbers not make any money by 0:16:31.320 --> 0:16:34.880 the report of the strong top line tell us about 0:16:35.760 --> 0:16:38.360 I gotta go to l brands. I know that the 0:16:38.720 --> 0:16:40.800 results are already out, so I was just watching to 0:16:40.800 --> 0:16:43.160 talk about Victoria's secret. Well, I just don't know. I mean, 0:16:43.200 --> 0:16:45.760 here's the stock. It's down at sixth the body works, 0:16:46.600 --> 0:16:51.920 I see good, thank you down six Uh. They don't know. 0:16:52.040 --> 0:16:55.440 They they've got their own stores. Obviously a brand but 0:16:55.560 --> 0:16:56.960 I mean, is this the story that is this like 0:16:56.960 --> 0:16:58.840 a business that's going to be around in five years 0:16:58.920 --> 0:17:02.360 in the same format somehow, I think the market for 0:17:02.560 --> 0:17:06.960 intimatewear or innerwears calling it these days, I suspect that's 0:17:06.960 --> 0:17:09.560 gonna be around for a while. The difference is is 0:17:09.600 --> 0:17:13.600 that Victoria's Secret uh, as apart from Bath and Bodyworks, 0:17:13.600 --> 0:17:16.439 which is you know, different little bit of different animals. 0:17:16.720 --> 0:17:21.399 But for the for Vicky, um, we believe that it's overexpanded. 0:17:21.600 --> 0:17:24.840 It kind of breathed, was breathing its own exhaustumes too much. 0:17:25.440 --> 0:17:28.200 And any good retail you have, even if you have 0:17:28.240 --> 0:17:30.679 a great concept, you don't want to make it so 0:17:30.760 --> 0:17:33.919 it's totally ubiquitous. So there's one on every corner because 0:17:35.000 --> 0:17:38.280 you'll you'll overserve the market. And right now the market 0:17:38.359 --> 0:17:42.320 for for for intimate underwear is uh, it's you know, 0:17:42.400 --> 0:17:46.080 it's modestly growing, but it's not rampant. Well and also 0:17:46.080 --> 0:17:49.879 didn't Victoria's Secret come under some fire for not having 0:17:49.920 --> 0:17:52.480 big enough sizes for some clients and there was some 0:17:52.560 --> 0:17:56.199 discussion about should they have should they cater to a 0:17:56.280 --> 0:17:59.359 larger population. Does that matter to you at all or 0:17:59.480 --> 0:18:02.560 is that sort of just a relevant kind of side show. Well, 0:18:03.280 --> 0:18:06.879 the the size of the average woman has over the 0:18:06.960 --> 0:18:12.600 last generation has increased, and uh, the full figured woman 0:18:12.920 --> 0:18:15.760 does have a market, and right now that's a little 0:18:15.760 --> 0:18:20.359 bit underserved, we believe. And so Victoria's secret, you know, 0:18:20.400 --> 0:18:23.760 it's the image of Victoria's sacred is maybe you know, 0:18:23.920 --> 0:18:26.720 a little thinner, younger, et cetera. But there's a ton 0:18:26.760 --> 0:18:29.800 of women that may need, you know, a little bit 0:18:29.880 --> 0:18:33.600 larger sizing, and there we believe they're a little bit undeserved. Craig, 0:18:33.880 --> 0:18:36.320 you said that you just returned from a trip to Chicago. 0:18:36.359 --> 0:18:37.560 I know you spent a lot of time on the 0:18:37.640 --> 0:18:40.280 road actually checking out the retail operations. What can you 0:18:40.320 --> 0:18:42.480 tell about what's going on in the middle of the 0:18:42.480 --> 0:18:44.960 country in Chicago, Well, he was, you know, we have 0:18:45.160 --> 0:18:47.480 a team of eighteen people. We've been doing this for 0:18:47.560 --> 0:18:49.720 years across the country. They go about to about ninety 0:18:49.760 --> 0:18:53.440 major venues um and I like to travel myself and 0:18:53.800 --> 0:18:56.760 native Chicago's I remember Marshall Fields in its better days, 0:18:57.440 --> 0:19:00.000 and so you remember the chocolate, the mints, I guess 0:19:00.200 --> 0:19:03.399 the Franco mits where which macis. I believe they just 0:19:03.440 --> 0:19:08.000 sold that the great thing and so um. Retail in 0:19:08.040 --> 0:19:11.000 the rest of the country is doing, you know, kind 0:19:11.000 --> 0:19:13.680 of much better than the pundits think because the headlines 0:19:13.720 --> 0:19:15.600 are all around the department store as the well known 0:19:15.680 --> 0:19:19.880 names and departments are a sector is tanking, it's it's 0:19:19.920 --> 0:19:22.360 a it's a near free fall. Now there's a role 0:19:22.400 --> 0:19:25.720 for department stores, but they have to rethink and reconceptualize 0:19:26.040 --> 0:19:28.440 really what they are. But what you see in Chicago, 0:19:28.480 --> 0:19:29.960 can you tell us, I mean any are there any 0:19:30.000 --> 0:19:31.960 retail concepts that are new that we need to pay 0:19:32.000 --> 0:19:34.879 attention to? One of them, just as expanding rapidly is 0:19:34.920 --> 0:19:38.560 a warby Parker, the the the eyeglass maker, and they 0:19:38.600 --> 0:19:40.919 have I was in their stores on North Rush Street 0:19:40.960 --> 0:19:43.800 and it's great. Locations like Catty Corner from an urban outfitters, 0:19:43.840 --> 0:19:45.119 you know, sort of serve a little bit of the 0:19:45.119 --> 0:19:48.080 same customers and so forth. And so they now have 0:19:48.119 --> 0:19:50.480 a couple of locations physical location. Because this is a 0:19:50.840 --> 0:19:55.679 retailer that started online. Classes. Yeah, but they started online 0:19:56.359 --> 0:19:59.880 and now they're now they're rapidly going to building out 0:19:59.920 --> 0:20:02.600 a store fleet. Craig Johnson, thank you so much for 0:20:02.680 --> 0:20:05.960 joining us. Craig, uh, it sounds like they're eighteen people 0:20:06.000 --> 0:20:09.480 go around secretly shopping for for for their business. I 0:20:09.520 --> 0:20:12.919 love it. Craig Johnson, president of Customer Growth Partners in 0:20:12.960 --> 0:20:29.119 New Canaan at Connecticut Well pim Fox. We heard quite 0:20:29.160 --> 0:20:33.840 a bit this morning from US Treasury Secretary UH Steve Minution. 0:20:33.920 --> 0:20:36.359 Now that he has been confirmed, he is making the 0:20:36.480 --> 0:20:40.440 rounds and giving some sense of what his priorities will 0:20:40.520 --> 0:20:44.439 be over the next couple of years. I want to 0:20:44.440 --> 0:20:48.160 bring in Salaha Moson, she is a Bloomberg News reporter, 0:20:48.480 --> 0:20:50.760 to talk a little bit about what we've learned about 0:20:51.040 --> 0:20:55.639 manutions policies. So, Sala, let's first start with the longer 0:20:55.760 --> 0:20:59.240 dated US Treasury since this is moving markets and causing 0:20:59.640 --> 0:21:01.800 a quarter into some traders. This is what's causing the 0:21:01.880 --> 0:21:05.520 yield curve to steep in somewhat today. Um, what exactly 0:21:05.560 --> 0:21:08.720 did he say about the U s issuing fifty one 0:21:08.760 --> 0:21:12.119 hundred year treasuries? So the Secretary Minution said that the 0:21:12.160 --> 0:21:17.520 Treasury will explore issuing longer term debt maturities. As you said, Um, 0:21:17.560 --> 0:21:21.800 he said that with rates seen historically low for some 0:21:21.840 --> 0:21:25.400 time to come, it is time to seriously explore whether 0:21:25.400 --> 0:21:29.760 Treasury should be issuing these bonds. Well, what is the 0:21:29.840 --> 0:21:32.200 likelihood that this will happen? Who does he have in support? 0:21:33.160 --> 0:21:35.520 You know, there are a few members in Congress who 0:21:35.560 --> 0:21:38.760 have asked about this in the last year, uh and 0:21:39.000 --> 0:21:43.080 including some Democrats, But so far in the Senate there 0:21:43.119 --> 0:21:45.199 hasn't been a lot of movement on this. It's not 0:21:45.320 --> 0:21:47.960 clear that he would actually even need congress um full 0:21:48.000 --> 0:21:50.760 support to do this, But I think for now it's 0:21:50.800 --> 0:21:55.400 more just the sake, a question of asking market participants 0:21:55.440 --> 0:21:57.880 and investors what they think and then going from there. 0:21:58.119 --> 0:22:01.480 You know, one thing that I found interesting both today 0:22:01.520 --> 0:22:04.680 as well as yesterday, there was an article about Treasury 0:22:04.760 --> 0:22:07.320 Manution in the Wall Street Journal where he talked about 0:22:07.359 --> 0:22:11.080 the dollar policy and that the strong the strong dollar 0:22:11.280 --> 0:22:14.520 is a good reflection on the US over the long term. 0:22:14.560 --> 0:22:17.560 That seemed to go in contradiction to what President Trump 0:22:17.600 --> 0:22:20.200 had said about the dollar being too strong. He also 0:22:20.560 --> 0:22:23.359 said today that there is no urgency to brand China 0:22:23.880 --> 0:22:29.679 a currency manipulator. How much is Treasury Secretary Manution in 0:22:29.760 --> 0:22:34.400 sync with President Trump? You know, it's hard to know, um, 0:22:34.400 --> 0:22:36.840 when something might come out on a tweet and where 0:22:36.920 --> 0:22:40.880 the signaling there might when it might shift, um. But 0:22:41.000 --> 0:22:44.159 you know, we have seen some clear signals from Trump 0:22:44.240 --> 0:22:48.160 himself where he is softening on his views of China. UM. 0:22:48.240 --> 0:22:51.240 That started after the elections and it's continued as he 0:22:51.320 --> 0:22:56.000 has become president. UM and Manution is pretty much echoing that. 0:22:56.200 --> 0:22:58.520 But this is new that you know, no announcement will 0:22:58.560 --> 0:23:00.720 come before April, and that means that they are looking 0:23:00.760 --> 0:23:05.159 to the traditional mechanisms to investigate whether they should be 0:23:05.240 --> 0:23:08.760 labeling them now or or how they can start raising 0:23:08.800 --> 0:23:12.040 any alarms before they would actually formally designate them. It 0:23:12.160 --> 0:23:14.760 just shows that we're not going to do this haphazardly. 0:23:14.800 --> 0:23:18.399 We're gonna look to what existing established mechanisms. We have 0:23:18.520 --> 0:23:23.520 to do this now, Sala. Earlier, President Trump spoke about 0:23:23.760 --> 0:23:27.520 the United states is economic relationship with Mexico, and did 0:23:27.560 --> 0:23:31.400 he reference that Secretary of State Rex Tillerson is in 0:23:31.440 --> 0:23:36.120 Mexico today beginning that relationship. What if you could speak 0:23:36.119 --> 0:23:39.040 a little bit about what you know about repealing or 0:23:39.119 --> 0:23:43.680