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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App. Muhammad al Aerona Queen's College, Cambridge,

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Speaker 2: saying this on one of the picks, Kevin Wassh's professional

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Speaker 2: career and writings would make him a strong presidential choice

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Speaker 2: for Treasury and for the Federal Reserve. Muhammed joins us.

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Speaker 2: Now for more, Muhammed, are you endorsing a candidate then?

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Speaker 3: In this race for Treasury?

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Speaker 1: What I'm seeing John?

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Speaker 4: Of the four, the one that I have followed most

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Speaker 4: closely is Kevin Walsh. I've done that for almost two decades.

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Speaker 4: And if you look at what he would bring to

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Speaker 4: either or both jobs. First, a good understanding and knowledge

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Speaker 4: of economics, you're talking about Stanford, Harvard MIT. He would

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Speaker 4: bring policy making experience the NEEC and the FED. He

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Speaker 4: would bring private sector experience. He understands the functioning of

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Speaker 4: the capital markets. It's not often that you find someone

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Speaker 4: who can operate at this intersection of economics, finance, and policy,

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Speaker 4: and it's not often that you find someone who not

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Speaker 4: only can operate there, but can communicate well. And we

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Speaker 4: do need much better economic communication.

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Speaker 2: Mohammed, I've said this a few times, and I'm sure

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Speaker 2: you agree. It's good news that the caliber of all

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Speaker 2: the candidates is so high given the challenges they'll have

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Speaker 2: to confront in the next several years. As we look

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Speaker 2: ahead to twenty twenty five. Could we go through a

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Speaker 2: few of those challenges right now? What do you think

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Speaker 2: the biggest for the incoming Treasury secretary.

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Speaker 4: I think it's maintained economic growth. John, I can't stress

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Speaker 4: how important that is. It is important to deal with

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Speaker 4: problems of inequality.

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Speaker 1: It's important to deal with the debt issue.

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Speaker 4: The best way to address a debt issue is through

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Speaker 4: economic growth. And we are looking at a major transition

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Speaker 4: which is ongoing from old engine of growth to new

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Speaker 4: engines or what economists called the old model of growth

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Speaker 4: to the new model of growth, and the Tragedy Secretary

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Speaker 4: will be the lead person in figuring out how we

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Speaker 4: navigate all this.

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Speaker 5: Well, if it is someone like Kevin Walsh and everyone

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Speaker 5: knows his endgame is the FED, does that blur the

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Speaker 5: line of FED independence?

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Speaker 4: I think it's somed that well that that line has

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Speaker 4: been blurred before. But I suspect that if Walsh gets

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Speaker 4: the job, he's going to be really careful as to

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Speaker 4: what he says on monetary policy.

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Speaker 1: He will respect that line. It's also not.

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Speaker 4: Clear that the President elect will commit to a second

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Speaker 4: step for Kevin Walsh. I suspect that he will say

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Speaker 4: he will keep his options open, So I don't worry

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Speaker 4: about that. And Marie, I just look at Kevin as

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Speaker 4: someone who both as Treasury and FETCH Chair I think

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Speaker 4: would do a really good job.

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Speaker 5: If this drags on, we're supposed to get a pick yesterday.

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Speaker 5: If we don't get one today, if this continues to

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Speaker 5: drag drag on, Gary Cohne reminded us all yesterday that

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Speaker 5: his pick, his nod, and also Minutionin's nod came after Thanksgiving.

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Speaker 5: Is that in itself a market negative given the fact

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Speaker 5: that we have all these other nominees floating around for

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Speaker 5: the incoming administration, but we don't have this one key

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Speaker 5: name for the markets.

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Speaker 4: Yeah, I thought Gary's interview with you yesterday was really

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Speaker 4: good because he said two things. One, as you just mentioned,

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Speaker 4: he said, look, I didn't find out a lot of Thanksgiving.

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Speaker 4: And then the second thing he said is look at

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Speaker 4: what we inherited then, including some unanticipated development, compared to

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Speaker 4: what the new team will have been here now. So

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Speaker 4: I don't think it's a market negative. I particularly don't

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Speaker 4: think it's a market negative because, as John said, the

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Speaker 4: are credible candidates being considered. Oh it's so we told so. No,

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Speaker 4: I don't think it is a market negative. I think

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Speaker 4: it's the right thing to take time to make this decision.

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Speaker 6: Mohammed. I thought of you a lot this morning when

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Speaker 6: I saw the flows for the past week into bonds

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Speaker 6: and stock funds in the US, and I saw the outflows,

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Speaker 6: the dramatic outflows from European bond and stock flows, and

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Speaker 6: I thought about your comment about that sucking sound of

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Speaker 6: capital away from the rest of the world and in

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Speaker 6: the United States, and I have to wonder, are there

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Speaker 6: limits to this because basically the fact that everybody else

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Speaker 6: is paying is leading to the US gain is also

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Speaker 6: leading to higher rates that the rest of the world

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Speaker 6: is going to pay for. In other words, they're going

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Speaker 6: to pay for that debt because of the attraction of

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Speaker 6: interest rates.

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Speaker 7: When does that kind.

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Speaker 6: Of balance out?

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Speaker 7: Do people get sick of this story?

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Speaker 1: Not for a while?

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Speaker 4: And I thought of all three of you because I

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Speaker 4: remember when we were together last week and we talked

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Speaker 4: about the global economy, and I told you the good,

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Speaker 4: the bad, and the ugly, and I put Europe in

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Speaker 4: the ugly, saying there really is an issue there that

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Speaker 4: as both secular and cyclical headwinds come together, and today's

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Speaker 4: PMI numbers are a clear reminder that there is this

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Speaker 4: problem and it's getting deeper. We know what the solutions are.

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Speaker 4: There is the Drug Report, but there is no political

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Speaker 4: will to implement it, so the.

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Speaker 1: US will continue to diverge.

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Speaker 4: Like you, Lisa, I think divergence is a really important

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Speaker 4: theme for the next twelve months. Is there a limit

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Speaker 4: short as a limit at some point, but we're not

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Speaker 4: there yet, And the worst thing is to sacrifice US

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Speaker 4: growth in order to get lower rates. That would be

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Speaker 4: the world I mean, the US is the only engine

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Speaker 4: of global growth right now, So you do not want

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Speaker 4: to sacrifice the only engine of global growth. What you

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Speaker 4: do want to happen is both with China and for

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Speaker 4: Europe to get the act together and to transition to

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Speaker 4: healthier and higher growth.

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Speaker 6: I have to wonder also how much this pushes central

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Speaker 6: banks around the world to keep investing in gold and

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Speaker 6: try to diversify away from the dollar, because at some

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Speaker 6: point there has to be some anger or at least

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Speaker 6: a feeling of frustration that everybody else is at the

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Speaker 6: whims of the United States in terms of whatever kind

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Speaker 6: of fiscal situation they want to implement, and that the

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Speaker 6: fiscal dominance allows them to do that. How much do

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Speaker 6: you see that kind of trend in gold in other

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Speaker 6: acid classes really continuing as people look toward a day

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Speaker 6: that maybe could be a different regime with respect to

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Speaker 6: the dollar.

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Speaker 4: So this trend which we have seen now for a

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Speaker 4: solid twelve months of trying to diverse away from both

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Speaker 4: the dollar as a reserve currency and importantly looking to

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Speaker 4: diverse away from the dollar system as a payment system,

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Speaker 4: and I worry much more about the second than the first.

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Speaker 4: The trend is there reasons you've cited on the currency

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Speaker 4: side at the margin, and I want to stress it

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Speaker 4: is at the margin people are looking to diverse away

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Speaker 4: away from the.

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Speaker 1: Dollar into gold.

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Speaker 4: The payment system is a reaction to the worry about

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Speaker 4: weaponization of investment, sanctions and trade.

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Speaker 1: So that is ongoing and we have to keep an

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Speaker 1: eye on it.

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Speaker 4: Now. We're not anywhere near a critical mass. There is

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Speaker 4: nothing to replace the dollar at the center of the system.

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Speaker 4: There is nothing to replace the dollar payment system. However,

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Speaker 4: you don't want alternatives as clunky and as inefficient as

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Speaker 4: they are to gain momentum.

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Speaker 2: Which is why we're saying the dollar to pre shed

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Speaker 2: against gold, the pre shed against something like bitcoin. But

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Speaker 2: I think we have to take a step back and

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Speaker 2: recognize what it's not doing against other currencies. We're facing

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Speaker 2: the prospect of an eight consecutive week of strength for

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Speaker 2: the US dollar for dollar index for DXY mohammed the

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Speaker 2: wise because the data in America has been pretty decent,

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Speaker 2: and we're rethinking the fence path malas Eliot. Deutsche Bank

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Speaker 2: had this to say in its outlook. Growth is too fast,

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Speaker 2: inflation is too furious for FED cuts. Our baseline c's

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Speaker 2: a twenty five basis point cut in December, calls it

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Speaker 2: a close call, goes on to say after that, we

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Speaker 2: expect an extended pause which keeps the FED funds right

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Speaker 2: above four percent into twenty twenty six.

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Speaker 3: Is that your base case?

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Speaker 4: Two, So my base case is they cut by twenty five.

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Speaker 4: When they come to their next meeting, they'll have clarity

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Speaker 4: on three things that will impact how they see.

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Speaker 1: The economy going.

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Speaker 4: They'll have clarity on tariffs, that have clarity on immigration,

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Speaker 4: and that have clarity on where the budget is going.

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Speaker 4: And they'll build up that clarity as they go into

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Speaker 4: the year, and that is what's going to determine whether they.

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Speaker 1: Do more or not. They're to going to see how

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Speaker 1: they see things. John.

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Speaker 4: These fundamentally impact. First, tariffs will impact price behavior. You

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Speaker 4: see this in the UK. Companies now have gotten much

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Speaker 4: more use to passing on any incre costs. So in

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Speaker 4: the case of the UK, the supermarkets have come out

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Speaker 4: and said, you know what, the higher national insurance contributions,

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Speaker 4: we're going to pass on that to crisis and demand

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Speaker 4: here is not as strong in the US as it

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Speaker 4: is in the US, So tariffs will have an impact

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Speaker 4: on pricing behavior by companies. Immigration will have impact on

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Speaker 4: the labor market, and of course what they decide on

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Speaker 4: taxes in particular, which will come ahead of what they

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Speaker 4: do on spending where they look into cut spending will

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Speaker 4: have an impact on issuance. So they're going to have

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Speaker 4: the FED is going to have to step back and

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Speaker 4: look at these three things and then decide how.

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Speaker 1: They fit into this big puzzle.

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Speaker 2: Let's finish on that word clarity. They'll have clarity on tariffs.

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Speaker 2: They might have clarity on what the approach might be,

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Speaker 2: how big the tariffs will be, they may not have

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Speaker 2: clarity on the effects. So this is something you touched

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Speaker 2: on earlier this week when you talked about things like

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Speaker 2: trade flows, corporate pricing, demand, supply elasticities. How long does

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Speaker 2: it take to get clarity on the effect of those tariffs.

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Speaker 4: Yeah, and that list goes on on game theoretics, stage craft.

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Speaker 4: I mean, it is a very complex issue and the

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Speaker 4: media has tended to simplify it over simplified.

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Speaker 1: No, they'll need time, but.

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Speaker 4: They'll have a clarity on how serious is a direction

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Speaker 4: of travel, and that's going to be important in how

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Speaker 4: do they think about what interest what policy we should

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Speaker 4: do Muhammed.

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Speaker 2: We appreciate your time. We're looking to catch up with you, sir.

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Speaker 2: Thank you, Muhammed Al, Aaron of Queen's College, Cambridge. On

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Speaker 2: the latest in the United States and beyond, Tryler is

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Speaker 2: ramping up bets on a jumpbo raakecout in December by

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Speaker 2: the ECB as Eurozone PMI is contracted in November, feeling

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Speaker 2: concerns about the state of Europe's economy as it faces

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Speaker 2: down the prospect of hire terrists from the incoming Trump administration.

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Speaker 3: Joining us now is a man who has.

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Speaker 2: A say it next month's meeting, the Portuguese Central Bank

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Speaker 2: Governor Mario Sentino. Governor Sentino, thank you for being with us.

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Speaker 2: We appreciate your time. It's important points out that every

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Speaker 2: official on the covernany council, has a different view, and

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Speaker 2: at the time this morning, where people are questioning whether

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Speaker 2: the ECP is behind the curve, I think it's important

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Speaker 2: to highlight your more recent comments suggests you are very

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Speaker 2: much ahead of this weekly data, anticipating it and worried

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Speaker 2: about it. We'd love your reaction to this morning's economic

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Speaker 2: data and what do you believe a fifty basis point

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Speaker 2: breakcount should be on the table at next month's meeting.

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Speaker 8: Well, thank you for having me, and good morning from London. Well,

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Speaker 8: we have to take this data in the context of

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Speaker 8: all the information that we now have to take a decision.

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Speaker 8: Next month we will have also new forecasts. My first

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Speaker 8: reaction is that these data certainly confirms the propertateness of

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Speaker 8: the decision we took in October and the profile that

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Speaker 8: we now have for the trajectory of interest rates also

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Speaker 8: going forward. This is the appropriate message that I'd like

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Speaker 8: to send. We know, I mean the challenges had We

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Speaker 8: know that the Euro Area economy is struggling to recovery.

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Speaker 8: The most important though, is that inflation is on target

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Speaker 8: and we need to move. According to all these data,

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Speaker 8: today's information goes along the way. Indeed, I've been looking

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Speaker 8: at the European economy. It just confirms that we need

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Speaker 8: to move with monetary policy.

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Speaker 3: Governor.

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Speaker 2: How quickly you move is part of the conversation, and

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Speaker 2: whether you should be constrained by twenty five basis point

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Speaker 2: increments or not. Do you believe larger reductions should be

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Speaker 2: considered in a month from now.

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Speaker 8: Well, we have been discussing that for a while. I

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Speaker 8: rather prefer us to move gradual, and gradual means steady

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Speaker 8: and with predictable steps. But of course, if the data

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Speaker 8: confirms that.

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Speaker 3: The risks to.

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Speaker 8: The downside in growth materialize, that the numbers for inflation

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Speaker 8: that we still are expecting these months go in the

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Speaker 8: same direction, we can certainly discuss and be open to

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Speaker 8: discuss different steps. But what is more important is to

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Speaker 8: send a message of we are doing our job. We

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Speaker 8: are moving interest rates in the right direction, and we

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Speaker 8: will continue to do so as long as data requires.

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Speaker 2: As you know and from listening to you and your colleagues,

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Speaker 2: the focus so far has been on normalizing interest rates,

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Speaker 2: which speaks to that gradual approach.

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Speaker 3: Governor.

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Speaker 2: When I look at the day around Europe, when we

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Speaker 2: all do, when we see Germany bally growing and the

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Speaker 2: pmising contraction, I think quite rightly the conversation is changing

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Speaker 2: in financial markets to whether you need to be accommodative,

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Speaker 2: whether we should be constrained by this idea of normalizing

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Speaker 2: and moving in gradual steps, or which whether we should

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Speaker 2: be open to becoming accommodative and moving much more quickly.

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Speaker 3: What's the difference between the two. For you, we do.

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Speaker 8: Know that we are still in restrictive territory. The interest

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Speaker 8: rate is above the neutral levels, and so this means

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Speaker 8: that the past going forward will be to continue to

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Speaker 8: reduce the level of interest rates. We also know that

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Speaker 8: the biggest problem in Europe is investment, and investment is

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Speaker 8: certainly quite sensitive to the interest rates. So it will

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Speaker 8: be also of importance for us to have the support

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Speaker 8: of the economy so that inflation can remain at two percent.

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Speaker 8: We don't want to go below two percent, and for

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Speaker 8: that we need a stronger economy. So it's the combination

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Speaker 8: of those two that need to be on the table

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Speaker 8: so that we take a decision that so far brought

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Speaker 8: us in a stable past, which is always important to

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Speaker 8: two percent, and now we need to make sure that

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Speaker 8: we continue there.

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Speaker 2: Governor, if I could put you on the spot appointed question,

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Speaker 2: do you believe the biggest risk right now is above

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Speaker 2: target inflation or below target inflation? And I'm not talking

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Speaker 2: about next month's data. I'm thinking about a medium term view,

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Speaker 2: looking out several years. What is the biggest risk above

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Speaker 2: target inflation or below target inflation?

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Speaker 8: Well, the history of Europe in the ten years prior

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Speaker 8: to this inflationary experience was below target inflation. And the

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Speaker 8: fundamentals for the European economy didn't change much. So in

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Speaker 8: my view, we need to be concerned with below target inflation.

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Speaker 8: The risks that we face today, both from the economy

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Speaker 8: and from shocks outside Europe take us in that direction.

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Speaker 8: So we need to focus on not going below target

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Speaker 8: in terms of the medium term, because then we open

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Speaker 8: up again the issue of as you are saying, normalizing

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Speaker 8: monetary policy. We were successful thus far to bring inflation

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Speaker 8: to two percent. Now the job is a little bit different.

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Speaker 8: It's like, you know, this last mile not being a

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Speaker 8: pass from above the target, but from below the target,

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Speaker 8: and it's not easy. It proved not easy for the

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Speaker 8: Eurozone to bring inflation close to two percent before twenty nineteen,

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Speaker 8: and we need to be very serious about it.

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Speaker 6: Do you think that on a broader sense, the easy

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Speaker 6: if he needs to consider I don't want to say

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Speaker 6: a dual mandate like the federal reserve, where you're looking

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Speaker 6: at employment as well as inflation, but the growth backdrop

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Speaker 6: as well as maybe there's going to be that bumpiness

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Speaker 6: that you talk about in the near term path of inflation,

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Speaker 6: but the longer term path, you see that risk significantly

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Speaker 6: to the downside when it comes to that is inflation.

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Speaker 8: I don't think we need to discuss the dual mandate

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Speaker 8: or the single mandate that we have. We just need

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Speaker 8: to remind ourselves that inflation is an endogenous variable. It

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Speaker 8: is strictly connected with the way the economy goes. By

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Speaker 8: targeting inflation, we are somehow looking at a broader set

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Speaker 8: of data and see how it interacts with prices, the

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Speaker 8: labor market, certainly, unemployment, employment, the dynamism that the European

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Speaker 8: economy had recently on the labor market is very important,

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Speaker 8: and it's also our job to protect it, to preserve it.

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Speaker 8: That's not because of the layman market on its own,

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Speaker 8: which is already important, but it's on the impact that

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Speaker 8: this may have on inflation. We do know that an

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Speaker 8: economy that doesn't grow, that doesn't invest, will not be

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Speaker 8: compatible with prices at two percent, so I always look

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Speaker 8: at this in a more broad sense. So for me, honestly,

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Speaker 8: the thing of the double mandate is not an issue.

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Speaker 2: Governor, you brought up shocks from outside of Europe. I'd

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Speaker 2: like to talk about those shocks with you. The prospect

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Speaker 2: of a change of policy in the United States following

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Speaker 2: the US election, and whether that introduces a new risk

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Speaker 2: that you have to confront. If the walls go up,

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Speaker 2: if the tariffs go up in America, and we were

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Speaker 2: all concerned about over capacity in China, there's one place

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Speaker 2: that's going to have to eat that over capacity and

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Speaker 2: it could be another disinflationary threat.

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Speaker 3: That's Europe. Can you walk me through your.

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Speaker 2: Understanding the policy changes we might see in the next

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Speaker 2: year and it kind of introduces to your Roundlook.

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Speaker 8: I totally agree with you on the way you put

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Speaker 8: the risks that the tariffs and the spare capacity that

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Speaker 8: we see around the globe will imply to inflation. So

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Speaker 8: I see these shocks from an economic policy perspective as

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Speaker 8: a wake up call for Europe. Europe needs to move

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Speaker 8: from the passenger seat that very often we see Europe

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Speaker 8: sitting comfortable to a more leading role in the world

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Speaker 8: that will call for an increased role for the euro internationally.

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Speaker 8: We were discussing that back in twenty nineteen, just prior

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Speaker 8: to COVID. We may be facing the same challenges right now,

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Speaker 8: so we better focus on the response that Europe needs

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Speaker 8: to do an to produce to those challenges instead of

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Speaker 8: discussing what is going on elsewhere. We do know that

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Speaker 8: we need to move very fast if we are presented

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Speaker 8: with these challenges. If I may, I can quote here

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Speaker 8: Elvis Presley and say to you that we can't go

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Speaker 8: on together if those challenges from the outside present to Europe,

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Speaker 8: challenges that Europe cannot cannot go along with.

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Speaker 6: So for the past couple of months, the ECB terminal

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Speaker 6: rate is expected to be something like two and a

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Speaker 6: half percent by the end of next year. Putting Elvis

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Speaker 6: Presley aside, given all of the potential external shocks and

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Speaker 6: the courage jectory, do you think it ought to be

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Speaker 6: much lower than that?

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Speaker 8: Well, I don't see reasons for the neutral rating group

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Speaker 8: to be much different from before this crisis. The fundamentals

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Speaker 8: in Europe are pretty similar. We have a more dynamic

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Speaker 8: labor market that will certainly help bringing the natural rate up,

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Speaker 8: but probably it will not be enough, given that many

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Speaker 8: other factors like demography and productivity that will still wait

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Speaker 8: into into into that number. So if we go close

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Speaker 8: to two percent, probably below, it will be my best

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Speaker 8: guest right now for for the neutral to be so.

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Speaker 8: We still have some way, some paths to cover, and

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Speaker 8: we need we need to be very much focused on that.

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Speaker 2: Interesting, So we appreciate your time with a suspicious mind.

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Speaker 2: ECP Comveny Council member Mario Sentein.

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Speaker 3: I think is.

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Speaker 2: Let's stick with retail one week ount for Black Friday

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Speaker 2: and a shortened holiday shopping season. Gap and Walmart seeing

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Speaker 2: higher end consumers coming to them for value as Target

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Speaker 2: sees weakening sales and inventory piling gup. Joining us now

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Speaker 2: is dw To Towsie of TAUSI Advisory Group. Dana, welcome

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Speaker 2: to the program.

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Speaker 7: Thank you so much for having.

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Speaker 3: Me compare Target, so everybody else? What went wrong there?

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Speaker 9: Forty eight percent of Target sales are discretionary. They had

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Speaker 9: elevated promotions, higher costs didn't work. You look at Walmart,

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Speaker 9: which has sixty percent of their sales coming from essentials,

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Speaker 9: and when you think about discretionary, Look what you just mentioned.

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Speaker 9: The GAP is gaining some momentum right now. Look at TJX,

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Speaker 9: same thing. They're gaining some momentum too. So that value

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Speaker 9: shopper where there is style and product is working.

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Speaker 2: Is there an execution story there as well? What is

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Speaker 2: the GAP doing right?

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Speaker 7: I think a couple things.

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Speaker 9: I mean Richard's Richard's phrase is performed while you transform.

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Speaker 9: The things they're doing right is the consistency of looking

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Speaker 9: at the product and really elevating it today's times. Look

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Speaker 9: at the wide leg denim jeans. They are remodeling some

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Speaker 9: of their stores at Old Navy. The kid's business is important,

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Speaker 9: and the kid's business weekend in this quarter given the

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Speaker 9: weather that was out there, coming out of the quarter,

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Speaker 9: kids strengthened. And so I think off price value and

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Speaker 9: where there's newness and innovation, consumers are going. So you

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Speaker 9: have that what's happening with the Gap brand and an

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Speaker 9: Old Navy.

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Speaker 6: I want to get into policy and all of that,

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Speaker 6: but what is newness and innovation right now?

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Speaker 7: And we talk about this.

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Speaker 6: Is it launches, is it limited edition? Is it wide

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Speaker 6: leg pants that are going to be in style for

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Speaker 6: you know, another six months?

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Speaker 3: Maybe no.

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Speaker 7: Typically denim cycles can be three years. Sorry, no worries.

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Speaker 7: But when you think about innovation, what's new and different?

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Speaker 9: What about the closed toad shoes at Birkenstock selling it

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Speaker 9: full price? People are buying the sandals and they're buying

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Speaker 9: the closed toad shoes. When you think about the wide

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Speaker 9: leg jeans, there's a lot in footwear Look what's doing

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Speaker 9: with the new colorways at Hoka. It's interesting. Same thing

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Speaker 9: at On. But you know what, you marry the product

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Speaker 9: with the physical space. Look at the new remodels that

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Speaker 9: are opening. If you walk lower Fifth Avenue, the new

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Speaker 9: Gap remodel, it's colors, it's got punched. You take a

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Speaker 9: look at the Abercrombie remodel. They expanded the men's area.

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Speaker 9: Look at the new On store. So we've got newness

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Speaker 9: and product, newness and channel, and you need to have value.

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Speaker 6: Maybe Target just needs a new dog and then they'll

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Speaker 6: be just fine.

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Speaker 7: But there is to be done.

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Speaker 3: Okay, that's just the dog. That's probably more than.

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Speaker 6: Just the dog, given some of the performance. But there

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Speaker 6: is this question about how exposed some of these retailers

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Speaker 6: are to the potential of tariffs, especially if their whole

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Speaker 6: reburse depends on the ability for fast goods that they

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Speaker 6: can get manufacturing brought in.

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Speaker 9: When we had Terris, the first time everyone went to

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Speaker 9: diversify their sourcing out of China. It's happening again now.

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Speaker 9: Probably the one who's talked about it the most is

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Speaker 9: Steve Madden. Taking their percentage of good from China down

442
00:25:00,960 --> 00:25:04,320
Speaker 9: from fifty percent to twenty five percent, hopefully in almost

443
00:25:04,359 --> 00:25:06,680
Speaker 9: a year. Gap set it on their call last night,

444
00:25:06,720 --> 00:25:09,520
Speaker 9: around less than ten percent of their goods come from China.

445
00:25:09,840 --> 00:25:11,000
Speaker 7: Where else are people going.

446
00:25:11,240 --> 00:25:13,920
Speaker 9: They're going to Mexico, They're going to Africa, They're going

447
00:25:13,960 --> 00:25:14,560
Speaker 9: to Vietnam.

448
00:25:14,560 --> 00:25:15,879
Speaker 7: In terms of where goods are going to be.

449
00:25:16,240 --> 00:25:19,560
Speaker 9: The end result, though, and National Retail Federation talked about it,

450
00:25:19,880 --> 00:25:22,240
Speaker 9: if we have these teriffs, you're going to have an

451
00:25:22,280 --> 00:25:25,840
Speaker 9: impact to consumer spending that can approach nearly eighty billion

452
00:25:25,880 --> 00:25:28,639
Speaker 9: dollars and what it requires in the apparel area, if

453
00:25:28,680 --> 00:25:31,560
Speaker 9: you're going to have increased costs passed on to the consumer,

454
00:25:31,960 --> 00:25:34,480
Speaker 9: can be price increases of low double digits.

455
00:25:34,720 --> 00:25:36,640
Speaker 7: That's a concern across the board.

456
00:25:36,560 --> 00:25:38,320
Speaker 5: Or any of these retailers talking about coming back to

457
00:25:38,320 --> 00:25:40,880
Speaker 5: the United States because what President like Trump is talking

458
00:25:40,880 --> 00:25:43,879
Speaker 5: about was basically a carrot and stick approach. I'm putting

459
00:25:43,920 --> 00:25:45,680
Speaker 5: up the walls, but you're going to get a fifteen

460
00:25:45,720 --> 00:25:49,800
Speaker 5: percent potentially corporate tax rate if you produce in USA.

461
00:25:50,240 --> 00:25:53,480
Speaker 9: Now some of them have mentioned some items coming back

462
00:25:53,520 --> 00:25:57,480
Speaker 9: to the USA, but basically it's Mexico, it's Vietnam, it's

463
00:25:57,520 --> 00:26:00,840
Speaker 9: even Africa where people are going the labor cost so lower.

464
00:26:01,160 --> 00:26:03,879
Speaker 9: They have the labor to be able to make the

465
00:26:03,920 --> 00:26:06,960
Speaker 9: goods and the expertise of it. That's why the reason

466
00:26:06,960 --> 00:26:10,000
Speaker 9: why everyone's in China. There is no China like China

467
00:26:10,119 --> 00:26:12,320
Speaker 9: in terms of the expertise of how they make the goods.

468
00:26:12,640 --> 00:26:14,520
Speaker 9: It will be a problem and a big topic of

469
00:26:14,640 --> 00:26:18,080
Speaker 9: discussion throughout twenty five if those tariffs get enacted.

470
00:26:18,240 --> 00:26:20,800
Speaker 5: Tariffs has one potential risks down the pipe. We also

471
00:26:20,880 --> 00:26:24,920
Speaker 5: have the ports that strikers that deadline is January fifteenth.

472
00:26:25,000 --> 00:26:28,639
Speaker 5: We see Target overshoot when they were building their inventory.

473
00:26:28,680 --> 00:26:30,840
Speaker 5: Do you see retailers now having to build up inventory

474
00:26:30,840 --> 00:26:32,119
Speaker 5: because they're concerned.

475
00:26:31,760 --> 00:26:33,320
Speaker 3: There won't be a deal in January?

476
00:26:33,760 --> 00:26:37,159
Speaker 9: I think overall they're watching carefully. Only Target has been

477
00:26:37,160 --> 00:26:40,720
Speaker 9: the one who's called out the increased inventory that they're building.

478
00:26:40,920 --> 00:26:42,160
Speaker 7: I don't really have others.

479
00:26:42,400 --> 00:26:45,679
Speaker 9: As the earnings are being reported, you're still seeing inventory

480
00:26:45,720 --> 00:26:48,680
Speaker 9: growth less than sales growth. Tuesday is a major day.

481
00:26:48,760 --> 00:26:50,920
Speaker 9: You have all the mall retailers reporting on Tuesday. In

482
00:26:50,960 --> 00:26:54,320
Speaker 9: addition to Burlington, you got ten reports coming out on Tuesday.

483
00:26:54,560 --> 00:26:57,160
Speaker 9: We'll hear more about what we've heard so far. I'm

484
00:26:57,160 --> 00:27:00,199
Speaker 9: not seeing inventory pile ups except for Target calling that.

485
00:27:00,520 --> 00:27:01,520
Speaker 3: Why did they get it so wrong?

486
00:27:01,560 --> 00:27:04,120
Speaker 7: Then the target, Yeah, how do if.

487
00:27:04,119 --> 00:27:06,800
Speaker 3: They step on such a massive inventory landmine.

488
00:27:06,560 --> 00:27:08,800
Speaker 9: Different way of looking at things and there and how

489
00:27:08,800 --> 00:27:11,680
Speaker 9: they're planning than everyone else. It is surprising in terms

490
00:27:11,680 --> 00:27:14,159
Speaker 9: of how they stood out so much because when you

491
00:27:14,160 --> 00:27:16,919
Speaker 9: look at Walmart, who reported just the day before, it

492
00:27:17,000 --> 00:27:20,240
Speaker 9: was the other areas of business that also accelerated the growth.

493
00:27:20,320 --> 00:27:22,320
Speaker 2: When the numbers dropped, and then we all reflected on

494
00:27:22,359 --> 00:27:24,719
Speaker 2: the same thing. It reminded us of Spring twenty twenty two.

495
00:27:25,440 --> 00:27:27,760
Speaker 2: This isn't the first time we've seen this movie, which

496
00:27:27,800 --> 00:27:30,520
Speaker 2: I think is why some investors were pretty spooked by it.

497
00:27:30,520 --> 00:27:32,840
Speaker 2: It's as if they haven't corrected for the mistakes they

498
00:27:32,840 --> 00:27:33,880
Speaker 2: made a couple of years back.

499
00:27:33,960 --> 00:27:36,320
Speaker 3: Is that a fact? Criticism of WMAR is that unfair.

500
00:27:36,440 --> 00:27:39,000
Speaker 9: I think overall they may have corrected then for the

501
00:27:39,119 --> 00:27:42,320
Speaker 9: mistakes they made, but then looking at the macro landscape,

502
00:27:42,520 --> 00:27:46,679
Speaker 9: they acted faster and took made change quicker than others,

503
00:27:47,000 --> 00:27:50,359
Speaker 9: while others basically saying it takes time to enact some

504
00:27:50,400 --> 00:27:53,440
Speaker 9: of these initiatives, and so no, I'm not seeing others

505
00:27:53,440 --> 00:27:53,719
Speaker 9: do that.

506
00:27:53,800 --> 00:27:56,240
Speaker 2: So you think they overcrect it, corrected based on the

507
00:27:56,280 --> 00:27:57,640
Speaker 2: lesson that they learned in twenty two.

508
00:27:57,760 --> 00:28:01,040
Speaker 9: Yeah, it seems like it's way too advanced for what

509
00:28:01,280 --> 00:28:04,000
Speaker 9: compared to everybody else. And you have to look at

510
00:28:04,000 --> 00:28:07,240
Speaker 9: this holiday season with a compressed season of five fewer days,

511
00:28:07,520 --> 00:28:10,399
Speaker 9: promotions are happening. I don't know about your email inbox,

512
00:28:10,480 --> 00:28:12,840
Speaker 9: but mine is filled with they're trying to do off.

513
00:28:13,200 --> 00:28:15,520
Speaker 3: How much does that five days change things? Huge?

514
00:28:15,600 --> 00:28:17,400
Speaker 7: I think the five days is very important.

515
00:28:17,640 --> 00:28:20,080
Speaker 9: It makes the Black Friday weekend that much more important

516
00:28:20,080 --> 00:28:22,960
Speaker 9: because there are fewer days. People always still shop the

517
00:28:23,040 --> 00:28:25,920
Speaker 9: last ten days before Christmas, but it's going to make

518
00:28:25,960 --> 00:28:29,920
Speaker 9: the retailers hit the dial on let's anti up the promotions.

519
00:28:30,040 --> 00:28:32,200
Speaker 6: I wonder if Target is sort of a warning shot

520
00:28:32,440 --> 00:28:36,800
Speaker 6: in terms of competing on more the innovation and less

521
00:28:36,920 --> 00:28:40,720
Speaker 6: unjust price value has to also come with something new,

522
00:28:41,120 --> 00:28:43,920
Speaker 6: and I wonder how much Walmart is exerting that pressure

523
00:28:44,360 --> 00:28:46,720
Speaker 6: because they can compete in a way that nobody else

524
00:28:46,760 --> 00:28:50,160
Speaker 6: can because of their product mix. Is that the takeaway

525
00:28:50,160 --> 00:28:52,400
Speaker 6: from some of the recent earnings, well.

526
00:28:52,280 --> 00:28:55,240
Speaker 9: Part of it, but also look what Walmart's doing. When

527
00:28:55,280 --> 00:28:58,320
Speaker 9: Doug McMillan said that their highest growth came from some

528
00:28:58,440 --> 00:29:01,560
Speaker 9: of their upper income consumer of one hundred thousand dollar

529
00:29:01,680 --> 00:29:04,520
Speaker 9: household income. They're taking that share from the targets of

530
00:29:04,560 --> 00:29:06,560
Speaker 9: the world. And you also have to say, look at

531
00:29:06,560 --> 00:29:09,920
Speaker 9: the growth of TJX, the traffic increases that tj is

532
00:29:09,920 --> 00:29:13,080
Speaker 9: getting and frankly even some of the luxury items that

533
00:29:13,120 --> 00:29:16,040
Speaker 9: they have their smattered about and just select stores, but

534
00:29:16,080 --> 00:29:16,640
Speaker 9: it's a driver.

535
00:29:16,880 --> 00:29:20,080
Speaker 5: Well is GAP basically copying that because they said yesterday

536
00:29:20,120 --> 00:29:25,040
Speaker 5: that they're also making inroads with upper middle class, wealthy patrons.

537
00:29:25,160 --> 00:29:27,480
Speaker 9: But part of what GAP is doing look at the

538
00:29:27,520 --> 00:29:31,160
Speaker 9: collaborations to your mention before, whether it's influencers, whether it's

539
00:29:31,200 --> 00:29:35,240
Speaker 9: cult gaya, they're getting in the conversation by stepping up

540
00:29:35,280 --> 00:29:38,320
Speaker 9: and saying, we're part of the brand halo that's out

541
00:29:38,360 --> 00:29:41,040
Speaker 9: there of other brands who want to be in reach

542
00:29:41,320 --> 00:29:45,080
Speaker 9: a wider audience of consumers that have a wider income level.

543
00:29:45,320 --> 00:29:47,880
Speaker 3: Top pick this holiday shop in season? What is it?

544
00:29:48,240 --> 00:29:50,200
Speaker 7: I think? Well, I think on value, I think it's

545
00:29:50,200 --> 00:29:52,200
Speaker 7: going to be TJX. That's the top pick there.

546
00:29:52,600 --> 00:29:55,400
Speaker 9: When I think about newness, I think Birkenstock is going

547
00:29:55,440 --> 00:29:56,560
Speaker 9: to continue to drive sales.

548
00:29:56,560 --> 00:29:58,160
Speaker 3: I kind stand them. I don't know. I'm looking at

549
00:29:58,160 --> 00:30:01,400
Speaker 3: the clogs now on them. I just I just cannot

550
00:30:01,400 --> 00:30:01,920
Speaker 3: get on board.

551
00:30:01,960 --> 00:30:05,400
Speaker 5: I like, I like, do you it attracts very much

552
00:30:05,440 --> 00:30:08,280
Speaker 5: so and like yeah, doing your taxes and broken sticks.

553
00:30:08,360 --> 00:30:09,240
Speaker 7: Absolutely that's me.

554
00:30:09,680 --> 00:30:12,360
Speaker 6: Yep, I will out myself on that. I actually do

555
00:30:12,480 --> 00:30:14,560
Speaker 6: think I think they're very convenient.

556
00:30:15,480 --> 00:30:16,680
Speaker 7: I actually only only one.

557
00:30:16,560 --> 00:30:18,800
Speaker 3: With socks because people wear them with socks.

558
00:30:18,920 --> 00:30:22,360
Speaker 6: I think it's so specific and it's such an eraror.

559
00:30:22,440 --> 00:30:23,960
Speaker 6: I think it lasted less than three years.

560
00:30:23,960 --> 00:30:26,560
Speaker 3: So the people who's done, I think that's has a

561
00:30:26,560 --> 00:30:27,240
Speaker 3: three year cycle.

562
00:30:27,600 --> 00:30:28,960
Speaker 6: That has about a two months cycle.

563
00:30:29,000 --> 00:30:30,680
Speaker 3: That is no cycle. Daniel, appreciate your time.

564
00:30:30,680 --> 00:30:32,440
Speaker 2: It's going to thank you very much. Busy a few

565
00:30:32,480 --> 00:30:34,240
Speaker 2: weeks of shoping ahead of a Stana Tawsi. There a

566
00:30:34,280 --> 00:30:38,800
Speaker 2: Tausi Advisory Group. This is the Bloomberg Survellants podcast, bringing

567
00:30:38,880 --> 00:30:42,479
Speaker 2: you the best in markets, economics, angiot politics. You can

568
00:30:42,520 --> 00:30:45,320
Speaker 2: watch the show live on Bloomberg TV weekday mornings from

569
00:30:45,320 --> 00:30:48,600
Speaker 2: six am to nine am Eastern. Subscribe to the podcast

570
00:30:48,640 --> 00:30:51,800
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571
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Speaker 2: always on the Bloomberg Terminal and the Bloomberg Business out