Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: 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. The
Speaker 1: news over the last few hours a two hundred billion
Speaker 1: dollar reduction of a trade surplus. Some China disputing reports
Speaker 1: this morning that it had offered to reduce its annual
Speaker 1: trade surplus with the United States by that number, with
Speaker 1: a Foreign Ministry officials saying he was unaware of any
Speaker 1: such concession. Where does the two billion come from? While
Speaker 1: the reduction in the U. S trade get with China
Speaker 1: by was on a list of demands that the president's
Speaker 1: administration made earlier this month, as Treasury Secretary Steve Manuchin
Speaker 1: led a delegation to Beijing. So just where are we? What?
Speaker 1: I'm really pleased to say that Barry I. Can Green
Speaker 1: University of California Berkeley professor joins us now the author
Speaker 1: of his new Berkeley Populist Temptation, Economic Grievance and Political
Speaker 1: Reaction in the Modern Era, and joining us on his
Speaker 1: most recent project syndicate column as well, China and the
Speaker 1: future of democracy, Barry, where better to begin than with China.
Speaker 1: Let's just begin with the news if we can, and
Speaker 1: we'll work our way through some of the work you've
Speaker 1: been doing recently. How realistic is it to get this
Speaker 1: trade surplus down two billion dollars? It's unrealistic period um.
Speaker 1: I think a number like that may be attainable over
Speaker 1: a decade um as a consequence of big changes in
Speaker 1: the structure of the Chinese economy, and maybe some changes
Speaker 1: in the structure of the U s economy as well,
Speaker 1: but not as a matter of government fiat. If China
Speaker 1: were to take major steps to curtail its exports to
Speaker 1: the US, it would export more to other markets, say
Speaker 1: to Europe, and other countries in Asia would redirect their
Speaker 1: exports towards the United States. Even if you deal with
Speaker 1: the bilateral trade balance, you don't end up solving the
Speaker 1: problem if you regard it as a problem of the
Speaker 1: overall US trade deficit. The other big issues as well. Barry.
Speaker 1: On the list of demands that the United States has
Speaker 1: reportedly given to China, this might be the easier one
Speaker 1: to get the Chinese to agree to. Bring this surplus
Speaker 1: down over an agreed period of time. The more difficult one,
Speaker 1: perhaps is to get the Chinese to stop subsidizing the
Speaker 1: industries around the made in China five effort. How difficult
Speaker 1: will that be? Barry? I agree that to focus on
Speaker 1: the trade deficit is to take our eyes off the
Speaker 1: more important issues. I don't think that China thing is
Speaker 1: a big or objectionable issue. Every country has an industrial
Speaker 1: policy and does things us to try to develop its
Speaker 1: high tech sectors. Where China violates international norms is in
Speaker 1: terms of intellectual property protections. And my worry is that
Speaker 1: if we focus on the headline trade deficit number and
Speaker 1: and congratulate ourselves on our ability to export more motor
Speaker 1: vehicles to China, we lose sight of what really matters,
Speaker 1: which is intellectual property rights. Bury the hallmark of your work,
Speaker 1: your books from Golden Fetters to Globalizing Capital, in the
Speaker 1: many many books that all of us have read, and
Speaker 1: of course this book Folcus is an immediate view of
Speaker 1: book of the year. This is on populism from Professor
Speaker 1: Eiken Green is the old phrase O B E. Then
Speaker 1: we get to a point where all our good thinking,
Speaker 1: where we're overcome by events. When you look at dollars strength,
Speaker 1: how close are we to being overcome by events? I
Speaker 1: think there is obviously a tendency to react excess of lee.
Speaker 1: That's what financial markets do. They react excessively to news.
Speaker 1: So people are extrapolating the recent rise of the dollar
Speaker 1: into the future and imagining that it could proceed much further.
Speaker 1: And that's part of the reason I think why emerging
Speaker 1: markets are having such a tough time at the moment.
Speaker 1: It could be that the dollar pauses, and that gives
Speaker 1: Argentina time, for example, to conclude its negotiations with the IMF.
Speaker 1: It gives Argentina time, but then you get knock on effects.
Speaker 1: For example, John I did log in honor of professor
Speaker 1: Ike Green. I did a semilog chart of Brazilian real
Speaker 1: which is curve a linear log, which means some acceleration
Speaker 1: back up to new Brazilian weakness. Is it a domino effect?
Speaker 1: Does it? Does it go from Argentina or Turkey onto
Speaker 1: other things? Is is that what we learned in Ecuador,
Speaker 1: Mexico or Thailand, what we learned from from that earlier
Speaker 1: experiences that investors can um go to sleep for extended
Speaker 1: periods and then something called s along to send them
Speaker 1: a wake up call. So I don't think there is
Speaker 1: economic spillover from Argentina Brazil, but there is a greater
Speaker 1: awareness all of a sudden that there's an election coming
Speaker 1: in Brazil later this year, and that could deliver the unexpected,
Speaker 1: as it did in Italy. I look, Barry at the
Speaker 1: political Maelstruman as we spoke on television this morning. I
Speaker 1: think our audience worldwide on radio wants to know what
Speaker 1: the backside of populism is. I mean, William Jennings Bryan
Speaker 1: was William Jennings Bryan and then things changed. How do
Speaker 1: things change? Is it just economic growth solves populous fears
Speaker 1: of elites. Economic growth certainly helps. So the economy in
Speaker 1: the United States had turned around in a year before
Speaker 1: that historic McKinley Brian election. Prices had begun to rise
Speaker 1: rather than falling, So all that help. That helped the
Speaker 1: armors and UH and the workers. But the other thing
Speaker 1: that happened was an effort to address distributional concerns and
Speaker 1: to strengthen competition anticrust policy, to deal with the railway monopolies.
Speaker 1: And UH. It's not only only growth, but it's also
Speaker 1: economic and social policy. More broadly, then you have to
Speaker 1: ask the question why are some countries better able to
Speaker 1: respond in that constructive manner, whereas in contrast, you saw
Speaker 1: in Italy and Germany in the ninet twenties no no
Speaker 1: response and UH an even more extreme swing to the right.
Speaker 1: Have we had the populist shock yet, Barry? Have we
Speaker 1: actually seen that and where have we seen it? Well?
Speaker 1: I think we have seen it in a sense that
Speaker 1: there's been a profound disaffection towards mainstream political parties, UH,
Speaker 1: criticism of the elites, UH, targeting immigrants, minorities and others,
Speaker 1: and and authoritarian tendencies. So if you asked me to
Speaker 1: define populism, I would say anti elite, anti authoritarian, and
Speaker 1: anti other where other can mean the wealthy bankers or
Speaker 1: or foreigners, depending on whether you have right wing or
Speaker 1: left wing populism. So, yes, we've seen it, we just
Speaker 1: don't know how it will end. Very congratulations on this effort, folks.
Speaker 1: I'll be direct. I've already downloaded it to the old kindle.
Speaker 1: I've got a big trip coming up and it will
Speaker 1: be major airplane reading. Already a shortlist for Book of
Speaker 1: the Year, The populist populist temptation by Barry Coon Green
Speaker 1: at the University of California at Berkeley. We greatly appreciate
Speaker 1: his attendance. Julia Carnado with us right now, with micro policies,
Speaker 1: we look at any number of things. I think, just
Speaker 1: because of time, Julie, I really want to focus in
Speaker 1: on the inflation dynamic. Is the Fed's measurement of inflation
Speaker 1: right now anywhere near accurate in the measurement of the
Speaker 1: inflation our viewers feel? Yes, I mean, I think that
Speaker 1: what they tend to look at is while they focus
Speaker 1: on core inflation as the underlying trend, they look at
Speaker 1: headline inflation. So right now we're seeing headline inflation perk
Speaker 1: up a bit on higher gas. Goods is coming up
Speaker 1: as well as it was. Actually, you know, broader goods,
Speaker 1: core goods prices really aren't showing the strength that they've
Speaker 1: been wanting to see. So we see things like auto
Speaker 1: prices coming down because auto the auto cycle is peaked
Speaker 1: and we're seeing auto demand come off. Auto prices are
Speaker 1: you know, people have to offer discounts to get people
Speaker 1: to buy cars now. So broadly speaking, the inflation picture
Speaker 1: looks pretty benign again abstracting from what consumers are going
Speaker 1: to feel as a big hit front gas prices in
Speaker 1: the near term overnight. John Fair, I bring this up
Speaker 1: because of Japan, where I mean, I'm sorry it was
Speaker 1: it was Mouldi nominal g d P John, and Mouldy
Speaker 1: inflation as well in Japan. Julia West thinky credit picture
Speaker 1: in the United States. Now, the New York Fed coming
Speaker 1: out with their high frequency data, the release of the
Speaker 1: credit loans and and looking at the number of consumers
Speaker 1: inquiring about taking a more credit within six months, and
Speaker 1: it's fallen into five point six five it's very very low. Yeah,
Speaker 1: So that reflects again the peaking of the auto cycle,
Speaker 1: less demand for auto's, less need for loans ferrautos. In general,
Speaker 1: consumers have not shown a taste for releveraging one. Credit
Speaker 1: standards are still pretty tight, but in general we really
Speaker 1: haven't seen that sort of rush to add on new obligations,
Speaker 1: even as the economy is better, in the labor market
Speaker 1: heats up a bit, so people will be sort of
Speaker 1: wandering about that drop of five point six five percent.
Speaker 1: I'm wondering whether that's related to tax savings, so that
Speaker 1: I need to take on more credits. So is there
Speaker 1: an optimistic story there or is this one of pessimism.
Speaker 1: I mean, that's a that's a pretty high frequency read.
Speaker 1: I mean I think, um, most consumers did see a
Speaker 1: small bump in their paychecks, but a lot of consumers
Speaker 1: are facing uncertainty because of higher state and local liabilities.
Speaker 1: So I think, net net, a lot of consumers are
Speaker 1: going to be really uncertain until they file their taxes
Speaker 1: next year about what the net effect of the tax
Speaker 1: cut is for them. So I wouldn't call this attack story.
Speaker 1: I just think in general, if you look at debt
Speaker 1: to income, consumers have been cautious the entire cycle, and
Speaker 1: there's no sign that that's about to fade. Are we
Speaker 1: make America great again? I mean, you've been more cautious
Speaker 1: in you you know, you made your reputation on being
Speaker 1: right about a more subtle and diminished GDP versus consensus
Speaker 1: at the time. If we're not at this represent run rate,
Speaker 1: where are we? Well? Look, I think a lot of
Speaker 1: my view is based in the demographics of our country
Speaker 1: and of the global economy, and so you've got a
Speaker 1: lot an older generation sation that is more focused on
Speaker 1: saving their gains. If if equity prices go up, that's great.
Speaker 1: We'll spend a little, but we'll save more than we
Speaker 1: did in the past, and and and focus on retirement.
Speaker 1: So I think that that's just a reality that we face.
Speaker 1: So I still think potential GDP growth is below two.
Speaker 1: We're running pretty strong right now. Um, that's creating good,
Speaker 1: good labor market momentum. I think we can see that continue.
Speaker 1: But the underlying trend is is pretty pretty modest. Where
Speaker 1: are you in good question? Most people agree on we'll
Speaker 1: get close to a three handle. That's what the government
Speaker 1: is looking for. The economists surveys by Bloomberg on the Street,
Speaker 1: the median estimate this year, I believe it's two point
Speaker 1: eight pc. It's going to be the high. Two seems
Speaker 1: to be the consensus view. That's the consensus. The consensus
Speaker 1: breaks down significantly next year and the year after that.
Speaker 1: What's your view? So so, not surprisingly I'm on the
Speaker 1: more cautious side, partly because, um, I think when we
Speaker 1: do tax when we do fiscal stimulus, defice financed fiscal
Speaker 1: stimulus at full employment, we are going to see margins
Speaker 1: of crowding out. Um, We're going to see higher interest rates,
Speaker 1: tighter financial conditions, perhaps wider trade deficit. All of these
Speaker 1: things mean that the pass through to the domestic economy
Speaker 1: is not going to be as strong. Jiropolicy Advisors, thank
Speaker 1: you so much. Thank you for wearing like an evening
Speaker 1: gown type you would graduate. I'm all amped up for
Speaker 1: team coverage. I mean, I wore a tuxedo today for radio.
Speaker 1: It works on radio. You look, you look fabulous. Pharaoh.
Speaker 1: On the other hand, what do you have on an
Speaker 1: A C. Mullin Jersey over there? I know, well, a weddy.
Speaker 1: You don't wear black to a wedding in the not
Speaker 1: at Kingdom's home. It's a few really really please protocol
Speaker 1: breath tell us about that. No one of the European
Speaker 1: aristocracy would wear black to a wedding. Really, what do
Speaker 1: they wear? You would? You would wear a different color,
Speaker 1: black and gray and perhaps gray. You'll strung man, you'll,
Speaker 1: I'll go to find many men in the city of
Speaker 1: London as well wearing black suits. One of the miracles,
Speaker 1: the miracles buried on the internet is the photo of
Speaker 1: me at my junior problem. That wasn't a black tuxedo.
Speaker 1: Let's get right to it. And there's been a huge
Speaker 1: demand for foreign exchange analysis, whether it's Berry ken Green
Speaker 1: in international economics or in the trenches of gazing at
Speaker 1: the Bloomberg one M McCormick. Mark McCormick with t D Securities,
Speaker 1: UM is very good at folding Bloomberg functionality into his reports. Mark,
Speaker 1: when you walk in in the morning, what's the first
Speaker 1: thing in the FX world you look at on your Bloomberg? Yeah,
Speaker 1: the first thing is always the w c RS function.
Speaker 1: So I look at w c R, S, w E, I,
Speaker 1: w B and just the commodity function to kind of
Speaker 1: see what's going on across different asset classes. I look
Speaker 1: at w c RS and folks, this is a function
Speaker 1: I know John Farrell doors as well, and you can
Speaker 1: parse it into the different buckets of dollar dynamics against
Speaker 1: G seven, against d x Y, against the emerging market
Speaker 1: a d x y blah blah blah. Which bucket is
Speaker 1: of most interest to t D Securities right now? Um?
Speaker 1: It's actually, so I do I do two different buckets,
Speaker 1: one to customize where it's all G ten, and then
Speaker 1: I do one that I frame out that's kind of
Speaker 1: global macro. So I throw in the major emerging markets
Speaker 1: to T d cover. So we'll you know, we look
Speaker 1: at Turkey, a little bit of South Africa, Brazil, uh,
Speaker 1: some of the Latin and some of the major Asians.
Speaker 1: So come in and kind of look at what's going
Speaker 1: on the G ten, kind of give this sense of
Speaker 1: what's going on with the d x Y and then
Speaker 1: kind of pull it back out to what's going on
Speaker 1: and some of the major emerging markets. After I looked
Speaker 1: at my rad screen, you know, I've got it on
Speaker 1: the screen right now, Mark, and I've got the daughter
Speaker 1: was device currency in my basket. Just plane emerging markets
Speaker 1: have set the time period to one month, and it
Speaker 1: is ugly. The Turkish Lyra down ten percent, the Argentine
Speaker 1: pace so dance sevent the Mexican pay so down almost
Speaker 1: nine percent. The Polish slotty has been hammered as well.
Speaker 1: Muhammad Alarium Bloomberg view columnist, Bloomberg opinion columnist and of
Speaker 1: course economic advisor to Alliance as well, talking about this
Speaker 1: trifecta of higher roll prices, stronger dollar, high US rates
Speaker 1: injecting some poison into emerging markets. Just how brutal is
Speaker 1: it right now for a m Mark? Yeah, this is
Speaker 1: a this is a tricky time pre um because like
Speaker 1: what you have is you've got tighter global financial conditions.
Speaker 1: So obviously you've got the US rate story, which is
Speaker 1: very clear. We've seen the break of on the tenure,
Speaker 1: which is causing some kind of global financing stress. You've
Speaker 1: got the moving library, So librar o I S has
Speaker 1: been moving probably maybe on what people would look as
Speaker 1: like technical reasons. We maybe it's some refinancing of the
Speaker 1: budgets and those kind of things, along with some repatriation
Speaker 1: that's come through from the Cisco package. But the other
Speaker 1: side of it is you've got US real rates are
Speaker 1: starting to move up. I think that's one thing that
Speaker 1: a lot of people kind of misses that the US
Speaker 1: real rate is the global plumbing of the financial markets,
Speaker 1: and so the US tenure real rates back is pretty
Speaker 1: close to one. So to me, what we're kind of
Speaker 1: really focused on is whether or not the US deal
Speaker 1: ker is going to continue to whether US real rates
Speaker 1: are going to break one percent. And also the story
Speaker 1: behind the scenes is the ECB and the b o
Speaker 1: J are are gradually normalizing policy when you look at
Speaker 1: the deils of their balance sheets. So you've got this
Speaker 1: really kind of toxic mix for emerging market which you
Speaker 1: have volatility and you've got the end of easy money
Speaker 1: coming at the exact same time period. Mark, let's go
Speaker 1: on Canadian onion. In the time we've got left, you're
Speaker 1: with Toronto Dominion Bank TV Securities. And is there a
Speaker 1: play in Looney right now or is there a a
Speaker 1: play and a different Canadian pair where John can you know,
Speaker 1: recover financially from his wedding gift to Megan and and Henry,
Speaker 1: I mean, where where's the place to make it? Henry?
Speaker 1: It's Henry, Not excuse me, folks, it's Henry, not Harry. Okay, Mark, Mark,
Speaker 1: where can I make money in Canada? Yeah, it's a
Speaker 1: very interesting time because I think what people are usually
Speaker 1: focused on in Canada they always look at oil prices,
Speaker 1: and they always look at the kind of interest rate
Speaker 1: differential or terminal rate spread to get between the US
Speaker 1: and UH in Canada. What I think people are missing
Speaker 1: again in this story is that Canada is now becoming
Speaker 1: what we're calling a credit currency. And so you've got essentially, um,
Speaker 1: we're where in the world, as we just kind of
Speaker 1: mentioned here, in emerging markets, where you've got its global
Speaker 1: tighter financial conditions you've got what we'd call a regime
Speaker 1: change in financial system. Central banks are ending the easy
Speaker 1: money game. And Canada here is a country that sits
Speaker 1: with a very large current account deficit two and a
Speaker 1: half percent of GDP. It has not improved since the
Speaker 1: paper tantrum, Which was one positive evaluation signally got from
Speaker 1: emerging markets is they started to reduce those external and
Speaker 1: bounce is once the taper tantrum started in two thousand twelve,
Speaker 1: two thirteen. But the concern for Canadas, you have a
Speaker 1: country that hasn't really started to deliver yet, you have
Speaker 1: a wholesale funded banking system. You've got tighter financial conditions
Speaker 1: coming from the US and that's being passed on the
Speaker 1: Canadian consumer. And the big story here is that the
Speaker 1: Bank of Canada is already engineered and overshoot um. Whether
Speaker 1: or not they call it temporary or whether tactically they
Speaker 1: are going to overshoot their inflation target. You're going to
Speaker 1: have lower real rates in Canada. You're gonna have a
Speaker 1: very large current account deficits. Did you see Did you see? JOHNA.
Speaker 1: McCormick didn't answer the question give me an economic dissertation.
Speaker 1: I just want to know John where you can make
Speaker 1: money to bake up for your wedding present. Yeah, to Henry,
Speaker 1: I guess he was town. What do I do? Run mind? Yeah,
Speaker 1: I mean do a do do a dou. So it's
Speaker 1: straight up to buy dollar cat dips trade on fifty,
Speaker 1: but it's also a cross trade on on evaluation but basket.
Speaker 1: So we're looking at short cat against Yeah, we're looking
Speaker 1: at short cat against cable, shortcat against euro. So essentially
Speaker 1: what we're trying to do is we want to be
Speaker 1: along all those turn accounts surplus countries that we still
Speaker 1: see those currencies as being undervalued over the next six
Speaker 1: or twelve months, and we're short the Canadian dollar against them.
Speaker 1: So that's kind of the want to. You don't want
Speaker 1: to be traveling to Europe. McCormick was long the Winnipeg
Speaker 1: Jets leave alone. Just quickly. You mentioned Canada has not delivered.
Speaker 1: We've all heard stories about the property marketing Canada. We've
Speaker 1: all heard very ugly stories. Where is it and where's
Speaker 1: it going? In your mind? Where do you see things going? Well?
Speaker 1: I think things are still relatively positive, So there's you know,
Speaker 1: you kind of have your sentiment base, you know, where
Speaker 1: should you know, where how do people feel about it,
Speaker 1: and how people feel what's the common knowledge about the
Speaker 1: real estate market and whether or not they want to
Speaker 1: continue to kind of you know, buy into it. And
Speaker 1: there's also the supply demand. The supply demand for kind
Speaker 1: of the real estate market is really driven by what's
Speaker 1: happening in toront know, which is becoming a much more
Speaker 1: globalized city and you're seeing a lot more immigration, You're
Speaker 1: seeing a lot more you know, pressure on the supply
Speaker 1: and demand story. It's kind of like you know, where
Speaker 1: New York City was ten fifteen years ago in terms
Speaker 1: of you have all these people coming in, you have
Speaker 1: these different industries changing, and the city is just not
Speaker 1: ready for it. So there is a natural pressure that
Speaker 1: prices do we just have to to kind of continue
Speaker 1: to rise. But the story is is how much really
Speaker 1: is this impacted by the mobility of global capital and
Speaker 1: how much money is kind of coming in from other
Speaker 1: countries and how much is that dislocating the potential for
Speaker 1: people that can afford real estate versus kind of like
Speaker 1: how much is this an asset play? So I think
Speaker 1: the baseline here is that the market's cooling off, but
Speaker 1: it's pulling off at the exact same time that the
Speaker 1: consumers have just are basically just starting stage one of
Speaker 1: the leveraging. So the domestic demand story is really kind
Speaker 1: of I think what is the major concern is that
Speaker 1: if housing market and the consumer come off from the
Speaker 1: exact same time, there hasn't been anything else to kind
Speaker 1: of kind of hand over the economy to continue to move. Mark,
Speaker 1: nobody cares Jets or Vegas, which one I guess I'll
Speaker 1: just go Vegas. No, you're we You work for TV Securities.
Speaker 1: You're supposed to say Jets. I stopped watching sports after
Speaker 1: the Raptors. Uh after they got swept by the by
Speaker 1: they did. I know, it's it's therapy as well. Okay,
Speaker 1: Mark McCormick, thank you so much, greatly appreciate what TV Securities.
Speaker 1: That was brilliant, nice summary there of Canada. Pim Fox
Speaker 1: and I on a Friday with John Tucker and we're
Speaker 1: sitting around anxiously deciding what champagne to buy for the
Speaker 1: Royal wedding, and Campbell's falls apart, so we're able to
Speaker 1: go out and get Scott muschikin. He's with Wolf for years,
Speaker 1: with d l J and Kidder Peabody's when every award
Speaker 1: out there, he was so good. The Wall Street Journal
Speaker 1: in their beauty contest a couple of years ago, actually
Speaker 1: retired him. He's not retired. He's with Wolf where he's
Speaker 1: He's seen the Durance family struggle for years. Scott Um
Speaker 1: nineteen or rather two thousand and eight, ten years ago,
Speaker 1: Campbell's soup with a moldy five point one percent total
Speaker 1: return and the two minute drill is they're not getting
Speaker 1: it done. From their annual report of ten years ago.
Speaker 1: At Campbell, we believe the key to sustainable success more
Speaker 1: than ever is on course strains, major trends and outstanding
Speaker 1: opportunities worldwide. Isn't this about nobody wants to buy a
Speaker 1: can of Campbell's tomato soup. Yeah. Hey, first of all
Speaker 1: to him and Tom, thanks thanks for having me. But
Speaker 1: you know it's interesting, Uh, the ship category actually grew
Speaker 1: this year, UM, Believe it or not. It was a
Speaker 1: cold winter, so soup grew. So you know, one of
Speaker 1: the things going on here is just lot out mismanagement
Speaker 1: of Campbell's UM. Now there's unprecedented change afflicting the food
Speaker 1: at home space UM, and there's certainly that headwind and
Speaker 1: very disturbing coming off that conference call with them talking
Speaker 1: about not being able to get pricing through and what
Speaker 1: is that is that that's Bentonville, that's Walmart. Walmart saying
Speaker 1: no way, guys. You know, we're we got a plan
Speaker 1: and we're keeping prices low and so aluminiums up, steals up.
Speaker 1: You're not getting pricing, But go ahead, Scott, I had
Speaker 1: a slide rule when people were talking about this good family,
Speaker 1: the steward of Campbell's soup should sell the company. Is
Speaker 1: that same conversation going on today? I mean, I think
Speaker 1: you gotta look at Campbell's and they talked about a
Speaker 1: strategic review and you know, from our perspective, ten billion
Speaker 1: dollars in revenue going against you know, guys like Kroger
Speaker 1: and Walmart. You know, the scale is just not there.
Speaker 1: Uh and clearly the operating acumens not there. And so
Speaker 1: I think, you know, the family should think about it.
Speaker 1: I think Kraft Hyns makes a lot of sense, honestly,
Speaker 1: and we've talked about that and even in writing like
Speaker 1: I don't think they have the scale to do it.
Speaker 1: I think there's unprecedented change coming at this industry. Food
Speaker 1: at home industry and people need to bulk up, and
Speaker 1: not only retailers. But I think these manufacturers have to
Speaker 1: think about coming together, all right, So Scott Mushkin, let's
Speaker 1: say that they're thinking about coming together. You mentioned Craft Hynes.
Speaker 1: Is that the only one? I mean, I think that
Speaker 1: in our opinion, it seems it seems somewhat logical. Um,
Speaker 1: there's obviously long term investors in in Kraft times uh
Speaker 1: three g in in Berkshire, Hathaway. So if the dor
Speaker 1: and Sandy wants to do it, they you know that
Speaker 1: it makes sense there. But I mean, as they said,
Speaker 1: everything is on the table and it's always tough to speculate,
Speaker 1: but it makes a lot of sense. They fit nicely together.
Speaker 1: How long can they keep doing this? Campbell's Yeah, I mean,
Speaker 1: you know, I think the markets telling us that you know,
Speaker 1: they're they're they're tired of of what Campbell's has been
Speaker 1: doing over the last ten years. Um and the challenges.
Speaker 1: And we saw you know, Kroger partnering with Accado yesterday. Um,
Speaker 1: the industry is it's tell Tom about that. To hang
Speaker 1: on a second, Tell people, tell tell people about and
Speaker 1: Tom about this this deal, because this is interesting. What
Speaker 1: Kroger did with Ocado. It's licensing some technology that is
Speaker 1: already being tested and used in France and also in Canada. Yeah,
Speaker 1: and then of course over in the UK. So I
Speaker 1: mean the you know, Accado basically is an automated system
Speaker 1: to bring online groceries to your home. Um, and Kroger
Speaker 1: his license decked technology. It's been pretty successful over in
Speaker 1: the UK, and as you mentioned, there now spreading their
Speaker 1: wings into other markets. Um. But the net of it is,
Speaker 1: and this is the challenge, is Kroger's agreed to build
Speaker 1: twenty STU where houses distribution centers. That's all extra capacity. Um.
Speaker 1: Funny enough, the birthrate came out yesterday I think from
Speaker 1: the CDC, and it was the lowest it's been. So
Speaker 1: the challenge with the industry is it's not growing all
Speaker 1: that fast. Populations of fifty BIPs. You know, food at
Speaker 1: home may not even be growing fifty BIPs. And so
Speaker 1: when Kroeger announces they're gonna build twenty fulfillment centers, you
Speaker 1: know almost gives me heart palplications and like more capacity
Speaker 1: into an overcapacity industry. Uh, not to mention what Amazon
Speaker 1: is doing with Whole food, So you know, they got
Speaker 1: to play. The industry is changing, but man as is
Speaker 1: tough out there. It's tough out there, and with your experience,
Speaker 1: Scott Michigan, is just simple. It all gets worked out.
Speaker 1: You know, the five year plan becomes the three year plan.
Speaker 1: I think everybody can basically stay. Campbell's has been a
Speaker 1: modest train wreck for a number of years for whatever reasons,
Speaker 1: and all that every other industry is rolling up essentially,
Speaker 1: look at media just as one example. When does the
Speaker 1: food frenzy start and they all merge? I mean, you
Speaker 1: know it should in our opinion, it should, and it's
Speaker 1: it's started to a degree. I mean obviously Campbell's bought,
Speaker 1: but but Lance, but um, it needs to happen at
Speaker 1: a much more rapid pace. I mean, we would have thought,
Speaker 1: and we've wrongly thought over the last six months it
Speaker 1: would have sped up. Um. But you know, even on
Speaker 1: the retail side, there's this kind of like almost overconfidence,
Speaker 1: um that things will be okay, it's all gonna work
Speaker 1: itself out. We've seen you know, bad trends before. But
Speaker 1: you know, in our opinion, that's that's the wrong thought
Speaker 1: to have. That you really need to partner and partner quickly.
Speaker 1: Pen very quickly. Kraft Heine's employment thirty nine thousand, Campbell
Speaker 1: soup half as much eighteen thousand. That gives you the skills. Yeah, well, Scott,
Speaker 1: I just wanted to know if that is, Uh, if
Speaker 1: that sort of underscores the I guess the scorecard that
Speaker 1: you've got. You covered twenty three companies officially, you've got
Speaker 1: thirteen holes and ten buys. That's not a big bull
Speaker 1: endorsement for the sector, is it. Yeah? And then you know,
Speaker 1: you know, we've we've known each other for years, and
Speaker 1: you know one of the things that you know, I
Speaker 1: think I got wrong honestly over the last six months.
Speaker 1: So we were very barished on the food at home
Speaker 1: sector with a lot of cells. With tax reform, we
Speaker 1: believe nominal growth in the U S would accelerate, which
Speaker 1: is actually happening. We thought the inflation rate would rise,
Speaker 1: that's happening. Generally. That becomes a much more productive environment
Speaker 1: for the food at home sector. Uh. Realizing there's unprecedented change.
Speaker 1: But right now we're seeing is that this idea of
Speaker 1: nominal growth helping the sector, it's just not not coming through. Um.
Speaker 1: The unprecedented pressures are winning the day. Well, let's be
Speaker 1: constructed here are you've been kind to come out and
Speaker 1: short notice Scott Muskin. What is natural Grocers? Oh? Natural Grocers. Oh,
Speaker 1: it's a it's a small regional chain selling natural organic
Speaker 1: food out of it's located at the Denver's that stores
Speaker 1: kind of in the mid all ther performance and that
Speaker 1: you're killing it on natural Grocers, it means it's been
Speaker 1: why is that a moon shot versus everybody else troubled?
Speaker 1: So so I think you know, one of the things
Speaker 1: we see in the food at home industry is well,
Speaker 1: first of all, geography matters, right, So they're located in Denver,
Speaker 1: they have a lot of stores in the oil market,
Speaker 1: which is rallying, uh huge, and so they're they're getting
Speaker 1: a big economic benefit. But we see is this so
Speaker 1: as you get up into the national organic channel, it
Speaker 1: does respond to a better economy and more robust economy,
Speaker 1: and so natural grocers. So I think that's factor number one.
Speaker 1: Factor number two is you know, there's just not a
Speaker 1: lot of liquidity in that stock, and so I think
Speaker 1: that you know, when it can, it can overshoot and
Speaker 1: undershoot just because of the liquidity factors. But you know,
Speaker 1: definitely their business has improved markedly because of what's going
Speaker 1: on in the macro industry, macro economy. Scott really appreciate
Speaker 1: this on short notice with wild free search. Scott musing
Speaker 1: on Campbell's soup as well. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keene before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio