1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:34,400 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Can 5 00:00:34,440 --> 00:00:38,040 Speaker 1: we give Professor Faulstein a proper introduction please, I insist. 6 00:00:38,360 --> 00:00:40,839 Speaker 1: The former chairman of the Council of Economic Advisors, the 7 00:00:40,840 --> 00:00:45,040 Speaker 1: former Chief ECONOP advisor to the President Ronald Reagan, Marty 8 00:00:45,120 --> 00:00:47,880 Speaker 1: fauld Stein, the Harvard University Professor of Economics joints this. 9 00:00:47,920 --> 00:00:50,600 Speaker 1: Now that's better, isn't it. It's better. That's better, Marty. 10 00:00:50,640 --> 00:00:52,680 Speaker 1: Great to see you're good to be back on radio. 11 00:00:53,040 --> 00:00:56,760 Speaker 1: In your words, Marty, it is not a China US 12 00:00:57,120 --> 00:01:01,760 Speaker 1: trade war. Why not. What it's really about is not trade. 13 00:01:01,840 --> 00:01:07,319 Speaker 1: It's about China stealing US technology, stealing and by forcing 14 00:01:07,360 --> 00:01:13,840 Speaker 1: American companies who do business in China to transfer their 15 00:01:13,880 --> 00:01:19,200 Speaker 1: technology to Chinese firms, and also the Chinese stealing through 16 00:01:19,240 --> 00:01:23,600 Speaker 1: the internet. So, Marzi, this riises a question. One of 17 00:01:23,640 --> 00:01:27,280 Speaker 1: the moves forward, the point of progress we've seen this 18 00:01:27,319 --> 00:01:30,039 Speaker 1: week has been the Chinese set to be offering to 19 00:01:30,120 --> 00:01:34,440 Speaker 1: buy even more agricultural product. Sounds like for you at least, Marty, 20 00:01:34,520 --> 00:01:36,200 Speaker 1: that's not gonna get it done. That's not gonna be 21 00:01:36,319 --> 00:01:39,039 Speaker 1: enough to broak a deal. It's the opposite that is, 22 00:01:39,120 --> 00:01:43,119 Speaker 1: they're saying, let's not talk about technology theft. Let's talk 23 00:01:43,160 --> 00:01:47,600 Speaker 1: about the trade deficit between China and the US, and 24 00:01:47,760 --> 00:01:50,600 Speaker 1: we the Chinese, can solve that problem. We can buy 25 00:01:50,640 --> 00:01:53,400 Speaker 1: more of this that the other thing. But that doesn't 26 00:01:53,440 --> 00:01:58,400 Speaker 1: deal with the true underlying technology theft, and it doesn't 27 00:01:58,480 --> 00:02:02,360 Speaker 1: change the overall you has trade deficit. It'll shift it 28 00:02:02,440 --> 00:02:05,600 Speaker 1: from China to the rest of the world. The President 29 00:02:05,760 --> 00:02:09,680 Speaker 1: might actually be happy if the bilateral deficit is addressed, 30 00:02:09,880 --> 00:02:13,760 Speaker 1: even if the I T issues are not, and bassillor 31 00:02:13,840 --> 00:02:16,720 Speaker 1: Lightheiser may have a very different point of view on this, Marty. 32 00:02:17,280 --> 00:02:20,200 Speaker 1: Do you see the prospect of the President actually accepting 33 00:02:20,280 --> 00:02:22,840 Speaker 1: this kind of movement from the Chinese, because ultimately, for 34 00:02:22,919 --> 00:02:26,400 Speaker 1: him he might need a win, and anything that moves 35 00:02:26,440 --> 00:02:31,160 Speaker 1: the bilateral deficit in by some form of magnitude palatable 36 00:02:31,200 --> 00:02:33,680 Speaker 1: for the president would be sufficient enough for him. I 37 00:02:33,760 --> 00:02:36,960 Speaker 1: hope not. I hope not. I hope that he's listening 38 00:02:37,040 --> 00:02:41,120 Speaker 1: hard to the voices of Lighthouser and others who are 39 00:02:41,240 --> 00:02:46,520 Speaker 1: saying that's just a diversion from the real issue. To 40 00:02:46,600 --> 00:02:48,880 Speaker 1: get the real interaty addressed, though, you need the Chinese 41 00:02:48,880 --> 00:02:52,720 Speaker 1: to acknowledge the issue is an issue. At the moment, Professor, 42 00:02:53,080 --> 00:02:56,079 Speaker 1: that's not happening. But the US is making it very 43 00:02:56,120 --> 00:02:58,320 Speaker 1: clear to them, as we did not in the beginning. 44 00:02:58,680 --> 00:03:02,040 Speaker 1: In the beginning we talked about the trade deficit, wasn't 45 00:03:02,080 --> 00:03:06,520 Speaker 1: clear what the administration wanted. We're X number of years 46 00:03:06,560 --> 00:03:08,920 Speaker 1: on from a February morning where we all woke up 47 00:03:08,919 --> 00:03:10,840 Speaker 1: in America to the fact that our president of the 48 00:03:10,919 --> 00:03:13,679 Speaker 1: United States was envisioned. Were you on that trip with 49 00:03:13,760 --> 00:03:16,480 Speaker 1: President Nixon? By any chance? I was not, But but 50 00:03:16,720 --> 00:03:18,960 Speaker 1: we were all on that trip with the excitement and 51 00:03:19,000 --> 00:03:23,000 Speaker 1: the history making of it. Are the Chinese now any 52 00:03:23,120 --> 00:03:28,160 Speaker 1: different than they were then about just waiting out the 53 00:03:28,200 --> 00:03:32,640 Speaker 1: American and Western process. Well, they see themselves as much 54 00:03:32,680 --> 00:03:36,640 Speaker 1: more important, much bigger. They see that as an economy 55 00:03:36,760 --> 00:03:40,840 Speaker 1: their real size is equal to ours, equal to the 56 00:03:40,880 --> 00:03:44,119 Speaker 1: European Union, and that gives them a lot a lot 57 00:03:44,160 --> 00:03:49,160 Speaker 1: of leverage with the companies of Asia who want to 58 00:03:49,200 --> 00:03:54,120 Speaker 1: trade with them. So they've got a very different sense 59 00:03:54,200 --> 00:03:56,800 Speaker 1: of their role in the world. Right to catch up 60 00:03:56,800 --> 00:03:58,520 Speaker 1: with you as a whitse It's fantastic to have you 61 00:03:58,560 --> 00:04:01,480 Speaker 1: with us in the studio, Matt found Stein, the Hovid 62 00:04:01,680 --> 00:04:21,400 Speaker 1: University Professor of economics. If you are interested in how 63 00:04:21,440 --> 00:04:26,280 Speaker 1: every big merger craters, this is the conversation of the day. 64 00:04:26,320 --> 00:04:31,200 Speaker 1: Tara la Chapel has been brutal about not just Craft 65 00:04:31,240 --> 00:04:34,960 Speaker 1: and all the rest of it, but every single combination. 66 00:04:35,520 --> 00:04:39,640 Speaker 1: The obligatory press conference, all the grinning, all the smiling, 67 00:04:39,960 --> 00:04:42,400 Speaker 1: and the memo today from Tara la Chapelle is right 68 00:04:42,440 --> 00:04:46,159 Speaker 1: to the point. Warren Buffett those investors more than a 69 00:04:46,240 --> 00:04:50,760 Speaker 1: memo this year, Tara, what did he get wrong? So 70 00:04:51,240 --> 00:04:54,240 Speaker 1: with Warren Buffett, his letter is scheduled to come out tomorrow. 71 00:04:54,600 --> 00:04:57,120 Speaker 1: I think that accessors want to hear more from him 72 00:04:57,160 --> 00:05:00,960 Speaker 1: about his um strategy around invest singing tech stocks. He 73 00:05:01,000 --> 00:05:03,080 Speaker 1: seems to be jumping in and out of those, and 74 00:05:03,160 --> 00:05:05,720 Speaker 1: also more about the succession plan and what's going to 75 00:05:05,760 --> 00:05:08,920 Speaker 1: happen with all. Okay, but think today the big news 76 00:05:09,000 --> 00:05:12,240 Speaker 1: is Craft. Hi, come on, okay, Tara, I just did 77 00:05:12,279 --> 00:05:16,880 Speaker 1: the common size balance sheet analysis. The percentage of goodwill 78 00:05:17,000 --> 00:05:23,800 Speaker 1: on Pepsicola's balance sheet is the percentage of goodwill bad 79 00:05:23,800 --> 00:05:29,200 Speaker 1: will on Craft's financially engineered balance sheet. It's ginormous. It's 80 00:05:29,240 --> 00:05:33,200 Speaker 1: like thirty eight or thirty nine percent a it's failed 81 00:05:33,680 --> 00:05:36,120 Speaker 1: be they got more to write down in the future. 82 00:05:36,480 --> 00:05:39,920 Speaker 1: How did this happen? You know, I think a lot 83 00:05:39,960 --> 00:05:42,279 Speaker 1: of people were just kind of drinking the koolie. You know, 84 00:05:42,600 --> 00:05:47,080 Speaker 1: Craft Highns for a while had the leading operating margins 85 00:05:47,080 --> 00:05:49,640 Speaker 1: in this industry, so they're extremely profitable, and I think 86 00:05:49,640 --> 00:05:52,520 Speaker 1: people thought, you know, this strategy, maybe it does work, 87 00:05:52,560 --> 00:05:55,839 Speaker 1: but it was very shortsighted. Basically, they just got the business. 88 00:05:55,880 --> 00:05:58,279 Speaker 1: They cut as many costs as they can, really weren't 89 00:05:58,279 --> 00:06:01,279 Speaker 1: investing much in the brands, and and you know, that 90 00:06:01,279 --> 00:06:03,960 Speaker 1: strategy only works for so long until you have us 91 00:06:03,960 --> 00:06:06,240 Speaker 1: flip up like this, and then suddenly they need to 92 00:06:06,279 --> 00:06:09,120 Speaker 1: do another mega merger to sort of hide that, bring 93 00:06:09,160 --> 00:06:11,680 Speaker 1: another company in that they can go back to cutting costs, 94 00:06:11,680 --> 00:06:15,599 Speaker 1: because with the businesses they have, you can't slash costs 95 00:06:15,600 --> 00:06:17,800 Speaker 1: into perpetuity. That just doesn't work. And that's what we're 96 00:06:17,800 --> 00:06:20,279 Speaker 1: seeing here. Kick. Should I just say that that was 97 00:06:20,320 --> 00:06:22,960 Speaker 1: the ultimate cf A punt of the week. What was 98 00:06:23,000 --> 00:06:25,960 Speaker 1: that she can't drink the kool a craft on school. 99 00:06:25,960 --> 00:06:30,840 Speaker 1: Its very very smart. Actually missed that tower that was 100 00:06:30,880 --> 00:06:34,640 Speaker 1: actually fantastic. It's four ab A colleague kre Brad Allison 101 00:06:34,680 --> 00:06:36,760 Speaker 1: wrote this morning, I actually think this is quite interesting 102 00:06:36,800 --> 00:06:39,680 Speaker 1: that Berkshire Hathaway's Warren Buffett will go out there this 103 00:06:39,720 --> 00:06:43,200 Speaker 1: weekend and perhaps talk about the struggle to locate great deals. 104 00:06:43,760 --> 00:06:46,120 Speaker 1: The real question, Tara should have been the deals that 105 00:06:46,160 --> 00:06:49,080 Speaker 1: he had made just aren't turning out that great either. 106 00:06:49,839 --> 00:06:52,080 Speaker 1: This weekend, we're going to spend this weekend talking about 107 00:06:52,320 --> 00:06:54,400 Speaker 1: finding great deals and how hard it is to find 108 00:06:54,440 --> 00:06:57,560 Speaker 1: great deals, and and not spend much time when we 109 00:06:57,600 --> 00:06:59,600 Speaker 1: should be looking back at the deals that have been 110 00:06:59,600 --> 00:07:02,920 Speaker 1: made exactly and you know, a lot of his letters 111 00:07:02,920 --> 00:07:05,640 Speaker 1: he spent as sort of aud top seeing some of 112 00:07:05,640 --> 00:07:07,920 Speaker 1: the business decisions they've made, you know, really getting into 113 00:07:07,960 --> 00:07:11,160 Speaker 1: the weeds of insurance and they're different units. But he doesn't, 114 00:07:11,480 --> 00:07:14,360 Speaker 1: you know, really talk as much about Craft for example, 115 00:07:14,360 --> 00:07:17,120 Speaker 1: and some of these investments that they've made on the 116 00:07:17,200 --> 00:07:20,560 Speaker 1: on the stock market side that really you know nothing, 117 00:07:20,680 --> 00:07:23,120 Speaker 1: we are puzzling to investors. They don't align with what 118 00:07:23,160 --> 00:07:26,000 Speaker 1: we know about Buffet and his belief. It's very odd. 119 00:07:26,080 --> 00:07:28,840 Speaker 1: Hit Oh stop. His belief is to get a preferred coupon. 120 00:07:28,960 --> 00:07:32,360 Speaker 1: That's all it comes down to, is his Yeah, but 121 00:07:32,400 --> 00:07:34,800 Speaker 1: his Buffet one on one is his eight percent or 122 00:07:34,800 --> 00:07:38,160 Speaker 1: whatever it is, preferred coupon. Is that a threat with 123 00:07:38,280 --> 00:07:42,280 Speaker 1: this right down and with the equity price cratering, or 124 00:07:42,280 --> 00:07:45,760 Speaker 1: does he still get his coupon? I mean, I don't 125 00:07:45,760 --> 00:07:47,680 Speaker 1: know the details are on that, but I would suspect 126 00:07:47,680 --> 00:07:50,240 Speaker 1: that we're getting to the point where Buffett really needs 127 00:07:50,240 --> 00:07:52,240 Speaker 1: to consider whether he stays in the stock. They are 128 00:07:52,280 --> 00:07:55,160 Speaker 1: the largest shareholder, even bigger than three GS, and at 129 00:07:55,160 --> 00:07:58,200 Speaker 1: this point it's really hard to defend. I'm sure that 130 00:07:58,400 --> 00:08:00,080 Speaker 1: he's still you know, they've made a ton of this 131 00:08:00,240 --> 00:08:03,680 Speaker 1: investment because of that this guy. How did they how 132 00:08:03,680 --> 00:08:06,400 Speaker 1: did they quote unquote make a ton on this investment. 133 00:08:06,520 --> 00:08:09,040 Speaker 1: So the way this works, so Buffett had helped three 134 00:08:09,040 --> 00:08:13,200 Speaker 1: G buy out hind and then they helped bankroll the 135 00:08:13,240 --> 00:08:16,480 Speaker 1: deal with Craft and Hynes that brought those two companies together, 136 00:08:16,720 --> 00:08:19,400 Speaker 1: and as part of that, Buffett got preferred shares, which 137 00:08:19,800 --> 00:08:23,920 Speaker 1: the company eventually bought back from them, but has left 138 00:08:23,920 --> 00:08:27,800 Speaker 1: Buffet with this huge stake in the common shares. But 139 00:08:28,280 --> 00:08:29,440 Speaker 1: at the end of the day, you know, they did 140 00:08:29,760 --> 00:08:31,840 Speaker 1: make out pretty well because for a while, you know, 141 00:08:32,000 --> 00:08:33,480 Speaker 1: they were getting see this, I think it was a 142 00:08:33,559 --> 00:08:35,680 Speaker 1: nine percent coupon, and on top of it, a stock 143 00:08:35,800 --> 00:08:37,400 Speaker 1: was doing okay for a while, and everyone in the 144 00:08:37,400 --> 00:08:40,040 Speaker 1: industry felt this need to mimic them. So it felt like, 145 00:08:40,280 --> 00:08:42,520 Speaker 1: you know, these guys are the ones to copy that 146 00:08:42,600 --> 00:08:44,880 Speaker 1: they're doing the right thing. It was only a matter 147 00:08:44,920 --> 00:08:47,040 Speaker 1: of time before you know, the curtain would fall and 148 00:08:47,040 --> 00:08:50,559 Speaker 1: we would see that this strategy simply is flawed. And 149 00:08:50,800 --> 00:08:53,280 Speaker 1: you know, I can't imagine how much one Berkshire would say. 150 00:08:53,280 --> 00:08:56,000 Speaker 1: Buffett Um exited the board last year, so he's no 151 00:08:56,040 --> 00:08:59,120 Speaker 1: longer an insider at the company. He's simply a shareholder. Okay, 152 00:09:00,000 --> 00:09:02,559 Speaker 1: thanks so much, folks. I'll get out on Twitter. Cherylas 153 00:09:02,640 --> 00:09:05,959 Speaker 1: Chapelle Warren Buffeto's investors more than a memo this year. 154 00:09:06,000 --> 00:09:10,280 Speaker 1: It's a terrific precursor. Thank you rather to that meeting 155 00:09:10,320 --> 00:09:30,800 Speaker 1: and normal outspoken of fantastic schwap Since for Financial Research, 156 00:09:30,920 --> 00:09:34,560 Speaker 1: chief fixed income strategist Take Kathy. Great to catch up 157 00:09:34,559 --> 00:09:37,200 Speaker 1: with you what I keep hearing from a lot of 158 00:09:37,200 --> 00:09:40,320 Speaker 1: people on the bye side. Her from Pimco. Yesterday, I 159 00:09:40,320 --> 00:09:42,559 Speaker 1: caught up with Mark kiss all over there. It's to 160 00:09:42,679 --> 00:09:45,360 Speaker 1: fade the strength. It's this theme of fading the strength, 161 00:09:45,400 --> 00:09:47,880 Speaker 1: looking to build cash and go up in quality. Does 162 00:09:47,920 --> 00:09:51,120 Speaker 1: that resonate with you, Kathy? Yeah, yeah, good morning, Thanks 163 00:09:51,160 --> 00:09:53,480 Speaker 1: for having me on. Um. Yeah, we've been we've been 164 00:09:53,520 --> 00:09:58,600 Speaker 1: actually suggesting moving up in credit quality for quite some time. Um. 165 00:09:58,800 --> 00:10:01,760 Speaker 1: I think this, this big move we've had since the 166 00:10:01,800 --> 00:10:05,200 Speaker 1: first of the year, since about Christmas Eve, uh, in 167 00:10:05,360 --> 00:10:09,800 Speaker 1: credit and lower quality credits should be faded. I think. Um, 168 00:10:09,840 --> 00:10:12,160 Speaker 1: there's just really not a lot of substance behind it. 169 00:10:12,280 --> 00:10:14,840 Speaker 1: And when you look at the risk reward trade offs, 170 00:10:14,880 --> 00:10:16,880 Speaker 1: you're saying, well, how much how much reward am I 171 00:10:16,920 --> 00:10:19,840 Speaker 1: getting at these spreads for the risk I'm taking? And 172 00:10:19,840 --> 00:10:22,600 Speaker 1: it doesn't look all that attractive. So, Kathy, where aren't we? 173 00:10:22,640 --> 00:10:26,280 Speaker 1: Are you at about four d basis points over correct? Yeah? 174 00:10:26,800 --> 00:10:28,480 Speaker 1: Is that too tight for you? Then, Kathy, you just 175 00:10:28,480 --> 00:10:32,360 Speaker 1: think that's too tight? Um. You know we're officially neutral here, 176 00:10:32,800 --> 00:10:36,160 Speaker 1: but I would say that it's a bit tight considering 177 00:10:36,840 --> 00:10:39,680 Speaker 1: the risk that we get some downgrades from the triple 178 00:10:39,760 --> 00:10:43,320 Speaker 1: Bees into the junk area. Um, that could overwhelm it. 179 00:10:43,400 --> 00:10:46,680 Speaker 1: And we really still aren't clear on what the FED 180 00:10:46,840 --> 00:10:49,640 Speaker 1: is doing Uh, we know that they're sitting on the sidelines, 181 00:10:49,679 --> 00:10:51,719 Speaker 1: but we don't really know what the next move is 182 00:10:51,760 --> 00:10:54,080 Speaker 1: going to be. Keathy Jones, Just so you understand where 183 00:10:54,080 --> 00:10:56,199 Speaker 1: are we were four and a half hours away from 184 00:10:56,200 --> 00:10:59,199 Speaker 1: the real yields scene on Bloomberg TV on bonds. With 185 00:10:59,400 --> 00:11:02,120 Speaker 1: that mentioned, Kathy, is there any real yield out there? 186 00:11:02,480 --> 00:11:05,640 Speaker 1: I mean, inflation is lower, so do I feel better 187 00:11:05,679 --> 00:11:09,200 Speaker 1: about my inflation and just a yield? Well, there are 188 00:11:09,880 --> 00:11:12,560 Speaker 1: the real yields are higher than they used to be. Okay, 189 00:11:12,679 --> 00:11:14,760 Speaker 1: so when we have the zero industry policy, it was 190 00:11:14,760 --> 00:11:17,280 Speaker 1: really tough to find any real yield. You can find 191 00:11:17,320 --> 00:11:19,640 Speaker 1: a little bit out there, but it's not you know, 192 00:11:19,679 --> 00:11:23,880 Speaker 1: it's not fantastic. It isn't going likely going back to 193 00:11:23,920 --> 00:11:27,559 Speaker 1: where it used to be prior to the financial crisis. Um, 194 00:11:27,559 --> 00:11:30,880 Speaker 1: we just don't don't see nominal rates moving up that 195 00:11:30,960 --> 00:11:33,599 Speaker 1: much relative to inflation. Rich Trueman, did you get that 196 00:11:33,679 --> 00:11:36,400 Speaker 1: where Ms Jones said the real yield is not fantastic? 197 00:11:36,559 --> 00:11:39,240 Speaker 1: Can we put that into an ad ad campaign? Okay, 198 00:11:39,280 --> 00:11:42,160 Speaker 1: that's not what she meant. She's a regular on the show, 199 00:11:43,480 --> 00:11:48,200 Speaker 1: your regular on the shows, Cathy. You enjoyed the program, 200 00:11:48,240 --> 00:11:50,800 Speaker 1: don't you? Oh? I love the program. It's my favorite. 201 00:11:51,040 --> 00:11:55,360 Speaker 1: It's my favorite TV show. God like that. Do you 202 00:11:55,559 --> 00:12:00,400 Speaker 1: like that, Kane? Do you sleep through Limbeg's veilance something TV? 203 00:12:00,679 --> 00:12:06,680 Speaker 1: Lis Ane Saunders doesn't treat me like Kathy. This idea 204 00:12:06,760 --> 00:12:09,560 Speaker 1: of going up in quality just for people not familiar 205 00:12:10,040 --> 00:12:13,280 Speaker 1: with fixed income, What does that ultimately means? Specifically? What 206 00:12:13,400 --> 00:12:16,680 Speaker 1: is coming up in quality mean? Well, I think within 207 00:12:16,880 --> 00:12:20,640 Speaker 1: to say, the investment grade corporate bond area, now about 208 00:12:20,640 --> 00:12:23,080 Speaker 1: half of that university, maybe even a little bit more 209 00:12:23,400 --> 00:12:27,280 Speaker 1: is the lowest UH tier triple B. So we would 210 00:12:27,280 --> 00:12:32,280 Speaker 1: suggest that you you move up and into the say 211 00:12:32,320 --> 00:12:36,000 Speaker 1: the A rated bonds, not abandoned triple be entirely, but 212 00:12:36,120 --> 00:12:40,439 Speaker 1: certainly not concentrate there. And it's easy, particularly if you're 213 00:12:40,480 --> 00:12:43,520 Speaker 1: in a passive strategy that just follows an index, to 214 00:12:43,600 --> 00:12:46,800 Speaker 1: get overweighted in the lower tiers of credit quality. So 215 00:12:46,960 --> 00:12:50,280 Speaker 1: we're suggesting move up at least divide out between the 216 00:12:50,280 --> 00:12:53,200 Speaker 1: triple bs and and some A rated bonds. And in 217 00:12:53,360 --> 00:12:55,680 Speaker 1: the junk world the same story. I mean, if we're 218 00:12:56,200 --> 00:12:59,640 Speaker 1: even within junk, if you're heavily concentrated in the triple 219 00:12:59,679 --> 00:13:02,440 Speaker 1: C to your risk of default, getting some bonds at 220 00:13:02,480 --> 00:13:05,920 Speaker 1: default is very high if we go into a slowdown 221 00:13:05,960 --> 00:13:08,160 Speaker 1: in the economy. I mean this, what you just said, 222 00:13:08,160 --> 00:13:11,319 Speaker 1: they're cat is extremely important because people are not buying 223 00:13:11,360 --> 00:13:15,559 Speaker 1: individual bonds nowadays. They're buying indexes, They're buying ETFs, are 224 00:13:15,559 --> 00:13:21,079 Speaker 1: buying segmented Are our listeners too segmented in your bond world? 225 00:13:21,400 --> 00:13:26,600 Speaker 1: Should they be buying more blended et fs and portfolios? Well, 226 00:13:26,640 --> 00:13:28,600 Speaker 1: you know, we we like e TF so we like 227 00:13:28,679 --> 00:13:31,880 Speaker 1: passive strategies because they're really you know, provide you a 228 00:13:31,880 --> 00:13:35,559 Speaker 1: lot of liquidity and a very cost effective way to invest. 229 00:13:35,600 --> 00:13:38,200 Speaker 1: So I wouldn't abandon it entirely, but yeah, we do 230 00:13:38,320 --> 00:13:41,120 Speaker 1: think you need to be somewhat strategic here and and 231 00:13:41,200 --> 00:13:45,520 Speaker 1: even tactical in how you allocate within the passive in 232 00:13:45,559 --> 00:13:49,160 Speaker 1: the passive world, because it's been pretty easy for a 233 00:13:49,240 --> 00:13:52,840 Speaker 1: very long time as asset prices kind of moved up 234 00:13:52,880 --> 00:13:54,880 Speaker 1: with the FED being very easy, and we've had a 235 00:13:54,920 --> 00:13:57,559 Speaker 1: little bit of that year to day. But when things 236 00:13:57,720 --> 00:14:01,080 Speaker 1: change is going to get more challenging. Jiants always criites 237 00:14:01,080 --> 00:14:03,520 Speaker 1: a catch up with you. Thank you. She said the 238 00:14:03,559 --> 00:14:07,800 Speaker 1: real yield five times in the interview. I kept counting. No, 239 00:14:07,960 --> 00:14:25,200 Speaker 1: that's great, Cathy. Thank you strategist. I want to make 240 00:14:25,240 --> 00:14:28,080 Speaker 1: clearer the markets just shifted. There's no other way to 241 00:14:28,120 --> 00:14:31,120 Speaker 1: put it. On a Friday morning, we had higher yields. 242 00:14:31,120 --> 00:14:34,480 Speaker 1: A thirty year bond with a vengeance has come lower 243 00:14:34,560 --> 00:14:38,720 Speaker 1: yield three basis points to four digits three point zero 244 00:14:38,800 --> 00:14:42,440 Speaker 1: one nine. The abruptness of that is sobering, with a 245 00:14:42,520 --> 00:14:46,480 Speaker 1: tenure two point six six percent green on the screen 246 00:14:46,560 --> 00:14:50,720 Speaker 1: on futures. But also sterling comes in abruptly in the 247 00:14:50,840 --> 00:14:54,760 Speaker 1: Euro one thirteen thirty seven. And as Karen mentioned there, 248 00:14:54,800 --> 00:15:01,400 Speaker 1: it is Samsonite, Caterpillar, and Xerox to be a list 249 00:15:01,440 --> 00:15:05,320 Speaker 1: of companies that we would get to. She is senior 250 00:15:05,400 --> 00:15:09,120 Speaker 1: vice president for TIT for TAT Trade, UH for Vanguard, 251 00:15:09,240 --> 00:15:14,120 Speaker 1: and Matthias joins us now supremely qualified on Washington on 252 00:15:14,280 --> 00:15:17,600 Speaker 1: our domestic and international relations. And I should point out 253 00:15:17,640 --> 00:15:20,720 Speaker 1: she's a member of the CFA Institute, so unlike so 254 00:15:20,760 --> 00:15:24,560 Speaker 1: many in Washington, she actually understands the bid and they 255 00:15:24,600 --> 00:15:27,360 Speaker 1: ask and thrilled to have you with today what's the bid? 256 00:15:27,360 --> 00:15:30,800 Speaker 1: And ask on American trade right now? It's so interesting. 257 00:15:31,160 --> 00:15:33,840 Speaker 1: You know, trade takes forever, and you can achieve so 258 00:15:33,920 --> 00:15:36,440 Speaker 1: much just by threatening, Like look at the markets this morning. 259 00:15:36,920 --> 00:15:39,040 Speaker 1: What we're doing with China and with Europe, that is 260 00:15:39,080 --> 00:15:40,720 Speaker 1: what is going on right now. There's a lot of 261 00:15:40,800 --> 00:15:46,720 Speaker 1: chess thumping, silver back, gorilla posing power posing, to paraphrase Amy, 262 00:15:46,720 --> 00:15:50,960 Speaker 1: good morning meeting at Bloomberg, surveillance to continue. So what 263 00:15:51,080 --> 00:15:54,480 Speaker 1: happens after the chess thumping, Well, that's the interesting thing. Trade, 264 00:15:54,520 --> 00:15:57,640 Speaker 1: Real trade agreements take a long time to accomplish. Tariffs 265 00:15:57,680 --> 00:15:59,600 Speaker 1: you can slap them on right away, you can do 266 00:15:59,680 --> 00:16:02,720 Speaker 1: some political damage. So I think this is just a 267 00:16:02,760 --> 00:16:05,880 Speaker 1: moment where everyone's trying to to to pile their chips 268 00:16:05,960 --> 00:16:08,040 Speaker 1: up on the table. So when they really start playing 269 00:16:08,080 --> 00:16:10,960 Speaker 1: the game, when they really start negotiating trade agreements, they 270 00:16:10,960 --> 00:16:14,120 Speaker 1: have something to play with. So I would I would 271 00:16:14,200 --> 00:16:16,800 Speaker 1: read through a lot of it as an investment. But 272 00:16:16,880 --> 00:16:21,040 Speaker 1: it's a unilateral, bilateral discussion, and we're all at tuned 273 00:16:21,040 --> 00:16:25,080 Speaker 1: to bilateral or multilateral that is right. Solutions are they 274 00:16:25,120 --> 00:16:29,160 Speaker 1: out there? I do think there are some multilateral solutions 275 00:16:29,160 --> 00:16:31,840 Speaker 1: that are still possible. We have a president who is very, 276 00:16:31,960 --> 00:16:35,520 Speaker 1: very bilaterally focused on trade. Obviously he's trying to you know, 277 00:16:35,760 --> 00:16:38,240 Speaker 1: carve off and do one on one negotiations with with 278 00:16:38,320 --> 00:16:40,720 Speaker 1: the major trading partners. But I do think the European 279 00:16:40,840 --> 00:16:44,680 Speaker 1: Union will stick together on the trading front. Um. You know, 280 00:16:44,720 --> 00:16:47,040 Speaker 1: these this this headline that we just had this morning 281 00:16:47,040 --> 00:16:51,160 Speaker 1: about Caterpillar or Xerox and Samsonite uh tariffs from Europe. 282 00:16:51,400 --> 00:16:54,880 Speaker 1: M is sort of a positioning play. But I think 283 00:16:55,000 --> 00:16:56,880 Speaker 1: I think let's like bring it back up a little 284 00:16:56,920 --> 00:17:00,520 Speaker 1: bit global trade right now, global trade disc beautes are 285 00:17:00,560 --> 00:17:04,800 Speaker 1: a proxy for people's worry about global growth. Okay, but 286 00:17:05,359 --> 00:17:07,400 Speaker 1: you know the Bentley was down today, so I didn't 287 00:17:07,400 --> 00:17:09,479 Speaker 1: bring it into the office early, and I came in 288 00:17:09,480 --> 00:17:13,480 Speaker 1: in a fine German automobile. Why can't we have no 289 00:17:13,640 --> 00:17:16,800 Speaker 1: tariffs on autos and see if the best car wins 290 00:17:16,960 --> 00:17:19,720 Speaker 1: at whatever price point. Well we could do that if 291 00:17:19,720 --> 00:17:22,320 Speaker 1: there was one global president and everybody voted for here. 292 00:17:22,520 --> 00:17:25,800 Speaker 1: But the answers were afraid to do that, right America 293 00:17:25,880 --> 00:17:27,840 Speaker 1: is afraid to do that. Well, every country in the 294 00:17:27,880 --> 00:17:31,359 Speaker 1: world is. Germany is afraid to go to no tariffs, 295 00:17:32,040 --> 00:17:35,520 Speaker 1: I think so. And Japan, for example, protects its agricultural 296 00:17:35,560 --> 00:17:40,639 Speaker 1: industry pretty significantly. I mean, in automobiles, automobiles are unit decision. 297 00:17:40,880 --> 00:17:44,040 Speaker 1: You know that. I would suggest it's not like corn. 298 00:17:44,280 --> 00:17:48,480 Speaker 1: You know perfect you know, nineteenth century commodity, and I 299 00:17:48,800 --> 00:17:52,160 Speaker 1: just don't. Isn't it good for the Germans to call 300 00:17:52,240 --> 00:17:55,359 Speaker 1: the president's bluff and say, okay, tariff guy, let's do 301 00:17:55,400 --> 00:17:59,600 Speaker 1: no tariffs. I think it's really tough because those industries 302 00:18:00,000 --> 00:18:02,080 Speaker 1: employ a ton of people, both in the US and 303 00:18:02,160 --> 00:18:04,480 Speaker 1: in Germany, and those are voters both in the US 304 00:18:04,520 --> 00:18:06,960 Speaker 1: and in Germany. And like you said, a car is 305 00:18:06,960 --> 00:18:12,520 Speaker 1: not a ear of corn. A car moves back and forth. Theoretically, No, 306 00:18:12,640 --> 00:18:15,280 Speaker 1: it's not a soybean. It is part of a huge 307 00:18:15,320 --> 00:18:18,080 Speaker 1: integrated global supply chain, and the companies don't want to 308 00:18:18,080 --> 00:18:20,920 Speaker 1: blow that to a matthiass expertise. What do you see 309 00:18:20,960 --> 00:18:24,800 Speaker 1: in the Senate where they are worried about agriculture in 310 00:18:24,920 --> 00:18:27,800 Speaker 1: terms of China and the US negotiations, forge about all 311 00:18:27,840 --> 00:18:30,760 Speaker 1: the chest thumping, as you call it, that we're gonna 312 00:18:30,760 --> 00:18:34,840 Speaker 1: witness in Washington, what does a given senator from Iowa 313 00:18:35,040 --> 00:18:38,640 Speaker 1: or Idaho actually think, Well, they would like to have 314 00:18:38,840 --> 00:18:41,400 Speaker 1: China buy more U S agricultural products, and I think 315 00:18:41,440 --> 00:18:43,520 Speaker 1: the thing that they're most worried about is that there 316 00:18:43,600 --> 00:18:46,520 Speaker 1: is some huge breakdown in trade talks or in the 317 00:18:46,920 --> 00:18:51,040 Speaker 1: in the bilateral agricultural relationship between China and the US. 318 00:18:51,040 --> 00:18:53,200 Speaker 1: Were China says, okay, no Moss, We're going to buy 319 00:18:53,240 --> 00:18:56,640 Speaker 1: everything from Brazil. That would be a disaster. So that's 320 00:18:56,640 --> 00:18:59,560 Speaker 1: why you see the Chinese offering to buy more agricultural 321 00:18:59,600 --> 00:19:03,920 Speaker 1: products part of their trade talks. You're you're a student 322 00:19:04,040 --> 00:19:07,280 Speaker 1: of Washington and you're doing this for Vanguard. I understand, 323 00:19:07,840 --> 00:19:10,840 Speaker 1: but you're doing it within a gilded age. I'm looking 324 00:19:10,840 --> 00:19:15,120 Speaker 1: at yields today coming in abruptly again the German tenure 325 00:19:15,160 --> 00:19:18,480 Speaker 1: I find stunning now folks, point zero nine eight, it's 326 00:19:18,520 --> 00:19:22,679 Speaker 1: ground down another thousands. I mean, these are all important discussions, 327 00:19:22,680 --> 00:19:26,320 Speaker 1: and their discussions of disinflation, that's right. Does that mean 328 00:19:26,359 --> 00:19:29,440 Speaker 1: we don't care about Martin Feldstein's fiscal deficit or debt 329 00:19:29,480 --> 00:19:33,280 Speaker 1: because low yields are going to come to the rescue forever? Well, 330 00:19:33,280 --> 00:19:35,280 Speaker 1: that's that's a really good question. We can have a 331 00:19:35,480 --> 00:19:38,159 Speaker 1: deep academic discussion, but we don't do those on Friday 332 00:19:38,240 --> 00:19:41,120 Speaker 1: to continue. I know, I know. So you know, in 333 00:19:41,119 --> 00:19:43,560 Speaker 1: in active funds, as investors were trying to figure out 334 00:19:43,600 --> 00:19:46,600 Speaker 1: where we can make some some return for our investors, 335 00:19:47,000 --> 00:19:49,840 Speaker 1: um with with our with our strategies and and You're right, 336 00:19:49,880 --> 00:19:52,199 Speaker 1: it is very challenging, but there are a lot of 337 00:19:52,240 --> 00:19:55,840 Speaker 1: tail winds. It's not just trade, It's not just this president. 338 00:19:55,880 --> 00:19:58,239 Speaker 1: It's not just this last couple of years that are 339 00:19:58,320 --> 00:20:03,640 Speaker 1: driving yields lower. Uh. You have a combination of demographics, technology, globalization, 340 00:20:03,960 --> 00:20:07,800 Speaker 1: whereas inflation. This this should be the perfect environment for inflation, 341 00:20:08,040 --> 00:20:10,439 Speaker 1: and we can barely crack two percent. As a student 342 00:20:10,600 --> 00:20:15,080 Speaker 1: of Washington, how do you how do you define the 343 00:20:15,160 --> 00:20:18,520 Speaker 1: paths forward for our new socialism? Howard Dean spoke to 344 00:20:18,600 --> 00:20:21,640 Speaker 1: us this morning and he was piercing about it being 345 00:20:21,680 --> 00:20:24,000 Speaker 1: a one off. Do you do you buy it as 346 00:20:24,040 --> 00:20:26,040 Speaker 1: a one off. We've been doing a lot of work 347 00:20:26,240 --> 00:20:28,960 Speaker 1: in our in our group at Vanguard on income inequality 348 00:20:29,119 --> 00:20:32,399 Speaker 1: and ways to think about it, try to resolve it. 349 00:20:32,720 --> 00:20:36,080 Speaker 1: I think some of these discussions around socialism and changing 350 00:20:36,160 --> 00:20:40,960 Speaker 1: the overall objectives of government are driven by income inequality, 351 00:20:41,119 --> 00:20:43,320 Speaker 1: and um, you know that's something we're gonna have to tackle. 352 00:20:43,359 --> 00:20:46,760 Speaker 1: So I don't think socialism, this discussion around socialism is 353 00:20:47,119 --> 00:20:50,720 Speaker 1: the one way. I think it's a symptom of an 354 00:20:50,760 --> 00:20:54,360 Speaker 1: economic environment that's been growing over a number of years, 355 00:20:54,680 --> 00:20:57,359 Speaker 1: got a major problem. Since I've last seen you, I 356 00:20:57,440 --> 00:21:00,439 Speaker 1: wanted to Helsinki with the leaders of the world. And 357 00:21:00,480 --> 00:21:03,320 Speaker 1: I enjoyed the Helsinki summer, which is like twenty five 358 00:21:03,320 --> 00:21:07,080 Speaker 1: hours in a day. What a gorgeous city. I was thunderstood. 359 00:21:07,400 --> 00:21:09,879 Speaker 1: Have you been there in the winter? Yes, I actually 360 00:21:10,000 --> 00:21:13,040 Speaker 1: was just there in January. What is it like when 361 00:21:13,080 --> 00:21:15,800 Speaker 1: it's dark? Stop? What's it like when it's dark all day? 362 00:21:15,920 --> 00:21:19,119 Speaker 1: It's lovely, it's snows and it's sort of glows in 363 00:21:19,160 --> 00:21:21,320 Speaker 1: the snow with a beautiful, huge moon, and there's no 364 00:21:21,359 --> 00:21:24,440 Speaker 1: one there. It's very peaceful. You would be bored. Is 365 00:21:24,520 --> 00:21:27,439 Speaker 1: it like Frozen? I mean everything it's frozen. It's like 366 00:21:27,480 --> 00:21:29,640 Speaker 1: the movie Frozen. Yeah, they have They actually have ice 367 00:21:29,760 --> 00:21:33,639 Speaker 1: ratings for the different inlets and lake areas, so that 368 00:21:33,800 --> 00:21:36,520 Speaker 1: you know, you know, if you got to go out 369 00:21:36,720 --> 00:21:39,320 Speaker 1: like the opening scene of Frozen. Yeah, you know this 370 00:21:39,359 --> 00:21:41,879 Speaker 1: one Paul Sweeney where the iceman come out. Of course, 371 00:21:44,119 --> 00:21:48,120 Speaker 1: I'm sorry. I was gonna say, you'd never leave the bar. 372 00:21:50,640 --> 00:21:52,359 Speaker 1: I think you have to wait. They have a drink. 373 00:21:52,440 --> 00:21:55,000 Speaker 1: I tried. It's what is the drink? I tried. It's white. 374 00:21:55,400 --> 00:22:00,159 Speaker 1: It's a coconut thing or something. I don't know, don't me. 375 00:22:00,560 --> 00:22:03,639 Speaker 1: It's like some Paul Sweeney somehow nose the answer to this. 376 00:22:04,080 --> 00:22:07,600 Speaker 1: It's like some famous finished drink with gin and white 377 00:22:07,640 --> 00:22:10,560 Speaker 1: stuff in it or something that sounds perfect for they 378 00:22:10,800 --> 00:22:12,879 Speaker 1: use it a duke when they lose. Amatheist, Thank you 379 00:22:12,920 --> 00:22:15,360 Speaker 1: so much, so good to see you. And please, where 380 00:22:15,359 --> 00:22:19,119 Speaker 1: are you based out of now? Are you at Vanguard 381 00:22:19,680 --> 00:22:22,760 Speaker 1: Active Fixed Income Team? So we're you know, we're managing 382 00:22:22,800 --> 00:22:25,119 Speaker 1: a couple hundred billion in active assets. Thank you. You You 383 00:22:25,200 --> 00:22:27,359 Speaker 1: gotta go to television. Thank you so much for joining 384 00:22:27,440 --> 00:22:45,280 Speaker 1: us Amatheist with Vanguard Today. There are exactly three people 385 00:22:45,520 --> 00:22:49,000 Speaker 1: that I would like to talk to about this exceptionally 386 00:22:49,080 --> 00:22:52,040 Speaker 1: historic week in fashion. One is, of course, the great 387 00:22:52,160 --> 00:22:55,720 Speaker 1: Vanessa Friedman over at the New York Times, My good 388 00:22:55,760 --> 00:22:59,200 Speaker 1: friend Robert Burke with all he's done in retail over 389 00:22:59,240 --> 00:23:03,960 Speaker 1: the years. And our guest Dana Telsey. Dana, you grew 390 00:23:04,080 --> 00:23:09,359 Speaker 1: up literally X number of years old, toddling around Bergdorf Goodman. 391 00:23:09,480 --> 00:23:14,280 Speaker 1: When did you discover Chanel at Bergdorf Goodman many many 392 00:23:14,359 --> 00:23:18,760 Speaker 1: years ago? What is amazing about Channel is in every category, 393 00:23:19,160 --> 00:23:23,960 Speaker 1: whether it's handbags, whether it's clothing, whether it's cosmetics, they dominate. 394 00:23:24,240 --> 00:23:27,080 Speaker 1: And while Carl Lagerfeld did not just for Chanel but 395 00:23:27,160 --> 00:23:30,199 Speaker 1: for the fashion industry. Seems like we'll never see anything 396 00:23:30,240 --> 00:23:33,320 Speaker 1: like that again. Why will we never see a Lagerfeld again? 397 00:23:33,440 --> 00:23:35,879 Speaker 1: Is it just there's too much money being thrown at 398 00:23:35,920 --> 00:23:38,600 Speaker 1: the industry. I mean, he did Chloe and then he 399 00:23:38,640 --> 00:23:41,160 Speaker 1: did this, he did that, and then a thirty year 400 00:23:41,240 --> 00:23:44,600 Speaker 1: plus run at Chanel. Why can't that Pixie does be 401 00:23:44,680 --> 00:23:48,959 Speaker 1: reinvented again at a Gucci for instance? The speed at 402 00:23:48,960 --> 00:23:51,920 Speaker 1: which fashion is moving today and the ability for one 403 00:23:52,000 --> 00:23:55,680 Speaker 1: designer to dominate for that period of time is basically 404 00:23:55,760 --> 00:23:58,800 Speaker 1: something we haven't seen. And the ability to manage to 405 00:23:59,800 --> 00:24:04,320 Speaker 1: to managed two brands is and be able to differentiate 406 00:24:04,400 --> 00:24:08,600 Speaker 1: them and create something unique and innovative is exceptional. And 407 00:24:08,680 --> 00:24:11,199 Speaker 1: yet he had his own line also, so what he 408 00:24:11,280 --> 00:24:15,120 Speaker 1: meant to so many different brandons, the wide range of consumers. 409 00:24:15,160 --> 00:24:18,439 Speaker 1: He was innovative and adaptable, and that was what was 410 00:24:18,480 --> 00:24:21,280 Speaker 1: so impressive. I'm sure you bumped into him over the years. 411 00:24:21,320 --> 00:24:24,720 Speaker 1: What was the body chemistry of Carl Lagerfeld in a 412 00:24:24,960 --> 00:24:28,840 Speaker 1: high end fashion audience? What's the personal vision you can 413 00:24:28,880 --> 00:24:31,920 Speaker 1: bring on Mr Lagerfeld? I think one of the things 414 00:24:31,920 --> 00:24:34,199 Speaker 1: when you saw him is that he was so forward 415 00:24:34,280 --> 00:24:38,119 Speaker 1: thinking and you were basically in the company of someone 416 00:24:38,359 --> 00:24:40,920 Speaker 1: who saw what the next season and the next trend 417 00:24:40,960 --> 00:24:43,040 Speaker 1: is going to look like. He may be dressing you 418 00:24:43,119 --> 00:24:45,840 Speaker 1: for today, but he's thinking about tomorrow. Let's talk about 419 00:24:45,840 --> 00:24:49,639 Speaker 1: the tomorrow fashion. Boy, has it been interesting and ugly? 420 00:24:49,680 --> 00:24:53,040 Speaker 1: I see the vacancies that moving around on Madison Avenue. 421 00:24:53,040 --> 00:24:56,960 Speaker 1: What is Dana Telsey c forward for autumn and then 422 00:24:57,000 --> 00:25:01,240 Speaker 1: into that important holiday season two thousand nine. I see 423 00:25:01,240 --> 00:25:03,280 Speaker 1: what you're seeing in terms of the movement around. It 424 00:25:03,280 --> 00:25:06,000 Speaker 1: seems like everything is getting closer to Madison in six 425 00:25:06,160 --> 00:25:09,399 Speaker 1: years or sixty one rather than in the upper seventies 426 00:25:09,440 --> 00:25:12,160 Speaker 1: where some of the higher end brands have been located. 427 00:25:12,359 --> 00:25:15,720 Speaker 1: But there definitely seems to be a collection going to 428 00:25:15,800 --> 00:25:18,520 Speaker 1: a certain particular area. When you think about the fall 429 00:25:18,600 --> 00:25:21,000 Speaker 1: and what's going to change out there from what is now. 430 00:25:21,480 --> 00:25:24,840 Speaker 1: I think the continuation to be even more differentiated will 431 00:25:24,880 --> 00:25:27,639 Speaker 1: be key to give people a reason to be able 432 00:25:27,720 --> 00:25:31,160 Speaker 1: to buy and to say whatever it may be, I'm 433 00:25:31,200 --> 00:25:34,320 Speaker 1: associated with with this brand, and I think that's going 434 00:25:34,359 --> 00:25:36,360 Speaker 1: to be what we see a little bit. I think 435 00:25:36,400 --> 00:25:39,720 Speaker 1: we're still beginning to see logos continue to be very important. 436 00:25:40,040 --> 00:25:43,879 Speaker 1: The dominance of Gucci continues to be very strong, and 437 00:25:43,920 --> 00:25:47,560 Speaker 1: also the streetwear cultural and lot activewear is doing. It's 438 00:25:47,600 --> 00:25:51,960 Speaker 1: basically resonating throughout almost every brand today, and I think 439 00:25:52,000 --> 00:25:54,080 Speaker 1: it's going to be super interesting to see the mark 440 00:25:54,440 --> 00:25:58,000 Speaker 1: new designers make on brand, whether it's at Selene or 441 00:25:58,000 --> 00:26:02,080 Speaker 1: whether at that Burbery. We have some new new collections 442 00:26:02,119 --> 00:26:05,360 Speaker 1: that everyone's going to be watching carefully. So, Dana, we've 443 00:26:05,400 --> 00:26:08,840 Speaker 1: got the Chinese all important Chinese luxury market or the 444 00:26:08,920 --> 00:26:11,439 Speaker 1: Chinese marketing general slowing down. We've got Western Europe a 445 00:26:11,440 --> 00:26:14,439 Speaker 1: lot of uncertainty there with Brexit. How's that impacting the 446 00:26:14,560 --> 00:26:18,040 Speaker 1: luxury end of the retail market. What was so interesting 447 00:26:18,160 --> 00:26:21,600 Speaker 1: is that on most recent results coming out of LVMH, 448 00:26:21,640 --> 00:26:25,000 Speaker 1: their fashion and leather goods business showed an increase of 449 00:26:25,080 --> 00:26:29,240 Speaker 1: around seventeen percent. That was higher than expected, and frankly, 450 00:26:29,280 --> 00:26:32,360 Speaker 1: that strength that they had, I think that was stronger 451 00:26:32,400 --> 00:26:36,640 Speaker 1: than anyone exactly expected. Obviously, it's full priced sales and 452 00:26:36,680 --> 00:26:39,399 Speaker 1: the newness that you have at the Louis Vuitton brand 453 00:26:39,960 --> 00:26:43,560 Speaker 1: was amazing, so beyond the age of Pacific growth that 454 00:26:43,640 --> 00:26:47,160 Speaker 1: you had, because you did have that, I mean, you're 455 00:26:47,359 --> 00:26:51,280 Speaker 1: continuing to see strengths there and it accelerated from fourteen 456 00:26:51,320 --> 00:26:54,360 Speaker 1: percent through the first nine months. That was that was terrific. 457 00:26:54,560 --> 00:26:58,360 Speaker 1: I mean this includes the Louis von Archlight sneaker exclusively 458 00:26:58,480 --> 00:27:02,639 Speaker 1: online one thousand ninety dollars for set of sneakers. Dana, 459 00:27:02,680 --> 00:27:04,520 Speaker 1: do you want a pair of those sneakers? Or like 460 00:27:04,640 --> 00:27:07,600 Speaker 1: Jeff Curry's got the balance ones, do you want to 461 00:27:07,640 --> 00:27:11,160 Speaker 1: pair of those fancy over price sneakers? Who wouldn't want 462 00:27:11,160 --> 00:27:13,480 Speaker 1: to own a pair of those fancy over price sneakers? 463 00:27:13,600 --> 00:27:16,159 Speaker 1: Because you know what, it's the look of today and 464 00:27:16,280 --> 00:27:19,560 Speaker 1: that matters. So Dana has more and more retail sales 465 00:27:19,640 --> 00:27:22,840 Speaker 1: go online. Which of the retailers that you follow doing 466 00:27:22,880 --> 00:27:25,520 Speaker 1: the best job of managing that? I mean, you're certainly 467 00:27:25,600 --> 00:27:29,440 Speaker 1: seeing companies like Nordchdrom doing a terrific job online knowing 468 00:27:29,520 --> 00:27:32,960 Speaker 1: their customer with their rewards program and marrying it with 469 00:27:33,119 --> 00:27:36,280 Speaker 1: Norchdrom local and how they integrate the rack. I think 470 00:27:36,320 --> 00:27:38,879 Speaker 1: they're doing a terrific job at online. And we're going 471 00:27:38,920 --> 00:27:41,119 Speaker 1: to continue to see more. If you're just joining us 472 00:27:41,200 --> 00:27:44,000 Speaker 1: Dana Telsea where US Telsey Advisory Group. As we discuss 473 00:27:44,320 --> 00:27:47,040 Speaker 1: Carl Lagerfeld and look at luxury, maybe Paul let's go 474 00:27:47,040 --> 00:27:49,560 Speaker 1: a little downmarket right now. What's your perspective there. Well, 475 00:27:49,560 --> 00:27:51,199 Speaker 1: it's interesting one of the things, Dana, want to get 476 00:27:51,200 --> 00:27:54,719 Speaker 1: your perspective on those surprisingly bad retail sales numbers came 477 00:27:54,720 --> 00:27:56,679 Speaker 1: out in December, down one point two percent, but then 478 00:27:56,720 --> 00:27:59,240 Speaker 1: Walmart came out with pretty good numbers last week. What 479 00:27:59,359 --> 00:28:01,800 Speaker 1: is your sense of the market. I mean, overall, I 480 00:28:01,880 --> 00:28:04,720 Speaker 1: think the mass markets, given that they're there, where they're 481 00:28:04,800 --> 00:28:08,200 Speaker 1: located in open air centers, they seem to be gaining traffics. 482 00:28:08,400 --> 00:28:11,840 Speaker 1: What was so impressive about Walmart do us number? Not 483 00:28:12,000 --> 00:28:15,560 Speaker 1: only was it a sequential acceleration on a two year basis, 484 00:28:15,880 --> 00:28:18,480 Speaker 1: but it was driven by positive traffic up just under 485 00:28:18,520 --> 00:28:21,720 Speaker 1: a percent, a mid single digit grocery camp, an e 486 00:28:21,800 --> 00:28:25,159 Speaker 1: commerce growth of pent plus the fact that when you 487 00:28:25,240 --> 00:28:28,360 Speaker 1: look at the Stam's Club business, the three point three 488 00:28:28,440 --> 00:28:32,040 Speaker 1: percent complex fuel traffic was up six point four percent. 489 00:28:32,520 --> 00:28:35,040 Speaker 1: So what it tells you is traffic is going to 490 00:28:35,119 --> 00:28:38,920 Speaker 1: these discounters. It's going to the off prices. They in 491 00:28:39,040 --> 00:28:43,240 Speaker 1: a pun, they value value and it's working. So people 492 00:28:43,320 --> 00:28:46,360 Speaker 1: want to see where can they get more for their dollar. So, Dana, 493 00:28:46,400 --> 00:28:48,960 Speaker 1: we're getting the majority of the retailers starting reporting I 494 00:28:49,000 --> 00:28:52,040 Speaker 1: believe next week. What should investors really be looking for here? 495 00:28:52,680 --> 00:28:55,320 Speaker 1: I want to watch the inventory levels, particularly at the 496 00:28:55,360 --> 00:28:58,120 Speaker 1: department stores. We had a rough holiday season for the 497 00:28:58,200 --> 00:29:02,120 Speaker 1: department stores, definitely a bit lackluster. Some of them came 498 00:29:02,160 --> 00:29:04,720 Speaker 1: in with inventory levels that were higher going to the 499 00:29:04,760 --> 00:29:08,680 Speaker 1: fourth quarter with the expectation of a stronger holiday season, 500 00:29:09,080 --> 00:29:12,560 Speaker 1: and overall after third quarter inventory was up one nine. 501 00:29:13,480 --> 00:29:16,520 Speaker 1: We're looking for fourth quarter inventory. Hopefully it shows a 502 00:29:16,600 --> 00:29:19,400 Speaker 1: downward trend, which is what we need. In a date, Dana, 503 00:29:19,440 --> 00:29:23,280 Speaker 1: we're seacraft, you know, craft food slaughtered. What's the strategic 504 00:29:23,480 --> 00:29:27,440 Speaker 1: vision forward for big retail Macy's calls and the rest 505 00:29:27,520 --> 00:29:29,640 Speaker 1: of them? Is it just cost cutting? Is that the 506 00:29:29,760 --> 00:29:32,960 Speaker 1: only solution or do you have a better idea? Got 507 00:29:33,080 --> 00:29:36,360 Speaker 1: to be services. It's got to be reconfiguring the store prints, 508 00:29:36,400 --> 00:29:42,080 Speaker 1: footprint into what into what? What makeup? No no, no services. 509 00:29:42,360 --> 00:29:44,560 Speaker 1: What you're seeing with what some of these stores are doing. 510 00:29:44,680 --> 00:29:47,680 Speaker 1: Look what Macy's has done with the Apple in store shops. 511 00:29:47,920 --> 00:29:50,560 Speaker 1: Look what Bloomingdale's has done lately with their news is 512 00:29:50,600 --> 00:29:53,400 Speaker 1: a Tiffany model worked all that fancy new Tiffany kids 513 00:29:53,440 --> 00:29:56,240 Speaker 1: stuff they've got. It is one of the most popular 514 00:29:56,320 --> 00:29:59,200 Speaker 1: items of Tiffany's lately is everything for pets. It's been 515 00:29:59,280 --> 00:30:03,120 Speaker 1: very popular. Oh no, let's not go there, tom See. 516 00:30:03,440 --> 00:30:06,440 Speaker 1: Dana saw me in Central Park. Dana, you know that 517 00:30:06,600 --> 00:30:10,240 Speaker 1: vet Bill got a Tiffany light blue. You know Leash. 518 00:30:11,240 --> 00:30:14,440 Speaker 1: I told you the pet pet purchases a Tiffany. They're 519 00:30:14,560 --> 00:30:16,560 Speaker 1: very popular. Yeah, they told me. I can't go to 520 00:30:16,600 --> 00:30:18,760 Speaker 1: the website to see what we paid for that thing. 521 00:30:18,840 --> 00:30:21,440 Speaker 1: As well, Dana, what's the fashion item for summer? All 522 00:30:21,480 --> 00:30:24,240 Speaker 1: of our listeners coast to coast and worldwide one to 523 00:30:24,280 --> 00:30:26,760 Speaker 1: know what Dana tells. He says every woman needs for 524 00:30:26,840 --> 00:30:29,560 Speaker 1: the summer. What is it? I think overall what people 525 00:30:29,560 --> 00:30:31,720 Speaker 1: are gonna need for this summer. I think it's going 526 00:30:31,800 --> 00:30:34,800 Speaker 1: to be all about some of the maxi skirts that 527 00:30:34,840 --> 00:30:36,719 Speaker 1: are out there in the flowing dresses. I think that's 528 00:30:36,760 --> 00:30:39,200 Speaker 1: gonna be the one of the popular trend. Riley from St. 529 00:30:39,280 --> 00:30:42,760 Speaker 1: Louis modeling that yesterday. Dana Telsey, thank you so much, 530 00:30:43,240 --> 00:30:47,040 Speaker 1: greatly appreciate it, particularly that perspective on Dana Telsey's Bergdorf 531 00:30:47,200 --> 00:30:50,240 Speaker 1: Goodman of years ago and Mr Lagerfeld as well. Dana 532 00:30:50,280 --> 00:30:52,160 Speaker 1: is a jewel she she's ad sell side of bear 533 00:30:52,280 --> 00:30:55,560 Speaker 1: Stearns and then Boom. And what I admire most about 534 00:30:55,560 --> 00:30:57,000 Speaker 1: her is not that she's, you know, one of the 535 00:30:57,040 --> 00:30:59,960 Speaker 1: absolute top retail annals, but she has built a phenomenal business. 536 00:31:00,040 --> 00:31:02,040 Speaker 1: She left uh the safety if you would have the 537 00:31:02,080 --> 00:31:05,040 Speaker 1: cell side founded her own firm, and I would. You 538 00:31:05,120 --> 00:31:07,800 Speaker 1: can count on one hand those animals that have left 539 00:31:07,960 --> 00:31:11,920 Speaker 1: Wall Street and established large, thriving re research departments, and 540 00:31:12,000 --> 00:31:14,360 Speaker 1: she was absolutely at the forefront. To me, with Dana, 541 00:31:14,560 --> 00:31:17,920 Speaker 1: it's so visceral with her because of her childhood or 542 00:31:18,040 --> 00:31:21,600 Speaker 1: her grandparents were involved with I believe with Bergdorf Goodman. 543 00:31:21,600 --> 00:31:24,360 Speaker 1: I can't remember the story right now, but it's wonderful 544 00:31:24,400 --> 00:31:27,720 Speaker 1: when you've got cell side where it's visceral, like Mario 545 00:31:27,840 --> 00:31:34,000 Speaker 1: Gabelly on autos and that kind of stuff. Thanks for 546 00:31:34,120 --> 00:31:38,480 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 547 00:31:38,680 --> 00:31:44,360 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 548 00:31:44,960 --> 00:31:48,240 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 549 00:31:48,320 --> 00:31:51,720 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio