WEBVTT - Surveillance: Negative Rates with Mohamed El-Erian 0:00:00.080 --> 0:00:12.639 Yeah, yeah. Welcome to the Bloomberg Surveillance Podcast. I'm Tom 0:00:12.720 --> 0:00:17.560 Keane Jailey. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.040 Bloomberg dot Com, and of course on the Bloomberg Michael 0:00:32.080 --> 0:00:34.159 Holland with us as well. Many of you will know 0:00:34.280 --> 0:00:38.280 him for the courage to be in the markets as well. Michael, 0:00:38.320 --> 0:00:41.480 what happens after a bang up double digit here? What 0:00:41.479 --> 0:00:45.720 what's the history of what happens next? The history, Tom 0:00:46.000 --> 0:00:48.600 is pretty clear that if you look at the last 0:00:48.640 --> 0:00:52.840 quarter of a century, there's been six years of performance 0:00:52.880 --> 0:00:58.200 like we just had in the US. In over three 0:00:58.240 --> 0:01:01.040 quarters of those years, the following year you had double 0:01:01.080 --> 0:01:03.400 digit rates of return. There was Newton law of motion. 0:01:03.720 --> 0:01:06.880 Things in motions stay in motion. That's what's happened, by 0:01:06.920 --> 0:01:08.720 the way, in the other years you lost money. So 0:01:09.080 --> 0:01:12.440 historians would all be millionaires of history simply repeated itself 0:01:13.720 --> 0:01:17.960 perfect exactly. So, Michael, it's interesting, you know, we hear 0:01:18.000 --> 0:01:20.600 a lot of folks coming here and they look back 0:01:20.680 --> 0:01:24.080 at ten they had this huge run. But it's interesting 0:01:24.080 --> 0:01:25.240 if you take a look at it from the peak 0:01:25.280 --> 0:01:28.120 of eighteen and September, it's maybe it's still a double 0:01:28.160 --> 0:01:31.440 digit return, but there's no reason to maybe say, oh 0:01:31.440 --> 0:01:34.560 my god, I can't possibly follow up twenty percent year. 0:01:34.920 --> 0:01:36.760 It's more like a ten or eleven or twelve percent 0:01:37.080 --> 0:01:40.240 year relative to Barry d Barry Ridholtz made it and 0:01:40.440 --> 0:01:44.199 thanks for listening exactly, and we have to give Barty 0:01:44.200 --> 0:01:46.959 Barry credit. How do you think about so nineteen? Do 0:01:47.040 --> 0:01:49.520 I need to think about certain sectors that I want 0:01:49.520 --> 0:01:51.280 to be in? Do I want to be more aggressive 0:01:51.280 --> 0:01:53.080 than I want to be defensive? How do you think 0:01:53.080 --> 0:01:56.320 about it after even a double digit year? I think, Paul, 0:01:56.640 --> 0:02:01.240 when when you whenever including this period we just went 0:02:01.280 --> 0:02:03.440 through and are going into right now, I think you 0:02:03.520 --> 0:02:06.440 always have to look for the individual. If you're buying 0:02:06.440 --> 0:02:09.359 individual companies, you simply have to look at number one management. 0:02:09.360 --> 0:02:12.200 For example, we talked about Boeing earlier too. Uh, you 0:02:12.240 --> 0:02:14.640 have a new management that it probably is a major 0:02:14.720 --> 0:02:18.480 plus for the company. Um. You look at companies like Microsoft, 0:02:18.520 --> 0:02:20.920 what they've done versus IBM and the cloud you go 0:02:20.960 --> 0:02:22.920 on it, so then you look at the valuation. So 0:02:23.160 --> 0:02:26.560 I think it's as simple as fundamentals. Basic blocking and 0:02:26.600 --> 0:02:29.400 tackling Um, there's still companies out there, they're trading at 0:02:29.440 --> 0:02:33.480 reasonable prices given their prospects. How do you factor in 0:02:34.600 --> 0:02:37.680 all these I guess exogenous issues that have really whip 0:02:37.680 --> 0:02:39.959 solved this market around almost on a daily basis. Let's 0:02:39.960 --> 0:02:42.040 just take trade for example. Do you just try to 0:02:42.480 --> 0:02:45.440 just take the trade out of the discussion and focus 0:02:45.480 --> 0:02:47.400 again on the fundamentals of the companies or you can 0:02:47.440 --> 0:02:48.800 have to say, g I have to think about a 0:02:48.800 --> 0:02:53.320 stock that's gonna weather maybe a prolonged trade disagreements skirmish 0:02:53.320 --> 0:02:56.400 with China. Yeah, the crazy trade stuff for the past year, Paul, 0:02:56.440 --> 0:02:59.800 actually provides opportunities if you identify a company really like 0:03:00.400 --> 0:03:03.240 and because someone says we're not gonna have a deal 0:03:03.360 --> 0:03:06.160 with the China, the Chinese uh, and the market goes down, 0:03:06.280 --> 0:03:08.520 you can you have an opportunity to buy it. I 0:03:08.560 --> 0:03:11.000 think at the end end of the process, would would 0:03:11.000 --> 0:03:12.560 you end up with with with the trade thing is 0:03:12.919 --> 0:03:15.280 we're gonna get something, the Chinese will get something, but 0:03:15.400 --> 0:03:18.440 not very much and it doesn't really matter. Far more 0:03:18.440 --> 0:03:21.840 important actually for me over the decades and full of 0:03:21.880 --> 0:03:24.200 markets and market is the Federal Reserve. A year ago, 0:03:24.480 --> 0:03:28.640 the ugly December we had the worse since was caused 0:03:28.639 --> 0:03:31.840 in large part by the worry about the Fed hiking 0:03:31.960 --> 0:03:34.640 interest rates. Made no The market said, this is nuts. 0:03:34.880 --> 0:03:37.320 We may be going into a recession. We don't know, 0:03:37.600 --> 0:03:39.680 and the feed is talking about hiking rates. This is 0:03:39.720 --> 0:03:42.800 crazy in the market. Tank. Now you have opposite day, 0:03:42.840 --> 0:03:47.560 which is massive amounts of liquidity, probably a record balance 0:03:47.560 --> 0:03:50.440 sheet for the Federal Reserve at the end of the year. Okay, 0:03:50.640 --> 0:03:53.240 we're doing We're channel in Wall Street week. Uh this 0:03:53.280 --> 0:03:56.400 day with Danna Telsea later and Elf and Michael Holland 0:03:56.400 --> 0:03:59.960 with us is well in honor of Marty's wife. Don't 0:04:00.240 --> 0:04:04.160 fight the Fed. How do you not fight the Fed? Forward? 0:04:05.480 --> 0:04:09.400 You don't fight him? Marty wonderful friend, do him for years? 0:04:09.400 --> 0:04:12.960 A brilliant investors, really really good investor. Uh, there's gonna 0:04:13.000 --> 0:04:17.080 be a crash, the famous line, and uh, right before 0:04:17.400 --> 0:04:21.240 the crash of the market back anyhow, he he got 0:04:21.240 --> 0:04:23.760 it right. The Federal Reserve, if they were going to 0:04:23.920 --> 0:04:25.919 hike a year ago, you wanted to be out of 0:04:25.960 --> 0:04:28.800 the market. If they can, they don't have a they 0:04:28.839 --> 0:04:31.680 don't have a choice the Fed. Sometimes it's very the 0:04:31.680 --> 0:04:36.080 play card is pretty easy it's easy right now because 0:04:36.160 --> 0:04:39.160 for the time being, the Federal Reserve is really concerned 0:04:39.200 --> 0:04:42.440 about the liquidity in the markets. They looks it looks 0:04:42.480 --> 0:04:44.040 like they've addressed it through the end of the year, 0:04:44.080 --> 0:04:46.919 but there was major concern back in going to rebuild 0:04:46.960 --> 0:04:49.719 the balance sheet and keep yield slow in the next year. 0:04:49.760 --> 0:04:56.440 They because they quick answer yes, yeah, I mean I 0:04:56.440 --> 0:05:00.800 think it's absolutely extraordinary. Michael. How we look at as 0:05:00.800 --> 0:05:03.160 we said earlier Graham, Dodd and Coddle, we've thrown it 0:05:03.200 --> 0:05:05.880 out the window. So what are we left with? What 0:05:06.040 --> 0:05:09.400 is the theory of owning companies like Amazon right now 0:05:09.480 --> 0:05:13.039 or even an elevated Microsoft. What's the underlying theory that 0:05:13.120 --> 0:05:17.960 allows you to own them? Uh? You do human stuff, 0:05:18.080 --> 0:05:20.320 and that is you look at companies where the managements 0:05:20.320 --> 0:05:26.080 have figured it out. They perpetuate themselves Johnson and Johnson, Uh, Microsoft, 0:05:26.160 --> 0:05:28.320 You go on and on through through the great companies 0:05:28.720 --> 0:05:32.640 and you figure out where their price go ahead. No, no, 0:05:32.800 --> 0:05:36.920 don't please continue. No. So so that hasn't changed in 0:05:37.440 --> 0:05:39.440 any way. I think at the end, at the end 0:05:39.480 --> 0:05:43.000 of the day, once once you find very high quality 0:05:43.440 --> 0:05:46.320 I think professional sports to the top athlete and get 0:05:46.360 --> 0:05:48.240 it at the right price, you realize that the only 0:05:48.240 --> 0:05:50.400 reason Holland's here he said, I'd only show up if 0:05:50.400 --> 0:05:54.440 the Bruins beat the capitalist You know that's the truth. Um, 0:05:54.640 --> 0:05:56.599 this is important, folks. You got a couple of minutes 0:05:56.640 --> 0:05:58.600 to go here, and we have where this Paul Sweeney, 0:05:58.839 --> 0:06:02.560 who's done more to develop security analysis at Bloomberg than anyone, 0:06:02.960 --> 0:06:05.440 and a guy named Holland who began with Morgan Guarantee 0:06:05.440 --> 0:06:08.400 and then first Boston. Right, this is a few years ago. 0:06:09.120 --> 0:06:11.279 What are cf A is gonna do ten years from 0:06:11.279 --> 0:06:14.880 now or five years now? We're where Michael Holland, where 0:06:14.920 --> 0:06:19.080 is the security analysis five years from now? Well, I 0:06:19.120 --> 0:06:21.600 think it's it's interesting, Tom. I think the cells, it's 0:06:21.640 --> 0:06:23.680 not necessarily the cell side, which is one of the 0:06:23.839 --> 0:06:26.840 historic landing points for the CFAs. Um, it's going to 0:06:26.920 --> 0:06:28.400 be at the bye side. I think there's taking more 0:06:28.440 --> 0:06:30.480 research in house on the by side. But then it's 0:06:30.480 --> 0:06:34.400 gonna be alternative research platforms, for example Bloomberg Intelligence here 0:06:34.440 --> 0:06:37.599 where we have three analysts covering two thousand stocks. It's 0:06:37.600 --> 0:06:40.560 just a different model kind of reacting to the changes 0:06:40.640 --> 0:06:42.560 in the cell side. And I think there's gonna be 0:06:42.560 --> 0:06:44.839 other models out there. As well. Dana Telsey is a 0:06:44.880 --> 0:06:48.840 great example Tom for some of the independiques, the independent boties. 0:06:49.000 --> 0:06:50.919 But you have to be somebody like what do you 0:06:51.000 --> 0:06:53.120 read every day? Michael Holland. I mean, you know, we 0:06:53.200 --> 0:06:55.039 used to. I used to go up the elevator with 0:06:55.080 --> 0:06:58.480 Phil Kray Pioneer, and he had piles of stuff, you know, 0:06:58.520 --> 0:07:00.960 on the dolly. What do you reading? In his nineties, 0:07:01.000 --> 0:07:03.640 he was still reading stuff. I knew him. He was 0:07:03.680 --> 0:07:05.880 one of my heroes in the business. I'm almost as 0:07:05.880 --> 0:07:09.200 old as he right now. I actually this is not 0:07:09.279 --> 0:07:11.680 a commercial. I don't belong to Bloomberg. I don't get 0:07:11.680 --> 0:07:14.559 paid by Bloomberg. I actually start with Bloomberg in the morning. 0:07:14.960 --> 0:07:18.840 And Paul Sweeney has helped to develop the model of 0:07:18.880 --> 0:07:21.440 the future, the business model of the future. The model 0:07:21.480 --> 0:07:24.640 that I grew up with in the business is dead. Uh. 0:07:24.720 --> 0:07:26.960 The model of the future is what you have at Bloomberg. 0:07:27.240 --> 0:07:30.600 People who have an objective reason to be right about 0:07:30.640 --> 0:07:33.040 Then who who decides by hold self for you? If 0:07:33.040 --> 0:07:35.960 Paul Sweeney doesn't, oh, well, I have to do that myself. 0:07:36.160 --> 0:07:42.560 To do it's a surveillance bre exclusive investors by hold Cell. 0:07:43.000 --> 0:07:45.480 Michael Holland. Thank you so much for joining us here 0:07:46.200 --> 0:07:48.160 as well. We got through that without him talking, Abo. 0:07:50.120 --> 0:07:51.920 Can we hold him for another block? I'd like to 0:07:51.920 --> 0:07:56.400 speak about the upcoming presidential election? What should I disclaimer 0:07:56.440 --> 0:07:59.600 here before we do the three? Michael Holland with us 0:07:59.600 --> 0:08:12.080 getting us into trouble, We're thrilled to bring you know 0:08:12.720 --> 0:08:15.360 uh an original healf on Wall Street Week. Dana Telsey 0:08:15.440 --> 0:08:17.840 joins us now with bear Stearings for years in a 0:08:17.920 --> 0:08:22.720 hugely successful retail research shop, Telsey Advisory. Dana, thank you 0:08:22.760 --> 0:08:25.040 so much for joining us. Let's just sum up here. 0:08:25.160 --> 0:08:28.800 How is this holiday season? Ben? I think the holiday 0:08:28.840 --> 0:08:31.400 season has basically been okay. I think there's a have 0:08:31.600 --> 0:08:35.800 and to have, not value and convenience is winning And basically, 0:08:35.840 --> 0:08:38.640 if you are not having something innovative, you're not going 0:08:38.679 --> 0:08:41.520 to drive the traffic. I saw the other day the 0:08:41.640 --> 0:08:45.959 Steam luxury BRANDI off five days before Christmas or whatever. 0:08:46.480 --> 0:08:49.800 What do they do on the and forward into about 0:08:49.880 --> 0:08:54.079 January five? If they're sixty off, now, how much do 0:08:54.200 --> 0:08:56.960 they go off in the next ten days? I mean 0:08:57.840 --> 0:09:00.480 off typically is the most it's gonna go. They'll move 0:09:00.520 --> 0:09:03.240 the merchandise or else it'll get sold to some of 0:09:03.240 --> 0:09:05.680 the off pricers. But the other key thing is what 0:09:05.800 --> 0:09:07.920 some of the retailers do that is a smart thing. 0:09:08.240 --> 0:09:10.640 They bring in new merchandise. You have to bring in 0:09:10.720 --> 0:09:13.679 fresh goods in order to attract the consumer. It can't 0:09:13.679 --> 0:09:16.480 be a deal a day every day in order to 0:09:16.520 --> 0:09:19.800 generate your profitable margins. So, Dana, what are people buying 0:09:20.040 --> 0:09:22.160 this shopping season? I mean Tom just has got I 0:09:22.160 --> 0:09:25.040 think he bought twelve air pods or something to for 0:09:25.160 --> 0:09:28.120 his lisp. What are most people buying? That's what they're buying. 0:09:28.280 --> 0:09:31.120 Those AirPods are some of the most popular items out there. 0:09:31.440 --> 0:09:35.200 Some TVs are very popular also, and everything active. Check 0:09:35.240 --> 0:09:37.840 out those sneakers. And this is a boot season also 0:09:38.160 --> 0:09:40.880 where boots are doing very well too, like the Selene 0:09:40.960 --> 0:09:45.079 Folco over the knee boot and calf skin one thousand ninety. 0:09:45.600 --> 0:09:48.200 Some saline must have and it's a musty, haven't I 0:09:48.240 --> 0:09:50.880 believe me? Someone was watching you, Dana with me earlier 0:09:50.920 --> 0:09:53.280 and she emailed in and said, deer on the way home, 0:09:54.720 --> 0:09:57.480 pick up those salines. How do these brands still do? What? 0:09:57.520 --> 0:09:59.719 I mean? Some brands are sinking. I'm you know, the 0:09:59.760 --> 0:10:03.079 Bank Group seeds to come. Uh, Dana and that. How 0:10:03.120 --> 0:10:06.200 does someone like Selena of such a good year. I 0:10:06.240 --> 0:10:08.160 think some of the things they do, it's coming out 0:10:08.200 --> 0:10:11.520 with new designs, new styles on a regular basis, and 0:10:11.720 --> 0:10:15.080 basically being in the press and bring on social media 0:10:15.400 --> 0:10:18.720 that people want to be part of that club. Instagram media. 0:10:19.400 --> 0:10:24.720 Instagrams changed everything. How do the department stores adapt to 0:10:24.800 --> 0:10:28.720 the reality of Instagram. They need to offer service. You 0:10:28.800 --> 0:10:30.640 need to be able to have service to marry the 0:10:30.679 --> 0:10:34.480 activity of buying with the activity of doing. It's interesting, Dana, 0:10:34.520 --> 0:10:36.679 what I've noticed, you know, just following the earnings of 0:10:36.760 --> 0:10:39.319 some of the big retailer, big box retailers, whether it's 0:10:39.320 --> 0:10:41.800 a wal Mart, Target is every quarter I look at 0:10:41.840 --> 0:10:45.320 their digital sales numbers and their eye popping, you know, 0:10:47.080 --> 0:10:49.120 kind of growth in e commerce from some of these 0:10:49.160 --> 0:10:52.520 big companies. To me, I'm just a lay person looking 0:10:52.520 --> 0:10:54.680 at the retail space, but it seems like they figured 0:10:54.679 --> 0:10:57.719 out how to compete against Amazon. I think that is 0:10:57.760 --> 0:10:59.600 what's happening. I think when you think about some of 0:10:59.600 --> 0:11:02.839 these do aital numbers and you're marrying it with retail stores. Also, 0:11:03.240 --> 0:11:05.920 I think one of the themes of holiday season two 0:11:05.920 --> 0:11:09.000 thousand nine is going to be buy online pickup in 0:11:09.080 --> 0:11:12.520 store worked. That's ONNI channel tongue. Oh that's um, that's like, 0:11:12.640 --> 0:11:17.040 that's okay, I'm learning, Dana. You wrote a piece two 0:11:17.120 --> 0:11:20.600 days ago. I'll say that was absolutely exquisite on what 0:11:20.880 --> 0:11:24.079 I know everyone is talking about, which is the piles 0:11:24.080 --> 0:11:28.200 and piles of cardboard boxes. Can Amazon, first of all, 0:11:28.240 --> 0:11:33.120 can Amazon be successful with one day shipping? I think 0:11:33.160 --> 0:11:35.920 they're going to be. I think Amazon continues to push 0:11:35.960 --> 0:11:39.720 the needle on speed, and speed basically means everything because 0:11:39.760 --> 0:11:42.439 I can allow you to gaine care. And I think 0:11:42.440 --> 0:11:46.079 we're going to continue to see retailers enhance their speed models. 0:11:46.440 --> 0:11:48.520 What do they do about the expense I believe you 0:11:48.559 --> 0:11:51.560 have in your lead paragraph shipping up eight to that 0:11:51.720 --> 0:11:55.520 crushes retail margins. Do they pass that on to the customer? 0:11:55.559 --> 0:11:58.079 How does that work? I think some of it does 0:11:58.160 --> 0:12:00.280 come in the form of the of cost. I think 0:12:00.320 --> 0:12:03.000 some of it comes in the form of service, and 0:12:03.040 --> 0:12:05.360 I think some of it is just lower margins. It 0:12:05.559 --> 0:12:08.320 is expensive to offer all of these services. It doesn't 0:12:08.360 --> 0:12:10.520 come for free. Yeah, that's kind of where I wanted 0:12:10.520 --> 0:12:12.960 to go, Dana. I mean, if if I'm not a Walmart, 0:12:12.960 --> 0:12:16.679 if I'm not a Target, how do I compete against 0:12:16.760 --> 0:12:21.079 the digital aspect of it all? I can't invest, can I? Well, 0:12:21.080 --> 0:12:22.880 I think there are some elements where you can. I 0:12:22.880 --> 0:12:25.840 think some of these companies overall, if you're not a Walmart, 0:12:25.920 --> 0:12:27.439 you're not a target. Take a look at the off 0:12:27.480 --> 0:12:31.040 pricers that treasure hunt experience. There's a reason why their 0:12:31.040 --> 0:12:33.360 traffic is up all the time. Take a look at 0:12:33.360 --> 0:12:36.439 country brands. You can only get them at those luxury stores. 0:12:36.800 --> 0:12:39.960 Or take a look at Lulu Lemon. Basically the identify 0:12:40.160 --> 0:12:43.360 of that brand, if it's unique and differentiated, the consumer 0:12:43.400 --> 0:12:46.120 will come well, we're unique and differentiated. And then we're 0:12:46.160 --> 0:12:49.000 just two guys talking retail with Dana Telsey sort of 0:12:49.080 --> 0:12:52.160 fix that joining us saw the star of Bloomberg Business Week, 0:12:52.160 --> 0:12:58.640 Carol Masser. Women who can talk about stop. No, I'm 0:12:58.679 --> 0:13:00.439 out of questions. What do you think of all the 0:13:00.840 --> 0:13:04.199 more enlightened No, I am. We've been talking to Selene 0:13:04.200 --> 0:13:06.920 boot for two thousand dollars. Mrs Keane has noted that 0:13:08.440 --> 0:13:11.960 in my dream question, please for data, Telsey, Data Telsey, 0:13:12.480 --> 0:13:14.440 the retailers. You know, it's funny. I was looking at 0:13:14.440 --> 0:13:17.079 some of the best performing and worst performing stocks of 0:13:17.160 --> 0:13:20.120 the S and P five hundred for the year last year, 0:13:20.480 --> 0:13:25.200 Target is near the top and at the bottles, So like, 0:13:25.440 --> 0:13:29.800 how do you reconcile the retailers who figured it out 0:13:30.040 --> 0:13:32.600 and those who haven't. I think one of the things 0:13:32.600 --> 0:13:35.160 that we've seen Target and Brian Cornell do a Target 0:13:35.200 --> 0:13:39.880 that's been pretty amazing and basically has worked the service aspect. 0:13:40.080 --> 0:13:41.840 Look at the look at the look of the stores 0:13:41.880 --> 0:13:45.200 they've gotten cleaner. Look at the exclusive brands that's come 0:13:45.240 --> 0:13:47.520 in where basically he's changing up the brands on a 0:13:47.559 --> 0:13:50.960 regular basis. And look at the categories to it goes 0:13:51.000 --> 0:13:55.040 from electronics to cosmetics, to apparel to food. He really 0:13:55.080 --> 0:13:58.319 has taken that whole business model and turned it upside 0:13:58.360 --> 0:14:01.240 down and came out with something that's and exciting. Dana 0:14:01.240 --> 0:14:04.520 and Carol and also and Danny, you mentioned this earlier 0:14:04.520 --> 0:14:07.679 on my other property, the whole makeup thing. I mean, Carol, 0:14:07.720 --> 0:14:10.400 you're living this in real time with various you know 0:14:10.480 --> 0:14:13.319 Tom King. Literally I just came down the escalator, Dana. 0:14:13.760 --> 0:14:15.840 I'm like here with my bags and he's like coming 0:14:15.840 --> 0:14:17.720 into the studio, coming to the studio. But I have 0:14:17.840 --> 0:14:21.320 to say the makeup category that like creams and lotions. 0:14:21.360 --> 0:14:23.840 Look at Sepphora, look at look at Alta. Alta is 0:14:23.880 --> 0:14:28.360 constantly I'm the most accurate. Who's the target, Dana Telsey, 0:14:28.400 --> 0:14:32.400 who is the targ of the makeup category. It's Alta 0:14:32.440 --> 0:14:34.720 and Sepphora that are doing it. Alta out of the mall, 0:14:34.840 --> 0:14:38.320 Sepphora in the mall, and basically the reason why they 0:14:38.360 --> 0:14:41.840 have they have makeup applications there and it's a community. 0:14:42.160 --> 0:14:44.880 People basically get excited when they say that looks good 0:14:44.880 --> 0:14:46.520 on you or no, this is the color for you. 0:14:47.160 --> 0:14:50.280 It's it's interacting. That's what's driving the bus. Yeah, I 0:14:50.320 --> 0:14:52.880 like Paul Color one oh six, Tasty Hazel. This is 0:14:52.920 --> 0:14:57.640 the Gucci Ruga Levra Matt lipstick forty two dollars after 0:14:58.120 --> 0:15:01.840 after thought, Dana, save us, because can you believe these 0:15:01.880 --> 0:15:05.320 two guys are talking lipstick? You know what? You never know? 0:15:05.520 --> 0:15:10.360 Right map Everyone wants to carry their skin with your 0:15:10.360 --> 0:15:14.000 heritage with Bergdorf? Do they make money in the basement? 0:15:14.040 --> 0:15:16.160 You go down there to the most dangerous basement in 0:15:16.160 --> 0:15:19.160 the world. What per square foot do they make in 0:15:19.200 --> 0:15:23.480 the basement of Bergdorf? I makeup cosmetics is very high margin. 0:15:23.560 --> 0:15:26.479 There's a reason why there's always called the lipstick indicator. 0:15:26.800 --> 0:15:30.680 When recessions come, women will always buy lipstick. It's profitable 0:15:30.720 --> 0:15:33.160 and it adds a Dasha newness where there's a boom. Now, 0:15:33.160 --> 0:15:35.480 what's the newness now from miss mass or is she 0:15:35.560 --> 0:15:38.400 considers getting to the holidays? I mean, is it the 0:15:38.640 --> 0:15:42.160 is it the facelift? The face mask? No, the face 0:15:42.200 --> 0:15:45.040 mask thing you're doing by looking at me and saying 0:15:47.280 --> 0:15:49.680 you wear one of my favorite everybody's walking around the 0:15:49.720 --> 0:15:52.360 house with face mask on? Is that like the next thing, Dana? 0:15:52.560 --> 0:15:54.720 Don't you know? The new look is all about natural 0:15:55.040 --> 0:15:56.840 and it takes a lot of work to look natural, 0:15:57.040 --> 0:16:00.440 but naturals wears that right now, telling Dana to tell us, 0:16:00.680 --> 0:16:02.800 thank you so much for being with us. Thrilled that 0:16:02.840 --> 0:16:14.040 you're with us. We are thrilled to bringing a gentleman 0:16:14.080 --> 0:16:15.960 who put a book out a few years ago there 0:16:16.000 --> 0:16:19.440 was a must must read when markets collide, and when 0:16:19.440 --> 0:16:22.920 then his work for the industry, his work at Pimco 0:16:23.000 --> 0:16:26.400 and Alians, and of course his service to Cambridge which 0:16:26.440 --> 0:16:29.360 comes up in late two thousand and twenty. It is 0:16:29.480 --> 0:16:32.640 rare that you not only deliver when markets collide, but 0:16:32.720 --> 0:16:35.480 a second book as well. The Only Game in Town, 0:16:35.880 --> 0:16:38.000 Dr Larry and joins us Samohama, And I know you're 0:16:38.000 --> 0:16:40.840 working on a new edition of the Only Game in Town? 0:16:40.960 --> 0:16:43.560 What will be new in the in the game in 0:16:43.600 --> 0:16:47.600 this town? I'm good morning, Tom, and thanks for having in. 0:16:47.640 --> 0:16:50.400 Happy holidays to you and and all our listeners. Um, 0:16:50.480 --> 0:16:53.240 what's gonna be new is that since I published a 0:16:53.280 --> 0:16:56.680 book in January two accounting and sixteen people have understood 0:16:56.680 --> 0:16:59.320 the issue. They have understood that there are costs and 0:16:59.480 --> 0:17:03.480 risks of excessive reliance on central banks. And now we 0:17:03.560 --> 0:17:06.760 have a list of things that have become clear, but 0:17:06.840 --> 0:17:09.320 we have a list of other things that have become 0:17:09.400 --> 0:17:14.480 even more murky. And the conversation is starting to lose 0:17:14.560 --> 0:17:16.520 sight of the fact that we can get out of 0:17:16.520 --> 0:17:18.920 this mess, but we need to do it quickly. One 0:17:18.920 --> 0:17:22.320 of my conversations of the year was with great courage, 0:17:22.480 --> 0:17:26.800 David folk arts Landau of Deutsche Bank took a stand 0:17:27.000 --> 0:17:30.119 against negative interest rates with all the complexities of his 0:17:30.240 --> 0:17:34.080 executive abilities at Deutsche Bank. And that do you agree 0:17:34.160 --> 0:17:37.080 with folk its land out that the experiment is done? 0:17:38.480 --> 0:17:40.240 So I think the experiment is done. I think the 0:17:40.240 --> 0:17:43.560 experiment was done. Um. A few years ago that's why 0:17:43.600 --> 0:17:46.399 I wrote the book. But getting out of the experiment 0:17:46.600 --> 0:17:48.520 is not in the hands of central banks. That's what 0:17:48.640 --> 0:17:52.360 people lose sight of. In order to normalize monetary policy, 0:17:52.520 --> 0:17:57.400 you need a policy handoff from excessive reliance on central 0:17:57.440 --> 0:18:01.800 banks to a comprehensive poke growth approach. And that means 0:18:01.800 --> 0:18:05.760 the governments. It means politics, and we're simply not saying it, 0:18:05.800 --> 0:18:09.520 which is why No, I don't mean to interrupt Dr Lambe, 0:18:09.520 --> 0:18:11.439 but this is so important. Under the Hicksie and I 0:18:11.560 --> 0:18:14.880 s l l M framework, you're saying, move it over 0:18:14.920 --> 0:18:17.920 from the monetary game to the real economy game. Does 0:18:17.960 --> 0:18:21.639 that include fiscal policy? Are you suggesting it's strictly a 0:18:21.760 --> 0:18:27.240 policy opportunity. So for a very small handful of countries, 0:18:27.600 --> 0:18:31.679 very small um, it means physical opportunity. For the rest, 0:18:32.280 --> 0:18:36.800 it means focusing on the drivers of productivity, on structure reforms, 0:18:36.840 --> 0:18:40.399 on infrastructure, on labor retraining, on labor retooling. There is 0:18:40.440 --> 0:18:42.879 so much to do, and if you look for the 0:18:42.920 --> 0:18:46.840 last twenty years, with the exception of Germany, nothing has 0:18:46.880 --> 0:18:49.520 been done. In the advanced world. We've relied on finance, 0:18:49.760 --> 0:18:53.119 first on private finance, and then on central banks and 0:18:53.160 --> 0:18:56.119 we've lost sight of what tribes productivity and growth. So 0:18:56.160 --> 0:18:58.320 we need a pivot back. But I'm not too optimistic 0:18:58.640 --> 0:19:02.520 because that means a lot politicians, and it means that 0:19:02.600 --> 0:19:05.440 they have to get their act together. And Mohammed talking 0:19:05.440 --> 0:19:08.399 about getting the act together, I'm thinking about Germany and 0:19:08.440 --> 0:19:11.880 that's kind of you know, think about negative interest rates 0:19:12.000 --> 0:19:15.040 in the industrial world, certainly think about Germany. They have 0:19:15.160 --> 0:19:18.200 shown no signs. I guess from a political point to 0:19:18.200 --> 0:19:21.159 go to your point of thinking about fiscal steamless, what 0:19:21.359 --> 0:19:25.479 has to change? What do you think realistically can happen 0:19:25.880 --> 0:19:29.440 to push it out. So if you are in Germany 0:19:29.560 --> 0:19:34.000 and everybody is lecturing you for fiscal stimulus, you really 0:19:34.040 --> 0:19:36.920 are baffled because, on the one hand, your service industry 0:19:36.960 --> 0:19:40.679 is doing fine. Second, yes, your manufacturing sector is not 0:19:40.760 --> 0:19:43.120 doing great, but that has little to do with demand. 0:19:43.240 --> 0:19:45.200 It has to do with trade, and it has to 0:19:45.240 --> 0:19:47.560 do with the auto sector. So you keep on scrashing 0:19:47.560 --> 0:19:49.560 your head and saying, wait a minute, why is everybody 0:19:49.560 --> 0:19:55.560 asking me to sacrifice my physical side if they're not 0:19:55.600 --> 0:19:58.720 doing more? So I you know this notion we fell 0:19:58.760 --> 0:20:00.400 in love at one stage with them. Are your place 0:20:00.440 --> 0:20:02.960 with this notion that Germany was gonna implement. It's not 0:20:02.960 --> 0:20:06.560 gonna happen. They may do something small. So the answer 0:20:06.600 --> 0:20:11.120 to that is unfortunately more complicated, is that Germany has 0:20:11.119 --> 0:20:14.320 to be part of a regional effort to get fiscal 0:20:14.359 --> 0:20:17.280 integration going. That's that's the answer. That is what the 0:20:17.280 --> 0:20:20.400 engineers would tell you, But the politicians will say, hey, no, 0:20:20.440 --> 0:20:22.960 not now. If you're just joining us worldwide in coast 0:20:22.960 --> 0:20:25.520 to coast Muhammad a'll aian with us of course writing 0:20:25.520 --> 0:20:28.920 for Bloomberg Opinion, uh and with alliance and of course 0:20:28.960 --> 0:20:30.960 moving to Queen's College at Cambridge? Are you going to 0:20:31.000 --> 0:20:32.960 be a tough grader at Queen's Scott What are you 0:20:32.960 --> 0:20:34.680 gonna do at Cambridge? I mean, are you going to 0:20:34.760 --> 0:20:37.840 teach a course? But what you've missed, Tom is I've 0:20:37.880 --> 0:20:41.400 been teaching a course this semester at Wharton and it's 0:20:41.400 --> 0:20:43.560 been the most enjoyable thing. You want to learn something, 0:20:43.640 --> 0:20:49.359 go go talk to seventy secure year old and you 0:20:49.400 --> 0:20:51.560 will learn so much from them. It's been an incredible 0:20:51.640 --> 0:20:53.560 joy in various What are you telling them about the 0:20:53.560 --> 0:20:55.840 new actual assumption? I mean the reality here And this 0:20:55.920 --> 0:20:58.879 is NBA speak, folks, But the bottom line is the 0:20:58.920 --> 0:21:03.840 actual assumption come screaming down. Bill Gross talks about financial repression. 0:21:04.040 --> 0:21:07.800 It's here for retirees. What do you tell them about 0:21:07.880 --> 0:21:10.200 what your new normal is? I mean, is it three 0:21:10.720 --> 0:21:14.080 actual real assumption? Is that where we're heading? So I 0:21:14.160 --> 0:21:18.119 take that as an example of you people sitting in 0:21:18.119 --> 0:21:20.480 the room are going to have to make decisions on 0:21:20.600 --> 0:21:24.359 their radical uncertainty, on the unusual uncertainty. There's lots of 0:21:24.400 --> 0:21:27.840 things that were unthinkable that have become reality, and they 0:21:27.840 --> 0:21:31.000 are changing the way the system works, and that is 0:21:31.200 --> 0:21:33.919 the biggest challenge you're going to face in your business career. 0:21:34.400 --> 0:21:36.119 And then what I do is I give them tools. 0:21:36.200 --> 0:21:37.800 I don't give them the answer because I don't know 0:21:37.800 --> 0:21:40.159 what the answer is, but I give them tools to 0:21:40.280 --> 0:21:42.600 help them figure out how to get to an answer 0:21:42.640 --> 0:21:46.560 in their particular circumstances. Interesting, Mohammed, if I were, you know, 0:21:46.680 --> 0:21:49.360 thinking about that. Tom talks about the actual assumptions. It's 0:21:49.440 --> 0:21:51.520