WEBVTT - Holiday Shopping to Start Earlier Than Ever 0:00:01.800 --> 0:00:04.400 This is Bloomberg Business Week. I'm Karl Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanibek. We're here every day bringing 0:00:07.280 --> 0:00:09.800 you the latest news from the world to business and finance, 0:00:09.800 --> 0:00:13.640 plus technology, politics, economics, all partnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.120 --> 0:00:19.960 analysts in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.200 Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.360 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.880 --> 0:00:31.560 YouTube search Bloomberg Global News. Hard to believe, but I'm 0:00:31.600 --> 0:00:34.559 already seeing Christmas merchandise in stores. Doesn't mean you've done 0:00:34.600 --> 0:00:37.720 your Christmas shopping. Uh No, but I did this week 0:00:37.760 --> 0:00:40.600 and buy a Christmas holiday shower curtain. That doesn't count 0:00:40.640 --> 0:00:42.520 at all. I like Christmas everywhere in the house. Something 0:00:42.680 --> 0:00:45.120 that does not count. No, well, we'll come on. There 0:00:45.120 --> 0:00:47.080 were Chris. Did it seem expensive or did it seem 0:00:47.080 --> 0:00:48.920 like it was at a discount? Were they trying to 0:00:48.920 --> 0:00:51.080 get rid of it? No? No, no, it was they 0:00:51.080 --> 0:00:56.320 were introducing Christmas merchandise ordered and adjusted. Oh I think 0:00:56.320 --> 0:00:59.960 they're just like, hey, start buying. It was a long 0:01:00.000 --> 0:01:03.120 said the Thanksgiving merchandise alongside, wasn't I don't think there 0:01:03.120 --> 0:01:05.560 was any Halloween. I think that was gone already. Not 0:01:05.720 --> 0:01:08.600 Valentine's Day, alright. Valentine's Day alright. So let's get a 0:01:08.600 --> 0:01:10.919 look at our retail environment and the all important holiday 0:01:10.959 --> 0:01:13.800 retail shopping season. For that, we welcome Patrick Brown, VP 0:01:14.160 --> 0:01:17.440 of Growth, Marketing and Insights at Adobe. He's on the 0:01:17.480 --> 0:01:21.280 phone from at Burlingham, California. Patrick, Good to have you 0:01:21.360 --> 0:01:24.440 here with Tim and myself. So let's start macro the 0:01:24.680 --> 0:01:27.840 very very high level retail. What does it look like 0:01:28.040 --> 0:01:29.800 right now and what does it tell of us maybe 0:01:29.800 --> 0:01:34.000 about the upcoming holiday shopping season. Great to be with you, 0:01:34.120 --> 0:01:38.080 Carol and him. Really excited, and you're right, some of 0:01:38.080 --> 0:01:40.640 the holidays trends that we're seeing our continuation of what 0:01:40.720 --> 0:01:43.680 we saw last year. We're shopping and just starting earlier. 0:01:43.760 --> 0:01:45.959 And as we look ahead to the holiday season, we're 0:01:46.000 --> 0:01:49.080 expecting growth your rear of about two and a half 0:01:49.160 --> 0:01:53.920 percent in the US retail market. But really some of 0:01:53.920 --> 0:01:55.880 the drivers of the growth they're gonna be a little 0:01:55.880 --> 0:01:58.400 bit different. And what we're seeing is people's shopping earlier 0:01:58.520 --> 0:02:01.040 some of the trends from last year. Last year one 0:02:01.040 --> 0:02:02.960 of the big drivers as we know, like you were mentioning, 0:02:03.360 --> 0:02:08.040 supply chain constraints made very weary customers and consumers start 0:02:08.120 --> 0:02:10.440 to shop earlier. This year, it's really going to be 0:02:10.440 --> 0:02:12.760 more of a discounting story. And those are some of 0:02:12.760 --> 0:02:14.720 the trends that will will see carry out through the 0:02:15.040 --> 0:02:17.320 holiday season. How and why are we going to be 0:02:17.320 --> 0:02:19.359 seeing discounting right now? I mean we're talking about a 0:02:19.400 --> 0:02:22.680 CPI report that on when Thursday, excuse me, is supposed 0:02:22.680 --> 0:02:25.800 to show US inflation growing at eight point one you 0:02:27.960 --> 0:02:30.000 I know, but I mean you know, so it's like 0:02:30.000 --> 0:02:32.480 on in the one sense, we are having certain prices 0:02:32.520 --> 0:02:35.760 move higher, but in the other sense, uh, you know 0:02:35.800 --> 0:02:37.440 a lot of the retails. Look, we heard about this 0:02:37.520 --> 0:02:40.400 three months ago to Carol, right, so so explain what's 0:02:40.440 --> 0:02:42.320 going on, Patrick? How did it set up this dynamic? 0:02:43.120 --> 0:02:45.520 When you're exactly right, and the spread between the core 0:02:45.680 --> 0:02:49.040 and the non core price, it's just it's just really 0:02:49.200 --> 0:02:51.920 going to be spreading out, even online. And so for 0:02:52.120 --> 0:02:56.480 categories that you consider kind of core um inflation, like grocery, 0:02:56.880 --> 0:02:59.359 we're actually not expecting much of a discount as you 0:02:59.400 --> 0:03:02.600 might imagine if it's a similar trend online. As a 0:03:02.720 --> 0:03:04.919 shoppers are buying more and more of their kind of 0:03:04.960 --> 0:03:07.919 their basket of goods UH their grocery basketting goods online 0:03:07.960 --> 0:03:11.400 as well, and they'll still be paying a higher price. However, 0:03:11.520 --> 0:03:14.200 as supply chain constraints have eased for some of the 0:03:14.200 --> 0:03:18.480 other products like computers and electronics, we're expecting some really 0:03:18.520 --> 0:03:22.040 significant discounting because retailers are looking to capture some of 0:03:22.040 --> 0:03:24.840 the some of the strength that is in the market. 0:03:24.880 --> 0:03:27.960 And another thing one of the big drivers the last 0:03:28.040 --> 0:03:31.200 year as consumers were wary of supply chain. This year 0:03:31.320 --> 0:03:34.880 again it's really driven by by discounting and things like 0:03:34.960 --> 0:03:38.000 the Prime early access sales that are starting this week 0:03:38.440 --> 0:03:41.880 are going to pull sales into mid October starting this week. Frankly, 0:03:42.000 --> 0:03:44.680 that will then carry through to the through the entire 0:03:44.720 --> 0:03:46.640 holiday season. And and the last time there was a 0:03:46.720 --> 0:03:51.200 Prime day in October, we saw year over year growth 0:03:51.200 --> 0:03:54.240 it would have been and so we're really watching closely 0:03:54.280 --> 0:03:57.200 how much sales to get pulled up starting this week. 0:03:58.440 --> 0:04:01.240 So I don't know if you can, I know, you 0:04:01.280 --> 0:04:03.320 guys go through a lot of data and track a 0:04:03.320 --> 0:04:05.760 lot of stuff, Patrick, But are we going to see 0:04:06.360 --> 0:04:10.000 so that the number dollar amount up year over year 0:04:11.160 --> 0:04:14.040 ultimately when all of a sudden done, Yeah, you're right, 0:04:14.120 --> 0:04:17.040 So we uh we do. We track trillions of actual 0:04:17.080 --> 0:04:22.320 transactions across the analytics platforms, and we are going to 0:04:22.320 --> 0:04:24.320 be up here over year. It's gonna be up about 0:04:24.400 --> 0:04:27.440 three two and a half percent year over year um. 0:04:27.520 --> 0:04:29.400 But that is looking at a holiday season that really 0:04:29.400 --> 0:04:32.279 starts in November through to December end of December, and 0:04:32.360 --> 0:04:33.960 one of the things that we're exploring is you start 0:04:34.040 --> 0:04:36.880 to define what the holiday season is. If we're continuing 0:04:36.920 --> 0:04:39.520 to look at holiday season, start to pull back into October, 0:04:39.600 --> 0:04:41.920 we have to kind of expand our aperture a little 0:04:41.920 --> 0:04:43.800 bit and look a little broader. But even in the 0:04:43.880 --> 0:04:47.360 November to December time frame, we're expecting an increase here 0:04:47.400 --> 0:04:50.440 over here. And I get just just just a quick 0:04:50.480 --> 0:04:52.600 follow and is it a case of the number up 0:04:52.680 --> 0:04:57.159 because there's more individual items being sold or is it 0:04:57.240 --> 0:05:00.279 because things that are being bought are just more intive? 0:05:00.279 --> 0:05:03.640 I guess I'm trying to figure out what it means. Yeah, 0:05:03.640 --> 0:05:06.200 it's the real nominal question, I think is the one 0:05:06.200 --> 0:05:08.080 that we're all kind of keeping an eye on. You know, 0:05:08.120 --> 0:05:11.560 we're expecting what we're going into the holiday season with 0:05:11.920 --> 0:05:14.719 some of the prices of course elevated as we're seeing everywhere, 0:05:15.040 --> 0:05:18.120 we are expecting deeper discounts to bring that down. So 0:05:18.520 --> 0:05:22.159 it shouldn't just be a you know, a revenue story, 0:05:22.200 --> 0:05:24.840 it should also be a unit in volume story. For example, 0:05:24.920 --> 0:05:28.919 in the computers space, last year, we saw discounts of 0:05:28.960 --> 0:05:31.680 around ten percent, which is really nothing when we're used 0:05:31.720 --> 0:05:35.000 to something over the holiday season. This year, we're projecting 0:05:35.040 --> 0:05:39.760 upwards of discounting for computers electronics. We're expecting a change 0:05:39.760 --> 0:05:44.200 from eight percent last year to nearly So what we're 0:05:44.200 --> 0:05:45.800 already seeing that in some of the raw data that 0:05:45.800 --> 0:05:48.479 we're looking at is received few purchasing and prices come down. 0:05:48.520 --> 0:05:51.960 So it seems like in certain segments there there will 0:05:52.040 --> 0:05:54.640 be more kind of unit volume that then supports some 0:05:54.680 --> 0:05:57.400 of the top line numbers. Interesting to hear this from you, Patrick, 0:05:57.440 --> 0:05:59.159 and think back to what a month ago and Apple 0:05:59.200 --> 0:06:00.800 and build its new eye phone and said it wasn't 0:06:00.839 --> 0:06:02.800 raising the price for that base model. That's an entirely 0:06:02.800 --> 0:06:05.680 different discussion. We only have a minute left, Patrick, and 0:06:05.680 --> 0:06:08.680 I'm wondering about the strength of the consumer and what 0:06:08.760 --> 0:06:10.760 you see in terms of data from Adobe right now 0:06:10.800 --> 0:06:14.080 that tell you how strong the consumer is. You know, 0:06:14.160 --> 0:06:17.479 we've we've seen the continued march to online sales for consumers. 0:06:17.480 --> 0:06:19.560 I think some of the trends from covid where we 0:06:19.680 --> 0:06:23.320 got really comfortable buying more categories online, we see those continuing. 0:06:23.640 --> 0:06:25.920 I mentioned grocery before that continues to make up a 0:06:25.960 --> 0:06:29.640 larger percentage of our online purchasing overall. You know, the 0:06:29.720 --> 0:06:31.919 thing we're really watching is how the discounting is going 0:06:32.000 --> 0:06:34.480 to allow consumers to get more bang for their book 0:06:34.560 --> 0:06:38.520 online potentially versus an online like an offline single. So 0:06:39.200 --> 0:06:42.200 we think it may go back to the days when 0:06:42.200 --> 0:06:44.320 you can find a better deal online and and that's 0:06:44.440 --> 0:06:46.320 really what we're watching. And I think that that should 0:06:46.400 --> 0:06:49.320 create some more bullish consumers from the online sit Patrick 0:06:49.360 --> 0:06:52.200 really quickly fifteen seconds by now pay later? Are people 0:06:52.360 --> 0:06:56.799 using more credit or no? You know, that's kind of plateau, frankly, 0:06:56.880 --> 0:06:58.680 and so we've seen people using it for a lot 0:06:58.680 --> 0:07:00.720 of a lot of years. Exceller, right, but it started 0:07:00.760 --> 0:07:02.400 the slow down a little bit. All right, We're gonna 0:07:02.480 --> 0:07:04.359 leave with their Patrick, thank you so much, Patrick Brown, 0:07:04.480 --> 0:07:07.520 VP of Growth Marketing and Insights. Over at Adobe. You 0:07:07.560 --> 0:07:11.160 are listening and watching Bloomberg Business Week. This is Bloomberg 0:07:11.200 --> 0:07:14.840 Business Week with Carol Messer and Bloomberg Quick Takes Tim 0:07:14.920 --> 0:07:20.200 Stenovic on Bloomberg Radio. Well geopolitical tensions heightening fellowing comments 0:07:20.200 --> 0:07:24.120 by President President Vladimir Putin, who threatened further missile attacks 0:07:24.120 --> 0:07:26.720 on Ukraine after Russia hit Kiev and other cities in 0:07:26.760 --> 0:07:29.120 the most intense barage of strikes since the first days 0:07:29.120 --> 0:07:32.200 of its invasion, marking a dangerous new escalation in the 0:07:32.240 --> 0:07:35.200 war that is going on much longer than everybody anticipated. 0:07:35.280 --> 0:07:38.120 At the same time, a warning from President bidenough fundraiser 0:07:38.240 --> 0:07:42.120 in recent days as sending shivers down many people's spines 0:07:42.160 --> 0:07:44.000 around the world. We've got a great guest with us 0:07:44.040 --> 0:07:46.640 this afternoon. Angela sten is senior advisor for the Center 0:07:46.880 --> 0:07:49.960 for Eurasian, Russian and East European Studies. She joins us 0:07:49.960 --> 0:07:52.560 on the phone from Washington, d C. Her most recent book, 0:07:52.640 --> 0:07:57.239 Putin's World, Russia Against the West and with the Rest. Angela, 0:07:57.440 --> 0:07:59.840 really good to have you with us this afternoon. Where 0:07:59.840 --> 0:08:03.360 do we begin with the most recent action in Crimea 0:08:03.680 --> 0:08:06.640 in Russia and of course in Ukraine as well in 0:08:06.760 --> 0:08:11.160 terms of how this conflict could spread even beyond those borders. 0:08:11.160 --> 0:08:15.600 So Putin obviously has escalated the conflict since the attack 0:08:15.720 --> 0:08:18.760 on the bridge to Crimea a couple of days ago. 0:08:18.880 --> 0:08:23.040 And there was this really indiscriminate bombing all around Ukraine, 0:08:23.760 --> 0:08:28.520 major cities losing all their electricity and water um, and 0:08:28.600 --> 0:08:30.920 some of them still in the dark. So real attacks 0:08:30.920 --> 0:08:35.559 on infrastructure, but also indiscriminate attacks on civilians. Children's playgrounds 0:08:35.760 --> 0:08:38.800 blown up, shopping malls blown up. You know, this is 0:08:38.840 --> 0:08:42.040 not these aren't military targets. So this is Putin's way 0:08:42.080 --> 0:08:45.480 of saying, um, you know, we're going to really fight back. 0:08:45.760 --> 0:08:50.640 He's disappointed a new commander of all the troops and 0:08:50.720 --> 0:08:55.400 the Ukraine operation, a man called General Sua Vicin, who 0:08:55.760 --> 0:09:00.160 has a reputation for being particularly brutal from this here 0:09:00.200 --> 0:09:03.280 in civil war and down. He's even served time in jail, 0:09:03.559 --> 0:09:06.240 and he you know, didn't waste any time, having just 0:09:06.400 --> 0:09:09.959 been appointed after Putin was criticized for not doing off 0:09:10.000 --> 0:09:13.960 in Ukraine. And clearly this is his first act um 0:09:14.040 --> 0:09:17.280 and as Putine has warned, this isn't the last one. 0:09:17.960 --> 0:09:19.840 So what does that mean? How do you interpret that? 0:09:19.880 --> 0:09:24.520 How would you advise world leaders with comments like that? Well, 0:09:24.559 --> 0:09:28.400 I think they have to expect more of these indiscriminate bombings. However, 0:09:28.400 --> 0:09:30.480 we do know that Russia hasn't does not have an 0:09:30.480 --> 0:09:34.320 infinite supply of these long range weapons, and they may 0:09:34.400 --> 0:09:37.120 run out of them sooner, maybe than they themselves want 0:09:37.160 --> 0:09:40.120 to admit. I think world leaders have to, you know, 0:09:40.240 --> 0:09:43.280 redouble their efforts to support Ukraine. There is going to 0:09:43.360 --> 0:09:46.199 be more pressure from some people on the Biden administration 0:09:46.559 --> 0:09:51.600 to supply even more lethal and long range weapons to Ukraine. 0:09:51.760 --> 0:09:54.800 Thinks of President Teleski has been asking for and no 0:09:54.880 --> 0:09:57.240 doubt will ask for again when he has beamed into 0:09:57.280 --> 0:10:00.760 this emergency G seven summit to discuss us what's happening. 0:10:01.440 --> 0:10:03.760 So I think that that's where the emphasis will be 0:10:03.800 --> 0:10:05.880 and there will be have to be a discussion is 0:10:05.920 --> 0:10:08.680 there more that we could be doing, uh, particularly with 0:10:08.800 --> 0:10:13.000 air defenses to help y Ukrainian send off these attacks? Angela, 0:10:13.040 --> 0:10:15.959 As Tim mentioned, your latest book is on Vladimir Putin. 0:10:16.000 --> 0:10:18.679 Putin's World, Russia against the West End with the rest 0:10:19.200 --> 0:10:21.520 um get inside Putin's head as much as you can 0:10:21.600 --> 0:10:24.680 for us and tell us tell the world what we 0:10:24.760 --> 0:10:29.000 need to be nervous about right now. Well, the Russians 0:10:29.000 --> 0:10:31.840 aren't winning this war. I think Putin's grip on power 0:10:31.960 --> 0:10:34.360 is now weaker than it's been at any time since 0:10:34.360 --> 0:10:37.080 he came to power twenty two years ago. Uh, he 0:10:37.360 --> 0:10:39.720 just celebrated the seventieth birthday. He thought he was going 0:10:39.760 --> 0:10:43.120 to leave this legacy of conquering Ukraine. So he is, 0:10:43.240 --> 0:10:46.600 from his point of view, cornered. He's under attack from 0:10:46.800 --> 0:10:49.960 people who are more hawkish than he is to show 0:10:50.000 --> 0:10:52.520 that Russia can win. So I think we are a 0:10:52.600 --> 0:10:56.560 dangerous moment. I think we can expect more escalation, at 0:10:56.640 --> 0:11:00.120 least in a conventional way, and less concerned about these 0:11:00.240 --> 0:11:03.560 nuclear threats although uh, you know, President Biden, as you said, 0:11:03.559 --> 0:11:06.520 alluded to them before. Because Russia can do an enormous 0:11:06.559 --> 0:11:09.839 amount of damage to Ukraine without going nuclear. Why are 0:11:09.840 --> 0:11:14.160 you less concerned about the nuclear threat here? Because it 0:11:14.480 --> 0:11:17.160 wouldn't you know, using a tactical nuclear weapon. It would 0:11:17.200 --> 0:11:19.559 set the Ukraine's back a bit, but it wouldn't really 0:11:19.600 --> 0:11:23.080 accomplish the kind of territorial gains that Plutin is trying 0:11:23.120 --> 0:11:26.000 to make, and it would really by breaking a taboo 0:11:26.120 --> 0:11:28.600 like that. It would alienate a number of countries that 0:11:28.679 --> 0:11:31.400 up till now have supported or be neutral. Would it 0:11:31.440 --> 0:11:35.920 begin World War three? Well, it would begin to would 0:11:35.960 --> 0:11:39.080 world War three if it escalated from one tactical nuclear 0:11:39.120 --> 0:11:41.800 weapons to strategic nuclear weapons, the ones that can reach 0:11:41.840 --> 0:11:45.520 the United States. And some people say, we've never had 0:11:45.679 --> 0:11:48.480 a situation where someone's used to a tactical nuclear weapon, 0:11:48.640 --> 0:11:51.280 but in fact, it would escalate quite quickly, and then 0:11:51.320 --> 0:11:53.559 that would be World War three. Servers up my spine 0:11:53.640 --> 0:11:56.400 just by even talking about this, Hey, um, Angela. Before 0:11:56.400 --> 0:11:59.120 we got into this interview, we Tim and I talked 0:11:59.160 --> 0:12:02.320 about a pro an activist group claiming credit for a 0:12:02.320 --> 0:12:04.600 series of disruptions that temporarily knocked the websites of some 0:12:04.760 --> 0:12:08.960 US airports offline. You know, it's traditional warfare, if you will, 0:12:09.080 --> 0:12:12.040 using you know, ground war missiles and so on, but 0:12:12.080 --> 0:12:14.719 it's also a cyber war. How do we need to 0:12:14.760 --> 0:12:18.199 think about that as Russia? As you said, President Putin. 0:12:18.320 --> 0:12:22.199 Putin certainly feels cornered at this point, so I think 0:12:22.240 --> 0:12:25.120 we should expect. In fact, people have wondered why there 0:12:25.120 --> 0:12:27.520 hadn't been more of these kind of cyber attacks. The 0:12:27.559 --> 0:12:30.840 German train system in the last couple of lace days 0:12:30.880 --> 0:12:34.520 were suddenly disrupted in northern Germany. Who did that? So 0:12:34.559 --> 0:12:37.400 I think we we these kind of asymmetric cyber attacks 0:12:37.840 --> 0:12:40.960 UM are probably what's going to happen in the future, 0:12:41.000 --> 0:12:43.800 and we have to be well prepared for that and 0:12:43.840 --> 0:12:45.839 we have to know how to strike back against that. 0:12:46.000 --> 0:12:49.960 So what does this mean potentially for Taiwan, China and 0:12:50.040 --> 0:12:54.679 everyone else? Well, I think for the Chinese UM were 0:12:54.720 --> 0:12:57.560 they're watching what's happening in Ukraine and they're seeing how 0:12:57.600 --> 0:13:00.079 the Ukrainians are fighting back, so they might want to 0:13:00.440 --> 0:13:04.680 how the Taigwanese, also equipped with American weaponry, might fight back. 0:13:04.840 --> 0:13:08.400 And then uh, they're watching the sanctions that were imposed 0:13:08.440 --> 0:13:11.440 on Russia and that presumably those kinds of sanctions would 0:13:11.440 --> 0:13:13.880 be on impost on China. So I don't think what's 0:13:13.920 --> 0:13:16.160 happening it's going to win bold in China. I think 0:13:16.160 --> 0:13:19.040 it would give them pause for thought before they did anything. 0:13:19.160 --> 0:13:22.000 All right, thirty seconds left angela potential off ramp for 0:13:22.080 --> 0:13:25.440 Vladimir Putin? What could it be? I don't see an 0:13:25.480 --> 0:13:28.280 off ramp at the moment because Putin wants the whole 0:13:28.320 --> 0:13:32.120 of Ukraine. So there's there's nothing at the moment I 0:13:32.120 --> 0:13:35.040 think that would work as an off ramp unless Ukraine 0:13:35.080 --> 0:13:38.000 we're willing to see an enormous amount of its territory, 0:13:38.000 --> 0:13:40.439 which is not willing to do. Is it just Ukraine 0:13:40.480 --> 0:13:44.600 or is there more in his sights? Ten seconds? Oh yeah, 0:13:44.600 --> 0:13:46.520 I mean he would like to go further than Ukraine, 0:13:46.520 --> 0:13:48.640 and that was his goal at the beginning. It doesn't 0:13:48.640 --> 0:13:51.319 look as if that's very likely now, so appreciate you. 0:13:51.600 --> 0:13:54.480 Angela Stance, Senior Advisors, Center for Eurasian, Russian and East 0:13:54.520 --> 0:13:57.840 European Studies. Check out her book Putin's World Rush Against 0:13:57.840 --> 0:14:00.400 the West End with the rest. You're listening to Bloomberg 0:14:00.400 --> 0:14:04.280 Business Week on Bloomberg Radio. This is Bloomberg Business Week 0:14:04.440 --> 0:14:08.440 with Carol Messer and Bloomberg Quick Takes Tim Stinovic on 0:14:08.559 --> 0:14:12.000 Bloomberg Radio. She us on fire recent Bloomberg Business Week 0:14:12.000 --> 0:14:14.280 cover story and the dollar problem for the world, remember 0:14:14.320 --> 0:14:16.599 that just recently, and then today out with one of 0:14:16.640 --> 0:14:18.719 the most red stories on the Bloomberg about how the 0:14:18.760 --> 0:14:22.560 most powerful buyers in US treasuries are all bailing at once. 0:14:22.640 --> 0:14:25.040 It's what I call a wait what moment. Liz McCormick 0:14:25.080 --> 0:14:28.040 is Chief correspondent for Global macro Markets with Bloomberg News. 0:14:28.080 --> 0:14:31.960 She's with us right now in the Bloomberg Interactive Broker's studio. Liz, 0:14:32.000 --> 0:14:35.040 good to have you with us this afternoon. So where 0:14:35.040 --> 0:14:38.320 are the biggest players going. I mean we're talking about pensions, 0:14:38.440 --> 0:14:43.240 life insure, life insurers, foreign government's, US commercial banks. Where 0:14:43.240 --> 0:14:45.960 are they going? Well, a lot of them are sitting 0:14:46.000 --> 0:14:48.440 in cash. I mean, of course there's the FED also, 0:14:48.560 --> 0:14:51.400 who they're not a trader, right, so they're doing q 0:14:51.560 --> 0:14:54.280 T now, so instead of buying like Quie, they're rolling 0:14:54.320 --> 0:14:56.960 stuff off. And they were the biggest buyer of treasuries 0:14:57.000 --> 0:15:00.320 in the last couple of years, right, commercial banks, you know, 0:15:00.680 --> 0:15:03.080 as deposits are going down, you know, I know you 0:15:03.120 --> 0:15:05.480 were talking about Jamie Diamond. But as the FED is 0:15:05.520 --> 0:15:09.320 pulled back and there's less reserves, deposits are going down 0:15:09.360 --> 0:15:11.800 also because the interest rates on banks are not so 0:15:11.840 --> 0:15:14.400 good relative to some of the other high yield things, 0:15:14.400 --> 0:15:16.640 so they have less money to invest in treasuries, just 0:15:16.760 --> 0:15:19.440 some of it. There's less money like FED commercial banks, 0:15:19.640 --> 0:15:22.160 other foreign accounts. Some of the local bond yields are 0:15:22.200 --> 0:15:25.000 pretty nice. Yeah, And the headshield in the US is 0:15:25.080 --> 0:15:28.280 kind of negative. You know, so how much? And I 0:15:28.280 --> 0:15:29.680 think in your story you say, if it was just 0:15:29.760 --> 0:15:32.680 one of the overseas buyers, right, it wouldn't maybe be 0:15:32.720 --> 0:15:35.280 such a story. But you're talking about like all of them? 0:15:35.280 --> 0:15:37.560 Are most of them? Are? Many of them? Yeah, the 0:15:37.640 --> 0:15:40.320 major ones, Because you know, sometimes even like in the 0:15:40.360 --> 0:15:43.560 wonky world of supplying demand, editors will be like, that 0:15:43.600 --> 0:15:46.480 doesn't matter too much, Let's go away, you know, let's 0:15:46.520 --> 0:15:48.880 not a good story. But when it's like the big 0:15:48.920 --> 0:15:51.880 players are all going in the same direction, that's like 0:15:51.920 --> 0:15:54.720 a flow story that matters, right, So I think that 0:15:54.880 --> 0:15:57.280 is the story, like, and JP Morgan has done some 0:15:57.320 --> 0:16:00.280 good data on it, breaking down that the key by years, 0:16:00.280 --> 0:16:02.400 and they're saying, we're at a little concerned here. You know, 0:16:02.800 --> 0:16:05.480 you have these players, especially like commercial banks who who 0:16:05.520 --> 0:16:08.600 bought so much as all the liquidity came in going 0:16:08.640 --> 0:16:11.360 the other direction. I mean, I keep saying to myself, 0:16:11.560 --> 0:16:14.200 it's a mix of this now supply demand that's working 0:16:14.200 --> 0:16:17.680 against treasuries. And although we don't know what ends, inflation 0:16:17.720 --> 0:16:21.080 is still staying hot, although Lyle Brainers said some caution, 0:16:21.240 --> 0:16:24.240 but the Feds still being hawkish, So they're both a 0:16:24.280 --> 0:16:26.520 negative for the treasury market. Well, that's what I'm thinking 0:16:26.560 --> 0:16:28.640 when we think about how high yields are go, right. 0:16:28.800 --> 0:16:30.600 I mean, this is a conversation Tim and I have 0:16:30.640 --> 0:16:32.760 and with our TV colleagues of you know, where's the 0:16:32.760 --> 0:16:35.320 bottom inequities and where's the top and yields. So that's 0:16:35.360 --> 0:16:39.600 another dynamic that plays into pushing uppeals even higher exactly. 0:16:39.640 --> 0:16:42.480 And I feel like my daughter says, you don't do that. 0:16:42.520 --> 0:16:44.720 You sound old, but like I feel like I've been 0:16:44.760 --> 0:16:47.760 around for a while, and sometimes I almost like, oh, 0:16:48.080 --> 0:16:50.600 this peak yield thing, like a three and a half 0:16:50.680 --> 0:16:52.920 yield when treasury tenure yields were there, Like that's not 0:16:53.040 --> 0:16:55.160 so bad if you were around a long time. You know, 0:16:55.240 --> 0:16:57.600 we're just kind of used to this zero rate era. 0:16:58.000 --> 0:17:00.200 So I think that's the thing that the door just 0:17:00.280 --> 0:17:02.840 keep getting blown off, like, oh, we couldn't go above 0:17:02.880 --> 0:17:05.360 four and now, of course we went above four in yields, 0:17:05.400 --> 0:17:07.879 and the FED might go to four point six and 0:17:07.920 --> 0:17:11.719 a long a Bloomberg Economics says five percent of you know, 0:17:11.840 --> 0:17:15.120 at the terminal rate. So I think that's the hard thing. 0:17:15.520 --> 0:17:19.000 Are we at the peak? No? You know it's scary, right, 0:17:19.040 --> 0:17:20.560 you know, you don't want to buy when you think 0:17:20.600 --> 0:17:22.879 it could be worse. Right, Well, that's the question, li is. 0:17:22.960 --> 0:17:26.280 I mean, what gets these institutions, these governments to get 0:17:26.320 --> 0:17:29.840 off the sidelines and move from cash back into you know, treasuries. 0:17:30.480 --> 0:17:33.240 Well as far as the central banks, I think they're 0:17:33.280 --> 0:17:36.320 backs to the wall, right because they for now have 0:17:36.480 --> 0:17:38.520 to do this q til though the Bank of England 0:17:38.840 --> 0:17:41.639 did a finessing thing of a market structure kind of 0:17:42.240 --> 0:17:44.840 you know, kind of call it financial stability support, as 0:17:44.880 --> 0:17:47.160 you know, for the long end, I think the foreign 0:17:47.200 --> 0:17:50.960 private accounts, it depends on when yields get attractive enough, right, 0:17:51.040 --> 0:17:54.560 maybe when the dollar eases off, because that's making hedging 0:17:54.640 --> 0:17:57.840 costs more expensive. It's all relative value. If it gets 0:17:57.880 --> 0:18:00.359 more appealing, they may come back. Or I mean the 0:18:00.440 --> 0:18:04.680 US was first and lost like first but fastest with hiking, right, 0:18:04.960 --> 0:18:07.800 So maybe if if we slowly get signs that they're 0:18:07.800 --> 0:18:10.479 going to at least and I don't like the word pivot, 0:18:10.640 --> 0:18:14.080 but maybe slowly from this room, yeah, it's like, you know, 0:18:14.119 --> 0:18:17.840 I keep thinking, Palasa, let's retire transitory, Let's retire pivot please. 0:18:17.920 --> 0:18:20.960 You know, week a long time and one of the 0:18:21.560 --> 0:18:24.159 one of the shows without actually saying I kind of 0:18:24.200 --> 0:18:27.640 pointed out, but yeah, and I ruined it, brought it back. 0:18:28.000 --> 0:18:30.800 But m but that's what I think. What I think 0:18:30.800 --> 0:18:32.480 we need to see like the whites of the eyes 0:18:32.480 --> 0:18:34.800 of the Fed actually slowing, you know, like they used 0:18:34.800 --> 0:18:37.000 to say about inflation. So when maybe they finally do 0:18:37.080 --> 0:18:40.240 a fifty racist point hike instead us supposedly we're looking 0:18:40.240 --> 0:18:42.639 for another seventy five that's four in a row. I 0:18:42.640 --> 0:18:45.639 mean that's a lot. So is it just a market 0:18:45.760 --> 0:18:47.680 cycle when it comes to treasuries, because I guess what 0:18:47.720 --> 0:18:50.800 I always think about is we need foreign buyers to 0:18:50.800 --> 0:18:53.439 buy US debt, right, That's what you know, keeps the 0:18:53.480 --> 0:18:56.440 US government going. So is it something more? We've always 0:18:56.480 --> 0:18:58.320 talked about this with you know, in regards to China. 0:18:58.560 --> 0:19:00.840 If it gets to be political, we'll trying to stop buying. 0:19:00.840 --> 0:19:02.560 But is it Is it just a case of where 0:19:02.600 --> 0:19:04.880 in this is a market cycle we're in right now 0:19:04.920 --> 0:19:07.199 and that's why you have foreign buyers pulling back? Or 0:19:07.240 --> 0:19:10.120 is there something more at playing we need to be concerned? Well, 0:19:10.200 --> 0:19:13.440 you know, it's interesting on the foreign buyers account um 0:19:13.640 --> 0:19:16.880 they have been Remember China was such the force and 0:19:16.920 --> 0:19:20.240 they if you forget about this, this recent stuff. They've 0:19:20.240 --> 0:19:22.800 been slowly less of a force, you know, number one, 0:19:22.840 --> 0:19:24.919 because the Fed is bought a lot. But you know, 0:19:25.000 --> 0:19:28.040 foreign accounts haven't had as much sway as they had 0:19:28.240 --> 0:19:31.200 let's say ten years ago, because they were the main force. 0:19:31.240 --> 0:19:34.800 Everyone was worried like, oh my gosh, if China moves away, um, 0:19:34.840 --> 0:19:36.720 but they still matter a lot. I mean when I 0:19:36.720 --> 0:19:39.240 say they have less force, you know, say for months 0:19:39.280 --> 0:19:41.879 and months their amount of holdings went down, but they 0:19:41.880 --> 0:19:44.119 still hold a heck of a lot. Right, So I 0:19:44.160 --> 0:19:46.520 think it's a market cycle and we're eventually going to 0:19:46.600 --> 0:19:49.679 have a recession. I mean, I want to say, Bernanke, 0:19:49.760 --> 0:19:52.320 where's my brain? But Pal is said, we're trying to 0:19:52.520 --> 0:19:57.760 get about price, so he's all over today. But Pal 0:19:57.920 --> 0:20:00.200 is trying to pull this off without a recession, maybe 0:20:00.200 --> 0:20:03.359 a soft landing. But you know, history shows that probably 0:20:03.600 --> 0:20:05.480 we're going to have a slowdown that will start, Like 0:20:05.520 --> 0:20:09.960 you're saying, the cycle, let's go down, Investors will come back, Yes, exactly. 0:20:10.280 --> 0:20:12.399 It's it worth because central banks are in such a 0:20:12.400 --> 0:20:14.959 pickle right now. Is it worth distinguishing their goals with 0:20:15.040 --> 0:20:17.960 the other institutions that usually buy up for in debt, 0:20:17.960 --> 0:20:20.879