Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business App. Muhammad al Aerona Queen's College, Cambridge,
Speaker 2: saying this on one of the picks, Kevin Wassh's professional
Speaker 2: career and writings would make him a strong presidential choice
Speaker 2: for Treasury and for the Federal Reserve. Muhammed joins us.
Speaker 2: Now for more, Muhammed, are you endorsing a candidate then?
Speaker 3: In this race for Treasury?
Speaker 1: What I'm seeing John?
Speaker 4: Of the four, the one that I have followed most
Speaker 4: closely is Kevin Walsh. I've done that for almost two decades.
Speaker 4: And if you look at what he would bring to
Speaker 4: either or both jobs. First, a good understanding and knowledge
Speaker 4: of economics, you're talking about Stanford, Harvard MIT. He would
Speaker 4: bring policy making experience the NEEC and the FED. He
Speaker 4: would bring private sector experience. He understands the functioning of
Speaker 4: the capital markets. It's not often that you find someone
Speaker 4: who can operate at this intersection of economics, finance, and policy,
Speaker 4: and it's not often that you find someone who not
Speaker 4: only can operate there, but can communicate well. And we
Speaker 4: do need much better economic communication.
Speaker 2: Mohammed, I've said this a few times, and I'm sure
Speaker 2: you agree. It's good news that the caliber of all
Speaker 2: the candidates is so high given the challenges they'll have
Speaker 2: to confront in the next several years. As we look
Speaker 2: ahead to twenty twenty five. Could we go through a
Speaker 2: few of those challenges right now? What do you think
Speaker 2: the biggest for the incoming Treasury secretary.
Speaker 4: I think it's maintained economic growth. John, I can't stress
Speaker 4: how important that is. It is important to deal with
Speaker 4: problems of inequality.
Speaker 1: It's important to deal with the debt issue.
Speaker 4: The best way to address a debt issue is through
Speaker 4: economic growth. And we are looking at a major transition
Speaker 4: which is ongoing from old engine of growth to new
Speaker 4: engines or what economists called the old model of growth
Speaker 4: to the new model of growth, and the Tragedy Secretary
Speaker 4: will be the lead person in figuring out how we
Speaker 4: navigate all this.
Speaker 5: Well, if it is someone like Kevin Walsh and everyone
Speaker 5: knows his endgame is the FED, does that blur the
Speaker 5: line of FED independence?
Speaker 4: I think it's somed that well that that line has
Speaker 4: been blurred before. But I suspect that if Walsh gets
Speaker 4: the job, he's going to be really careful as to
Speaker 4: what he says on monetary policy.
Speaker 1: He will respect that line. It's also not.
Speaker 4: Clear that the President elect will commit to a second
Speaker 4: step for Kevin Walsh. I suspect that he will say
Speaker 4: he will keep his options open, So I don't worry
Speaker 4: about that. And Marie, I just look at Kevin as
Speaker 4: someone who both as Treasury and FETCH Chair I think
Speaker 4: would do a really good job.
Speaker 5: If this drags on, we're supposed to get a pick yesterday.
Speaker 5: If we don't get one today, if this continues to
Speaker 5: drag drag on, Gary Cohne reminded us all yesterday that
Speaker 5: his pick, his nod, and also Minutionin's nod came after Thanksgiving.
Speaker 5: Is that in itself a market negative given the fact
Speaker 5: that we have all these other nominees floating around for
Speaker 5: the incoming administration, but we don't have this one key
Speaker 5: name for the markets.
Speaker 4: Yeah, I thought Gary's interview with you yesterday was really
Speaker 4: good because he said two things. One, as you just mentioned,
Speaker 4: he said, look, I didn't find out a lot of Thanksgiving.
Speaker 4: And then the second thing he said is look at
Speaker 4: what we inherited then, including some unanticipated development, compared to
Speaker 4: what the new team will have been here now. So
Speaker 4: I don't think it's a market negative. I particularly don't
Speaker 4: think it's a market negative because, as John said, the
Speaker 4: are credible candidates being considered. Oh it's so we told so. No,
Speaker 4: I don't think it is a market negative. I think
Speaker 4: it's the right thing to take time to make this decision.
Speaker 6: Mohammed. I thought of you a lot this morning when
Speaker 6: I saw the flows for the past week into bonds
Speaker 6: and stock funds in the US, and I saw the outflows,
Speaker 6: the dramatic outflows from European bond and stock flows, and
Speaker 6: I thought about your comment about that sucking sound of
Speaker 6: capital away from the rest of the world and in
Speaker 6: the United States, and I have to wonder, are there
Speaker 6: limits to this because basically the fact that everybody else
Speaker 6: is paying is leading to the US gain is also
Speaker 6: leading to higher rates that the rest of the world
Speaker 6: is going to pay for. In other words, they're going
Speaker 6: to pay for that debt because of the attraction of
Speaker 6: interest rates.
Speaker 7: When does that kind.
Speaker 6: Of balance out?
Speaker 7: Do people get sick of this story?
Speaker 1: Not for a while?
Speaker 4: And I thought of all three of you because I
Speaker 4: remember when we were together last week and we talked
Speaker 4: about the global economy, and I told you the good,
Speaker 4: the bad, and the ugly, and I put Europe in
Speaker 4: the ugly, saying there really is an issue there that
Speaker 4: as both secular and cyclical headwinds come together, and today's
Speaker 4: PMI numbers are a clear reminder that there is this
Speaker 4: problem and it's getting deeper. We know what the solutions are.
Speaker 4: There is the Drug Report, but there is no political
Speaker 4: will to implement it, so the.
Speaker 1: US will continue to diverge.
Speaker 4: Like you, Lisa, I think divergence is a really important
Speaker 4: theme for the next twelve months. Is there a limit
Speaker 4: short as a limit at some point, but we're not
Speaker 4: there yet, And the worst thing is to sacrifice US
Speaker 4: growth in order to get lower rates. That would be
Speaker 4: the world I mean, the US is the only engine
Speaker 4: of global growth right now, So you do not want
Speaker 4: to sacrifice the only engine of global growth. What you
Speaker 4: do want to happen is both with China and for
Speaker 4: Europe to get the act together and to transition to
Speaker 4: healthier and higher growth.
Speaker 6: I have to wonder also how much this pushes central
Speaker 6: banks around the world to keep investing in gold and
Speaker 6: try to diversify away from the dollar, because at some
Speaker 6: point there has to be some anger or at least
Speaker 6: a feeling of frustration that everybody else is at the
Speaker 6: whims of the United States in terms of whatever kind
Speaker 6: of fiscal situation they want to implement, and that the
Speaker 6: fiscal dominance allows them to do that. How much do
Speaker 6: you see that kind of trend in gold in other
Speaker 6: acid classes really continuing as people look toward a day
Speaker 6: that maybe could be a different regime with respect to
Speaker 6: the dollar.
Speaker 4: So this trend which we have seen now for a
Speaker 4: solid twelve months of trying to diverse away from both
Speaker 4: the dollar as a reserve currency and importantly looking to
Speaker 4: diverse away from the dollar system as a payment system,
Speaker 4: and I worry much more about the second than the first.
Speaker 4: The trend is there reasons you've cited on the currency
Speaker 4: side at the margin, and I want to stress it
Speaker 4: is at the margin people are looking to diverse away
Speaker 4: away from the.
Speaker 1: Dollar into gold.
Speaker 4: The payment system is a reaction to the worry about
Speaker 4: weaponization of investment, sanctions and trade.
Speaker 1: So that is ongoing and we have to keep an
Speaker 1: eye on it.
Speaker 4: Now. We're not anywhere near a critical mass. There is
Speaker 4: nothing to replace the dollar at the center of the system.
Speaker 4: There is nothing to replace the dollar payment system. However,
Speaker 4: you don't want alternatives as clunky and as inefficient as
Speaker 4: they are to gain momentum.
