Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Can
Speaker 1: we give Professor Faulstein a proper introduction please, I insist.
Speaker 1: The former chairman of the Council of Economic Advisors, the
Speaker 1: former Chief ECONOP advisor to the President Ronald Reagan, Marty
Speaker 1: fauld Stein, the Harvard University Professor of Economics joints this.
Speaker 1: Now that's better, isn't it. It's better. That's better, Marty.
Speaker 1: Great to see you're good to be back on radio.
Speaker 1: In your words, Marty, it is not a China US
Speaker 1: trade war. Why not. What it's really about is not trade.
Speaker 1: It's about China stealing US technology, stealing and by forcing
Speaker 1: American companies who do business in China to transfer their
Speaker 1: technology to Chinese firms, and also the Chinese stealing through
Speaker 1: the internet. So, Marzi, this riises a question. One of
Speaker 1: the moves forward, the point of progress we've seen this
Speaker 1: week has been the Chinese set to be offering to
Speaker 1: buy even more agricultural product. Sounds like for you at least, Marty,
Speaker 1: that's not gonna get it done. That's not gonna be
Speaker 1: enough to broak a deal. It's the opposite that is,
Speaker 1: they're saying, let's not talk about technology theft. Let's talk
Speaker 1: about the trade deficit between China and the US, and
Speaker 1: we the Chinese, can solve that problem. We can buy
Speaker 1: more of this that the other thing. But that doesn't
Speaker 1: deal with the true underlying technology theft, and it doesn't
Speaker 1: change the overall you has trade deficit. It'll shift it
Speaker 1: from China to the rest of the world. The President
Speaker 1: might actually be happy if the bilateral deficit is addressed,
Speaker 1: even if the I T issues are not, and bassillor
Speaker 1: Lightheiser may have a very different point of view on this, Marty.
Speaker 1: Do you see the prospect of the President actually accepting
Speaker 1: this kind of movement from the Chinese, because ultimately, for
Speaker 1: him he might need a win, and anything that moves
Speaker 1: the bilateral deficit in by some form of magnitude palatable
Speaker 1: for the president would be sufficient enough for him. I
Speaker 1: hope not. I hope not. I hope that he's listening
Speaker 1: hard to the voices of Lighthouser and others who are
Speaker 1: saying that's just a diversion from the real issue. To
Speaker 1: get the real interaty addressed, though, you need the Chinese
Speaker 1: to acknowledge the issue is an issue. At the moment, Professor,
Speaker 1: that's not happening. But the US is making it very
Speaker 1: clear to them, as we did not in the beginning.
Speaker 1: In the beginning we talked about the trade deficit, wasn't
Speaker 1: clear what the administration wanted. We're X number of years
Speaker 1: on from a February morning where we all woke up
Speaker 1: in America to the fact that our president of the
Speaker 1: United States was envisioned. Were you on that trip with
Speaker 1: President Nixon? By any chance? I was not, But but
Speaker 1: we were all on that trip with the excitement and
Speaker 1: the history making of it. Are the Chinese now any
Speaker 1: different than they were then about just waiting out the
Speaker 1: American and Western process. Well, they see themselves as much
Speaker 1: more important, much bigger. They see that as an economy
Speaker 1: their real size is equal to ours, equal to the
Speaker 1: European Union, and that gives them a lot a lot
Speaker 1: of leverage with the companies of Asia who want to
Speaker 1: trade with them. So they've got a very different sense
Speaker 1: of their role in the world. Right to catch up
Speaker 1: with you as a whitse It's fantastic to have you
Speaker 1: with us in the studio, Matt found Stein, the Hovid
Speaker 1: University Professor of economics. If you are interested in how
Speaker 1: every big merger craters, this is the conversation of the day.
Speaker 1: Tara la Chapel has been brutal about not just Craft
Speaker 1: and all the rest of it, but every single combination.
Speaker 1: The obligatory press conference, all the grinning, all the smiling,
Speaker 1: and the memo today from Tara la Chapelle is right
Speaker 1: to the point. Warren Buffett those investors more than a
Speaker 1: memo this year, Tara, what did he get wrong? So
Speaker 1: with Warren Buffett, his letter is scheduled to come out tomorrow.
Speaker 1: I think that accessors want to hear more from him
Speaker 1: about his um strategy around invest singing tech stocks. He
Speaker 1: seems to be jumping in and out of those, and
Speaker 1: also more about the succession plan and what's going to
Speaker 1: happen with all. Okay, but think today the big news
Speaker 1: is Craft. Hi, come on, okay, Tara, I just did
Speaker 1: the common size balance sheet analysis. The percentage of goodwill
Speaker 1: on Pepsicola's balance sheet is the percentage of goodwill bad
Speaker 1: will on Craft's financially engineered balance sheet. It's ginormous. It's
Speaker 1: like thirty eight or thirty nine percent a it's failed
Speaker 1: be they got more to write down in the future.
Speaker 1: How did this happen? You know, I think a lot
Speaker 1: of people were just kind of drinking the koolie. You know,
Speaker 1: Craft Highns for a while had the leading operating margins
Speaker 1: in this industry, so they're extremely profitable, and I think
Speaker 1: people thought, you know, this strategy, maybe it does work,
Speaker 1: but it was very shortsighted. Basically, they just got the business.
Speaker 1: They cut as many costs as they can, really weren't
Speaker 1: investing much in the brands, and and you know, that
Speaker 1: strategy only works for so long until you have us
Speaker 1: flip up like this, and then suddenly they need to
Speaker 1: do another mega merger to sort of hide that, bring
Speaker 1: another company in that they can go back to cutting costs,
Speaker 1: because with the businesses they have, you can't slash costs
Speaker 1: into perpetuity. That just doesn't work. And that's what we're
Speaker 1: seeing here. Kick. Should I just say that that was
Speaker 1: the ultimate cf A punt of the week. What was
Speaker 1: that she can't drink the kool a craft on school.
Speaker 1: Its very very smart. Actually missed that tower that was
Speaker 1: actually fantastic. It's four ab A colleague kre Brad Allison
Speaker 1: wrote this morning, I actually think this is quite interesting
Speaker 1: that Berkshire Hathaway's Warren Buffett will go out there this
Speaker 1: weekend and perhaps talk about the struggle to locate great deals.
Speaker 1: The real question, Tara should have been the deals that
Speaker 1: he had made just aren't turning out that great either.
Speaker 1: This weekend, we're going to spend this weekend talking about
Speaker 1: finding great deals and how hard it is to find
Speaker 1: great deals, and and not spend much time when we
Speaker 1: should be looking back at the deals that have been
Speaker 1: made exactly and you know, a lot of his letters
Speaker 1: he spent as sort of aud top seeing some of
Speaker 1: the business decisions they've made, you know, really getting into
Speaker 1: the weeds of insurance and they're different units. But he doesn't,
Speaker 1: you know, really talk as much about Craft for example,
Speaker 1: and some of these investments that they've made on the
Speaker 1: on the stock market side that really you know nothing,
Speaker 1: we are puzzling to investors. They don't align with what
Speaker 1: we know about Buffet and his belief. It's very odd.
Speaker 1: Hit Oh stop. His belief is to get a preferred coupon.
Speaker 1: That's all it comes down to, is his Yeah, but
Speaker 1: his Buffet one on one is his eight percent or
Speaker 1: whatever it is, preferred coupon. Is that a threat with
Speaker 1: this right down and with the equity price cratering, or
Speaker 1: does he still get his coupon? I mean, I don't
Speaker 1: know the details are on that, but I would suspect
Speaker 1: that we're getting to the point where Buffett really needs
Speaker 1: to consider whether he stays in the stock. They are
Speaker 1: the largest shareholder, even bigger than three GS, and at
Speaker 1: this point it's really hard to defend. I'm sure that
Speaker 1: he's still you know, they've made a ton of this
Speaker 1: investment because of that this guy. How did they how
Speaker 1: did they quote unquote make a ton on this investment.
Speaker 1: So the way this works, so Buffett had helped three
Speaker 1: G buy out hind and then they helped bankroll the
Speaker 1: deal with Craft and Hynes that brought those two companies together,
Speaker 1: and as part of that, Buffett got preferred shares, which
Speaker 1: the company eventually bought back from them, but has left
Speaker 1: Buffet with this huge stake in the common shares. But
Speaker 1: at the end of the day, you know, they did
Speaker 1: make out pretty well because for a while, you know,
Speaker 1: they were getting see this, I think it was a
Speaker 1: nine percent coupon, and on top of it, a stock
Speaker 1: was doing okay for a while, and everyone in the
Speaker 1: industry felt this need to mimic them. So it felt like,
Speaker 1: you know, these guys are the ones to copy that
Speaker 1: they're doing the right thing. It was only a matter
Speaker 1: of time before you know, the curtain would fall and
Speaker 1: we would see that this strategy simply is flawed. And
Speaker 1: you know, I can't imagine how much one Berkshire would say.
Speaker 1: Buffett Um exited the board last year, so he's no
Speaker 1: longer an insider at the company. He's simply a shareholder. Okay,
Speaker 1: thanks so much, folks. I'll get out on Twitter. Cherylas
Speaker 1: Chapelle Warren Buffeto's investors more than a memo this year.
Speaker 1: It's a terrific precursor. Thank you rather to that meeting
Speaker 1: and normal outspoken of fantastic schwap Since for Financial Research,
Speaker 1: chief fixed income strategist Take Kathy. Great to catch up
Speaker 1: with you what I keep hearing from a lot of
Speaker 1: people on the bye side. Her from Pimco. Yesterday, I
Speaker 1: caught up with Mark kiss all over there. It's to
Speaker 1: fade the strength. It's this theme of fading the strength,
Speaker 1: looking to build cash and go up in quality. Does
Speaker 1: that resonate with you, Kathy? Yeah, yeah, good morning, Thanks
Speaker 1: for having me on. Um. Yeah, we've been we've been
Speaker 1: actually suggesting moving up in credit quality for quite some time. Um.
Speaker 1: I think this, this big move we've had since the
Speaker 1: first of the year, since about Christmas Eve, uh, in
Speaker 1: credit and lower quality credits should be faded. I think. Um,
Speaker 1: there's just really not a lot of substance behind it.
Speaker 1: And when you look at the risk reward trade offs,
Speaker 1: you're saying, well, how much how much reward am I
Speaker 1: getting at these spreads for the risk I'm taking? And
Speaker 1: it doesn't look all that attractive. So, Kathy, where aren't we?
Speaker 1: Are you at about four d basis points over correct? Yeah?
Speaker 1: Is that too tight for you? Then, Kathy, you just
Speaker 1: think that's too tight? Um. You know we're officially neutral here,
Speaker 1: but I would say that it's a bit tight considering
Speaker 1: the risk that we get some downgrades from the triple
Speaker 1: Bees into the junk area. Um, that could overwhelm it.
Speaker 1: And we really still aren't clear on what the FED
Speaker 1: is doing Uh, we know that they're sitting on the sidelines,
Speaker 1: but we don't really know what the next move is
Speaker 1: going to be. Keathy Jones, Just so you understand where
Speaker 1: are we were four and a half hours away from
Speaker 1: the real yields scene on Bloomberg TV on bonds. With
Speaker 1: that mentioned, Kathy, is there any real yield out there?
Speaker 1: I mean, inflation is lower, so do I feel better
Speaker 1: about my inflation and just a yield? Well, there are
Speaker 1: the real yields are higher than they used to be. Okay,
Speaker 1: so when we have the zero industry policy, it was
Speaker 1: really tough to find any real yield. You can find
Speaker 1: a little bit out there, but it's not you know,
Speaker 1: it's not fantastic. It isn't going likely going back to
Speaker 1: where it used to be prior to the financial crisis. Um,
Speaker 1: we just don't don't see nominal rates moving up that
Speaker 1: much relative to inflation. Rich Trueman, did you get that
Speaker 1: where Ms Jones said the real yield is not fantastic?
Speaker 1: Can we put that into an ad ad campaign? Okay,
Speaker 1: that's not what she meant. She's a regular on the show,
Speaker 1: your regular on the shows, Cathy. You enjoyed the program,
Speaker 1: don't you? Oh? I love the program. It's my favorite.
Speaker 1: It's my favorite TV show. God like that. Do you
Speaker 1: like that, Kane? Do you sleep through Limbeg's veilance something TV?
Speaker 1: Lis Ane Saunders doesn't treat me like Kathy. This idea
Speaker 1: of going up in quality just for people not familiar
Speaker 1: with fixed income, What does that ultimately means? Specifically? What
Speaker 1: is coming up in quality mean? Well, I think within
Speaker 1: to say, the investment grade corporate bond area, now about
Speaker 1: half of that university, maybe even a little bit more
Speaker 1: is the lowest UH tier triple B. So we would
Speaker 1: suggest that you you move up and into the say
Speaker 1: the A rated bonds, not abandoned triple be entirely, but
Speaker 1: certainly not concentrate there. And it's easy, particularly if you're
Speaker 1: in a passive strategy that just follows an index, to
Speaker 1: get overweighted in the lower tiers of credit quality. So
Speaker 1: we're suggesting move up at least divide out between the
Speaker 1: triple bs and and some A rated bonds. And in
Speaker 1: the junk world the same story. I mean, if we're
Speaker 1: even within junk, if you're heavily concentrated in the triple
Speaker 1: C to your risk of default, getting some bonds at
Speaker 1: default is very high if we go into a slowdown
Speaker 1: in the economy. I mean this, what you just said,
Speaker 1: they're cat is extremely important because people are not buying
Speaker 1: individual bonds nowadays. They're buying indexes, They're buying ETFs, are
Speaker 1: buying segmented Are our listeners too segmented in your bond world?
Speaker 1: Should they be buying more blended et fs and portfolios? Well,
Speaker 1: you know, we we like e TF so we like
Speaker 1: passive strategies because they're really you know, provide you a
Speaker 1: lot of liquidity and a very cost effective way to invest.
Speaker 1: So I wouldn't abandon it entirely, but yeah, we do
Speaker 1: think you need to be somewhat strategic here and and
Speaker 1: even tactical in how you allocate within the passive in
Speaker 1: the passive world, because it's been pretty easy for a
Speaker 1: very long time as asset prices kind of moved up
Speaker 1: with the FED being very easy, and we've had a
Speaker 1: little bit of that year to day. But when things
Speaker 1: change is going to get more challenging. Jiants always criites
Speaker 1: a catch up with you. Thank you. She said the
Speaker 1: real yield five times in the interview. I kept counting. No,
Speaker 1: that's great, Cathy. Thank you strategist. I want to make
Speaker 1: clearer the markets just shifted. There's no other way to
Speaker 1: put it. On a Friday morning, we had higher yields.
Speaker 1: A thirty year bond with a vengeance has come lower
Speaker 1: yield three basis points to four digits three point zero
Speaker 1: one nine. The abruptness of that is sobering, with a
Speaker 1: tenure two point six six percent green on the screen
Speaker 1: on futures. But also sterling comes in abruptly in the
Speaker 1: Euro one thirteen thirty seven. And as Karen mentioned there,
Speaker 1: it is Samsonite, Caterpillar, and Xerox to be a list
Speaker 1: of companies that we would get to. She is senior
Speaker 1: vice president for TIT for TAT Trade, UH for Vanguard,
Speaker 1: and Matthias joins us now supremely qualified on Washington on
Speaker 1: our domestic and international relations. And I should point out
Speaker 1: she's a member of the CFA Institute, so unlike so
Speaker 1: many in Washington, she actually understands the bid and they
Speaker 1: ask and thrilled to have you with today what's the bid?
Speaker 1: And ask on American trade right now? It's so interesting.
Speaker 1: You know, trade takes forever, and you can achieve so
Speaker 1: much just by threatening, Like look at the markets this morning.
Speaker 1: What we're doing with China and with Europe, that is
Speaker 1: what is going on right now. There's a lot of
Speaker 1: chess thumping, silver back, gorilla posing power posing, to paraphrase Amy,
Speaker 1: good morning meeting at Bloomberg, surveillance to continue. So what
Speaker 1: happens after the chess thumping, Well, that's the interesting thing. Trade,
Speaker 1: Real trade agreements take a long time to accomplish. Tariffs
Speaker 1: you can slap them on right away, you can do
Speaker 1: some political damage. So I think this is just a
Speaker 1: moment where everyone's trying to to to pile their chips
Speaker 1: up on the table. So when they really start playing
Speaker 1: the game, when they really start negotiating trade agreements, they
Speaker 1: have something to play with. So I would I would
Speaker 1: read through a lot of it as an investment. But
Speaker 1: it's a unilateral, bilateral discussion, and we're all at tuned
Speaker 1: to bilateral or multilateral that is right. Solutions are they
Speaker 1: out there? I do think there are some multilateral solutions
Speaker 1: that are still possible. We have a president who is very,
Speaker 1: very bilaterally focused on trade. Obviously he's trying to you know,
Speaker 1: carve off and do one on one negotiations with with
Speaker 1: the major trading partners. But I do think the European
Speaker 1: Union will stick together on the trading front. Um. You know,
Speaker 1: these this this headline that we just had this morning
Speaker 1: about Caterpillar or Xerox and Samsonite uh tariffs from Europe.
Speaker 1: M is sort of a positioning play. But I think
Speaker 1: I think let's like bring it back up a little
Speaker 1: bit global trade right now, global trade disc beautes are
Speaker 1: a proxy for people's worry about global growth. Okay, but
Speaker 1: you know the Bentley was down today, so I didn't
Speaker 1: bring it into the office early, and I came in
Speaker 1: in a fine German automobile. Why can't we have no
Speaker 1: tariffs on autos and see if the best car wins
Speaker 1: at whatever price point. Well we could do that if
Speaker 1: there was one global president and everybody voted for here.
Speaker 1: But the answers were afraid to do that, right America
Speaker 1: is afraid to do that. Well, every country in the
Speaker 1: world is. Germany is afraid to go to no tariffs,
Speaker 1: I think so. And Japan, for example, protects its agricultural
Speaker 1: industry pretty significantly. I mean, in automobiles, automobiles are unit decision.
Speaker 1: You know that. I would suggest it's not like corn.
Speaker 1: You know perfect you know, nineteenth century commodity, and I
Speaker 1: just don't. Isn't it good for the Germans to call
Speaker 1: the president's bluff and say, okay, tariff guy, let's do
Speaker 1: no tariffs. I think it's really tough because those industries
Speaker 1: employ a ton of people, both in the US and
Speaker 1: in Germany, and those are voters both in the US
Speaker 1: and in Germany. And like you said, a car is
Speaker 1: not a ear of corn. A car moves back and forth. Theoretically, No,
Speaker 1: it's not a soybean. It is part of a huge
Speaker 1: integrated global supply chain, and the companies don't want to
Speaker 1: blow that to a matthiass expertise. What do you see
Speaker 1: in the Senate where they are worried about agriculture in
Speaker 1: terms of China and the US negotiations, forge about all
Speaker 1: the chest thumping, as you call it, that we're gonna
Speaker 1: witness in Washington, what does a given senator from Iowa
Speaker 1: or Idaho actually think, Well, they would like to have
Speaker 1: China buy more U S agricultural products, and I think
Speaker 1: the thing that they're most worried about is that there
Speaker 1: is some huge breakdown in trade talks or in the
Speaker 1: in the bilateral agricultural relationship between China and the US.
Speaker 1: Were China says, okay, no Moss, We're going to buy
Speaker 1: everything from Brazil. That would be a disaster. So that's
Speaker 1: why you see the Chinese offering to buy more agricultural
Speaker 1: products part of their trade talks. You're you're a student
Speaker 1: of Washington and you're doing this for Vanguard. I understand,
Speaker 1: but you're doing it within a gilded age. I'm looking
Speaker 1: at yields today coming in abruptly again the German tenure
Speaker 1: I find stunning now folks, point zero nine eight, it's
Speaker 1: ground down another thousands. I mean, these are all important discussions,
Speaker 1: and their discussions of disinflation, that's right. Does that mean
Speaker 1: we don't care about Martin Feldstein's fiscal deficit or debt
Speaker 1: because low yields are going to come to the rescue forever? Well,
Speaker 1: that's that's a really good question. We can have a
Speaker 1: deep academic discussion, but we don't do those on Friday
Speaker 1: to continue. I know, I know. So you know, in
Speaker 1: in active funds, as investors were trying to figure out
Speaker 1: where we can make some some return for our investors,
Speaker 1: um with with our with our strategies and and You're right,
Speaker 1: it is very challenging, but there are a lot of
Speaker 1: tail winds. It's not just trade, It's not just this president.
Speaker 1: It's not just this last couple of years that are
Speaker 1: driving yields lower. Uh. You have a combination of demographics, technology, globalization,
Speaker 1: whereas inflation. This this should be the perfect environment for inflation,
Speaker 1: and we can barely crack two percent. As a student
Speaker 1: of Washington, how do you how do you define the
Speaker 1: paths forward for our new socialism? Howard Dean spoke to
Speaker 1: us this morning and he was piercing about it being
Speaker 1: a one off. Do you do you buy it as
Speaker 1: a one off. We've been doing a lot of work
Speaker 1: in our in our group at Vanguard on income inequality
Speaker 1: and ways to think about it, try to resolve it.
Speaker 1: I think some of these discussions around socialism and changing
Speaker 1: the overall objectives of government are driven by income inequality,
Speaker 1: and um, you know that's something we're gonna have to tackle.
Speaker 1: So I don't think socialism, this discussion around socialism is
Speaker 1: the one way. I think it's a symptom of an
Speaker 1: economic environment that's been growing over a number of years,
Speaker 1: got a major problem. Since I've last seen you, I
Speaker 1: wanted to Helsinki with the leaders of the world. And
Speaker 1: I enjoyed the Helsinki summer, which is like twenty five
Speaker 1: hours in a day. What a gorgeous city. I was thunderstood.
Speaker 1: Have you been there in the winter? Yes, I actually
Speaker 1: was just there in January. What is it like when
Speaker 1: it's dark? Stop? What's it like when it's dark all day?
Speaker 1: It's lovely, it's snows and it's sort of glows in
Speaker 1: the snow with a beautiful, huge moon, and there's no
Speaker 1: one there. It's very peaceful. You would be bored. Is
Speaker 1: it like Frozen? I mean everything it's frozen. It's like
Speaker 1: the movie Frozen. Yeah, they have They actually have ice
Speaker 1: ratings for the different inlets and lake areas, so that
Speaker 1: you know, you know, if you got to go out
Speaker 1: like the opening scene of Frozen. Yeah, you know this
Speaker 1: one Paul Sweeney where the iceman come out. Of course,
Speaker 1: I'm sorry. I was gonna say, you'd never leave the bar.
Speaker 1: I think you have to wait. They have a drink.
Speaker 1: I tried. It's what is the drink? I tried. It's white.
Speaker 1: It's a coconut thing or something. I don't know, don't me.
Speaker 1: It's like some Paul Sweeney somehow nose the answer to this.
Speaker 1: It's like some famous finished drink with gin and white
Speaker 1: stuff in it or something that sounds perfect for they
Speaker 1: use it a duke when they lose. Amatheist, Thank you
Speaker 1: so much, so good to see you. And please, where
Speaker 1: are you based out of now? Are you at Vanguard
Speaker 1: Active Fixed Income Team? So we're you know, we're managing
Speaker 1: a couple hundred billion in active assets. Thank you. You You
Speaker 1: gotta go to television. Thank you so much for joining
Speaker 1: us Amatheist with Vanguard Today. There are exactly three people
Speaker 1: that I would like to talk to about this exceptionally
Speaker 1: historic week in fashion. One is, of course, the great
Speaker 1: Vanessa Friedman over at the New York Times, My good
Speaker 1: friend Robert Burke with all he's done in retail over
Speaker 1: the years. And our guest Dana Telsey. Dana, you grew
Speaker 1: up literally X number of years old, toddling around Bergdorf Goodman.
Speaker 1: When did you discover Chanel at Bergdorf Goodman many many
Speaker 1: years ago? What is amazing about Channel is in every category,
Speaker 1: whether it's handbags, whether it's clothing, whether it's cosmetics, they dominate.
Speaker 1: And while Carl Lagerfeld did not just for Chanel but
Speaker 1: for the fashion industry. Seems like we'll never see anything
Speaker 1: like that again. Why will we never see a Lagerfeld again?
Speaker 1: Is it just there's too much money being thrown at
Speaker 1: the industry. I mean, he did Chloe and then he
Speaker 1: did this, he did that, and then a thirty year
Speaker 1: plus run at Chanel. Why can't that Pixie does be
Speaker 1: reinvented again at a Gucci for instance? The speed at
Speaker 1: which fashion is moving today and the ability for one
Speaker 1: designer to dominate for that period of time is basically
Speaker 1: something we haven't seen. And the ability to manage to
Speaker 1: to managed two brands is and be able to differentiate
Speaker 1: them and create something unique and innovative is exceptional. And
Speaker 1: yet he had his own line also, so what he
Speaker 1: meant to so many different brandons, the wide range of consumers.
Speaker 1: He was innovative and adaptable, and that was what was
Speaker 1: so impressive. I'm sure you bumped into him over the years.
Speaker 1: What was the body chemistry of Carl Lagerfeld in a
Speaker 1: high end fashion audience? What's the personal vision you can
Speaker 1: bring on Mr Lagerfeld? I think one of the things
Speaker 1: when you saw him is that he was so forward
Speaker 1: thinking and you were basically in the company of someone
Speaker 1: who saw what the next season and the next trend
Speaker 1: is going to look like. He may be dressing you
Speaker 1: for today, but he's thinking about tomorrow. Let's talk about
Speaker 1: the tomorrow fashion. Boy, has it been interesting and ugly?
Speaker 1: I see the vacancies that moving around on Madison Avenue.
Speaker 1: What is Dana Telsey c forward for autumn and then
Speaker 1: into that important holiday season two thousand nine. I see
Speaker 1: what you're seeing in terms of the movement around. It
Speaker 1: seems like everything is getting closer to Madison in six
Speaker 1: years or sixty one rather than in the upper seventies
Speaker 1: where some of the higher end brands have been located.
Speaker 1: But there definitely seems to be a collection going to
Speaker 1: a certain particular area. When you think about the fall
Speaker 1: and what's going to change out there from what is now.
Speaker 1: I think the continuation to be even more differentiated will
Speaker 1: be key to give people a reason to be able
Speaker 1: to buy and to say whatever it may be, I'm
Speaker 1: associated with with this brand, and I think that's going
Speaker 1: to be what we see a little bit. I think
Speaker 1: we're still beginning to see logos continue to be very important.
Speaker 1: The dominance of Gucci continues to be very strong, and
Speaker 1: also the streetwear cultural and lot activewear is doing. It's
Speaker 1: basically resonating throughout almost every brand today, and I think
Speaker 1: it's going to be super interesting to see the mark
Speaker 1: new designers make on brand, whether it's at Selene or
Speaker 1: whether at that Burbery. We have some new new collections
Speaker 1: that everyone's going to be watching carefully. So, Dana, we've
Speaker 1: got the Chinese all important Chinese luxury market or the
Speaker 1: Chinese marketing general slowing down. We've got Western Europe a
Speaker 1: lot of uncertainty there with Brexit. How's that impacting the
Speaker 1: luxury end of the retail market. What was so interesting
Speaker 1: is that on most recent results coming out of LVMH,
Speaker 1: their fashion and leather goods business showed an increase of
Speaker 1: around seventeen percent. That was higher than expected, and frankly,
Speaker 1: that strength that they had, I think that was stronger
Speaker 1: than anyone exactly expected. Obviously, it's full priced sales and
Speaker 1: the newness that you have at the Louis Vuitton brand
Speaker 1: was amazing, so beyond the age of Pacific growth that
Speaker 1: you had, because you did have that, I mean, you're
Speaker 1: continuing to see strengths there and it accelerated from fourteen
Speaker 1: percent through the first nine months. That was that was terrific.
Speaker 1: I mean this includes the Louis von Archlight sneaker exclusively
Speaker 1: online one thousand ninety dollars for set of sneakers. Dana,
Speaker 1: do you want a pair of those sneakers? Or like
Speaker 1: Jeff Curry's got the balance ones, do you want to
Speaker 1: pair of those fancy over price sneakers? Who wouldn't want
Speaker 1: to own a pair of those fancy over price sneakers?
Speaker 1: Because you know what, it's the look of today and
Speaker 1: that matters. So Dana has more and more retail sales
Speaker 1: go online. Which of the retailers that you follow doing
Speaker 1: the best job of managing that? I mean, you're certainly
Speaker 1: seeing companies like Nordchdrom doing a terrific job online knowing
Speaker 1: their customer with their rewards program and marrying it with
Speaker 1: Norchdrom local and how they integrate the rack. I think
Speaker 1: they're doing a terrific job at online. And we're going
Speaker 1: to continue to see more. If you're just joining us
Speaker 1: Dana Telsea where US Telsey Advisory Group. As we discuss
Speaker 1: Carl Lagerfeld and look at luxury, maybe Paul let's go
Speaker 1: a little downmarket right now. What's your perspective there. Well,
Speaker 1: it's interesting one of the things, Dana, want to get
Speaker 1: your perspective on those surprisingly bad retail sales numbers came
Speaker 1: out in December, down one point two percent, but then
Speaker 1: Walmart came out with pretty good numbers last week. What
Speaker 1: is your sense of the market. I mean, overall, I
Speaker 1: think the mass markets, given that they're there, where they're
Speaker 1: located in open air centers, they seem to be gaining traffics.
Speaker 1: What was so impressive about Walmart do us number? Not
Speaker 1: only was it a sequential acceleration on a two year basis,
Speaker 1: but it was driven by positive traffic up just under
Speaker 1: a percent, a mid single digit grocery camp, an e
Speaker 1: commerce growth of pent plus the fact that when you
Speaker 1: look at the Stam's Club business, the three point three
Speaker 1: percent complex fuel traffic was up six point four percent.
Speaker 1: So what it tells you is traffic is going to
Speaker 1: these discounters. It's going to the off prices. They in
Speaker 1: a pun, they value value and it's working. So people
Speaker 1: want to see where can they get more for their dollar. So, Dana,
Speaker 1: we're getting the majority of the retailers starting reporting I
Speaker 1: believe next week. What should investors really be looking for here?
Speaker 1: I want to watch the inventory levels, particularly at the
Speaker 1: department stores. We had a rough holiday season for the
Speaker 1: department stores, definitely a bit lackluster. Some of them came
Speaker 1: in with inventory levels that were higher going to the
Speaker 1: fourth quarter with the expectation of a stronger holiday season,
Speaker 1: and overall after third quarter inventory was up one nine.
Speaker 1: We're looking for fourth quarter inventory. Hopefully it shows a
Speaker 1: downward trend, which is what we need. In a date, Dana,
Speaker 1: we're seacraft, you know, craft food slaughtered. What's the strategic
Speaker 1: vision forward for big retail Macy's calls and the rest
Speaker 1: of them? Is it just cost cutting? Is that the
Speaker 1: only solution or do you have a better idea? Got
Speaker 1: to be services. It's got to be reconfiguring the store prints,
Speaker 1: footprint into what into what? What makeup? No no, no services.
Speaker 1: What you're seeing with what some of these stores are doing.
Speaker 1: Look what Macy's has done with the Apple in store shops.
Speaker 1: Look what Bloomingdale's has done lately with their news is
Speaker 1: a Tiffany model worked all that fancy new Tiffany kids
Speaker 1: stuff they've got. It is one of the most popular
Speaker 1: items of Tiffany's lately is everything for pets. It's been
Speaker 1: very popular. Oh no, let's not go there, tom See.
Speaker 1: Dana saw me in Central Park. Dana, you know that
Speaker 1: vet Bill got a Tiffany light blue. You know Leash.
Speaker 1: I told you the pet pet purchases a Tiffany. They're
Speaker 1: very popular. Yeah, they told me. I can't go to
Speaker 1: the website to see what we paid for that thing.
Speaker 1: As well, Dana, what's the fashion item for summer? All
Speaker 1: of our listeners coast to coast and worldwide one to
Speaker 1: know what Dana tells. He says every woman needs for
Speaker 1: the summer. What is it? I think overall what people
Speaker 1: are gonna need for this summer. I think it's going
Speaker 1: to be all about some of the maxi skirts that
Speaker 1: are out there in the flowing dresses. I think that's
Speaker 1: gonna be the one of the popular trend. Riley from St.
Speaker 1: Louis modeling that yesterday. Dana Telsey, thank you so much,
Speaker 1: greatly appreciate it, particularly that perspective on Dana Telsey's Bergdorf
Speaker 1: Goodman of years ago and Mr Lagerfeld as well. Dana
Speaker 1: is a jewel she she's ad sell side of bear
Speaker 1: Stearns and then Boom. And what I admire most about
Speaker 1: her is not that she's, you know, one of the
Speaker 1: absolute top retail annals, but she has built a phenomenal business.
Speaker 1: She left uh the safety if you would have the
Speaker 1: cell side founded her own firm, and I would. You
Speaker 1: can count on one hand those animals that have left
Speaker 1: Wall Street and established large, thriving re research departments, and
Speaker 1: she was absolutely at the forefront. To me, with Dana,
Speaker 1: it's so visceral with her because of her childhood or
Speaker 1: her grandparents were involved with I believe with Bergdorf Goodman.
Speaker 1: I can't remember the story right now, but it's wonderful
Speaker 1: when you've got cell side where it's visceral, like Mario
Speaker 1: Gabelly on autos and that kind of stuff. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
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Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio