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Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you,

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Speaker 1: along with my co host Lisa Brahma wits. Each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: that Bloomberg dot com. We have our good friend Leland Miller,

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Speaker 1: CEO of the BA Shop China Basebook International. He'll give

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Speaker 1: us very informed thoughts on kind of what this means

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Speaker 1: for China. Should we get some informed thoughts from him,

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Speaker 1: Let's do it. I mean, I think that might be

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Speaker 1: better than me pretending it. I could. I'm happy to pretending.

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Speaker 1: Willam Mill are here in studio with us. What are

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Speaker 1: you looking for today? You know, I I don't think

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Speaker 1: that there's a chance of a breakdown. I think that

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Speaker 1: we're you know, the the deal is UH is pretty

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Speaker 1: much spelled out. It's a purse agreement. Not many people

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Speaker 1: are expecting big things on I P or other issues.

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Speaker 1: So look, I think you're you're looking for a lot

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Speaker 1: of CEOs clicking CHAMPAGEO US is and saying, you know,

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Speaker 1: we're gonna be friends for the next year, all right,

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Speaker 1: but you are you skeptical that this is a material

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Speaker 1: deal or I mean, is there anything it's a really

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Speaker 1: meat here? How are you kind of viewing this? The

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Speaker 1: meat is the purchases beyond what the Chinese have provided

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Speaker 1: are talking about buying. Uh No, there really isn't There

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Speaker 1: really isn't a core deal. The Chinese are putting in

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Speaker 1: certain I p uh measures, some of them they have

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Speaker 1: announced previously six months ago or longer. Uh So, look

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Speaker 1: this this the reason there's not a bigger deal is

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Speaker 1: that the two sides just decided that they couldn't come

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Speaker 1: to terms with either rolling back a ton of a

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Speaker 1: ton of terroiffs in order to get the big I

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Speaker 1: p forced tech stuff. And so they said, look, the

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Speaker 1: best way to do it is to is to go

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Speaker 1: right on in and and and just do buys. I'm

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Speaker 1: a big questions has been uh sort of the overlap

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Speaker 1: between between the w t O agreement that the fact

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Speaker 1: that the US, UH, the UK, or rather the U, S,

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Speaker 1: the E, and Japan have all teamed up to try

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Speaker 1: to pressure China to reduce their industrial subsidies at the

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Speaker 1: same time that we're signing this Phase one agreement. How

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Speaker 1: are these multilateral and bilateral tracks overlapping or not? Well,

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Speaker 1: I think that the administration realized early, well it realized

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Speaker 1: recently that it's better to have friends, and so at

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Speaker 1: the beginning, everything was bilateral, We're gonna get a Bilattal

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Speaker 1: trade deal, We're gonna get bilateral agreement from the Chinese.

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Speaker 1: Did not not to do this or to do that.

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Speaker 1: And they've come around to the idea that it's it's

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Speaker 1: it's an easier process if you get the rest of

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Speaker 1: the world on board. Is that true? I mean, so

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Speaker 1: the Trans Pacific Partnership would would be the arguably the

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Speaker 1: epitome of a multilateral group negotiating. They're not that, they're

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Speaker 1: still not supportive of those types of agreements, are they not? Yet?

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Speaker 1: But the t p P is very closely associated with Obama.

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Speaker 1: So if you, you know, you rename TPP Trump Pacific

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Speaker 1: Partnership three years from now, then is there a chance

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Speaker 1: that they come around to it. It's I've I've discussed

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Speaker 1: it with administration officials, ingest who knows. Look, there's a

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Speaker 1: there was a desire by the Trump White House to

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Speaker 1: break from everything Obama. Uh, some things are good, some

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Speaker 1: things are more controversial. But t p P was was

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Speaker 1: was not gonna work under Trump, but a revised version

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Speaker 1: of it in the future, who knows. So what precipitate

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Speaker 1: did this come to Jesus moment for the administration multilateralism? Well,

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Speaker 1: I think they wanted to continue to claim that that

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Speaker 1: they're pushing the Chinese on odd subsidies. So if you're

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Speaker 1: if it's not part of Phase one, and you don't

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Speaker 1: have Phase two coming about, then why not go with

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Speaker 1: your allies, the w t O and and then get

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Speaker 1: the Europeans and Japanese animated about Chinese subsidies which they

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Speaker 1: care about as well. So this is this is not

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Speaker 1: really a come to Jesus so much as if they're

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Speaker 1: not getting progress on this now, why not utilize the

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Speaker 1: other tools in the toolbox to to push China. And

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Speaker 1: this the shift of of course done been done by

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Speaker 1: from the beginning, but it's it's it's making its way

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Speaker 1: back there. President Trump also mentioned at one point that

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Speaker 1: once this is one deal assigned that he I believe said,

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Speaker 1: would go to China to begin negotiating a phase two.

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Speaker 1: Is there any reason to believe that that will occur,

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Speaker 1: and will we have any success If you have a

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Speaker 1: second Trump term, then yeah, there will be a continuation

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Speaker 1: of of of the trade war trade negotiations. Then, Uh,

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Speaker 1: there's nothing contemplated right now now. The one asterist I

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Speaker 1: would put on that is if the economy starts to

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Speaker 1: really slide, if stock markets start to tank, they have

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Speaker 1: they have created this phased uh sequencing uh for the

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Speaker 1: ability for for for the President simply to jump into

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Speaker 1: and say, I'm going to start negotiating again and We're

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Speaker 1: going to do more tariff bullback. So we're gonna grant

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Speaker 1: some other concessions and we're gonna get more in return.

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Speaker 1: And so it will allow him, if he finds it

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Speaker 1: politically necessary to do so, to jump back in in

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Speaker 1: two thousand twenty. But that's not the game play. And

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Speaker 1: right now I still have struggling with this idea that

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Speaker 1: we're bilaterally negotiating, that the US and China are bilaterally

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Speaker 1: negotiating while there's a multilateral push on another level. I'm

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Speaker 1: just wondering, does that mean that Phase two is going

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Speaker 1: to be a multilateral Phase two or does that mean

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Speaker 1: that Phase two will continue with added pressure from allies

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Speaker 1: and others. I think I think what Phase two has

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Speaker 1: always been sold as is, we're going to do the

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Speaker 1: big moves next, So don't don't hold us to this now,

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Speaker 1: but we're gonna do it next time. And look, anyone

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Speaker 1: who's dealt with the Chinese uh for for years will realize,

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Speaker 1: like like the administration now has. They'll realize that the

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Speaker 1: Chinese are very savvy negotiators, and they'll string this out

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Speaker 1: and they're not going to give up core things that

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Speaker 1: are important to them without a lot of pain. So

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Speaker 1: I think this is more of a situation where, uh,

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Speaker 1: you know, the White House realized that its administration was

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Speaker 1: divided on on what to go after. The President had

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Speaker 1: different priorities and some of his some of his other principles,

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Speaker 1: and they would go after agricultural purchases first, try to

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Speaker 1: get the trade deficit in order as much as possible.

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Speaker 1: And while they're waiting that out, they'll they'll start to

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Speaker 1: to maybe go back and and and utilize again these

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Speaker 1: other tools which involve using Europeans and Japanese and everyone

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Speaker 1: else to try to push back on the Chinese model.

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Speaker 1: I'm not even sure I even buy off on the

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Speaker 1: whole agricultural aspect of this phase one, weren't they They

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Speaker 1: were buying agriculture and soybeans and stuff before. Now it's

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Speaker 1: gone a year, they haven't been buying. Now they're gonna

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Speaker 1: start buying again. I'm not sure what's incremental here. Well,

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Speaker 1: the big question is can they hit any of these

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Speaker 1: targets that are that are quite big that they claim

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Speaker 1: to be able to do over two years. So the

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Speaker 1: promise is that they're not going to just get the

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Speaker 1: number back up to two billion, that they're going to

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Speaker 1: get another two hundred billion on top of that. So

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Speaker 1: if by some miracle of math they're able to do that,

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Speaker 1: then there would be a real DNT in the Bilottal

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Speaker 1: trade deficit. The problem is is that this is really

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Speaker 1: a one year trade deal because the administration and the

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Speaker 1: Chinese are both motivated to get through the election. Uh,

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Speaker 1: at frontloads some of those purchases. Keep keep the keep

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Speaker 1: the guns the guns and ammo dry and try to

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Speaker 1: get into see where the situation is there. But look,

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Speaker 1: these targets are extremely bold. Uh they're they're almost mathematically

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Speaker 1: impossible to hit, the agriculture not being the most difficult

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Speaker 1: to hit, and so you're gonna you're You're gonna see

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Speaker 1: a lot of challenging things here. And if the Chinese

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Speaker 1: are actually getting close to me those targets, they're gonna

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Speaker 1: really irritate all their other trading partners who they're no

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Speaker 1: longer buying from. So the Chinese are trying to thread

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Speaker 1: this needle. It's probably not possible, but what they want

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Speaker 1: to do is get through this year first, and then

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Speaker 1: they're gonna worry about it here too. Lela Miller is

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Speaker 1: the person joining us right now, chief executive officer of

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Speaker 1: China Beige Book International, as we await the signing of

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Speaker 1: this trade deal between the US and China at the

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Speaker 1: White House. It's been widely anticipated, but no one's actually read,

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Speaker 1: at least in the public, the eighties six page document.

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Speaker 1: A lot of questions remain about the details, in particular

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Speaker 1: any concessions that China gave aside from making these agricultural purchases.

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Speaker 1: That's been one question raised. Do we know anything about

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Speaker 1: further concessions that China might have made. No, uh, we don't,

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Speaker 1: um look that. Here's here's the difficulty. A lot of

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Speaker 1: the things that that has been talked about in terms

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Speaker 1: of I P have been things that the Chinese have

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Speaker 1: announced domestically over the last several months. Uh So, one

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Speaker 1: of the things that was recently touted was the fact

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Speaker 1: that you know, there will be heavier criminal penalties for

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Speaker 1: i P infringers. Okay, but we knew that months ago.

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Speaker 1: So what they're doing right now is they're trying to

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Speaker 1: scoop in all the developments that have happened in the

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Speaker 1: Chinese economy and Chinese corporate landscape for the last you know,

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Speaker 1: three six, nine months and say these are part of

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Speaker 1: the i P changes that the administration is pushing about. Um,

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Speaker 1: we're not going to try to quantify them. We're more

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Speaker 1: worried about the purchases. But this is more than just purchases.

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Speaker 1: Uh this is this is us really moving the system.

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Speaker 1: So thet the lack of clarity is something it's it's

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Speaker 1: sort of hard to get around. And Leland, I know

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Speaker 1: in the past, when you've been in our studios talking

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Speaker 1: to us about China, you said to us, it's about enforcement.

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Speaker 1: We have to be able to enforce this, and that's

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Speaker 1: been a challenge in the past. Is there any reason

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Speaker 1: to believe that this agreement will include some provisions for

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Speaker 1: proper enforcement, so so I have and others have been

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Speaker 1: very critical the idea of snapback tariffs or some sort

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Speaker 1: of automatic mechanism for the simple fact that nothing's automatic

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Speaker 1: if you've got a president who will be weighing the

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Speaker 1: political ups and downs of throwing tariffs back on. So

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Speaker 1: there's nothing automatic about an enforcement mechanism, and that was

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Speaker 1: always oversold. However, this deal in some ways was done

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Speaker 1: very cleverly because the Chinese are very motivated to do

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Speaker 1: the purchases for the first year. If they can get

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Speaker 1: the numbers up and the numbers to where President Trump

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Speaker 1: likes it, then after November, sometime in the November to

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Speaker 1: January period, they have been promised behind the scenes that

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Speaker 1: they will get a tariff rollback. So they have to

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Speaker 1: get President Trump elected. They have to honor their commitments,

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Speaker 1: and if they do, then you're gonna see a tariff

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Speaker 1: rollback in the first few months of a Trump second term. Meanwhile,

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Speaker 1: the trade agreement has yet to be seen, and we

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Speaker 1: will be getting the document and perhaps passed through it

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Speaker 1: in real time as we get the text of it.

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Speaker 1: There is a question about China's underlying economy, particularly how

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Speaker 1: they've adjusted to the ongoing trade tensions. We got some

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Speaker 1: trade data that was kind of interesting showing how they've

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Speaker 1: shifted some of their uh, their channels. Um. But also

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Speaker 1: what remains to be seen is supply chains getting truly

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Speaker 1: rejiggered and the impact on China. How much have we

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Speaker 1: seen that already go into effect. How much more are

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Speaker 1: we going to see supply chains move away from that nation? Plenty? Uh,

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Speaker 1: But the question is you know in what areas? So

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Speaker 1: if you're if you're a tech company and you're trying

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Speaker 1: to figure out how to uh to to play the

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Speaker 1: US China game, you're gonna have to make a decision.

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Speaker 1: It looks it looks like they're gonna be cracking down

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Speaker 1: more and more and more as things go by. You're

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Speaker 1: not gonna be able to supply Huawei if you're supplying

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Speaker 1: you know, US firms and and US government um. And

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Speaker 1: this is going to continue from there. On the manufacturing side,

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Speaker 1: I think there is also going to be more and

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Speaker 1: more of a concerted effort to separate the supply chains.

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Speaker 1: They're gonna have even foreign companies developing inside China for

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Speaker 1: the China's China market, and that's going to be separate

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Speaker 1: from where other firms are supplying the United States the

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Speaker 1: rest of the world, so a lot of this supply chain, uh,

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Speaker 1: decoupling is happening. Um. It doesn't mean that decoupling overall

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Speaker 1: has to happen in some sort of scary sense, but

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Speaker 1: there's no question things are going in this direction. And

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Speaker 1: on the tech side, this is going to be the

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Speaker 1: battle that people fight, you know, for the next five

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Speaker 1: fifteen years. You know what, while we have you here,

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Speaker 1: just give us kind of an update on how things

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Speaker 1: are in China broadly speaking from an economic perspective. Well,

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Speaker 1: it's it's it's interesting because people are less worried about

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Speaker 1: the Chinese economy right now than they were, say three

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Speaker 1: months ago or six months ago. Uh, and fair enough

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Speaker 1: because our fourth quarter data were an improvement on Q three,

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Speaker 1: their improvement on year from a very very weak Q

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Speaker 1: four of last year. But you know, it's it's it's

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Speaker 1: more of a temporary stability, I think, Um, we when

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Speaker 1: we talk to firms, they are investing more and they

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Speaker 1: are hiring more. So so the fourth quarter again beyond

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Speaker 1: even the top line look better than than the third quarter.

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Speaker 1: But why are they doing this? If you look at

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Speaker 1: new orders, new orders are weaker for the second quarter

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Speaker 1: in a row. You look at cash flow, cash flow

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Speaker 1: is the weakest we've seen in the entire history of

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Speaker 1: China Beige Book for the fourth quarter of two thousand nineteen. Now,

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Speaker 1: why are they investing then? Why are they hiring it? Well?

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Speaker 1: Are they? Are they just looking at trade war headlines

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Speaker 1: and seeing a truce and investing blindly. That's what we're

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Speaker 1: going to see in early We're gonna see whether this

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Speaker 1: is a refusal of companies to listen to their customers

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Speaker 1: who are or they invest more because the government tells

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Speaker 1: them to invest more to make the numbers look good

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Speaker 1: because we're going to Washington negotiating. Historically the answers yes,

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Speaker 1: and it's historically with state firms the answer is a

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Speaker 1: double yes. So we're gonna see how much of that

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Speaker 1: is is the government saying, look, improve conditions. But you

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Speaker 1: can't do that forever. You can you can order a

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Speaker 1: temporary tick up, but you know, economics are economics. So

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Speaker 1: I think early twenty will be a a look to

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Speaker 1: the government to see how much slower growth it's willing

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Speaker 1: to accept now that the trade wars is going to

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Speaker 1: be temporary. Out of the headlines, what do we look

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Speaker 1: at now. A lot of people say, well, you know,

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Speaker 1: this all sounds problematic, but there's such a fire hose

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Speaker 1: that the PBOC has to release to the market to

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Speaker 1: sort of prop everything up that it doesn't matter. How

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Speaker 1: long can that be true? Well, the big argument we've

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Speaker 1: had with the consensus over the past years, we think

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Speaker 1: the PBOC and the China's credit environment overall are very

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Speaker 1: active right now. Now. The pushback usually is, well, we

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Speaker 1: don't see all the building we saw in that is correct.

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Speaker 1: We are not seeing a style stimulus where it's you know, build,

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Speaker 1: build it and they will come. Uh, this is not

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Speaker 1: heavy infrastructure spending right now. Our transportation construction indicators sharply weaker,

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Speaker 1: commodities are weaker. Uh so we're not seeing a build out.

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Speaker 1: But we are seeing is tremendous provision of credit to

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Speaker 1: corporates are are borrowing numbers are sky high. Our bond

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Speaker 1: sales numbers have gone up six consecutive quarters. We're seeing

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Speaker 1: a resurgence in shadow finance, which has not yet been

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Speaker 1: publicly admitted by Beijing. So that the PBOC has already

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Speaker 1: been very very active. And what is the result. Well,

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Speaker 1: they've got a stable economy. Now, things aren't falling, but

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Speaker 1: they're not getting a jolt. So it's a little bit

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Speaker 1: disconcerting that the PBOC is as active as it is

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Speaker 1: right now and they're not seeing a surgeon growth. They're

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Speaker 1: simply avoiding a much worse outcome. I want to bring

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Speaker 1: in Andy Brown right now. Andy's editorial director of the

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Speaker 1: New Economy Forum at Bloomberg, And you were reading the

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Speaker 1: signing of the trade agreement, the Phase one trade agreement

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Speaker 1: between the US and China. What does it mean to

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Speaker 1: you this trade agreement. Less in this trade agreement than

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Speaker 1: meets the eye that's always been saying for quite some time.

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Speaker 1: Uh So, the tariffs on most Chinese imports into the

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Speaker 1: United States remain okay. And the concessions that the Chinese

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Speaker 1: side of making have been on the table or they

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Speaker 1: were working on them long before this trade will began,

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Speaker 1: which includes concessions on intellectual property, which includes apparently concessions

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Speaker 1: on currency manipulations. In fact, China hasn't been manipulating its

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Speaker 1: currency now for many years, has been propping it up

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Speaker 1: rather than allowing it to depreciate. Um And the reason

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Speaker 1: that China has been proceeding with these reforms is not

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Speaker 1: because of pressure from the White House, but because it's

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Speaker 1: good for the Chinese economy. Andy, we heard from the

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Speaker 1: Democratic candidates last night and they made clear in their

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Speaker 1: discussions about trade they weren't necessarily going to take a

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Speaker 1: softer line with China. How much is that kind of

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Speaker 1: weighing on the Chinese delegation's minds at this idea that

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Speaker 1: you know, it's not just about waiting it out and

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Speaker 1: waiting until President Trump if he gets reelected, and then

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Speaker 1: figuring it out from there. That you know is picking

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Speaker 1: you know, the lesser of evils and just to sort

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Speaker 1: of go with it. You know, I think that the

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Speaker 1: Chinese side are about as confused as everybody is over

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Speaker 1: a central contradiction which is at the heart of US

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Speaker 1: training policy to China, that the White House cannot cannot

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Speaker 1: figure out what it is it wants to get out

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Speaker 1: of this trading relationship. What we're all waiting for, of course,

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Speaker 1: is the Phase two deal. Now, this phase to deal

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Speaker 1: is the about the rolling back of state owned enterprise

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Speaker 1: privilege and power in the Chinese economy to level the

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Speaker 1: playing field for foreign investors, including US investors, now to

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Speaker 1: the extent that that succeeds, it will actually open the

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Speaker 1: door for more foreign investment, more US investment in the

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Speaker 1: Chinese economy, which is apparently precisely the opposite of what

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Speaker 1: some in the Trump White House want, which is to

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Speaker 1: bring jobs and bring manufacturing back to the United States

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Speaker 1: with the unstated goal, of course, of economically weakening and

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Speaker 1: economic and security competitor. So both Democrats and Republicans need

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Speaker 1: to really get to grips with this issue. What is

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Speaker 1: it that the US wants out of the trading relationship? Lelan?

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Speaker 1: What do you think the Chinese government? How do you

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Speaker 1: think the Chinese government is going to portray this phase

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Speaker 1: one deal? Is at a great victory for China economically

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Speaker 1: or is it just it's a step along the way

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Speaker 1: and it's not that big a deal. Well, I think

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Speaker 1: at the very beginning you didn't hear much in the

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Speaker 1: Chinese press about this because they couldn't figure that out.

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Speaker 1: And now that they are convinced that President Trump is

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Speaker 1: serious about having this done, we'll see in a few minutes.

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Speaker 1: Uh they are. They are conveying a sense of victory,

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Speaker 1: but this is just a small step on the road.

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Speaker 1: So you know, there there are many disagreements. The fact

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Speaker 1: we came together on this and found compromises is healthy.

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Speaker 1: But let's not pretend that this is the end of

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Speaker 1: the road for the trade war. They've They've made sure

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Speaker 1: to add that in quite often when discussing this in

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Speaker 1: the in the Chinese press. So I think that they

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Speaker 1: see this as a temporary truce. It is just a

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Speaker 1: temporary truce and uh, and they're waiting for the other

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Speaker 1: shoe to drop, all right. We're just to reiterate we

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Speaker 1: are waiting this trade agreement to be signed. And we

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Speaker 1: are speaking currently with Leland Miller, CEO of China beige

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Speaker 1: Book International, as well as Andy Brown, who runs a

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Speaker 1: New Economy forum here at Bloomberg for US, and we

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Speaker 1: really appreciate both of your perspectives. One question I have

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Speaker 1: is we're coming out about a delay of ten months

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Speaker 1: before the tariffs get ruled back that the US has

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Speaker 1: put on China, And this is sort of differ This

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Speaker 1: just differs from what we've heard earlier where these tariffs

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Speaker 1: would be rolled back as as China sort of agreed

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Speaker 1: with or sort of complied with certain requirements. Is this

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Speaker 1: a big deal, Andy, I think it is a big deal.

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Speaker 1: I mean you know, you've you've got tariffs on three

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Speaker 1: sixty billion dollars of Chinese exports to the US. That's

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Speaker 1: two covers two thirds of all of the exports. So um,

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Speaker 1: you know you you this hasn't this, This isn't the end,

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Speaker 1: of course, is not the end of the trade. Well,

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Speaker 1: this this represents at best a truce. And then you

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Speaker 1: have to look at what the Chinese need to do

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Speaker 1: in order to get these tariffs. Now they have to

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Speaker 1: comply with this purchase agreement two billion dollars, which includes

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Speaker 1: something like eighty billion dollars of manufacturers from the United States.

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Speaker 1: This is not going to be easy for the unit

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Speaker 1: either for the United States to fulfill. Uh, you know,

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Speaker 1: where where is this? Where is this additional industrial capacity

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Speaker 1: going to come from to supply the Chinese market? In

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Speaker 1: two billion dollars, by the way, implies something like increase

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Speaker 1: annual increase in US exports to China over what they

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Speaker 1: were in two thousand and seventeen before the trade war started.

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Speaker 1: How's that going to happen? So Leland within China itself?

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Speaker 1: Did you in your data at the China Bage book,

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Speaker 1: did you see data? Are you seeing data that the

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Speaker 1: trade war. The trade uncertainty has caused Chinese companies to

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Speaker 1: pull back on maybe some of their investment and growth

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Speaker 1: and you know, building new plants and so on. It's

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Speaker 1: had an effect. It's not the reason the Chinese economy

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Speaker 1: is descellering. It it it has had an effect. What you

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Speaker 1: saw in the early early tranches of tariffs was a

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Speaker 1: Chinese counter reaction. You know, they would there would there

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Speaker 1: was a devaluation, depreciation of the currency. There were some

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Speaker 1: backdoor subsidies to basically counteract the effects of the first

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Speaker 1: waves of tariff UH, and then you saw a bit

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Speaker 1: of pain come from the next wave. But I think

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Speaker 1: that the real fear has always been the nightmare scenario,

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Speaker 1: which is putting tariffs, probably very high tariffs on all

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Speaker 1: five billion plus of Chinese of Chinese imports and keeping

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Speaker 1: them on there, and that would cause significant pain to

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Speaker 1: the Chinese economy. And that is why this entire trade

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Speaker 1: war UH, as animated as has been, has come to

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Speaker 1: the point we are today, which the Phase one signing.

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Speaker 1: The Chinese realized that we're not here to win, We're

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Speaker 1: here to avoid worst case scenarios, and that's what they're

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Speaker 1: doing by settling for a Phase one deal that's not

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Speaker 1: great for them, but it's it's far from far from terrible.

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Speaker 1: Right now, just in the market, we're seeing record highs

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Speaker 1: for the NASTAC and the SMP five hundred as people

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Speaker 1: look at earnings and see that the companies are still

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Speaker 1: coming in strong, as they look to this trade agreement

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Speaker 1: and see tensions easing. Meanwhile, basically flat on the treasury

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Speaker 1: curve here. And meanwhile gold and this is where I

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Speaker 1: really wanted to go. Gold getting another bid up to

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Speaker 1: one thousand, five hundred and fifty dollars per ounce, and

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Speaker 1: it comes as we have Bridgewater, one of their co

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Speaker 1: c io is saying that he expects it to go

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Speaker 1: to two thousand dollars per ounce, a record high. And

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Speaker 1: this comes as we talk about d dollarization, and we

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Speaker 1: talk about in particular China and Essential Bank buying a

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Speaker 1: lot more gold and leland. I'm wondering how serious is

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Speaker 1: this and how much do we expect this to gain

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Speaker 1: steam as tensions persist between the U S and China. Well,

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Speaker 1: the Chinese have been buying loads of gold as of

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Speaker 1: as of others like Russia for for for years now. UM,

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Speaker 1: I don't think that that's what's what's moving the gold

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Speaker 1: price right now. I think people have had some visibility

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Speaker 1: on that for years. Um, look, it's it. There's most

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Speaker 1: people have wanted to take their cash and throw it

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Speaker 1: in the market because the market keeps going up and

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Speaker 1: up and up. And if you're doing that, then putting

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Speaker 1: your money in gold is is a much uh you know,

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Speaker 1: it is a much more depressing investment. But now as

431
00:22:18,160 --> 00:22:21,720
Speaker 1: I think you get a little more uncertainty, um, goal

432
00:22:22,000 --> 00:22:24,919
Speaker 1: becomes more interesting. And I think we're gonna have to

433
00:22:24,960 --> 00:22:28,359
Speaker 1: see how the markets markets react this year. And you know,

434
00:22:28,600 --> 00:22:32,040
Speaker 1: this trade negotiation with China has been unlike anything we've seen,

435
00:22:32,080 --> 00:22:34,520
Speaker 1: the Red arc as much at a much higher level,

436
00:22:34,800 --> 00:22:38,399
Speaker 1: tariffs going on coming down. Is this the new way

437
00:22:38,960 --> 00:22:44,159
Speaker 1: to negotiate with China and with other major trade partners

438
00:22:44,240 --> 00:22:47,240
Speaker 1: or is this just the Trump administration way? Do you think? No?

439
00:22:47,320 --> 00:22:49,439
Speaker 1: I think this is very much a new era in

440
00:22:49,520 --> 00:22:55,199
Speaker 1: global trade. Multilateral trade negotiations, UH, deals and institutions are

441
00:22:55,240 --> 00:22:59,679
Speaker 1: collapsing UH very very significantly. In the middle of this

442
00:22:59,760 --> 00:23:02,880
Speaker 1: whole trade war, you had the Trump White House essentially

443
00:23:02,920 --> 00:23:06,159
Speaker 1: crippling UH the w t O. It's now all about

444
00:23:06,240 --> 00:23:10,800
Speaker 1: these big bilateral deals in which log economies, UM will

445
00:23:10,840 --> 00:23:14,280
Speaker 1: have the upper hand over smaller ones. This is managed trade.

446
00:23:14,280 --> 00:23:17,360
Speaker 1: This isn't free trade. There's managed trade. I mean two

447
00:23:17,720 --> 00:23:21,359
Speaker 1: billion dollars, very clear target, broken down into categories, so

448
00:23:21,480 --> 00:23:27,400
Speaker 1: much gas, so much agricultural production, so much UH manufactured production.

449
00:23:27,480 --> 00:23:29,719
Speaker 1: And in fact, they haven't even released a schedule of

450
00:23:29,720 --> 00:23:31,800
Speaker 1: this because they say that it's going to influence as

451
00:23:31,840 --> 00:23:35,000
Speaker 1: would of course it would influence the markets. UM. So

452
00:23:35,119 --> 00:23:37,720
Speaker 1: you know this is a this isn't an anti free

453
00:23:37,760 --> 00:23:41,760
Speaker 1: trade and anti free market arrangement that these two countries

454
00:23:41,800 --> 00:23:45,760
Speaker 1: are putting together going forward. I'm wondering, is this, though,

455
00:23:45,760 --> 00:23:48,960
Speaker 1: a beginning at least that we are going to get

456
00:23:49,000 --> 00:23:51,200
Speaker 1: some meeting of minds? I mean, is this an encouraging

457
00:23:51,280 --> 00:23:53,800
Speaker 1: sign to you on some level? I know you're saying

458
00:23:53,800 --> 00:23:56,960
Speaker 1: it's underwhelming, but on some level that there has been

459
00:23:57,000 --> 00:23:59,320
Speaker 1: something done? I mean, are we sort of blowing over

460
00:23:59,359 --> 00:24:01,919
Speaker 1: that a little bit too much? Well? The question is

461
00:24:02,000 --> 00:24:03,879
Speaker 1: was it worth it? You know? I mean all of

462
00:24:03,920 --> 00:24:06,679
Speaker 1: the disruption that we've seen over the last you know,

463
00:24:06,640 --> 00:24:11,320
Speaker 1: a year or so of of of trade tensions. UM,