Speaker 2: Which is why we're saying the dollar to pre shed
Speaker 2: against gold, the pre shed against something like bitcoin. But
Speaker 2: I think we have to take a step back and
Speaker 2: recognize what it's not doing against other currencies. We're facing
Speaker 2: the prospect of an eight consecutive week of strength for
Speaker 2: the US dollar for dollar index for DXY mohammed the
Speaker 2: wise because the data in America has been pretty decent,
Speaker 2: and we're rethinking the fence path malas Eliot. Deutsche Bank
Speaker 2: had this to say in its outlook. Growth is too fast,
Speaker 2: inflation is too furious for FED cuts. Our baseline c's
Speaker 2: a twenty five basis point cut in December, calls it
Speaker 2: a close call, goes on to say after that, we
Speaker 2: expect an extended pause which keeps the FED funds right
Speaker 2: above four percent into twenty twenty six.
Speaker 3: Is that your base case?
Speaker 4: Two, So my base case is they cut by twenty five.
Speaker 4: When they come to their next meeting, they'll have clarity
Speaker 4: on three things that will impact how they see.
Speaker 1: The economy going.
Speaker 4: They'll have clarity on tariffs, that have clarity on immigration,
Speaker 4: and that have clarity on where the budget is going.
Speaker 4: And they'll build up that clarity as they go into
Speaker 4: the year, and that is what's going to determine whether they.
Speaker 1: Do more or not. They're to going to see how
Speaker 1: they see things. John.
Speaker 4: These fundamentally impact. First, tariffs will impact price behavior. You
Speaker 4: see this in the UK. Companies now have gotten much
Speaker 4: more use to passing on any incre costs. So in
Speaker 4: the case of the UK, the supermarkets have come out
Speaker 4: and said, you know what, the higher national insurance contributions,
Speaker 4: we're going to pass on that to crisis and demand
Speaker 4: here is not as strong in the US as it
Speaker 4: is in the US, So tariffs will have an impact
Speaker 4: on pricing behavior by companies. Immigration will have impact on
Speaker 4: the labor market, and of course what they decide on
Speaker 4: taxes in particular, which will come ahead of what they
Speaker 4: do on spending where they look into cut spending will
Speaker 4: have an impact on issuance. So they're going to have
Speaker 4: the FED is going to have to step back and
Speaker 4: look at these three things and then decide how.
Speaker 1: They fit into this big puzzle.
Speaker 2: Let's finish on that word clarity. They'll have clarity on tariffs.
Speaker 2: They might have clarity on what the approach might be,
Speaker 2: how big the tariffs will be, they may not have
Speaker 2: clarity on the effects. So this is something you touched
Speaker 2: on earlier this week when you talked about things like
Speaker 2: trade flows, corporate pricing, demand, supply elasticities. How long does
Speaker 2: it take to get clarity on the effect of those tariffs.
Speaker 4: Yeah, and that list goes on on game theoretics, stage craft.
Speaker 4: I mean, it is a very complex issue and the
Speaker 4: media has tended to simplify it over simplified.
Speaker 1: No, they'll need time, but.
Speaker 4: They'll have a clarity on how serious is a direction
Speaker 4: of travel, and that's going to be important in how
Speaker 4: do they think about what interest what policy we should
Speaker 4: do Muhammed.
Speaker 2: We appreciate your time. We're looking to catch up with you, sir.
Speaker 2: Thank you, Muhammed Al, Aaron of Queen's College, Cambridge. On
Speaker 2: the latest in the United States and beyond, Tryler is
Speaker 2: ramping up bets on a jumpbo raakecout in December by
Speaker 2: the ECB as Eurozone PMI is contracted in November, feeling
Speaker 2: concerns about the state of Europe's economy as it faces
Speaker 2: down the prospect of hire terrists from the incoming Trump administration.
Speaker 3: Joining us now is a man who has.
Speaker 2: A say it next month's meeting, the Portuguese Central Bank
Speaker 2: Governor Mario Sentino. Governor Sentino, thank you for being with us.
Speaker 2: We appreciate your time. It's important points out that every
Speaker 2: official on the covernany council, has a different view, and
Speaker 2: at the time this morning, where people are questioning whether
Speaker 2: the ECP is behind the curve, I think it's important
Speaker 2: to highlight your more recent comments suggests you are very
Speaker 2: much ahead of this weekly data, anticipating it and worried
Speaker 2: about it. We'd love your reaction to this morning's economic
Speaker 2: data and what do you believe a fifty basis point
Speaker 2: breakcount should be on the table at next month's meeting.
Speaker 8: Well, thank you for having me, and good morning from London. Well,
Speaker 8: we have to take this data in the context of
Speaker 8: all the information that we now have to take a decision.
Speaker 8: Next month we will have also new forecasts. My first
Speaker 8: reaction is that these data certainly confirms the propertateness of
Speaker 8: the decision we took in October and the profile that
Speaker 8: we now have for the trajectory of interest rates also
Speaker 8: going forward. This is the appropriate message that I'd like
Speaker 8: to send. We know, I mean the challenges had We
Speaker 8: know that the Euro Area economy is struggling to recovery.
Speaker 8: The most important though, is that inflation is on target
Speaker 8: and we need to move. According to all these data,
Speaker 8: today's information goes along the way. Indeed, I've been looking
Speaker 8: at the European economy. It just confirms that we need
Speaker 8: to move with monetary policy.
Speaker 3: Governor.
Speaker 2: How quickly you move is part of the conversation, and
Speaker 2: whether you should be constrained by twenty five basis point
Speaker 2: increments or not. Do you believe larger reductions should be
Speaker 2: considered in a month from now.
Speaker 8: Well, we have been discussing that for a while. I
Speaker 8: rather prefer us to move gradual, and gradual means steady
Speaker 8: and with predictable steps. But of course, if the data
Speaker 8: confirms that.
Speaker 3: The risks to.
Speaker 8: The downside in growth materialize, that the numbers for inflation
Speaker 8: that we still are expecting these months go in the
Speaker 8: same direction, we can certainly discuss and be open to
Speaker 8: discuss different steps. But what is more important is to
Speaker 8: send a message of we are doing our job. We
Speaker 8: are moving interest rates in the right direction, and we
Speaker 8: will continue to do so as long as data requires.
Speaker 2: As you know and from listening to you and your colleagues,
Speaker 2: the focus so far has been on normalizing interest rates,
Speaker 2: which speaks to that gradual approach.
Speaker 3: Governor.
Speaker 2: When I look at the day around Europe, when we
Speaker 2: all do, when we see Germany bally growing and the
Speaker 2: pmising contraction, I think quite rightly the conversation is changing
Speaker 2: in financial markets to whether you need to be accommodative,
Speaker 2: whether we should be constrained by this idea of normalizing
Speaker 2: and moving in gradual steps, or which whether we should
Speaker 2: be open to becoming accommodative and moving much more quickly.
Speaker 3: What's the difference between the two. For you, we do.
Speaker 8: Know that we are still in restrictive territory. The interest
Speaker 8: rate is above the neutral levels, and so this means
Speaker 8: that the past going forward will be to continue to
Speaker 8: reduce the level of interest rates. We also know that
Speaker 8: the biggest problem in Europe is investment, and investment is
Speaker 8: certainly quite sensitive to the interest rates. So it will
Speaker 8: be also of importance for us to have the support
Speaker 8: of the economy so that inflation can remain at two percent.
Speaker 8: We don't want to go below two percent, and for
Speaker 8: that we need a stronger economy. So it's the combination
Speaker 8: of those two that need to be on the table
Speaker 8: so that we take a decision that so far brought
Speaker 8: us in a stable past, which is always important to
Speaker 8: two percent, and now we need to make sure that
Speaker 8: we continue there.
Speaker 2: Governor, if I could put you on the spot appointed question,
Speaker 2: do you believe the biggest risk right now is above
Speaker 2: target inflation or below target inflation? And I'm not talking
Speaker 2: about next month's data. I'm thinking about a medium term view,
Speaker 2: looking out several years. What is the biggest risk above
Speaker 2: target inflation or below target inflation?
Speaker 8: Well, the history of Europe in the ten years prior
Speaker 8: to this inflationary experience was below target inflation. And the
Speaker 8: fundamentals for the European economy didn't change much. So in
Speaker 8: my view, we need to be concerned with below target inflation.
Speaker 8: The risks that we face today, both from the economy
Speaker 8: and from shocks outside Europe take us in that direction.
Speaker 8: So we need to focus on not going below target
Speaker 8: in terms of the medium term, because then we open
Speaker 8: up again the issue of as you are saying, normalizing
Speaker 8: monetary policy. We were successful thus far to bring inflation
Speaker 8: to two percent. Now the job is a little bit different.
Speaker 8: It's like, you know, this last mile not being a
Speaker 8: pass from above the target, but from below the target,
Speaker 8: and it's not easy. It proved not easy for the
Speaker 8: Eurozone to bring inflation close to two percent before twenty nineteen,
Speaker 8: and we need to be very serious about it.
Speaker 6: Do you think that on a broader sense, the easy
Speaker 6: if he needs to consider I don't want to say
Speaker 6: a dual mandate like the federal reserve, where you're looking
Speaker 6: at employment as well as inflation, but the growth backdrop
Speaker 6: as well as maybe there's going to be that bumpiness
Speaker 6: that you talk about in the near term path of inflation,
Speaker 6: but the longer term path, you see that risk significantly
Speaker 6: to the downside when it comes to that is inflation.
Speaker 8: I don't think we need to discuss the dual mandate
Speaker 8: or the single mandate that we have. We just need
Speaker 8: to remind ourselves that inflation is an endogenous variable. It
Speaker 8: is strictly connected with the way the economy goes. By
Speaker 8: targeting inflation, we are somehow looking at a broader set
Speaker 8: of data and see how it interacts with prices, the
Speaker 8: labor market, certainly, unemployment, employment, the dynamism that the European
Speaker 8: economy had recently on the labor market is very important,
Speaker 8: and it's also our job to protect it, to preserve it.
Speaker 8: That's not because of the layman market on its own,
Speaker 8: which is already important, but it's on the impact that
Speaker 8: this may have on inflation. We do know that an
Speaker 8: economy that doesn't grow, that doesn't invest, will not be
Speaker 8: compatible with prices at two percent, so I always look
Speaker 8: at this in a more broad sense. So for me, honestly,
Speaker 8: the thing of the double mandate is not an issue.
Speaker 2: Governor, you brought up shocks from outside of Europe. I'd
Speaker 2: like to talk about those shocks with you. The prospect
Speaker 2: of a change of policy in the United States following
Speaker 2: the US election, and whether that introduces a new risk
Speaker 2: that you have to confront. If the walls go up,
Speaker 2: if the tariffs go up in America, and we were
Speaker 2: all concerned about over capacity in China, there's one place
Speaker 2: that's going to have to eat that over capacity and
Speaker 2: it could be another disinflationary threat.
Speaker 3: That's Europe. Can you walk me through your.
Speaker 2: Understanding the policy changes we might see in the next
Speaker 2: year and it kind of introduces to your Roundlook.
Speaker 8: I totally agree with you on the way you put
Speaker 8: the risks that the tariffs and the spare capacity that
Speaker 8: we see around the globe will imply to inflation. So
Speaker 8: I see these shocks from an economic policy perspective as
Speaker 8: a wake up call for Europe. Europe needs to move
Speaker 8: from the passenger seat that very often we see Europe
Speaker 8: sitting comfortable to a more leading role in the world
Speaker 8: that will call for an increased role for the euro internationally.
Speaker 8: We were discussing that back in twenty nineteen, just prior
Speaker 8: to COVID. We may be facing the same challenges right now,
Speaker 8: so we better focus on the response that Europe needs
Speaker 8: to do an to produce to those challenges instead of
Speaker 8: discussing what is going on elsewhere. We do know that
Speaker 8: we need to move very fast if we are presented
Speaker 8: with these challenges. If I may, I can quote here
Speaker 8: Elvis Presley and say to you that we can't go
Speaker 8: on together if those challenges from the outside present to Europe,
Speaker 8: challenges that Europe cannot cannot go along with.
Speaker 6: So for the past couple of months, the ECB terminal
Speaker 6: rate is expected to be something like two and a
Speaker 6: half percent by the end of next year. Putting Elvis
Speaker 6: Presley aside, given all of the potential external shocks and
Speaker 6: the courage jectory, do you think it ought to be
Speaker 6: much lower than that?
Speaker 8: Well, I don't see reasons for the neutral rating group
Speaker 8: to be much different from before this crisis. The fundamentals
Speaker 8: in Europe are pretty similar. We have a more dynamic
Speaker 8: labor market that will certainly help bringing the natural rate up,
Speaker 8: but probably it will not be enough, given that many
Speaker 8: other factors like demography and productivity that will still wait
Speaker 8: into into into that number. So if we go close
Speaker 8: to two percent, probably below, it will be my best
Speaker 8: guest right now for for the neutral to be so.
Speaker 8: We still have some way, some paths to cover, and
Speaker 8: we need we need to be very much focused on that.
Speaker 2: Interesting, So we appreciate your time with a suspicious mind.
Speaker 2: ECP Comveny Council member Mario Sentein.
Speaker 3: I think is.
Speaker 2: Let's stick with retail one week ount for Black Friday
Speaker 2: and a shortened holiday shopping season. Gap and Walmart seeing
Speaker 2: higher end consumers coming to them for value as Target
Speaker 2: sees weakening sales and inventory piling gup. Joining us now
Speaker 2: is dw To Towsie of TAUSI Advisory Group. Dana, welcome
Speaker 2: to the program.
Speaker 7: Thank you so much for having.
Speaker 3: Me compare Target, so everybody else? What went wrong there?
Speaker 9: Forty eight percent of Target sales are discretionary. They had
Speaker 9: elevated promotions, higher costs didn't work. You look at Walmart,
Speaker 9: which has sixty percent of their sales coming from essentials,
Speaker 9: and when you think about discretionary, Look what you just mentioned.
Speaker 9: The GAP is gaining some momentum right now. Look at TJX,
Speaker 9: same thing. They're gaining some momentum too. So that value
Speaker 9: shopper where there is style and product is working.
Speaker 2: Is there an execution story there as well? What is
Speaker 2: the GAP doing right?
Speaker 7: I think a couple things.
Speaker 9: I mean Richard's Richard's phrase is performed while you transform.
Speaker 9: The things they're doing right is the consistency of looking
Speaker 9: at the product and really elevating it today's times. Look
Speaker 9: at the wide leg denim jeans. They are remodeling some
Speaker 9: of their stores at Old Navy. The kid's business is important,
Speaker 9: and the kid's business weekend in this quarter given the
Speaker 9: weather that was out there, coming out of the quarter,
Speaker 9: kids strengthened. And so I think off price value and
Speaker 9: where there's newness and innovation, consumers are going. So you
Speaker 9: have that what's happening with the Gap brand and an
Speaker 9: Old Navy.
Speaker 6: I want to get into policy and all of that,
Speaker 6: but what is newness and innovation right now?
Speaker 7: And we talk about this.
Speaker 6: Is it launches, is it limited edition? Is it wide
Speaker 6: leg pants that are going to be in style for
Speaker 6: you know, another six months?
Speaker 3: Maybe no.
Speaker 7: Typically denim cycles can be three years. Sorry, no worries.
Speaker 7: But when you think about innovation, what's new and different?
Speaker 9: What about the closed toad shoes at Birkenstock selling it
Speaker 9: full price? People are buying the sandals and they're buying
Speaker 9: the closed toad shoes. When you think about the wide
Speaker 9: leg jeans, there's a lot in footwear Look what's doing
Speaker 9: with the new colorways at Hoka. It's interesting. Same thing
Speaker 9: at On. But you know what, you marry the product
Speaker 9: with the physical space. Look at the new remodels that
Speaker 9: are opening. If you walk lower Fifth Avenue, the new
Speaker 9: Gap remodel, it's colors, it's got punched. You take a
Speaker 9: look at the Abercrombie remodel. They expanded the men's area.
Speaker 9: Look at the new On store. So we've got newness
Speaker 9: and product, newness and channel, and you need to have value.
Speaker 6: Maybe Target just needs a new dog and then they'll
Speaker 6: be just fine.
Speaker 7: But there is to be done.
Speaker 3: Okay, that's just the dog. That's probably more than.
Speaker 6: Just the dog, given some of the performance. But there
Speaker 6: is this question about how exposed some of these retailers
Speaker 6: are to the potential of tariffs, especially if their whole
Speaker 6: reburse depends on the ability for fast goods that they
Speaker 6: can get manufacturing brought in.
Speaker 9: When we had Terris, the first time everyone went to
Speaker 9: diversify their sourcing out of China. It's happening again now.
Speaker 9: Probably the one who's talked about it the most is
Speaker 9: Steve Madden. Taking their percentage of good from China down
Speaker 9: from fifty percent to twenty five percent, hopefully in almost
Speaker 9: a year. Gap set it on their call last night,
Speaker 9: around less than ten percent of their goods come from China.
Speaker 7: Where else are people going.
Speaker 9: They're going to Mexico, They're going to Africa, They're going
Speaker 9: to Vietnam.
Speaker 7: In terms of where goods are going to be.
Speaker 9: The end result, though, and National Retail Federation talked about it,
Speaker 9: if we have these teriffs, you're going to have an
Speaker 9: impact to consumer spending that can approach nearly eighty billion
Speaker 9: dollars and what it requires in the apparel area, if
Speaker 9: you're going to have increased costs passed on to the consumer,
Speaker 9: can be price increases of low double digits.
Speaker 7: That's a concern across the board.
Speaker 5: Or any of these retailers talking about coming back to
Speaker 5: the United States because what President like Trump is talking
Speaker 5: about was basically a carrot and stick approach. I'm putting
Speaker 5: up the walls, but you're going to get a fifteen
Speaker 5: percent potentially corporate tax rate if you produce in USA.
Speaker 9: Now some of them have mentioned some items coming back
Speaker 9: to the USA, but basically it's Mexico, it's Vietnam, it's
Speaker 9: even Africa where people are going the labor cost so lower.
Speaker 9: They have the labor to be able to make the
Speaker 9: goods and the expertise of it. That's why the reason
Speaker 9: why everyone's in China. There is no China like China
Speaker 9: in terms of the expertise of how they make the goods.
Speaker 9: It will be a problem and a big topic of
Speaker 9: discussion throughout twenty five if those tariffs get enacted.
Speaker 5: Tariffs has one potential risks down the pipe. We also
Speaker 5: have the ports that strikers that deadline is January fifteenth.
Speaker 5: We see Target overshoot when they were building their inventory.
Speaker 5: Do you see retailers now having to build up inventory
Speaker 5: because they're concerned.
Speaker 3: There won't be a deal in January?
Speaker 9: I think overall they're watching carefully. Only Target has been
Speaker 9: the one who's called out the increased inventory that they're building.
Speaker 7: I don't really have others.
Speaker 9: As the earnings are being reported, you're still seeing inventory
Speaker 9: growth less than sales growth. Tuesday is a major day.
Speaker 9: You have all the mall retailers reporting on Tuesday. In
Speaker 9: addition to Burlington, you got ten reports coming out on Tuesday.
Speaker 9: We'll hear more about what we've heard so far. I'm
Speaker 9: not seeing inventory pile ups except for Target calling that.
Speaker 3: Why did they get it so wrong?
Speaker 7: Then the target, Yeah, how do if.
Speaker 3: They step on such a massive inventory landmine.
Speaker 9: Different way of looking at things and there and how
Speaker 9: they're planning than everyone else. It is surprising in terms
Speaker 9: of how they stood out so much because when you
Speaker 9: look at Walmart, who reported just the day before, it
Speaker 9: was the other areas of business that also accelerated the growth.
Speaker 2: When the numbers dropped, and then we all reflected on
Speaker 2: the same thing. It reminded us of Spring twenty twenty two.
Speaker 2: This isn't the first time we've seen this movie, which
Speaker 2: I think is why some investors were pretty spooked by it.
Speaker 2: It's as if they haven't corrected for the mistakes they
Speaker 2: made a couple of years back.
Speaker 3: Is that a fact? Criticism of WMAR is that unfair.
Speaker 9: I think overall they may have corrected then for the
Speaker 9: mistakes they made, but then looking at the macro landscape,
Speaker 9: they acted faster and took made change quicker than others,
Speaker 9: while others basically saying it takes time to enact some
Speaker 9: of these initiatives, and so no, I'm not seeing others
Speaker 9: do that.
Speaker 2: So you think they overcrect it, corrected based on the
Speaker 2: lesson that they learned in twenty two.
Speaker 9: Yeah, it seems like it's way too advanced for what
Speaker 9: compared to everybody else. And you have to look at
Speaker 9: this holiday season with a compressed season of five fewer days,
Speaker 9: promotions are happening. I don't know about your email inbox,
Speaker 9: but mine is filled with they're trying to do off.
Speaker 3: How much does that five days change things? Huge?
Speaker 7: I think the five days is very important.
Speaker 9: It makes the Black Friday weekend that much more important
Speaker 9: because there are fewer days. People always still shop the
Speaker 9: last ten days before Christmas, but it's going to make
Speaker 9: the retailers hit the dial on let's anti up the promotions.
Speaker 6: I wonder if Target is sort of a warning shot
Speaker 6: in terms of competing on more the innovation and less
Speaker 6: unjust price value has to also come with something new,
Speaker 6: and I wonder how much Walmart is exerting that pressure
Speaker 6: because they can compete in a way that nobody else
Speaker 6: can because of their product mix. Is that the takeaway
Speaker 6: from some of the recent earnings, well.
Speaker 9: Part of it, but also look what Walmart's doing. When
Speaker 9: Doug McMillan said that their highest growth came from some
Speaker 9: of their upper income consumer of one hundred thousand dollar
Speaker 9: household income. They're taking that share from the targets of
Speaker 9: the world. And you also have to say, look at
Speaker 9: the growth of TJX, the traffic increases that tj is
Speaker 9: getting and frankly even some of the luxury items that
Speaker 9: they have their smattered about and just select stores, but
Speaker 9: it's a driver.
Speaker 5: Well is GAP basically copying that because they said yesterday
Speaker 5: that they're also making inroads with upper middle class, wealthy patrons.
Speaker 9: But part of what GAP is doing look at the
Speaker 9: collaborations to your mention before, whether it's influencers, whether it's
Speaker 9: cult gaya, they're getting in the conversation by stepping up
Speaker 9: and saying, we're part of the brand halo that's out
Speaker 9: there of other brands who want to be in reach
Speaker 9: a wider audience of consumers that have a wider income level.
Speaker 3: Top pick this holiday shop in season? What is it?
Speaker 7: I think? Well, I think on value, I think it's
Speaker 7: going to be TJX. That's the top pick there.
Speaker 9: When I think about newness, I think Birkenstock is going
Speaker 9: to continue to drive sales.
Speaker 3: I kind stand them. I don't know. I'm looking at
Speaker 3: the clogs now on them. I just I just cannot
Speaker 3: get on board.
Speaker 5: I like, I like, do you it attracts very much
Speaker 5: so and like yeah, doing your taxes and broken sticks.
Speaker 7: Absolutely that's me.
Speaker 6: Yep, I will out myself on that. I actually do
Speaker 6: think I think they're very convenient.
Speaker 7: I actually only only one.
Speaker 3: With socks because people wear them with socks.
Speaker 6: I think it's so specific and it's such an eraror.
Speaker 6: I think it lasted less than three years.
Speaker 3: So the people who's done, I think that's has a
Speaker 3: three year cycle.
Speaker 6: That has about a two months cycle.
Speaker 3: That is no cycle. Daniel, appreciate your time.
Speaker 2: It's going to thank you very much. Busy a few
Speaker 2: weeks of shoping ahead of a Stana Tawsi. There a
Speaker 2: Tausi Advisory Group. This is the Bloomberg Survellants podcast, bringing
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