1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma Wicks. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,760 Speaker 1: at Bloomberg dot com. Here's some words for you. I 8 00:00:21,800 --> 00:00:24,840 Speaker 1: think President Trump is a pathological liar. Every day he's 9 00:00:24,840 --> 00:00:26,720 Speaker 1: telling one liar or another, and it gives me no 10 00:00:26,760 --> 00:00:28,800 Speaker 1: pleasure to say that. I also think he's a racist, 11 00:00:28,880 --> 00:00:32,599 Speaker 1: a sexist, homophobe, a zenophobe, somebody who's getting cheap political 12 00:00:32,640 --> 00:00:36,040 Speaker 1: points by trying to pick on minorities. That is what 13 00:00:36,120 --> 00:00:39,200 Speaker 1: Bernie Sanders said in an interview with Vermont Public Radio 14 00:00:39,280 --> 00:00:42,280 Speaker 1: as he announced his candidacy for the President of the 15 00:00:42,360 --> 00:00:45,600 Speaker 1: United States. Greg Bellier, chief US policy strategist for a 16 00:00:45,680 --> 00:00:48,760 Speaker 1: g F Investments, joins us Now, Greg, no surprise, but 17 00:00:48,800 --> 00:00:51,160 Speaker 1: what do you make of how you rolled out this announcement. 18 00:00:51,840 --> 00:00:53,960 Speaker 1: Just think we're going to have a year and a 19 00:00:54,000 --> 00:00:56,760 Speaker 1: half of this kind of rhetoric back and forth in 20 00:00:56,840 --> 00:01:00,320 Speaker 1: Trump of Chris hits back even harder. So, uh, welcome 21 00:01:00,360 --> 00:01:02,360 Speaker 1: to the next election. That's going to be pretty ugly. 22 00:01:03,000 --> 00:01:05,000 Speaker 1: And Paul, what's interesting, at least for me, is for 23 00:01:05,040 --> 00:01:06,920 Speaker 1: the last election, like Bernie Sanders was out on a 24 00:01:06,959 --> 00:01:09,440 Speaker 1: lima his own. Now he's not. Now he's not, he's 25 00:01:09,440 --> 00:01:11,839 Speaker 1: there's lots of company out on the left limb where 26 00:01:11,840 --> 00:01:16,080 Speaker 1: he likes to, uh they play. But Greg, thinking about it, 27 00:01:16,120 --> 00:01:18,760 Speaker 1: you know, it is a competitive it's it's a very 28 00:01:18,760 --> 00:01:21,120 Speaker 1: crowded field. We're up to twenty some odd names on 29 00:01:21,120 --> 00:01:24,280 Speaker 1: the Democratic side. Where do you think Bernie Sanders best 30 00:01:24,280 --> 00:01:28,640 Speaker 1: positions himself this go around. Well, let's be honest here, 31 00:01:28,720 --> 00:01:33,679 Speaker 1: He's not a Democrat. He is a self professed Democratic socialist, 32 00:01:34,040 --> 00:01:36,839 Speaker 1: has never really joined the party, so he's out there. 33 00:01:36,840 --> 00:01:40,199 Speaker 1: I mean he's well to the left. Obviously Elizabeth Warren 34 00:01:40,240 --> 00:01:43,880 Speaker 1: will be as well. But there's a huge lane in 35 00:01:43,920 --> 00:01:47,119 Speaker 1: the center. I think Klobuchar last night in the town 36 00:01:47,160 --> 00:01:49,640 Speaker 1: hall tried to take some of that lane. I think 37 00:01:49,760 --> 00:01:52,080 Speaker 1: Joe Biden well might even be a guy by the 38 00:01:52,160 --> 00:01:54,280 Speaker 1: name of Bloomberg. So there are a lot of people 39 00:01:54,280 --> 00:01:58,760 Speaker 1: who might want the middle lane, and Bernie makes it 40 00:01:58,800 --> 00:02:01,200 Speaker 1: easier for them. And of course Mike Bloomberg is the 41 00:02:01,200 --> 00:02:05,640 Speaker 1: majority owner uh and founder of Bloomberg LP. UM, So 42 00:02:05,960 --> 00:02:08,120 Speaker 1: are we in for this no matter what side? Because 43 00:02:08,120 --> 00:02:11,080 Speaker 1: if you take away even this sort of populist socialist rhetoric, 44 00:02:11,280 --> 00:02:14,080 Speaker 1: you also have things like buybacks with Marco Rubio, and 45 00:02:14,120 --> 00:02:17,040 Speaker 1: you have a Sanders and Schumer on that train to like, 46 00:02:17,160 --> 00:02:19,760 Speaker 1: either way, we're sort of headed for this sort of 47 00:02:19,800 --> 00:02:23,200 Speaker 1: collapse of Wall Street versus Main Street. Again, that's a 48 00:02:23,200 --> 00:02:26,800 Speaker 1: good point, Alex, and I think that even Republicans feel 49 00:02:26,880 --> 00:02:30,959 Speaker 1: that perhaps the tax cuts went too far for corporations 50 00:02:30,960 --> 00:02:33,600 Speaker 1: and the very wealthy, so that's going to be fair 51 00:02:33,639 --> 00:02:37,440 Speaker 1: game for just about everyone. But when you look at 52 00:02:37,639 --> 00:02:41,359 Speaker 1: Bernie Sanders in particular and the candidates who were well 53 00:02:41,400 --> 00:02:43,680 Speaker 1: to the left, I'll be damned if I can figure 54 00:02:43,680 --> 00:02:45,960 Speaker 1: out how they'll pay for any of this stuff. And 55 00:02:46,000 --> 00:02:48,160 Speaker 1: it may be a little too exotic. Trump has not 56 00:02:48,320 --> 00:02:52,919 Speaker 1: lost uh that Uh. He made a speech in Miami 57 00:02:53,120 --> 00:02:55,480 Speaker 1: yesterday in which like half of it seemed to be 58 00:02:55,760 --> 00:02:59,240 Speaker 1: talking how about how horrible socialists are. What they've done 59 00:02:59,280 --> 00:03:01,160 Speaker 1: to venis a whale of us. So he's going to 60 00:03:01,240 --> 00:03:03,799 Speaker 1: try to portray the Democrats is all socialists. I don't 61 00:03:03,840 --> 00:03:06,000 Speaker 1: think it's going to work. So Gregg, what do you 62 00:03:06,040 --> 00:03:09,320 Speaker 1: think that Bernie Sanders needs to change from the last 63 00:03:09,320 --> 00:03:13,240 Speaker 1: go round for him? Well, I think that he probably 64 00:03:13,320 --> 00:03:16,359 Speaker 1: has to do a little bit better with African Americans. 65 00:03:16,400 --> 00:03:20,080 Speaker 1: That was a weak spot for him. I think that 66 00:03:20,440 --> 00:03:23,720 Speaker 1: you know, at his age at seventy seven, now he's 67 00:03:23,720 --> 00:03:25,680 Speaker 1: going to have to show a lot of vigor. You know, 68 00:03:25,760 --> 00:03:28,760 Speaker 1: he can't get a cold. He's got to He's got 69 00:03:28,800 --> 00:03:31,840 Speaker 1: to plow right through. I think, uh, energy levels are 70 00:03:31,840 --> 00:03:35,160 Speaker 1: going to be important. So also what we're sort of 71 00:03:35,160 --> 00:03:37,240 Speaker 1: percolating on this is all the rhetoric we heard about 72 00:03:37,280 --> 00:03:40,200 Speaker 1: these potential auto tariffs from the US. You had the 73 00:03:40,280 --> 00:03:42,600 Speaker 1: auto European leaders speaking out against it. You know, I 74 00:03:42,640 --> 00:03:44,880 Speaker 1: spoke to Michael Jays as he runs policy over at 75 00:03:44,920 --> 00:03:47,760 Speaker 1: Morgan Stanley US Public Policy, and he said, look, it's 76 00:03:47,760 --> 00:03:49,560 Speaker 1: an issue, but it would be short term. This is 77 00:03:49,600 --> 00:03:51,880 Speaker 1: what he had to sand Bloomberg Television earlier today. There 78 00:03:52,000 --> 00:03:55,119 Speaker 1: is a potential political circuit breaker, which is a couple 79 00:03:55,200 --> 00:03:57,320 Speaker 1: of different bills that are going through the Senate right now. 80 00:03:57,680 --> 00:03:59,840 Speaker 1: Um that could take back some of this tariffing authority 81 00:04:00,040 --> 00:04:02,680 Speaker 1: from the President before it's actually put in the place 82 00:04:02,960 --> 00:04:04,880 Speaker 1: right now. I don't think that that's going to happen 83 00:04:04,960 --> 00:04:07,760 Speaker 1: before this becomes more live than it already is. But 84 00:04:07,840 --> 00:04:09,600 Speaker 1: we have to watch that very carefully because that could 85 00:04:09,640 --> 00:04:12,240 Speaker 1: stop it before it starts. So kind of to your point, Greg, 86 00:04:12,320 --> 00:04:14,920 Speaker 1: is that you know you went too far to one side. 87 00:04:15,200 --> 00:04:17,599 Speaker 1: Are we seeing a world where the Senate and Congress 88 00:04:17,640 --> 00:04:19,359 Speaker 1: is going to try and pair back any power that 89 00:04:19,400 --> 00:04:22,400 Speaker 1: Trump really has to push certain things forward. I think 90 00:04:22,440 --> 00:04:25,520 Speaker 1: if he went for auto terroris, and there's a secret 91 00:04:25,560 --> 00:04:28,760 Speaker 1: report that came out over the weekend from Commerce to 92 00:04:28,880 --> 00:04:31,479 Speaker 1: the President, and if he looks at it and says 93 00:04:31,480 --> 00:04:33,479 Speaker 1: I'm going to impose auto terris, he could get a 94 00:04:33,600 --> 00:04:39,039 Speaker 1: mighty mighty pushback from Congress, and not just from Democrats. So, Greg, 95 00:04:39,839 --> 00:04:42,279 Speaker 1: mentioning tariffs, what do you expect if anything out of 96 00:04:42,279 --> 00:04:44,400 Speaker 1: the trade talks with China that contents that are ongoing? 97 00:04:44,839 --> 00:04:48,400 Speaker 1: You know, I think that we probably have gone a 98 00:04:48,400 --> 00:04:50,520 Speaker 1: little bit too far, Paul. We've gotten a little bit 99 00:04:50,560 --> 00:04:53,360 Speaker 1: ahead of ourselves that there's not going to be a deal. 100 00:04:53,400 --> 00:04:56,760 Speaker 1: In my opinion on March one way, too much stuff 101 00:04:56,839 --> 00:05:00,760 Speaker 1: still to be resolved. I do think late spring, early 102 00:05:00,800 --> 00:05:03,360 Speaker 1: summer there's going to be a big, made for TV 103 00:05:03,640 --> 00:05:08,520 Speaker 1: splashy theatrical meeting between Presidents Trump and Z and we 104 00:05:08,600 --> 00:05:11,080 Speaker 1: will get a deal. But for anyone who's hoping for 105 00:05:11,120 --> 00:05:14,400 Speaker 1: a deal by this much March one deadline, I think 106 00:05:14,440 --> 00:05:17,960 Speaker 1: that's unrealistic. So you think we'll get an extension then 107 00:05:18,320 --> 00:05:20,360 Speaker 1: at least, yeah, I do. I don't think there's anything 108 00:05:20,400 --> 00:05:23,200 Speaker 1: special about that day. They can push it back, you know, 109 00:05:23,240 --> 00:05:26,080 Speaker 1: two or three months. It does look like they're making progress, 110 00:05:26,440 --> 00:05:28,760 Speaker 1: but there's not going to be a final deal without 111 00:05:28,800 --> 00:05:32,080 Speaker 1: Trump and Z. And it's too soon for them to 112 00:05:32,120 --> 00:05:35,400 Speaker 1: get together. I think that comes to three months from now. 113 00:05:36,279 --> 00:05:40,599 Speaker 1: Greg Valieri, Chief US Policy Strategy at a g F Investments, 114 00:05:40,600 --> 00:05:43,360 Speaker 1: thank you very much for joining us on Bloomberg Radio 115 00:05:43,400 --> 00:05:56,440 Speaker 1: this morning. Joining us now is the man who can 116 00:05:56,440 --> 00:06:00,520 Speaker 1: talk about everything retail berk Littinger, he joins. So from 117 00:06:00,560 --> 00:06:02,719 Speaker 1: a strategic let me get the name right, I don't 118 00:06:02,720 --> 00:06:06,080 Speaker 1: want to miss this one up Strategic Resource Group, show off, 119 00:06:06,080 --> 00:06:08,240 Speaker 1: Strategic Resource Group. I had your bio up, but of 120 00:06:08,279 --> 00:06:09,520 Speaker 1: course I didn't have the name of your shop. So 121 00:06:09,560 --> 00:06:12,640 Speaker 1: we managing director of Strategic Resource Group has a long career. 122 00:06:12,960 --> 00:06:15,680 Speaker 1: Whether you take a look at say PNG, throughout the 123 00:06:15,800 --> 00:06:18,839 Speaker 1: history and sort of helping boost consumer sales, their marketing 124 00:06:18,880 --> 00:06:22,320 Speaker 1: and retailing. You're the guy. So clearly Walmart did well 125 00:06:22,400 --> 00:06:24,640 Speaker 1: in part because of the push to e commerce, and 126 00:06:24,680 --> 00:06:28,520 Speaker 1: they're discounting and Alex and Paul. What's really impressive about 127 00:06:28,560 --> 00:06:33,200 Speaker 1: this quarter that hasn't been reported by other networks is 128 00:06:33,360 --> 00:06:37,239 Speaker 1: that Walmart's paying higher wages and at the same time 129 00:06:37,320 --> 00:06:42,440 Speaker 1: they're lowering their prices and generating more revenue and producing 130 00:06:42,520 --> 00:06:45,680 Speaker 1: higher levels of profits. So they're hitting all four cornerstones 131 00:06:46,040 --> 00:06:50,480 Speaker 1: that other competitors are not. And even even Amazon's not 132 00:06:50,600 --> 00:06:53,440 Speaker 1: doing all that because Amazon's racing prices, and that's one 133 00:06:53,480 --> 00:06:56,080 Speaker 1: of the reasons Walmart's doing so well well. This quarter's 134 00:06:56,160 --> 00:06:58,760 Speaker 1: numbers were very interesting. I think investors always focused on 135 00:06:58,800 --> 00:07:00,839 Speaker 1: Walmart just given its size. By think after the retail 136 00:07:00,839 --> 00:07:03,320 Speaker 1: sales report from last week that was such a curveball 137 00:07:03,360 --> 00:07:05,720 Speaker 1: for everybody with retail sales. I guess and you sent 138 00:07:05,800 --> 00:07:08,440 Speaker 1: me down reported one point two per cent. What do 139 00:07:08,480 --> 00:07:11,400 Speaker 1: you make of those that number plus the Walmart numbers today? 140 00:07:11,440 --> 00:07:15,160 Speaker 1: It's an important question in the issue is that all 141 00:07:15,200 --> 00:07:18,960 Speaker 1: consumers across the country are facing all ten monthly budget 142 00:07:18,960 --> 00:07:23,760 Speaker 1: expenditures have gone up over the last twelve months. UH 143 00:07:24,080 --> 00:07:28,119 Speaker 1: rich people love a bargain, and working people and people 144 00:07:28,120 --> 00:07:30,960 Speaker 1: on fixed and limited income need and have to have 145 00:07:31,040 --> 00:07:33,120 Speaker 1: a bargain. And the best place to get a bargain 146 00:07:33,200 --> 00:07:37,080 Speaker 1: on everything UH she or he buys as the consumers 147 00:07:37,400 --> 00:07:41,880 Speaker 1: is Walmart. It's the easiest place to return and UH 148 00:07:42,440 --> 00:07:46,040 Speaker 1: Amazon is good if a product doesn't weigh a lot, 149 00:07:46,440 --> 00:07:49,280 Speaker 1: or if it's not big in size, but if it's 150 00:07:49,400 --> 00:07:52,600 Speaker 1: something that's bulky, like a fifty pound bag of pet 151 00:07:52,640 --> 00:07:56,920 Speaker 1: food or uh any anything else that's large in size 152 00:07:57,000 --> 00:08:00,160 Speaker 1: or heavy and weight like a UH gall on a 153 00:08:00,280 --> 00:08:03,840 Speaker 1: milk which weighs nine pounds and is expensive on Amazon. 154 00:08:04,240 --> 00:08:10,800 Speaker 1: Walmart saves people more money. And Walmart's investing in advertising, marketing, 155 00:08:10,800 --> 00:08:15,160 Speaker 1: and consumer communication, whether it's Bloomberg, Radio, TV, the Super Bowl. 156 00:08:15,640 --> 00:08:19,560 Speaker 1: Sam Walden and his son Rob thought marketing and advertising 157 00:08:19,680 --> 00:08:25,440 Speaker 1: was an expense. Amazon views advertising as an expense, Doug McMillan, 158 00:08:25,520 --> 00:08:28,920 Speaker 1: the CEO of Walmart, looks at as an investment, and 159 00:08:29,000 --> 00:08:34,240 Speaker 1: Jerry del Famina, the legendary advertising agency head I, said 160 00:08:34,240 --> 00:08:37,480 Speaker 1: Walmart's advertising as some of the best anywhere in the world, 161 00:08:37,880 --> 00:08:42,360 Speaker 1: and that's in taking consumers away from competitors when Walmart 162 00:08:42,760 --> 00:08:46,319 Speaker 1: loss for competitors, but at what expense? Right, Like, so 163 00:08:46,400 --> 00:08:49,200 Speaker 1: gross margin expansion is going to still be a lusive 164 00:08:49,280 --> 00:08:50,920 Speaker 1: for them because they have to do all the stuff 165 00:08:50,920 --> 00:08:52,840 Speaker 1: that you just said. They have to keep prices low. 166 00:08:52,880 --> 00:08:54,640 Speaker 1: They also have to deal with delivery and shipping and 167 00:08:54,679 --> 00:08:58,679 Speaker 1: all that. So why is it okay now? First a 168 00:08:58,720 --> 00:09:01,000 Speaker 1: couple of years ago and that wasn't okay. We we 169 00:09:01,080 --> 00:09:05,800 Speaker 1: look at it, Alex on your key question is Walmart's 170 00:09:05,840 --> 00:09:10,880 Speaker 1: investing in the future to profitably drive sales growth. So 171 00:09:10,920 --> 00:09:15,120 Speaker 1: if you look at depreciation for Walmart versus depreciation for Amazon, 172 00:09:15,760 --> 00:09:20,280 Speaker 1: Walmart's spending more than its level of depreciation to win online. 173 00:09:20,400 --> 00:09:24,160 Speaker 1: When with their store eleven in Avon, Colorado, with click 174 00:09:24,200 --> 00:09:28,520 Speaker 1: and collect, with a FedEx station inside, with Western Union 175 00:09:28,520 --> 00:09:32,920 Speaker 1: to wire money and of America will be able to 176 00:09:32,960 --> 00:09:37,080 Speaker 1: get deliveries from Walmart dot Com including consumables within the 177 00:09:37,080 --> 00:09:40,720 Speaker 1: next two years. That's all through the investment. Meanwhile, Jeff 178 00:09:40,720 --> 00:09:44,439 Speaker 1: Bezos aid Amazon typically does not reinvest all his and 179 00:09:44,559 --> 00:09:48,400 Speaker 1: Amazon's depreciation in winning for the future. So Walmart with 180 00:09:48,440 --> 00:09:52,080 Speaker 1: a better balance sheet. To your point, the margin margins 181 00:09:52,120 --> 00:09:55,520 Speaker 1: are more modest, but that's investing in the Roman Empire 182 00:09:55,559 --> 00:09:58,880 Speaker 1: of retail UH to win in cyberspace and when the 183 00:09:58,880 --> 00:10:03,080 Speaker 1: wars and the stores well, because Amazon's just getting crushed 184 00:10:03,520 --> 00:10:07,000 Speaker 1: in the new whole foods formats by Walmart and others. 185 00:10:07,480 --> 00:10:10,520 Speaker 1: So Bert Flickinger, Managing director for Strategic Resource Group, joining 186 00:10:10,600 --> 00:10:13,319 Speaker 1: us in studio. One of the numbers that jumped out 187 00:10:13,480 --> 00:10:17,080 Speaker 1: at me Bert was that growth in e commerce UH 188 00:10:17,240 --> 00:10:21,520 Speaker 1: for Walmart. So they continue to compete extraordinarily well against Amazon. 189 00:10:22,440 --> 00:10:25,480 Speaker 1: What is the secret sauce for them? Secret sauce is 190 00:10:25,600 --> 00:10:32,200 Speaker 1: the investment that Alex referenced, plus the reverse recruiting, so UH, 191 00:10:32,200 --> 00:10:35,720 Speaker 1: Walmart and Doug McMillan of recruited Mark Lorie, who was 192 00:10:35,760 --> 00:10:39,760 Speaker 1: a genius who helped develop wag Diapers dot com a 193 00:10:39,760 --> 00:10:43,760 Speaker 1: lot of Amazon dot com away from Amazon. Dave Criscione, 194 00:10:44,320 --> 00:10:48,120 Speaker 1: my star student at Cornell Summer Executive Program, was running 195 00:10:48,160 --> 00:10:51,640 Speaker 1: Amazon Go. Walmart recruited Dave away, so they've taken a 196 00:10:51,720 --> 00:10:54,920 Speaker 1: dream team out of Amazon and Bazos, in our view, 197 00:10:55,000 --> 00:10:57,840 Speaker 1: is the most brilliant guy in all of the history 198 00:10:57,840 --> 00:11:01,400 Speaker 1: of retail. But one general can't win the war, and 199 00:11:01,480 --> 00:11:06,199 Speaker 1: Walmart's taking as best officers and bringing them into Walmart 200 00:11:06,240 --> 00:11:08,480 Speaker 1: for Walmart to win where Walmart has been losing in 201 00:11:08,600 --> 00:11:13,800 Speaker 1: cyberspace before they did a complete reset with great leadership 202 00:11:13,840 --> 00:11:17,959 Speaker 1: as opposed to family management. So who do you think 203 00:11:17,960 --> 00:11:20,719 Speaker 1: Walmart is taking market share from? Or is the pie 204 00:11:20,760 --> 00:11:22,599 Speaker 1: bigger than we thought? And we've talked about Amazon, but 205 00:11:22,640 --> 00:11:25,080 Speaker 1: I'm more interested also in like the targets are the Macy's, 206 00:11:25,200 --> 00:11:26,839 Speaker 1: Like who are they eat? Who's lunch a they're eating? 207 00:11:27,120 --> 00:11:30,680 Speaker 1: They're doing a combination. They're taking the business from Target 208 00:11:30,720 --> 00:11:35,600 Speaker 1: because Walmart on your investment point, Walmart has the biggest 209 00:11:36,040 --> 00:11:40,120 Speaker 1: UH data base in terms of terror bytes, second only 210 00:11:40,160 --> 00:11:44,480 Speaker 1: to the US Pentagon. So in terms of dedicated direct 211 00:11:44,600 --> 00:11:50,720 Speaker 1: distribution h e commerce communications down to the nanosecond, they're great. 212 00:11:50,960 --> 00:11:53,640 Speaker 1: Target's been working with McKenzie and company and a lot 213 00:11:53,679 --> 00:11:55,920 Speaker 1: of consulting firms that have done a lot of good work, 214 00:11:56,200 --> 00:12:01,200 Speaker 1: but they've outsourced distribution. They've outsowed, they outsourced Target dot 215 00:12:01,240 --> 00:12:03,280 Speaker 1: Com for a number of years, the outsourced part of 216 00:12:03,320 --> 00:12:08,680 Speaker 1: credit cards. So Target doesn't have that institutional efficiencies that 217 00:12:09,000 --> 00:12:12,160 Speaker 1: Walmart's gotten. The other thing that you and Paul reported 218 00:12:12,960 --> 00:12:17,480 Speaker 1: very well is the Payless bankruptcy, the Jimboree bankruptcies, the 219 00:12:17,520 --> 00:12:21,679 Speaker 1: earlier retail bankruptcies. So two toys r US, which you 220 00:12:21,760 --> 00:12:25,240 Speaker 1: and Paul spoke of earlier. So Walmart's aggregating the sales 221 00:12:25,320 --> 00:12:30,319 Speaker 1: from the bankrupt retailers, plus taking retailers from food, drug 222 00:12:30,440 --> 00:12:35,520 Speaker 1: discount department store category dominant, especially sporting goods and toys 223 00:12:36,040 --> 00:12:40,679 Speaker 1: twenty spart. How's the consumer doing? Broadly defined? Consumers doing 224 00:12:40,720 --> 00:12:45,640 Speaker 1: well in off price and the word working consumer, consumers 225 00:12:45,679 --> 00:12:50,160 Speaker 1: doing okay. Uh. Luxury consumers are really struggling worldwide. As 226 00:12:50,200 --> 00:12:52,760 Speaker 1: my husband said, can you just please stop spending alex 227 00:12:53,320 --> 00:12:56,880 Speaker 1: thanks just one week, don't buy Maybe I think a 228 00:12:56,880 --> 00:13:00,000 Speaker 1: lot of people that In December Profit Burt Flicking, your 229 00:13:00,040 --> 00:13:03,520 Speaker 1: managing director for Strategic Resource Group, joining us in study 230 00:13:03,679 --> 00:13:18,360 Speaker 1: on Walmart and all things retail. As we were talking about, 231 00:13:18,400 --> 00:13:20,600 Speaker 1: you have the FED minutes coming out on Wednesday at 232 00:13:20,600 --> 00:13:23,960 Speaker 1: two pm, and you know what I'm hearing, kill the dots, 233 00:13:24,160 --> 00:13:27,400 Speaker 1: more revolution of more revolt against the dot plot because 234 00:13:27,400 --> 00:13:30,400 Speaker 1: it doesn't help provide clarity, but more confusion for the markets. 235 00:13:30,440 --> 00:13:35,080 Speaker 1: Joining us now is Craig Taurus with the latest. So Craig, realistically, 236 00:13:35,760 --> 00:13:37,240 Speaker 1: are we really going to see the end of the 237 00:13:37,280 --> 00:13:42,199 Speaker 1: dot plot? And why no? And you're so sad about that. 238 00:13:44,080 --> 00:13:46,440 Speaker 1: It took a long time to get agreement on this. 239 00:13:47,400 --> 00:13:51,640 Speaker 1: I do think it really isn't expressing what they would 240 00:13:51,640 --> 00:13:55,840 Speaker 1: like to express, and maybe that's the departure point of 241 00:13:55,920 --> 00:14:01,160 Speaker 1: their conversation these days. So Craig, maybe you know, it's 242 00:14:01,200 --> 00:14:04,040 Speaker 1: debatable whether the dot plot itself and that forecast and 243 00:14:04,040 --> 00:14:06,079 Speaker 1: what it represents is the problem, or maybe just the 244 00:14:06,160 --> 00:14:10,400 Speaker 1: messaging of what the FED officials are seeing what happened 245 00:14:10,440 --> 00:14:15,720 Speaker 1: in December that really riled the markets. I think so they, 246 00:14:15,760 --> 00:14:19,480 Speaker 1: as everybody now knows, they stuck with this outlook of 247 00:14:19,640 --> 00:14:23,360 Speaker 1: two rate hikes at a time when we later saw 248 00:14:23,360 --> 00:14:26,600 Speaker 1: in the minutes there were as many as five downside 249 00:14:26,680 --> 00:14:30,520 Speaker 1: risks that they cited, and so whatever they said in 250 00:14:30,600 --> 00:14:34,720 Speaker 1: the press release and the FED statement in their forecasts 251 00:14:35,480 --> 00:14:42,480 Speaker 1: didn't really reflect the conditionality or their conviction about those 252 00:14:42,520 --> 00:14:47,600 Speaker 1: two hikes in penciled in for so, so again I 253 00:14:47,680 --> 00:14:51,120 Speaker 1: come back to, is more of a messaging issue. How 254 00:14:51,120 --> 00:14:52,800 Speaker 1: can they fix that if there is in fact a 255 00:14:52,840 --> 00:14:58,360 Speaker 1: systemic problem. It's complicated. As we say in our story today, 256 00:14:59,120 --> 00:15:02,840 Speaker 1: During a number of ideas floating around, one is well, 257 00:15:03,000 --> 00:15:06,120 Speaker 1: j Pal's having press conferences eight times a year now, right, 258 00:15:06,960 --> 00:15:10,280 Speaker 1: so they could give more frequent updates on their forecasts 259 00:15:10,360 --> 00:15:13,560 Speaker 1: eight times a year instead of four. Now, that would 260 00:15:13,560 --> 00:15:17,920 Speaker 1: show more agility in response to current information. And I 261 00:15:17,920 --> 00:15:21,560 Speaker 1: would expect, you know, that dot plot and the outlook 262 00:15:21,640 --> 00:15:26,760 Speaker 1: for growth, you might see some changes. UM would not 263 00:15:26,920 --> 00:15:32,080 Speaker 1: express conditionality though, uh no, it would not. So here's 264 00:15:32,080 --> 00:15:33,920 Speaker 1: what this reminds me of. And if you are a parent, 265 00:15:33,960 --> 00:15:36,120 Speaker 1: maybe you'll get this analogy. It reminds me of my 266 00:15:36,160 --> 00:15:38,800 Speaker 1: toddler wanting chocolate for breakfast and I said, you can't 267 00:15:38,840 --> 00:15:40,800 Speaker 1: have chocolate for breakfast, like but I want to and 268 00:15:40,840 --> 00:15:42,200 Speaker 1: hear all the reasons why, and I say, no, you 269 00:15:42,240 --> 00:15:44,960 Speaker 1: can't have any anything except giving her chocolate for breakfast. 270 00:15:45,120 --> 00:15:47,200 Speaker 1: Won't let her relax and calm down. It's kind of 271 00:15:47,200 --> 00:15:49,760 Speaker 1: the same thing. The markets basically want Powell to come 272 00:15:49,800 --> 00:15:52,800 Speaker 1: out and say we're raising rates this date and if 273 00:15:52,800 --> 00:15:55,080 Speaker 1: we don't, here's the number one reason why. But that 274 00:15:55,160 --> 00:15:58,360 Speaker 1: Paul is like totally unrealistic. That's not how the system works. 275 00:15:58,400 --> 00:16:00,680 Speaker 1: It is. And it's also a question of getting too 276 00:16:00,720 --> 00:16:03,200 Speaker 1: much information. With Chairman Pal, you know, speaking eight times 277 00:16:03,240 --> 00:16:06,240 Speaker 1: a year versus four times UM, is that too much information? 278 00:16:07,400 --> 00:16:12,680 Speaker 1: I don't think so. So I think the problem. You know, 279 00:16:12,720 --> 00:16:16,440 Speaker 1: there's something about communication when you make a decision, you know, 280 00:16:16,480 --> 00:16:19,600 Speaker 1: as a parent, as an individual, whoever, you want to 281 00:16:19,600 --> 00:16:22,280 Speaker 1: come out and kind of sell the decision, right, this 282 00:16:22,360 --> 00:16:25,360 Speaker 1: is why we did what we did. It's kind of 283 00:16:25,400 --> 00:16:28,320 Speaker 1: hard then to shift and say this is why we 284 00:16:28,440 --> 00:16:32,240 Speaker 1: might not do what we did. But they have to 285 00:16:32,280 --> 00:16:36,680 Speaker 1: do that because you know why fed funds markets, money 286 00:16:36,720 --> 00:16:42,320 Speaker 1: markets are always of reflecting the conditionality and probability of 287 00:16:42,680 --> 00:16:44,640 Speaker 1: that they're going to do or may not do that, 288 00:16:45,240 --> 00:16:48,160 Speaker 1: So somehow they have to address that. So basically that 289 00:16:48,200 --> 00:16:51,440 Speaker 1: means that instead of the market focusing on the dot plot, 290 00:16:51,680 --> 00:16:53,920 Speaker 1: it come out and say, I'm making this up. Here's 291 00:16:53,920 --> 00:16:57,480 Speaker 1: the criteria of six things that we look at boom boom, boom, 292 00:16:57,520 --> 00:16:59,280 Speaker 1: and this is what makes us doat a dependent or 293 00:16:59,320 --> 00:17:03,920 Speaker 1: not correct. So some central banks run scenarios and they 294 00:17:03,960 --> 00:17:08,280 Speaker 1: say this isn't gonna we don't this isn't our baseline. 295 00:17:08,440 --> 00:17:11,200 Speaker 1: This could happen or it may not. But what would 296 00:17:11,240 --> 00:17:15,720 Speaker 1: happen if after the fiscal stimulus, growth ratcheted down to 297 00:17:15,840 --> 00:17:18,919 Speaker 1: two percent or below, and then you just ran an 298 00:17:18,960 --> 00:17:22,280 Speaker 1: economic model and plotted out a funds rate that's called 299 00:17:22,280 --> 00:17:25,680 Speaker 1: a fan chart. Those are just as confusing. Now that's 300 00:17:25,720 --> 00:17:28,000 Speaker 1: not a fan chart. This is a scenario with a 301 00:17:28,040 --> 00:17:30,639 Speaker 1: funds rate and not a fan around it. Fan charts 302 00:17:30,640 --> 00:17:34,360 Speaker 1: are meaningless in my view and in many people's view, 303 00:17:34,400 --> 00:17:37,760 Speaker 1: because it tells you the number could be zero where 304 00:17:37,800 --> 00:17:41,480 Speaker 1: it could before. That's really not specific guidance, or it 305 00:17:41,520 --> 00:17:44,640 Speaker 1: doesn't say anything about I hate this word, but I'm 306 00:17:44,640 --> 00:17:49,320 Speaker 1: going to use it your reaction function, how you'll respond. So, Craig, 307 00:17:49,359 --> 00:17:51,520 Speaker 1: is there any chance that the FED would consider a 308 00:17:51,520 --> 00:17:58,680 Speaker 1: consensus forecast? That's a great question. So if the three 309 00:17:58,680 --> 00:18:01,159 Speaker 1: of us were in a room and we had to 310 00:18:01,240 --> 00:18:05,400 Speaker 1: walk out and say something to Bloomberg at large, right, 311 00:18:06,320 --> 00:18:09,160 Speaker 1: I think we could agree on what we're going to say. 312 00:18:09,359 --> 00:18:12,080 Speaker 1: For some reason, the f o MC has a very 313 00:18:12,119 --> 00:18:15,199 Speaker 1: hard time coming up with us or getting to the 314 00:18:15,200 --> 00:18:17,680 Speaker 1: point where they say, well, this is we're going to 315 00:18:17,760 --> 00:18:21,000 Speaker 1: agree on this forecast. Part of it is our system 316 00:18:21,000 --> 00:18:26,560 Speaker 1: were diversity of views is also important, But it doesn't 317 00:18:26,600 --> 00:18:30,320 Speaker 1: seem to me like a big goal to aim for. Um. 318 00:18:30,359 --> 00:18:33,280 Speaker 1: I'm optimistic, I guess all right, Craig, tourists tired of 319 00:18:33,320 --> 00:18:35,399 Speaker 1: the dot plot, but I resigned and trying to get 320 00:18:35,440 --> 00:18:48,800 Speaker 1: optimistic joining us up from Bloomberg. Well, interest rates are falling, 321 00:18:48,800 --> 00:18:52,480 Speaker 1: and a growing course is forecasting slower growth and tepid inflation. 322 00:18:52,960 --> 00:18:55,920 Speaker 1: Consensus has shifted to a point where virtually all forecasters 323 00:18:55,960 --> 00:18:58,879 Speaker 1: expect interest rates to follow inflation towards this seller. To 324 00:18:58,920 --> 00:19:01,480 Speaker 1: get a sense of how this scenario may play out, 325 00:19:01,520 --> 00:19:04,920 Speaker 1: we welcome Jack Ablin. Jack is founding partner and chief 326 00:19:04,960 --> 00:19:08,840 Speaker 1: investment officer at Crescent Wealth Advisors. Jack, thanks so much 327 00:19:08,880 --> 00:19:12,159 Speaker 1: for joining us. So the inflation outlook is currently I 328 00:19:12,200 --> 00:19:14,280 Speaker 1: think quite benign in the marketplace. What do you think 329 00:19:14,280 --> 00:19:18,600 Speaker 1: could change that? Well, I think probably if anything is 330 00:19:18,680 --> 00:19:22,840 Speaker 1: the labor market. You know clearly um our economy is 331 00:19:22,840 --> 00:19:27,880 Speaker 1: is pivots off of households, and household income pivots off 332 00:19:27,960 --> 00:19:30,159 Speaker 1: of wages. And you know, we'll keep in mind that 333 00:19:30,760 --> 00:19:34,359 Speaker 1: wages your over year have are up three point two percent, 334 00:19:34,440 --> 00:19:39,360 Speaker 1: so certainly you know, well above our trend trend growth 335 00:19:40,320 --> 00:19:44,679 Speaker 1: UH for real GDP, and based on our forecast, we 336 00:19:44,760 --> 00:19:48,080 Speaker 1: think wages could rise another three percent over the coming 337 00:19:48,080 --> 00:19:51,919 Speaker 1: four quarters. So does that wind up feeding into inflation 338 00:19:51,960 --> 00:19:55,639 Speaker 1: expectations because a lot of investors now argue that inflation 339 00:19:55,720 --> 00:20:00,720 Speaker 1: expectations will be now, really what the fees reacting to Yeah, 340 00:20:00,760 --> 00:20:03,480 Speaker 1: I think that's exactly at Uh. The fact is that, 341 00:20:03,600 --> 00:20:07,560 Speaker 1: you know, um that we've we've we've printed four point 342 00:20:07,600 --> 00:20:12,240 Speaker 1: three four point five trillion dollars of money to buy bonds. 343 00:20:12,680 --> 00:20:16,720 Speaker 1: That hasn't led too much inflation. We've had now a 344 00:20:17,000 --> 00:20:21,880 Speaker 1: ten year recovery. Uh, that so far has not led 345 00:20:21,920 --> 00:20:26,280 Speaker 1: too much inflation. But I think consumer demand, which drives 346 00:20:26,320 --> 00:20:30,680 Speaker 1: obviously most of economic activity, once we start running out 347 00:20:30,680 --> 00:20:35,280 Speaker 1: of capacity, we will, uh, we will eventually start to 348 00:20:35,280 --> 00:20:38,240 Speaker 1: see some price rises. Not to mention, of course, uh 349 00:20:38,280 --> 00:20:41,679 Speaker 1: some of these tariffs that um, that that companies are 350 00:20:41,680 --> 00:20:44,160 Speaker 1: going to have to pass along. So Jack, I guess 351 00:20:44,160 --> 00:20:46,800 Speaker 1: the consensus for the Fed for the remainder of the 352 00:20:46,840 --> 00:20:49,679 Speaker 1: year is maybe one, maybe two hikes and then I 353 00:20:49,680 --> 00:20:53,400 Speaker 1: guess a systematic, steady wind down of the balance sheet. 354 00:20:53,920 --> 00:20:58,440 Speaker 1: Are you in that consensus? Yeah, I mean I think 355 00:20:58,520 --> 00:21:02,400 Speaker 1: that In fact, I would say consensus what the Fed 356 00:21:02,440 --> 00:21:05,720 Speaker 1: believes and what consensus believes maybe a little bit different here. 357 00:21:06,359 --> 00:21:10,280 Speaker 1: I think consensus is closer to you know, zero hikes 358 00:21:10,359 --> 00:21:12,760 Speaker 1: this year and in fact rate cuts next year. I 359 00:21:12,800 --> 00:21:19,640 Speaker 1: think that probably a little overly aggressive. I do think, um, 360 00:21:19,680 --> 00:21:24,159 Speaker 1: you know, we are starting to run of certain capacity. UM. 361 00:21:24,200 --> 00:21:27,200 Speaker 1: You know, I I did note that, for example, UM, 362 00:21:27,240 --> 00:21:30,040 Speaker 1: a lot of the staples companies said that they're going 363 00:21:30,080 --> 00:21:34,880 Speaker 1: to be passing along higher prices to their consumers. UM. 364 00:21:35,000 --> 00:21:39,080 Speaker 1: And so you know that's obviously staples in elastic demand. 365 00:21:39,160 --> 00:21:43,040 Speaker 1: But eventually if that starts to move into other areas, UM, 366 00:21:43,080 --> 00:21:46,679 Speaker 1: you know, that could that could put the price indecks higher. 367 00:21:46,920 --> 00:21:50,000 Speaker 1: Here's a question. Can we just keep going up but 368 00:21:50,119 --> 00:21:56,960 Speaker 1: the economy slows? You know, it's a it's a great question. UM, yeah, 369 00:21:57,000 --> 00:21:59,840 Speaker 1: I guess it could if we have a higher productivity. 370 00:22:00,040 --> 00:22:04,520 Speaker 1: Mean right now, you know, businesses can only pay wage 371 00:22:04,560 --> 00:22:09,919 Speaker 1: increases out of really two things. One is higher inflation, right, 372 00:22:09,920 --> 00:22:12,480 Speaker 1: if they can price their products higher and then share 373 00:22:12,560 --> 00:22:16,640 Speaker 1: some of those higher prices with labor. Uh. The other, 374 00:22:16,720 --> 00:22:21,119 Speaker 1: of course, is productivity if they if their employees can earn, 375 00:22:21,280 --> 00:22:24,119 Speaker 1: you know, can can pump out five more product for 376 00:22:24,119 --> 00:22:26,800 Speaker 1: the same amount of effort that I argue you could 377 00:22:26,880 --> 00:22:31,080 Speaker 1: argue that, UM, business owners can pass some of those 378 00:22:31,280 --> 00:22:37,080 Speaker 1: productivity benefits along to their workforce. Without those two, UM, 379 00:22:37,280 --> 00:22:40,919 Speaker 1: the business owners have to start cutting into profits to 380 00:22:40,960 --> 00:22:44,960 Speaker 1: pay those wage increases. And that's pretty much what we're 381 00:22:44,960 --> 00:22:49,240 Speaker 1: starting to see over the last couple of quarters. So Jack, 382 00:22:49,320 --> 00:22:51,680 Speaker 1: we had some pretty good numbers coming out of Walmart 383 00:22:51,840 --> 00:22:55,800 Speaker 1: this morning. UM, kind of kind of I think, offsetting 384 00:22:55,840 --> 00:22:57,600 Speaker 1: kind of the weak retail sales number we had for 385 00:22:57,680 --> 00:23:00,640 Speaker 1: December last week. What is what is sense of where 386 00:23:00,640 --> 00:23:04,159 Speaker 1: the consumer is right now? I think that, you know, 387 00:23:04,280 --> 00:23:08,440 Speaker 1: it's funny, I'm actually very surprised with that weak retail 388 00:23:08,520 --> 00:23:12,360 Speaker 1: number in December. Um. You know, I don't know. UM 389 00:23:12,400 --> 00:23:15,239 Speaker 1: you know obviously one month um, and we want to 390 00:23:15,280 --> 00:23:18,720 Speaker 1: you know, one once we get um, you know, more data, 391 00:23:18,800 --> 00:23:21,480 Speaker 1: we can get a better sense of it. But I 392 00:23:21,600 --> 00:23:24,840 Speaker 1: tend to be believe Walmart, which I think last time 393 00:23:24,880 --> 00:23:28,720 Speaker 1: I checked was ten percent of all retail UM. Over 394 00:23:28,760 --> 00:23:31,760 Speaker 1: you know, some of the one one time government stat 395 00:23:32,440 --> 00:23:35,239 Speaker 1: I think the consumer is very strong. Um. You know 396 00:23:35,280 --> 00:23:40,240 Speaker 1: again hearkening back to this notion, uh that uh that 397 00:23:40,320 --> 00:23:44,399 Speaker 1: wages have outpaced economic activity, so real wages are on 398 00:23:44,480 --> 00:23:49,080 Speaker 1: the rise, and of course pump prices UM are remarkably low. 399 00:23:49,119 --> 00:23:51,200 Speaker 1: One of the things we look at is how far 400 00:23:51,359 --> 00:23:55,760 Speaker 1: can you drive on an hour's worth of work? Um. 401 00:23:55,840 --> 00:23:58,280 Speaker 1: So it looks at pump prices, it looks at wages, 402 00:23:58,320 --> 00:24:00,520 Speaker 1: It also looks at fuel efficient and see and we 403 00:24:00,880 --> 00:24:04,360 Speaker 1: find if you can get over three and twenty miles 404 00:24:04,400 --> 00:24:08,200 Speaker 1: on an hour's worth of work. UM, that's a pretty 405 00:24:08,240 --> 00:24:11,600 Speaker 1: good economy for American workforce. And that's where we are 406 00:24:11,680 --> 00:24:13,159 Speaker 1: right now. So does that mean you want to be 407 00:24:13,200 --> 00:24:18,200 Speaker 1: taking on more risk right now or less? Well? UM, 408 00:24:18,240 --> 00:24:21,480 Speaker 1: you know it's interesting. I'm looking at other metrics. UM. 409 00:24:21,520 --> 00:24:25,080 Speaker 1: I think that equities in general are fairly priced. I 410 00:24:25,160 --> 00:24:31,000 Speaker 1: will say, anyone who's forecasting recession, uh, must have a 411 00:24:31,000 --> 00:24:34,399 Speaker 1: better um crystal ball than I do. I don't see 412 00:24:34,440 --> 00:24:39,040 Speaker 1: one on the horizon. Uh. You know, notwithstanding the weakness abroad. 413 00:24:39,080 --> 00:24:42,200 Speaker 1: I I just don't see one here at home. UM. 414 00:24:42,280 --> 00:24:45,800 Speaker 1: So I would say, you know, I'm I'm pretty much 415 00:24:45,880 --> 00:24:49,240 Speaker 1: neutrally weighted to equities. I think they're fairly priced based 416 00:24:49,240 --> 00:24:52,440 Speaker 1: on conditions. One of the things I do look at, though, 417 00:24:52,480 --> 00:24:55,480 Speaker 1: for the next at least six months, is the relative 418 00:24:55,520 --> 00:25:00,600 Speaker 1: return of financials. What we find is historically that equities 419 00:25:00,640 --> 00:25:03,560 Speaker 1: do well when financials do well, and equities don't do 420 00:25:03,640 --> 00:25:07,200 Speaker 1: as well when financials are underperforming. And you know, over 421 00:25:07,200 --> 00:25:11,560 Speaker 1: the last six months, financials have underperformed. Uh, the S 422 00:25:11,560 --> 00:25:14,600 Speaker 1: and p F I've founded, and that spells some headwinds 423 00:25:14,680 --> 00:25:18,160 Speaker 1: for equity investing over the next couple of quarters. All right, Jack, 424 00:25:18,240 --> 00:25:20,159 Speaker 1: good to catch up with you. Thank you very much. 425 00:25:20,240 --> 00:25:23,240 Speaker 1: Chack Ablin, founding partner and chief investment officer at Crescent 426 00:25:23,440 --> 00:25:27,720 Speaker 1: Wealth Advisors. Thanks for listening to the Bloomberg P and 427 00:25:27,840 --> 00:25:30,359 Speaker 1: L podcast. You can subscribe and listen to interviews at 428 00:25:30,400 --> 00:25:34,120 Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. 429 00:25:34,160 --> 00:25:36,879 Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa Abram Woyds. 430 00:25:36,920 --> 00:25:39,920 Speaker 1: I'm on Twitter at Lisa bramw wits one. Before the podcast, 431 00:25:39,960 --> 00:25:42,560 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio.