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Speaker 2: All about the geopolitics front and center here, But there
Speaker 2: are earnings. Companies reporting earnings, and one of the companies
Speaker 2: we want to focus on here is Target because it
Speaker 2: goes to the consumer. Here Emily con joins his consumer
Speaker 2: team leader for Bloomberg News. Target reporters cenumbers is some
Speaker 2: better than expected profit for the full year.
Speaker 3: What you learn from the Target and what's the management saying?
Speaker 4: So on management, it's important to remember this is a
Speaker 4: new CEO, Michael Fidelki's first earnings call, and there's some
Speaker 4: optimism here. There's an upbeat forecast on the coming years
Speaker 4: and tease talking about this improving the store experience and
Speaker 4: bringing shoppers back with that cheap chic appeal that the
Speaker 4: that the stores have definitely lost in recent years. So
Speaker 4: the stock is responding quite positively.
Speaker 5: I love the term cheap chic. I do agree that
Speaker 5: when I go to Target, I find some quirky fines
Speaker 5: and I'm like, is this really this cheap? But how
Speaker 5: does Target plant to differentiate itself from competitors like Walmart
Speaker 5: and Amazon, especially as consumers remain price sensitive and their
Speaker 5: spending is shifting towards more essential so not anymore they're
Speaker 5: random things that.
Speaker 4: Totally find Yeah, you nailed it. I mean what we
Speaker 4: What Target used to do really well is you'd go
Speaker 4: in for some rolls of toilet paper and you'd come
Speaker 4: out with sweatshirts and sweatpants and fun things that you
Speaker 4: didn't know you needed. That was that tarje appeal. It
Speaker 4: attracted wealthier clients to Target. That was its advantage over
Speaker 4: Walmart for many years. It's lost that appeal. A big
Speaker 4: part of it is partnership. So we heard Fidelki just
Speaker 4: now speaking about increasing the pace of partnerships. They have
Speaker 4: a partnership with Roller Rabbit and more to come. That's
Speaker 4: part of it, bringing in brands that you know and
Speaker 4: love into Target at a at a good price point.
Speaker 4: They have a partnership with other partnerships with other brands
Speaker 4: coming out over the course of the year. I think
Speaker 4: that's part of the way they want to differentiate themselves
Speaker 4: for sure. Food and beverage we heard about this morning too.
Speaker 3: What do they really compete against day to day do
Speaker 3: you think?
Speaker 4: I mean, I think it's obviously Walmart and Amazon. I
Speaker 4: think one of the reasons Target is struggling right now
Speaker 4: is because they haven't invested as much in grocery as
Speaker 4: Walmart has. So one of the reasons that Walmart is
Speaker 4: seeing higher income shoppers come to Walmart increasingly is because
Speaker 4: they've made their grocery section a lot more appealing. There's
Speaker 4: you can find organic there, you can find a lot
Speaker 4: of fresh products. You go to Target, it it's just
Speaker 4: not there. So I think with you're going to increasingly
Speaker 4: see Target try to get more competitive in the grocery aisles,
Speaker 4: which would put it up against lots of other grocery companies.
Speaker 5: So does Target then plan to expand their food and
Speaker 5: essential assortments to I don't know, maybe stabilized traffic or
Speaker 5: do you think it'll double down on more discretionary or
Speaker 5: style lad categories.
Speaker 4: Yeah, I think we'll see, we'll see a bit of both.
Speaker 4: I think that they called out beauty and food and
Speaker 4: beverage this morning as some bright spots, and I think
Speaker 4: we'd expect to see.
Speaker 6: More of that.
Speaker 2: So what's Target saying about their consumer? How's their consumer behaving?
Speaker 4: Yeah, I mean the word of the you know that
Speaker 4: we're still seeing like very picky consumers who aren't spending
Speaker 4: as much in the discretionary categories. So I think Target
Speaker 4: is focusing on what it can do to bring people back.
Speaker 4: The CEO just said that they're going to be investing
Speaker 4: in hiring more workers and raising pay. That's pretty key
Speaker 4: to making the stores more enjoyable to shop in.
Speaker 2: Because that's what Alexis Christophers was saying earlier about her
Speaker 2: Target experiences.
Speaker 3: Not enough help on the floors.
Speaker 2: That's something that's a shared concern among this company aware
Speaker 2: that kind of is.
Speaker 4: It sounded like it. I mean raising pay is key.
Speaker 4: I think you know, there's going to spend a billion
Speaker 4: dollars on making the stores more pleasant. I think they
Speaker 4: laid off a lot of corporate employees to you know,
Speaker 4: perhaps that investment is going into making the stores better. So, yeah,
Speaker 4: that is a problem. Slow lines, lots of things locked
Speaker 4: up in cages when you.
Speaker 3: Try to don't get Matt Miller started all the stuff, gosh.
Speaker 2: I know.
Speaker 5: So then with a new CEO, any cultural or operational
Speaker 5: changes that signaled that the company truly turning a page
Speaker 5: after recent challenges, because you have probably skeptic saying maybe
Speaker 5: this is a one off.
Speaker 4: Yeah, I mean, we've seen he's been in the job
Speaker 4: for a month, we've seen a reshuffling in leadership, we've
Speaker 4: seen some layoffs. But where you know, the company is
Speaker 4: hosting its investor day later today, so we're hoping to
Speaker 4: learn more about what that turnaround strategy is and any
Speaker 4: specifics on new initiatives. How big are these investments and stores.
Speaker 4: Those are the things we're looking for later today with
Speaker 4: the event that's kicking off shortly.
Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 2: This military conflict in the Mid East cannot be good
Speaker 2: for logistics, the global supply chain, all that kind of stuff.
Speaker 2: We learned about this. Every time there's something wrong in
Speaker 2: the world, it impacts global trade, which means we need
Speaker 2: to check in with Lee Glasgow, Senior transport Logistics and
Speaker 2: shipping analysts for Bloomberg Intelligence.
Speaker 7: Lee, what do you make here of what we're.
Speaker 2: Seeing in the Middle East and how it may impact
Speaker 2: global trade? How are you thinking about it?
Speaker 6: Yeah, so, I mean, at the end of the day,
Speaker 6: it's going to put upward pressure on rates because there's
Speaker 6: now a premium on capacity, especially as it relates to
Speaker 6: the tanker industry. We've seen tanker rates get closed to
Speaker 6: almost five hundred thousand dollars a day. That is just
Speaker 6: being driven by the fact that people want oil, they're
Speaker 6: going to have to pay to get it. And the
Speaker 6: ripple effect really for my world because you know, I
Speaker 6: cover marine shipping, air freight guys, and also the folks
Speaker 6: here in the US, the railroads and trucking companies, the
Speaker 6: biggest impact is going to be the inflationary aspect and
Speaker 6: the higher decail prices. When diesel prices rise significantly, it
Speaker 6: tends to weigh on margins because there is a lag
Speaker 6: effect on the fuel search charges that they charge their customers.
Speaker 6: So you're going to see margins getting pressed. And also
Speaker 6: the you know, the one two punch from that is
Speaker 6: going to be if consumers have less discritionary money to
Speaker 6: spend on goods. That means it's going to be less
Speaker 6: stuff shipped around. So you know, there's really kind of
Speaker 6: a ripple effect going on with the events unfolding in
Speaker 6: the Middle East.
Speaker 5: If disruptions persist, do you think we could see supply
Speaker 5: chain bottlenecks similar to twenty twenty one to twenty two
Speaker 5: And if so, which sectors do you see will be
Speaker 5: falling first or will be affected first?
Speaker 6: I don't think you're going to see what we saw
Speaker 6: during the pandemic, because at the end of the day,
Speaker 6: the biggest impact really is the crude and energy markets.
Speaker 6: So you know, container aligners that are leaving Asia are
Speaker 6: still going to go to southern California to unload their goods.
Speaker 6: You know, the only time it's going to become a
Speaker 6: problem is that if you know, this is really prolonged
Speaker 6: and just people just don't have the energy to manufacture stuff.
Speaker 6: But let's hope you don't get there.
Speaker 5: What about vessels with vessels stalled and re routing around
Speaker 5: choke points? How sharply are fright and tanker rates going
Speaker 5: to rise? In your view?
Speaker 6: You know, my colleague ken Low out of Singapore, you
Speaker 6: just put out a note on the Blueberg terminal earlier
Speaker 6: today and he was calling for over five hundred thousand
Speaker 6: dollars a day and time traiter rates.
Speaker 8: Again.
Speaker 6: You know what, it's not so much the diversion, it's
Speaker 6: the kind of the demand. So people are willing to
Speaker 6: pay up high. A lot of insurance companies are no
Speaker 6: longer insuring in the region. So, uh, the you know,
Speaker 6: the straight of her Moves is pretty much you know,
Speaker 6: the right the Persian Gulf and the strade of her
Speaker 6: Moves is pretty much shut down no matter what the
Speaker 6: Iranians do.
Speaker 2: Solely, if I'm a FedEx pilot, I'm not flying anywhere
Speaker 2: near that airspace, so I'm gonna fly around.
Speaker 3: It is not going to raise costs for everybody.
Speaker 6: Yeah, and so like the ripple effect, you know, after
Speaker 6: the the ocean markets, probably the air markets are most impacted.
Speaker 6: A lot of the airspace and the Middle East has
Speaker 6: been shut down. A lot of commercial flights are no
Speaker 6: longer going in and out. And you know what the
Speaker 6: commercial airlines do is, you know, where we put our luggage,
Speaker 6: they also take cargo, so that that capacity is not available,
Speaker 6: and you know, it is going to impact FedEx UPS
Speaker 6: and DHL. DHL is more exposed to the Middle East
Speaker 6: than the other two. But you know, I think right
Speaker 6: now it's kind of a deminomous impact to UPS and FedEx.
Speaker 6: The real question is is how long does this go for?
Speaker 6: You know, is it going to be days, weeks or months?
Speaker 6: You know, if it's just going to be weeks, the
Speaker 6: impact earnings probably won't be that that significant for the
Speaker 6: FedEx is and the UPS is the world and slightly
Speaker 6: more for DHL. All right then, and then also, you
Speaker 6: know a lot of a lot of these businesses, they
Speaker 6: have forwarder freightforwarding businesses as well, and when you have
Speaker 6: these supply chains disruptions, shippers will lean heavily on the
Speaker 6: freightfowarders and help them navigate these new situations. So you
Speaker 6: might see, you know, the freightfowarders also could benefit. They
Speaker 6: can benefit from a higher rates and be also getting
Speaker 6: more customs business.
Speaker 7: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 1: you get your podcasts or watch US live on YouTube.
Speaker 2: The US Israeli war on Iran has entered its fourth day,
Speaker 2: with oil and gas prices surging in.
Speaker 3: The world adjusting to a conflict.
Speaker 2: The President Donald Trump says has no fixed timeline, and
Speaker 2: now we're see other countries in the region being pulled
Speaker 2: into the conflict, with Iranian response.
Speaker 3: Hitting a number of countries in the region.
Speaker 2: Our next guest has twenty years experience working in at
Speaker 2: the Middle East through various forms of the US government
Speaker 2: and private practice. Kirsten Fontain Rose joins his heare senior
Speaker 2: Fellow at the Atlantic Council, joining us via zoom from Washington, DC. Kirston,
Speaker 2: what do you make of the US action against Iran here?
Speaker 2: Just from your experience in the State Department in other areas.
Speaker 9: If the question is why are we doing this now
Speaker 9: or why is the US getting involved, there are two answers.
Speaker 9: One is that during the talks that people were tracking
Speaker 9: on the nuclearphile, the US team assessed that Iran was
Speaker 9: not actually making concessions. We heard encouraging things about movement
Speaker 9: being made, but the reality is what Iran was offering
Speaker 9: was not to enrich uranium. For three years, this time
Speaker 9: period is what the International Atomic Energy Agency, the IAEA
Speaker 9: told us same timeframe it would take Iran to restore
Speaker 9: their Uranian Richmond if no restrictions were placed on it.
Speaker 9: So the US team said, Iran is just toying with us.
Speaker 9: This is the same delay diplomacy they've been displaying for
Speaker 9: several US administrations. This is a problem. Back in DC,
Speaker 9: the military and the National Security Council and the presidents
Speaker 9: and our team said when the regime revealed this, that
Speaker 9: they were not willing to truly make concessions on the
Speaker 9: nuclear file or on their missile file, even though the
Speaker 9: US had a massive military build up on their shores.
Speaker 9: It caused the US administration to say they intend to
Speaker 9: build out both programs to the point where the international
Speaker 9: community would lose any leverage to negotiate with them. They
Speaker 9: would either build up their nuclear program to the extent
Speaker 9: that you could no longer safely go after their missile
Speaker 9: program kinetically, or they would build up their missile program
Speaker 9: to the extent that it made it too risky to
Speaker 9: destroy any of their nuclear facilities. So if the current
Speaker 9: on their borders was not enough, nothing would be, and
Speaker 9: therefore the time was now or never. The other pressure
Speaker 9: that was in was the US got signals from Israel
Speaker 9: that they were going to strike potentially unilaterally because of
Speaker 9: their own feeling of this being a small window of
Speaker 9: opportunity and being an existential threat. The US knew that
Speaker 9: that would mean that the US would be receiving attacks,
Speaker 9: our bases would be on the receiving end, because the
Speaker 9: Iranian regime had made it clear that any strike by
Speaker 9: Israel would also be considered a strike by the US.
Speaker 9: So combine those, then add in sprinkle in intelligence that
Speaker 9: told us that there would be clustered meetings of senior
Speaker 9: Iranian leadership almost too good to be true, and you
Speaker 9: wound up with the recipe for strikes when they happened.
Speaker 5: So, with Iran signaling reddiness for a long war, where
Speaker 5: does that leave the US when it comes to reshaping
Speaker 5: their strategy. We have some people saying it'll be three,
Speaker 5: four or five weeks.
Speaker 9: It's not really a reshaping. However, the US battle plan
Speaker 9: has been laid. You know, these can agencies have been
Speaker 9: on the shelf for quite some time, and of course
Speaker 9: they've been updated, massively updated. But the intent is to
Speaker 9: wipe out the military, wipe out the navy and prevent
Speaker 9: Iran from having a nuclear weapon and create a pathway
Speaker 9: for the Iranian people to govern themselves, to decide whether
Speaker 9: they want that to be someone new or to be
Speaker 9: levels three or four down within the regime. It's on them.
Speaker 9: But this kind of operation to destroy an entire military,
Speaker 9: an entire navy, including underwater assets, all the ships, all
Speaker 9: the bases, any missile facilities, drawn facilities, factories, manufacturing stockpiles,
Speaker 9: the like.
Speaker 3: It takes some time.
Speaker 9: So the US and Israel started with those air defenses
Speaker 9: that would prevent Iran from being able to guard against
Speaker 9: these kinds of strikes, and it went then to long range,
Speaker 9: medium range ballistic missiles, things that would threaten our bases
Speaker 9: and Israel. And it's moving on then to leadership, to
Speaker 9: things like the short range ballistic missiles that Terran barely
Speaker 9: touched in the June war and is what we're seeing
Speaker 9: them fire along with drones onto their golf neighbors now.
Speaker 9: So there's kind of a tiered hierarchy of places that
Speaker 9: were first priority to hit and now moving down. But
Speaker 9: the US operations won't finish until they hit all of
Speaker 9: their high value target list, some of those being individuals,
Speaker 9: but mostly being regime assets the ways they exert control.
Speaker 2: So, given your experience at Kirsten, is this something that
Speaker 2: can be achieved in the space of four to five weeks,
Speaker 2: as President Trump was suggesting, or going to go perhaps
Speaker 2: even longer.
Speaker 9: It depends on the state of Iran's air defenses, which
Speaker 9: right now we assess being pretty low, and then on intelligence,
Speaker 9: because we know Iran moves things around. So right now,
Speaker 9: satellite imagery, for instance, is helping our jets that are
Speaker 9: doing launcher hunting. They're literally scanning the air to look
Speaker 9: for launchers being moved from the places where they are
Speaker 9: secretly stored to the places where they are intended to launch,
Speaker 9: taking them out that way. How many of the stockpiles
Speaker 9: underground can we reach? Is the leadership on that list
Speaker 9: moving around? Do we know where they are? So it's
Speaker 9: the battle plan is there. It's just whether or not
Speaker 9: intelligence shifts day to day that lays out whether or
Speaker 9: not the timeline stays solid or not. It also will
Speaker 9: depend on some geopolitical factors. How is the economy reacting
Speaker 9: around the world, What kind of damage is coming to
Speaker 9: golf partners. It's not that things like damage would cut
Speaker 9: short US operations. In fact, if anything, it would probably
Speaker 9: speed them up.
Speaker 5: What are the odds that Golf states like cut there
Speaker 5: or UAE will be pulled deeper into a direct confrontation.
Speaker 9: Perhaps well, the US may not even want that. These
Speaker 9: Golf states have a lot of assets, They have standoff weaponry,
Speaker 9: they have great air defenses that the US is interoperable with.
Speaker 9: But you don't want to clutter the air space. You
Speaker 9: don't want more situations like we had in Kuwait. We're
Speaker 9: turning on Kuwait's air defenses wound up crashing three US
Speaker 9: fighter jets. So anything would have to be well coordinated.
Speaker 9: The US has planned the battle plan around those territories
Speaker 9: and that airspace not being available, so it certainly won't
Speaker 9: be a message, hey, everybody, pitch in when you're ready.
Speaker 9: All of that would be integrated. The Golf also tends
Speaker 9: to have a lot of their air defenses on automode,
Speaker 9: so it expends quite a bit of interceptor stockpile on
Speaker 9: perhaps one drone and its remnants and the like. So
Speaker 9: the US would want to say, before you get involved
Speaker 9: directly in anything offensive, let's really watch your defenses and
Speaker 9: make sure they're being well strategically expended. And then if
Speaker 9: we're going to use things like your standoff weapons, let's
Speaker 9: coordinate targeting. We want to really limit civilian casualties here.
Speaker 9: That's a big percentage of the planning has gone into
Speaker 9: how to limit those civilian casualties. But when you look around,
Speaker 9: even them participating in air defense is a contribution, and
Speaker 9: now that you have their civilians being hit, they're much
Speaker 9: more likely to say we would like to participate on
Speaker 9: the offensive side. Saw Cutter already take down two jet fighters.
Speaker 9: That's more than just turning on a jammer, for instance.
Speaker 9: And now that Saudi has had embassy's hit in their capital,
Speaker 9: they made their rethinking the Saudis prior to any engagement
Speaker 9: message to the your on nimes very clearly we're not
Speaker 9: allowing the US to use this as a base for launches,
Speaker 9: but if you do anything that strikes civilian architecture, we
Speaker 9: will consider it an act of war. And everything's on
Speaker 9: the table then, so we could be seeing the golf
Speaker 9: being drawn in.
Speaker 7: Stay with us more from Bloomberg Intelligence coming up.
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Speaker 2: Congressional warpower votes aimed at blocking President Donald Trump from
Speaker 2: further military action in Iran will likely fail.
Speaker 3: That is the assessment of our next.
Speaker 2: Guest, Nathan Dee, senior policy analyst the Bloomberg intelligencies down.
Speaker 3: There in DC. I mean this is just for show,
Speaker 3: isn't it, Nathan.
Speaker 2: I mean that Congress has given up a whole you know,
Speaker 2: war power thing a long time ago to this to
Speaker 2: our US presidency, haven't they.
Speaker 4: Yeah?
Speaker 8: Absolutely. I mean this is essentially a symbolic vote here.
Speaker 8: I mean, in order to get this through law, you
Speaker 8: would have to have both chambers pass it, and you'd
Speaker 8: have to have pass it in a way to get
Speaker 8: a veto proof majority, because President Trump would obviously vetoed
Speaker 8: this measured. So I think what you know Senator Tim Kaine,
Speaker 8: who is the sponsor of this legislation or this resolution,
Speaker 8: and he did something very similar to Venezuela is aiming
Speaker 8: to do, is essentially just put people on record ahead
Speaker 8: of the US midterms. Because current bully suggests that sixty
Speaker 8: percent of Americans are not on board with President Trump's
Speaker 8: strategy in Iran, and you know, as you can do
Speaker 8: in an election year, people like to play politics, and
Speaker 8: so this is something that I think just generally is
Speaker 8: more so about political aspects as we get closer and
Speaker 8: closer to November.
Speaker 5: But even if passed, resolutions would need a super majority
Speaker 5: to override Trump's veto, and so that leaves them, to
Speaker 5: Paul's points, something largely symbolics. So what is the ideal
Speaker 5: situation in your view?
Speaker 8: Yeah, so there's two reasons why Senator Tim Tim Kane
Speaker 8: is pushing this. The first is Congress doesn't like it
Speaker 8: when presidents start conflicts. And then you don't even have
Speaker 8: to have a Republican president or a Democratic president, you
Speaker 8: go all the way back, you know, over the last
Speaker 8: fifty sixty years. Congress doesn't like when president starts conflicts
Speaker 8: without going for congressional authorization. So this is the first reason.
Speaker 8: The second reason is is that, you know, just going
Speaker 8: back to my point about politics, all four hundred and
Speaker 8: thirty five members of the House representatives in one third
Speaker 8: of the Senate are running in November, and this could
Speaker 8: be a situation where Senator Keane wants to put people
Speaker 8: on the record, so that if that's sixty percent of
Speaker 8: the American populace isn't on board with President Trump's I
Speaker 8: RAN strategy grows larger. You can have some very difficult conversations.
Speaker 8: I mean, this is not going to change President Trump's,
Speaker 8: you know, strategy. When he says that he doesn't need
Speaker 8: to even think of the polling numbers, he's correct, But
Speaker 8: you know, he's also not running on the ticket in November.
Speaker 8: You know, there are going to be some Republicans on
Speaker 8: the other hand, who are looking at this and looking
Speaker 8: at the chances the Democrats take the House in November.
Speaker 8: And I'm not going to say there going to speak
Speaker 8: in opposition to this, but they certainly would be a
Speaker 8: little bit more wary or at least their uneasiness would
Speaker 8: rise as a result of this vote.
Speaker 2: Nathan realistically is the Senate up for play here in
Speaker 2: the midterms.
Speaker 8: So right now, the prediction markets have it about a
Speaker 8: forty percent chance, and the Democrats are going to take
Speaker 8: the Senate, and a lot of it hinges on today,
Speaker 8: specifically what's happening here primary day in Texas. Now, you
Speaker 8: have two reasons. You have the Republican race and the
Speaker 8: Democratic race. On the Republican race, you have Ken Pax
Speaker 8: and the Attorney General, who, according to the prediction markets,
Speaker 8: has an eighty five percent chance of beating the incumbent
Speaker 8: Senator John Cornyn. On the Democratic side, a similar number
Speaker 8: eighty two percent, suggests that James tallerco the moderate Democrat,
Speaker 8: has a good chance of beating Jasmine Crockett, the Progressive
Speaker 8: on that is the ticket that the Democrats want to
Speaker 8: see if they have a chance of beating the taking
Speaker 8: the Texas race. But again, you know, like I think
Speaker 8: most people, at least according to the prediction markets here
Speaker 8: in Washington, are sort of just taking into account as
Speaker 8: their scenario. The Democrats are have a really decent chance
Speaker 8: to take in the House about eighty to eighty five
Speaker 8: percent according to the prediction markets. The Senate is still
Speaker 8: going to be very difficult despite what happens today.
Speaker 5: What's the most likely geopolitical scenario your sources are telling
Speaker 5: you say, in the next thirty days, what are they
Speaker 5: preparing for maybe best case or worst case scenarios? Best
Speaker 5: case depending on the view you're taking.
Speaker 8: Yeah, you know, obviously, I think it's the timeline of Iran.
Speaker 8: I mean, our colleague from the Worgo economic expector. Wasser
Speaker 8: has been looking at this, Our colleague Queen Sanders has
Speaker 8: been looking at this, and there's this idea if you
Speaker 8: look at the prediction markets again in terms of where
Speaker 8: this is going to end. CALCI has a contract here.
Speaker 8: It essentially says the majority of folks think that this
Speaker 8: is going to be over this month. That's very different
Speaker 8: to this idea of the geopolitical risk will continue for months,
Speaker 8: especially in terms of like the trait of war moves
Speaker 8: and all that other stuff. So I think that's the
Speaker 8: number one thing here to keep in mind from the
Speaker 8: geopolitical perspective. But I would also just say from the
Speaker 8: US domestic perspective, keep in mind that there's going to
Speaker 8: be a rush to push legislation out this month and
Speaker 8: next month because Congress, like I said, is going to
Speaker 8: really focus on the midterm elections and then generally stopped
Speaker 8: them for passing legislation.
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