WEBVTT - Why Bermuda Is At The Forefront Of Blockchain Tech (Podcast) 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul Swinge. You 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 Podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:22.200 at Bloomberg dot com. Well, Bermuda has become a prominent 0:00:22.239 --> 0:00:26.480 player in the growing market for blockchain, fintech and virtual currencies. 0:00:26.840 --> 0:00:30.240 Help us better understand what is going on in Bermuda. 0:00:30.280 --> 0:00:32.640 We welcome the honorable David Birt. He's Premier of the 0:00:32.680 --> 0:00:34.560 government in Bermuda. He joins us live here on a 0:00:34.560 --> 0:00:38.040 Bloomberg Interactive Broker Studio premiere. Thank you so much for 0:00:38.240 --> 0:00:40.199 being with us. I wonder if you could just get 0:00:40.240 --> 0:00:42.360 my When I think blockchain, when I think krypto, I 0:00:42.360 --> 0:00:44.840 don't necessarily think of Bermuda. So tell me what's going 0:00:44.880 --> 0:00:47.960 on on that beautiful island Bermuda. Thank you very much. Paul. Well, 0:00:48.000 --> 0:00:50.040 when you think blockchain and crypto in the future, you 0:00:50.080 --> 0:00:53.199 should think about Bermuda because Bermuda was the first country 0:00:53.200 --> 0:00:55.520 in the world to actually have a full suite of 0:00:56.000 --> 0:00:59.320 laws and regulations to govern companies in this space. And 0:00:59.360 --> 0:01:01.440 we did that because we want to remain on the 0:01:01.560 --> 0:01:05.959 forefront of innovation in financial services. So now our Bermuda 0:01:06.000 --> 0:01:09.080 Monetary Authority, who is a world renowned regulator UM has 0:01:09.120 --> 0:01:11.800 an entire fintech team and we are there now able 0:01:11.840 --> 0:01:14.039 to license companies in this space to make sure that 0:01:14.120 --> 0:01:18.080 consumers are protected and that companies can grow and expand 0:01:18.080 --> 0:01:22.240 their services in a well regulated environment. So, uh, just 0:01:22.240 --> 0:01:25.080 I'm wondering, premiere, how closely do you watch the price 0:01:25.120 --> 0:01:27.920 of bitcoin? UM? I actually don't watch the price of bitcoin. 0:01:28.800 --> 0:01:31.360 I just gave him a quote bitcoin I just popped 0:01:31.400 --> 0:01:33.520 up on the screen. Well, I guess the reason why 0:01:33.560 --> 0:01:37.280 I ask is does the price of bitcoin cohere or 0:01:37.319 --> 0:01:41.960 sort of match the growing or waning demand by institutional 0:01:41.959 --> 0:01:46.240 investors for blockchain for the services that you're hoping Bermuda 0:01:46.280 --> 0:01:49.440 will be home to UM. I think that certainly the 0:01:49.480 --> 0:01:52.360 price of bitcoin as a factor, because a lot of 0:01:52.400 --> 0:01:55.440 the companies that are backed by persons who did make 0:01:56.240 --> 0:01:58.520 a lot of money during the run up in the 0:01:58.560 --> 0:02:02.640 price of bitcoin certainly are able to better deploy that 0:02:02.760 --> 0:02:05.040 capital but I think on a broader level, we're not 0:02:05.080 --> 0:02:06.800 looking at it from the short term. We're looking at 0:02:06.800 --> 0:02:09.240 it from the long term. This is just getting started. 0:02:09.480 --> 0:02:11.520 So what we want to ensure is that companies that 0:02:11.560 --> 0:02:14.320 are looking for that regulation have a home where they 0:02:14.320 --> 0:02:17.400 have a government that understands this. I have a technology background, 0:02:17.560 --> 0:02:19.440 they have a government that understands this, they have a 0:02:19.480 --> 0:02:21.360 regulator that's willing to work with them so they can 0:02:21.400 --> 0:02:24.560 design these new cutting edge products which will not have 0:02:24.840 --> 0:02:28.359 you know, digital currency is its own asset class, but 0:02:28.440 --> 0:02:31.639 we're talking about new financial products which heretofore you were 0:02:31.680 --> 0:02:34.760 not able to create, which you can now create UM 0:02:34.760 --> 0:02:39.320 with UH with these new UH distributed currencies. So we 0:02:39.360 --> 0:02:42.600 think about blockchain the technology, what are some of the 0:02:42.639 --> 0:02:44.639 applications that some of the companies that are coming to 0:02:44.720 --> 0:02:48.480 Bermuda think that might be some of the initial applications 0:02:48.480 --> 0:02:51.600 of blockchain or fintech. And broadly speaking, I can give 0:02:51.600 --> 0:02:54.320 you an example of one company which is called Diamond Standard, 0:02:54.560 --> 0:02:56.560 which is just announced that they're increasing the amount of 0:02:56.639 --> 0:02:59.440 jobs which UH. They have UM in Bermuda and are 0:02:59.480 --> 0:03:02.520 currently in the being regulated by the Muta Monitory Authority. 0:03:02.760 --> 0:03:04.280 And these are things that which you can do which 0:03:04.320 --> 0:03:07.280 you weren't able to do before. Their commoditizing diamonds. So 0:03:07.360 --> 0:03:09.359 before diamonds are one of those things you can't cut 0:03:09.440 --> 0:03:12.320 it because it loves its value. But that value is there, 0:03:12.440 --> 0:03:16.040 that value exists, So you can have secure custody those uh, 0:03:16.120 --> 0:03:18.919 those diamonds while at the same points in time leveraging 0:03:18.919 --> 0:03:22.760 those uh leveraging that asset and making use of it 0:03:23.080 --> 0:03:25.480 from that perspective, and you can do that with blockchain. 0:03:25.680 --> 0:03:28.800 You couldn't do that before. So Premiere, I'm just wondering. 0:03:28.840 --> 0:03:31.919 We talk about blockchain, we talked about virtual currencies. Blockchain 0:03:31.960 --> 0:03:35.400 increasingly is becoming sort of the state domain of back 0:03:35.480 --> 0:03:40.360 office operations. Virtual currencies still have a certain sexiness to them, 0:03:40.400 --> 0:03:44.240 but what is the primary business that you expect to 0:03:44.640 --> 0:03:47.920 fuel the industry in Bermuda? Is it blockchain? Is the 0:03:47.920 --> 0:03:51.120 back office sort of operations and tracking, or is it 0:03:51.240 --> 0:03:54.480 sort of this idea of virtual gold um I would 0:03:54.480 --> 0:03:58.360 say that it's more blockchain generally distributed leisure technologies, but 0:03:58.400 --> 0:04:01.680 they're but they're hard to divide because when we talk 0:04:01.720 --> 0:04:04.440 about you here bitcoin, which is a digital currency in 0:04:04.480 --> 0:04:07.680 its effect, but there are so many other types of 0:04:07.760 --> 0:04:12.080 digital currencies of which can be deployed to incentivize certain 0:04:12.080 --> 0:04:14.520 types of behavior. So when you're talking about the data, 0:04:14.600 --> 0:04:16.640 the data which you own, how do you get paid 0:04:16.680 --> 0:04:19.080 for the data which you own? In many different aspects. 0:04:19.080 --> 0:04:21.800 These are just two new structures which are able to 0:04:21.880 --> 0:04:25.159 be brought in place by distributed leisure technology. So it's 0:04:25.200 --> 0:04:27.800 the entire gamut right now. As I say, we're just 0:04:27.960 --> 0:04:30.120 at lead cutting edge, we're just at the beginning. So 0:04:30.160 --> 0:04:32.159 we're now beginning to see companies that are thinking. So 0:04:32.200 --> 0:04:35.400 in Bermuda right now, you can have a Bermuda company 0:04:35.440 --> 0:04:38.560 that can tokenize a real estate asset here in New 0:04:38.640 --> 0:04:43.400 York City and divide that amongst investors into multiple intantestimal divisions. 0:04:43.440 --> 0:04:46.359 These are things of which you can do efficiently now 0:04:46.440 --> 0:04:48.839 through blockchain that you were not able to do previously 0:04:49.080 --> 0:04:53.320 through traditional financial sector. We're speaking with the Honorable David Bird, 0:04:53.360 --> 0:04:55.720 the Premier of the Government of Bermuda, talking about all 0:04:55.760 --> 0:04:59.440 things crypto and fintech on the island of Bermuda. So 0:05:00.000 --> 0:05:03.120 a mirror wondering you know, Bermuda has always had a 0:05:03.240 --> 0:05:06.080 very strong regulatory framework. As you mentioned, I'm guessing from 0:05:06.120 --> 0:05:09.080 the insurance industry that that that's been home to the 0:05:09.120 --> 0:05:12.760 NFER for a long time. Who does Bermuda compete against 0:05:12.960 --> 0:05:16.159 in these early stages of trying to be the a 0:05:16.320 --> 0:05:19.520 home or a trust at home for UH blockchain type 0:05:19.520 --> 0:05:23.400 technology companies. Bermuda is not in composition with anyone. And 0:05:23.440 --> 0:05:25.200 there's a reason why I say that there's a lot 0:05:25.240 --> 0:05:28.360 of other countries around the world that will be engaged 0:05:28.400 --> 0:05:30.920 in the hype cycle. The fact is that as this 0:05:31.040 --> 0:05:33.320 early stages, there's going to be a lot of companies 0:05:33.360 --> 0:05:35.320 that pop up and a lot of companies that don't. 0:05:35.680 --> 0:05:39.520 In Bermuda, we started our licensing regime in September and 0:05:39.600 --> 0:05:42.880 today we've only had one company that's passed our licensing process. 0:05:43.200 --> 0:05:46.680 And there's a reason why we want quality and not quantity. 0:05:46.760 --> 0:05:50.240 We want to have those large institutional back companies that 0:05:50.279 --> 0:05:53.000 can actually pass those large hurdles because we don't want 0:05:53.040 --> 0:05:57.360 to have as a jurisdiction that protects its reputation consumers 0:05:57.360 --> 0:05:58.720 that would have lost a lot of money due to 0:05:58.760 --> 0:06:01.960 a cybersecurity era and the wrest. We have strict custody rules, 0:06:02.000 --> 0:06:05.360 strict cybersecurity rules and all those things which is necessary 0:06:05.400 --> 0:06:08.800 for adoption of this industry. So what I would say 0:06:08.839 --> 0:06:10.960 is that from that perspective we compete with no one. 0:06:11.160 --> 0:06:13.240 But I just want to say where Bermuda stands, there's 0:06:13.279 --> 0:06:16.240 only two countries in the world that have regulatory equivalents 0:06:16.240 --> 0:06:18.840 when it comes to risk, with both United States and 0:06:18.920 --> 0:06:21.599 the European Union, and that's Bermuda in Switzerland. And that's 0:06:21.640 --> 0:06:24.320 the class in which Bermuda plays in premiere. There is 0:06:24.360 --> 0:06:26.880 a little bit of a complication recently which has to 0:06:26.960 --> 0:06:30.400 do with Britain and Brexit. We do know that you 0:06:30.400 --> 0:06:32.680 guys are self governed, but you are a British territory 0:06:32.680 --> 0:06:36.520 and I'm just wondering how this sort of escalating debate 0:06:36.560 --> 0:06:40.040 in Parliament and and the likelihood of the increasing likelihood 0:06:40.040 --> 0:06:44.120 of potentially even a heartbreak affects your your your your 0:06:44.839 --> 0:06:47.520 territories economy. The only thing that I can say is 0:06:47.520 --> 0:06:50.279 the uncertainty is not helpful and we hope that someone 0:06:50.320 --> 0:06:53.400 would make a decision at some point in time um 0:06:53.440 --> 0:06:56.320 and it's very unfortunate. Ber Bermuda has its own relationships 0:06:56.320 --> 0:06:59.280 with the European Union and those relations as will continue. 0:06:59.760 --> 0:07:02.520 We have solvency to equivalents in insurance that was not 0:07:02.640 --> 0:07:05.599 through the United Kingdom that was through Bermuda and Bermuda 0:07:05.640 --> 0:07:08.800 Monitor Authority, direct liaise with the European Union, and those 0:07:08.839 --> 0:07:10.800 things will continue. We just hope that they can have 0:07:10.880 --> 0:07:13.440 some clarity as the nature the relationships so that we 0:07:13.480 --> 0:07:16.840 can actually plan our future engagement. But we expect minimal 0:07:16.880 --> 0:07:19.600 impact Bermuda from Brexit. Do you actually watch any of 0:07:19.640 --> 0:07:23.360 the Parliament debates? I woke up this morning watching Premier 0:07:23.640 --> 0:07:26.600 Prime Minister's question time, so I do. Actually. My wife 0:07:26.880 --> 0:07:28.920 laughs at me. She says that I'm addicted to Brexit 0:07:28.960 --> 0:07:31.000 and I can't get enough of the Brexit news. Well 0:07:31.000 --> 0:07:32.600 then you can. You'd be right at home up Bloomberg, 0:07:32.640 --> 0:07:36.600 cause we cover it very closely. Unfortunately, people have to 0:07:36.640 --> 0:07:39.960 be addicted because the outcome could potentially have pretty big 0:07:40.120 --> 0:07:43.680 ramifications on Britain and the territories. The Honorable David Burt, 0:07:43.680 --> 0:07:45.200 thank you so much for being with us. The Honorable 0:07:45.280 --> 0:07:49.200 David Burt, Premiere of the Government of Bermuda, joining us 0:07:49.200 --> 0:08:08.480 from our interactive broker studios in New York. Well. As 0:08:08.480 --> 0:08:11.520 the US and China trade tensions continue to simmer, markets 0:08:11.520 --> 0:08:15.360 are understandably nervous and our next guest is eminently qualified 0:08:15.360 --> 0:08:18.720 to a pine on these ongoing trade negotiations. Christopher Smartest, 0:08:18.760 --> 0:08:23.840 head of Bearings Investment Institute UH, and from he served 0:08:23.880 --> 0:08:27.200 US Special Assistant to the President at the National Economic 0:08:27.200 --> 0:08:29.760 Council and the National Security Council, where he was principal 0:08:29.760 --> 0:08:33.120 advisor on trade, investment and a wide range of global 0:08:33.160 --> 0:08:36.640 economic issues. Christopher, thank you so much for being with us. 0:08:37.000 --> 0:08:39.640 You just want to get your sense for the last 0:08:39.640 --> 0:08:43.000 ten days of really seeing these trade negotiations and the 0:08:43.120 --> 0:08:46.640 tensions between US and China really make a significant turn. 0:08:47.200 --> 0:08:49.800 Where do you think we are right now? I think 0:08:49.880 --> 0:08:54.520 right now we're still in kind of late stage throws 0:08:54.679 --> 0:08:57.559 of closing in on a deal. Of course, you get 0:08:57.559 --> 0:08:59.840 different messages from the White House in different days, but 0:08:59.880 --> 0:09:02.319 I think that seems to be where we're still headed. 0:09:02.320 --> 0:09:05.160 I think those who have done the long term negotiations 0:09:05.160 --> 0:09:07.880 with China this is relatively typical as we get closer 0:09:07.880 --> 0:09:10.840 to the end, where the bureaucracy back home may pull 0:09:10.920 --> 0:09:14.120 back from one or two agreed principles UH. And that's 0:09:14.160 --> 0:09:17.720 not unusual. I think it's not unusual for an American side, 0:09:17.720 --> 0:09:20.720 a political leader too threatened to walk away from the 0:09:20.760 --> 0:09:23.240 deal to sort of try and secure as much as 0:09:23.440 --> 0:09:24.800 as he can at the end of the day, but 0:09:24.840 --> 0:09:26.440 I think that's where we're still headed. I think the 0:09:26.440 --> 0:09:29.560 broader issue, though, is that looking out over the next 0:09:29.600 --> 0:09:32.280 few years or even decades, UH tariffs are going to 0:09:32.360 --> 0:09:34.959 be very much a part of our relationship with China. 0:09:35.200 --> 0:09:37.400 Whether they come off in the near term, I think 0:09:37.400 --> 0:09:39.839 they will always be looming in the background as a 0:09:39.880 --> 0:09:42.600 potential threat. And that's a new thing that investors in 0:09:42.679 --> 0:09:45.520 business UM managers are gonna have to deal with. Well 0:09:45.520 --> 0:09:48.160 and Christopher, we have seen money coming out of emerging 0:09:48.200 --> 0:09:52.040 markets funds over the past week or so as the 0:09:52.120 --> 0:09:55.480 rhetoric has gotten increasingly heated between China and the US. 0:09:55.520 --> 0:09:59.000 If the threat of tariffs does hang over China and 0:09:59.320 --> 0:10:02.440 the relationship between China the US in the years to come, 0:10:02.760 --> 0:10:05.559 what does that do for UM. Well, it's not great, 0:10:05.640 --> 0:10:10.160 since EM always depends on vibrant and growing UH international trade. 0:10:10.200 --> 0:10:14.520 But I think as investors learned to understand what the 0:10:14.720 --> 0:10:17.560 new framework is. I mean, tariffs are principally on the 0:10:17.640 --> 0:10:22.880 US China trade relationship. That creates opportunities for other emerging markets, 0:10:22.920 --> 0:10:24.880 particularly in South Asia. We've already seen that over the 0:10:24.960 --> 0:10:27.320 last few years, where costs in China have been rising 0:10:27.360 --> 0:10:31.000 and so people are looking for expanding their supply chains 0:10:31.040 --> 0:10:36.160 to UM, Malaysia, Singapore, Indonesia and other other countries, so 0:10:36.240 --> 0:10:39.680 that will continue as well. One of the concerns Christopher 0:10:39.880 --> 0:10:43.400 is as to the extent that this trade tension goes 0:10:43.440 --> 0:10:47.480 on longer than people expect and the tariffs remain in place, 0:10:48.000 --> 0:10:51.880 it may prompt China to sell uh U S treasuries 0:10:51.880 --> 0:10:55.200 their holdings of US treasuries. What is do you think 0:10:55.240 --> 0:10:57.439 that could occur will occur? And topic of a deal 0:10:57.520 --> 0:11:00.080 is that, well, if if they did, it would be 0:11:00.160 --> 0:11:02.520 a big deal. I think the chances of them doing 0:11:02.559 --> 0:11:07.120 that in this sudden, reactive, punitive way or next to 0:11:07.280 --> 0:11:11.960 nil uh it would be a tremendously self self damaging 0:11:12.000 --> 0:11:15.400 act to undertake. China uses those reserves in order to 0:11:15.400 --> 0:11:18.760 help manage the movements of its own currency uh and 0:11:19.000 --> 0:11:23.440 you know, a quick sell off would um would lower 0:11:23.480 --> 0:11:28.200 the value of those um of those treasuries it continues 0:11:28.200 --> 0:11:30.640 to own, as well as raising interest rates and all 0:11:30.679 --> 0:11:34.280 the consequences of the global economy on which China ultimately depends. 0:11:34.280 --> 0:11:36.240 So I think that's a very you know, there will 0:11:36.280 --> 0:11:38.640 be times where they buy slightly less or they buy 0:11:38.640 --> 0:11:41.199 slightly more. But I think looking to that as the 0:11:41.240 --> 0:11:43.560 way they would react is the wrong place to look. 0:11:43.600 --> 0:11:47.040 More likely than not, they will react by imposing new 0:11:47.080 --> 0:11:50.640 restrictions on American companies doing business in China. Um something 0:11:50.720 --> 0:11:52.640 they've been very good at, something they've been trying to 0:11:52.679 --> 0:11:55.400 loosen up on. But it's very easy to reimpose those 0:11:55.640 --> 0:11:58.959 restrictions making it more difficult for American firms already in China. 0:11:59.480 --> 0:12:02.559 So Chris, President Trump has talked about how he now 0:12:02.600 --> 0:12:05.199 has to deal with this because previous presidents have not, 0:12:05.559 --> 0:12:08.000 and that the just the relationship between the U. S 0:12:08.000 --> 0:12:10.280 and China has been incredibly complicated in China's been taking 0:12:10.280 --> 0:12:14.079 advantage of US companies for years. As a former member 0:12:14.120 --> 0:12:18.080 of the Obama administration, what's your response, Well, we have 0:12:18.200 --> 0:12:21.280 been as a country dealing with the rise of China 0:12:21.480 --> 0:12:25.560 for years, for decades, and to be you know, honest, 0:12:25.600 --> 0:12:27.400 I think what President Trump is trying to achieve is 0:12:27.480 --> 0:12:30.920 very much in line with what previous presidents in both 0:12:30.920 --> 0:12:34.880 parties have been trying to achieve, which is to recognize 0:12:34.880 --> 0:12:37.240 that China is a very big and growing part of 0:12:37.280 --> 0:12:40.600 the global economy that we needed to be more integrated 0:12:40.840 --> 0:12:45.600 and more um in line with global trade and investment practices. 0:12:46.120 --> 0:12:48.400 How do you achieve that? That's the big question. The 0:12:48.440 --> 0:12:51.640 President has chosen to be much more forthcoming on the 0:12:51.760 --> 0:12:56.560 punitive tariff side of things. Uh, it may work. Uh, 0:12:56.600 --> 0:12:59.400 you know, time will tell. I think the issue is 0:12:59.440 --> 0:13:01.560 that there is a single agreement that will solve the 0:13:01.600 --> 0:13:04.400 problem anything that is done or agreed over the next 0:13:04.440 --> 0:13:06.960 few months. These are long term issues that will be 0:13:07.000 --> 0:13:10.280 coming back to and talking to China with for years 0:13:10.280 --> 0:13:13.160 and years ahead. And it's really much more about the 0:13:13.240 --> 0:13:15.959 kind of relationship you're able to develop with China to 0:13:16.040 --> 0:13:19.520 manage these issues, I think, much more than any particular 0:13:19.559 --> 0:13:23.240 deal that you may sign. Christopher Smart, thank you so 0:13:23.320 --> 0:13:25.679 much for being with us. Christopher Smart, head of Bearings 0:13:25.720 --> 0:13:29.720 Investment Institute Bearings Overseas more than three hundred billion dollars 0:13:29.720 --> 0:13:33.520 coming to us from Boston. Christopher really raises some interesting points, 0:13:33.520 --> 0:13:36.520 which is this is not that big of a departure 0:13:36.559 --> 0:13:40.280 from previous administrations in terms of trying to address the U. S. 0:13:40.360 --> 0:13:42.920 China relationship when it comes to trade. It is just 0:13:43.040 --> 0:13:46.600 a different approach and the question is will tariffs work? 0:13:46.720 --> 0:14:06.120 And only time will tell. Well, we did get those 0:14:06.280 --> 0:14:10.480 weaker than expected retail sales data figures out of the 0:14:10.559 --> 0:14:13.160 US this morning. There is a question of what this 0:14:13.240 --> 0:14:16.240 means for the consumer joining us now. Craig Johnson, president 0:14:16.280 --> 0:14:19.400 of Customer Growth Partners, joining us in our eleven three 0:14:19.400 --> 0:14:21.800 oh studios. Craig, thank you so much for being with us. 0:14:21.840 --> 0:14:24.480 When you joined us back in February, you said that 0:14:24.520 --> 0:14:27.560 the dismal, the dismal retail sales print that we saw 0:14:28.040 --> 0:14:31.160 earlier in the year was calculated wrong and the you 0:14:31.200 --> 0:14:34.360 expect five percent retail sales growth for this year. Do 0:14:34.400 --> 0:14:37.720 you still see that to be the case after April's report? Well, 0:14:37.880 --> 0:14:40.560 we were actually very encouraged by the April report because 0:14:41.320 --> 0:14:45.080 we look at things on a year of year unadjusted basis, 0:14:45.240 --> 0:14:49.000 and April sales ex autos, Excasole and X rests was 0:14:49.080 --> 0:14:52.920 up five pe a touch above our forecast for the 0:14:53.040 --> 0:14:57.240 year um and that shows very strong growth. The nominal 0:14:57.360 --> 0:15:00.400 sequential zero point to growth, we think to fall to 0:15:00.400 --> 0:15:01.920 the way to look fall the way to look at 0:15:01.960 --> 0:15:05.440 things because the adjustment factors two to ten full points 0:15:05.440 --> 0:15:07.760 in any given month, you know more than an order 0:15:07.760 --> 0:15:10.359 of magnitude. So the question is as a point to 0:15:10.400 --> 0:15:15.080 represent actual sales growth or the accuracy of the adjustment factor. 0:15:15.360 --> 0:15:17.560 So but apples and apples the year of the year, 0:15:17.560 --> 0:15:21.480 it's five point one up. So, Craig, we had Macy's report, 0:15:21.480 --> 0:15:23.360 and we're gonna have a bunch of the big retailers 0:15:23.360 --> 0:15:26.760 report their earnings coming up better than expected results out 0:15:26.760 --> 0:15:29.840 of macy Today stocks trading up modestly. What did you 0:15:29.880 --> 0:15:32.960 take out of the Macy's numbers, Well, the department store 0:15:33.040 --> 0:15:37.080 sector is is very troubled now. And the zero point 0:15:37.120 --> 0:15:41.360 seven percent comp they posted, it's like the old line 0:15:41.560 --> 0:15:43.240 in the Land of the Blind and one eyed man 0:15:43.400 --> 0:15:48.120 is king, and so of a sorry bunch um the 0:15:48.200 --> 0:15:51.960 zero point seven it was a very credible thing, uh performance. 0:15:52.200 --> 0:15:55.520 And the other aspect of it is the quarters started 0:15:55.520 --> 0:15:57.880 out very slow. The first six or seven weeks of 0:15:57.880 --> 0:16:01.360 the quarter were very slow, almost abysmal. Allen sharply and 0:16:01.400 --> 0:16:04.120 so Mazie's ended up on a on a high note 0:16:04.240 --> 0:16:06.640 entering May and we think it's that may well be 0:16:06.800 --> 0:16:10.240 nicely positioned for um for summer and back to school. 0:16:10.800 --> 0:16:12.600 Not that the point seven is going to be a pin, 0:16:12.840 --> 0:16:14.880 you know, five percent, but it should creep up from 0:16:14.920 --> 0:16:17.360 that point. So Greig I want to go back to 0:16:17.400 --> 0:16:19.240 what you were just talking about with the fact that 0:16:19.280 --> 0:16:21.680 you still are optimistic that the retail sales aut it 0:16:21.720 --> 0:16:24.160 that we saw this morning was actually much more positive 0:16:24.200 --> 0:16:27.040 than the market is reading it to be. What's the 0:16:27.080 --> 0:16:29.840 market getting wrong because you saw so off deep end 0:16:29.920 --> 0:16:32.320 after this data come out and you saw yields plunge 0:16:33.040 --> 0:16:35.520 on on US treasury is given the fact that people 0:16:35.520 --> 0:16:39.360 are pricing in slower growth without consumer support. Um, well, 0:16:39.600 --> 0:16:43.239 I think there's a There's a couple of factors at play. UM. 0:16:43.400 --> 0:16:47.240 One is the accuracy of the adjustment factor, and the 0:16:47.320 --> 0:16:51.480 Census Bureau has been changing their methodology uh for calculating 0:16:51.480 --> 0:16:55.080 the figure. And we believe that the adjustment factors retail 0:16:55.120 --> 0:16:58.520 is changing so quickly um with the rise of the 0:16:58.560 --> 0:17:04.159 Internet that um uh that the statistics generated by the 0:17:04.160 --> 0:17:07.439 Censors Bureau, we think are faulty unless you look at 0:17:07.480 --> 0:17:10.119 things on an unadjusted year of a year basis and 0:17:10.160 --> 0:17:13.719 take online Online is by far the fastest growing sector 0:17:14.160 --> 0:17:18.680 in December they showed since BREL showed like a one 0:17:18.760 --> 0:17:21.679 percent growth for the Internet. That's that hasn't happened like 0:17:21.960 --> 0:17:24.680 ever to have just a one percent growth, And then 0:17:24.720 --> 0:17:27.399 now this month in April, year of a year, Uh, 0:17:27.440 --> 0:17:31.119 it was aleven point nine. Um, so they're they're the 0:17:31.440 --> 0:17:35.639 numbers are gradually improving on a accuracy basis, but we 0:17:35.720 --> 0:17:39.280 think there are some questions about the methodology that over time, 0:17:39.320 --> 0:17:42.520 hopeully'll get cleared up. So so Craig. When I look 0:17:42.560 --> 0:17:45.080 at the Macy's release, I see a lot of talk 0:17:45.119 --> 0:17:47.960 about from management by cutting costs. And I can understand 0:17:48.000 --> 0:17:50.600 the need to cut costs in a in an environment, 0:17:50.600 --> 0:17:52.400 in a business where there's not a lot of top 0:17:52.440 --> 0:17:54.360 line growth. But at the same time, you feel like 0:17:54.960 --> 0:17:58.240 the traditional retailers that department stores ought to be investing 0:17:58.320 --> 0:18:00.199 in there maybe in their business trying to come but 0:18:00.320 --> 0:18:03.760 new models, new ways to reach perhaps the the the 0:18:03.800 --> 0:18:06.399 new consumer. How do you come out on balancing the 0:18:06.960 --> 0:18:10.320 cost cuts to make your numbers versus spending to try 0:18:10.359 --> 0:18:12.880 to drive top line growth. Well, I think your poll 0:18:13.000 --> 0:18:17.040 your point is well taken. And Macy's and other smart 0:18:17.080 --> 0:18:20.200 department stores, first of all, they they're beginning to recognize 0:18:20.200 --> 0:18:23.840 that they they work in a declining sector. Um it's 0:18:24.560 --> 0:18:27.320 department stares. Traditional department store is only comprised about one 0:18:27.359 --> 0:18:30.120 point three percent of over our retail sales, So it's 0:18:30.119 --> 0:18:34.000 a declining size of the pie. And so a store 0:18:34.080 --> 0:18:36.600 like Macy's, which has six D eight unit fleet, needs 0:18:36.640 --> 0:18:39.760 to trim the fleet on the one hand, but ramp 0:18:39.880 --> 0:18:42.560 up what they call their growth fifty, which is growth 0:18:42.560 --> 0:18:45.760 one fifty, which is the premier stores that are actually 0:18:45.920 --> 0:18:48.280 you know, pulling the train there, and they need to 0:18:49.000 --> 0:18:54.399 dump about another hundred stores that are just not pulling 0:18:54.440 --> 0:18:58.120 their weight. So I wanted to sort of broaden out 0:18:58.160 --> 0:19:01.360 here with respect to retailers because we talked about sort 0:19:01.359 --> 0:19:04.600 of the weakening consumer. You think is is a data issue, 0:19:04.680 --> 0:19:06.720 but what about tariffs? I mean, how much can these 0:19:06.720 --> 0:19:09.600 retailers absorb the costs? How much can they pass it along? 0:19:09.880 --> 0:19:12.840 And what are you expecting there? Well, um, we did 0:19:12.840 --> 0:19:16.720 a study that shows about everything that's been enacted now, 0:19:16.760 --> 0:19:19.320 in other words, through I think it was May ten um, 0:19:19.640 --> 0:19:26.000 the households would have an incremental um uh burden of 0:19:26.040 --> 0:19:29.439 about five and sixty dollars per household. And to put 0:19:29.520 --> 0:19:33.600 that in perspective, collectively across retail, that represents about zero 0:19:33.640 --> 0:19:38.040 point nine of total sales, which is not nothing, but 0:19:38.160 --> 0:19:41.720 it's not zero, but it's not some huge burden. And 0:19:42.080 --> 0:19:47.399 what happens is is that UM retailers UH or brands 0:19:47.400 --> 0:19:49.439 that try to raise prices are going to meet a 0:19:49.440 --> 0:19:53.359 lot of price resistance from the consumer. And if the 0:19:53.400 --> 0:19:56.119 retailer or the brand is smart, they will take that 0:19:56.200 --> 0:19:59.000 pressure from consumers and work it right back up the 0:19:59.080 --> 0:20:05.560 supply chain. UM. So example, number one known branded consumer 0:20:05.600 --> 0:20:08.560 product coming out of China's chin Dao. Let's say the 0:20:08.640 --> 0:20:12.200 landed cost of a six packs four bucks, and they 0:20:12.240 --> 0:20:16.119 try to raise that up UH, and after wholesale and 0:20:16.160 --> 0:20:18.800 retail margins, they're going to get something around the webbin 0:20:18.880 --> 0:20:22.879 dollars well from what might be now about nine and 0:20:22.920 --> 0:20:26.560 a half or ten dollars. Consumers will flock out of that, 0:20:26.600 --> 0:20:28.560 they'll bail out of chin Dao, and if they want 0:20:28.560 --> 0:20:30.040 to keep the business, they're going to have to eat 0:20:30.080 --> 0:20:32.720 eat some of you. That's it would be interesting to see. 0:20:32.720 --> 0:20:34.440 It's a very good point about, you know, how much 0:20:34.480 --> 0:20:37.879 will be passed along the consumers or will be taken 0:20:37.920 --> 0:20:41.879 by the supply chain. Craig Johnson, president of Customer Growth Partners, 0:20:41.960 --> 0:20:44.520 joining us here in our Bloomberg Interactive Broker Studio talking 0:20:44.520 --> 0:20:49.080 about Macy's talking about the retail sales number UH Craig says, 0:20:49.080 --> 0:20:51.360 you know, a year of a year better than the 0:20:51.400 --> 0:20:54.400 headline looks, and also talking about tariffs and the impact 0:20:54.480 --> 0:21:12.919 on the consumer end on retail spending. Well, two of 0:21:13.000 --> 0:21:16.080 the tech giants out of China reported earnings, Ali Baba, 0:21:16.119 --> 0:21:20.040 Intense Cent. Both stocks are up about one to two today. 0:21:20.359 --> 0:21:22.720 So to dig deeper into those earnings, so what it 0:21:22.840 --> 0:21:26.320 might mean about the underlying Chinese economy the Chinese consumer, 0:21:26.720 --> 0:21:29.359 we turned to Lulu Chen. Lulu is a reporter for 0:21:29.400 --> 0:21:33.520 Bloomberg News based in Hong Kong. Lulu, thanks for staying 0:21:33.600 --> 0:21:35.879 up late to be with us. Let's start with Ali 0:21:35.960 --> 0:21:39.080 Baba first. What are the takeaways the highlights for you 0:21:39.119 --> 0:21:42.359 from the Ali Baba earnings? So for Ali Baba, it 0:21:42.440 --> 0:21:46.080 proved to be really resilient, especially given how the economy 0:21:46.119 --> 0:21:48.800 has not been doing that great in China. Um, if 0:21:48.840 --> 0:21:51.919 you look at their core e commerce business, social really 0:21:51.960 --> 0:21:55.199 strong growth there. And then also the key metric that 0:21:55.359 --> 0:21:59.520 people are looking at is their customer management revenue and 0:21:59.640 --> 0:22:03.720 that's where advertising is included. That posted a thirty one 0:22:03.760 --> 0:22:07.679 percent growth, definitely a pickup and showing the fact that 0:22:07.720 --> 0:22:12.119