464
00:24:11,359 --> 00:24:14,560
Speaker 1: you know, has all that pain been worth the game

465
00:24:14,680 --> 00:24:16,879
Speaker 1: that we're going to get out of this? Trade deal today,

466
00:24:17,160 --> 00:24:21,440
Speaker 1: I'm skeptical. However, I think what I am relatively positive

467
00:24:21,480 --> 00:24:23,760
Speaker 1: about is that it has, in a sense, but a

468
00:24:23,840 --> 00:24:27,760
Speaker 1: flaw underneath the U S China relationship um and I

469
00:24:27,800 --> 00:24:30,800
Speaker 1: think that is what the Chinese will be celebrating more

470
00:24:30,840 --> 00:24:33,320
Speaker 1: than anything else. They do not want this, and neither

471
00:24:33,359 --> 00:24:36,240
Speaker 1: side does want this relationship to fall off a cliff.

472
00:24:36,240 --> 00:24:38,320
Speaker 1: There's too much at stake these two countries, of too

473
00:24:38,440 --> 00:24:43,680
Speaker 1: much mutual interest. So leland do the Chinese people to

474
00:24:43,720 --> 00:24:47,240
Speaker 1: get a sense that the Chinese people support this? I

475
00:24:47,240 --> 00:24:49,800
Speaker 1: guess heightened kind of back and forth between China and

476
00:24:49,760 --> 00:24:52,960
Speaker 1: the US on traders. Is there a perception within China

477
00:24:53,000 --> 00:24:56,040
Speaker 1: that it's it's not balanced and maybe the US has

478
00:24:56,040 --> 00:24:58,560
Speaker 1: taken advantage of US, or they're or they're not supporting us.

479
00:24:58,560 --> 00:25:01,560
Speaker 1: What's the feeling within China? You know, it's very hard

480
00:25:01,600 --> 00:25:05,320
Speaker 1: to pinpoint a monolithic feeling coming out of China. I'd

481
00:25:05,320 --> 00:25:09,719
Speaker 1: say there's certainly is a sentiment within China that the

482
00:25:09,840 --> 00:25:14,840
Speaker 1: US is attacking it in certain ways, attacking Huawei, attacking

483
00:25:15,040 --> 00:25:17,640
Speaker 1: national champions. On the other hand, there's also a very

484
00:25:17,680 --> 00:25:24,160
Speaker 1: noisy minority that is uh that is very uh positive

485
00:25:24,200 --> 00:25:26,520
Speaker 1: about what Trump is doing and saying the only time

486
00:25:26,520 --> 00:25:28,640
Speaker 1: the Chinese system is going to change in a material

487
00:25:28,680 --> 00:25:30,840
Speaker 1: way as if it's pushed on the outside. That's the

488
00:25:30,960 --> 00:25:33,600
Speaker 1: lesson of Chinese history. That's a lesson uh that that

489
00:25:33,720 --> 00:25:36,000
Speaker 1: that we're taking now. So I don't think you have

490
00:25:36,040 --> 00:25:40,200
Speaker 1: any type of strong uh sentiment that's just in one direction.

491
00:25:40,440 --> 00:25:42,960
Speaker 1: But this is certainly something that to the extent that

492
00:25:43,080 --> 00:25:46,680
Speaker 1: Chinese citizens have have optics on what's actually going on,

493
00:25:46,960 --> 00:25:49,159
Speaker 1: I think they're they're very much of two minds about this.

494
00:25:49,280 --> 00:25:52,400
Speaker 1: Can we talk about the defaults in China, how much

495
00:25:52,520 --> 00:25:55,520
Speaker 1: we were worried about the corporate defaults that have been

496
00:25:55,520 --> 00:25:57,720
Speaker 1: picking up. They're still pretty pretty small, But this is

497
00:25:57,800 --> 00:26:00,560
Speaker 1: unchartered territory because it's the first time that China has

498
00:26:00,560 --> 00:26:03,399
Speaker 1: allowed companies to default in this manner. Right, well, I

499
00:26:03,400 --> 00:26:06,119
Speaker 1: think China watchers should be rooting for more defaults, not

500
00:26:06,240 --> 00:26:08,480
Speaker 1: that it won't cause some rough times in the short term,

501
00:26:08,520 --> 00:26:10,960
Speaker 1: but because the only way that they're going to fix

502
00:26:11,320 --> 00:26:15,359
Speaker 1: the financial system and fix the financial the economic model

503
00:26:15,680 --> 00:26:18,760
Speaker 1: is by allowing risk to be injected in the system.

504
00:26:18,800 --> 00:26:22,399
Speaker 1: If people think that they're financial products can't go bust,

505
00:26:22,480 --> 00:26:25,400
Speaker 1: if they think that companies can't go bankrupt. If they

506
00:26:25,400 --> 00:26:30,200
Speaker 1: think that investments can't default, then there's no way you're

507
00:26:30,200 --> 00:26:33,320
Speaker 1: going to ever have a model that allows for a

508
00:26:33,840 --> 00:26:36,240
Speaker 1: for for for rejiggering of of what has always been

509
00:26:36,280 --> 00:26:40,359
Speaker 1: a government backstopped economy. That's that's that's in real problems

510
00:26:40,440 --> 00:26:44,280
Speaker 1: right now. The real issue has been that as the

511
00:26:44,359 --> 00:26:48,680
Speaker 1: Chinese government has been unwilling to allow companies to go bankrupt,

512
00:26:48,760 --> 00:26:51,160
Speaker 1: they just keep throwing good money after bad and that

513
00:26:51,200 --> 00:26:54,440
Speaker 1: means that you're gonna have slower You're gonna slower growth

514
00:26:54,440 --> 00:26:57,480
Speaker 1: over time because you're constantly putting good money in the

515
00:26:57,520 --> 00:27:01,280
Speaker 1: economy after bad investments, and it just stagnates the economy

516
00:27:01,320 --> 00:27:04,600
Speaker 1: and into a zombie economy over time. Are deep deep

517
00:27:04,640 --> 00:27:07,600
Speaker 1: thanks to both of you, Lilan Miller and Andy Brown.

518
00:27:07,880 --> 00:27:10,840
Speaker 1: We really appreciate all of your perspectives here. H Leland

519
00:27:10,840 --> 00:27:15,680
Speaker 1: Miller is the executive the head of China Beige Book International,

520
00:27:15,920 --> 00:27:19,520
Speaker 1: Andy Brown, editorial director of the New Economy Forum at Bloomberg.

521
00:27:35,119 --> 00:27:37,439
Speaker 1: We are less than an hour away from the signing

522
00:27:37,480 --> 00:27:40,520
Speaker 1: of a six page trade agreement, the Phase one deal

523
00:27:40,880 --> 00:27:43,760
Speaker 1: between the US and China that we have not seen yet,

524
00:27:43,760 --> 00:27:46,760
Speaker 1: but evidently when they sign it it does exist and

525
00:27:46,800 --> 00:27:49,080
Speaker 1: evidently they are going to release it, so we will

526
00:27:49,080 --> 00:27:52,040
Speaker 1: be passing through that. It has a lot to do

527
00:27:52,160 --> 00:27:55,280
Speaker 1: with agg purchases, agricultural purchases. So we are so pleased

528
00:27:55,280 --> 00:27:58,480
Speaker 1: to say sal GILBERTI joining us now President, chief investment

529
00:27:58,480 --> 00:28:02,640
Speaker 1: officer and co founder of two Trading UH in Brattleboro, Vermont.

530
00:28:02,960 --> 00:28:06,040
Speaker 1: So just give us a sense of what we do

531
00:28:06,200 --> 00:28:12,680
Speaker 1: know about the agricultural purchase agreement here within this trade pact,

532
00:28:12,800 --> 00:28:16,680
Speaker 1: that UM, China will be buying aggs again from the US,

533
00:28:16,760 --> 00:28:19,920
Speaker 1: and that that's about it. We don't have many more details, unfortunately,

534
00:28:20,200 --> 00:28:24,119
Speaker 1: but what we what we can assume pretty confidently is

535
00:28:24,119 --> 00:28:27,160
Speaker 1: that China will buy as much agricultural product as they

536
00:28:27,200 --> 00:28:30,680
Speaker 1: need from the United States. Whatever number is is or

537
00:28:30,800 --> 00:28:34,320
Speaker 1: is not stated in the agreement really doesn't matter. UM.

538
00:28:34,359 --> 00:28:37,200
Speaker 1: We think that using seen is a baseline. That's the

539
00:28:37,280 --> 00:28:40,120
Speaker 1: last time we didn't have trade war implications between the

540
00:28:40,160 --> 00:28:43,600
Speaker 1: two nations. In their trade, UM China brought about four

541
00:28:43,640 --> 00:28:46,000
Speaker 1: billion worth of US agricultural product. If you just take

542
00:28:46,040 --> 00:28:48,840
Speaker 1: their rate of GDP growth and agricultural usage is probably

543
00:28:48,840 --> 00:28:52,760
Speaker 1: a little faster. UM, that means they need about billion

544
00:28:53,160 --> 00:28:56,240
Speaker 1: right now. UM, we're here at two Green projecting about

545
00:28:56,240 --> 00:28:59,120
Speaker 1: thirty one billion in that they'll that they'll buy and

546
00:28:59,160 --> 00:29:01,240
Speaker 1: they're going to meet come in and buy pork, beef,

547
00:29:01,240 --> 00:29:04,880
Speaker 1: and soybeans. There's no question because they need those things. Um,

548
00:29:04,960 --> 00:29:07,400
Speaker 1: how much more they buy of other things is up

549
00:29:07,400 --> 00:29:09,680
Speaker 1: for debate, but we do have have some projections for

550
00:29:09,720 --> 00:29:12,680
Speaker 1: that which we've published a sal I'm looking at your

551
00:29:12,800 --> 00:29:15,480
Speaker 1: research and it's just amazing that looking at those numbers

552
00:29:15,480 --> 00:29:18,120
Speaker 1: you just were discussing, we're really talking about soybeans here

553
00:29:18,200 --> 00:29:21,360
Speaker 1: we talk about what China imports from the US. Is

554
00:29:21,360 --> 00:29:25,360
Speaker 1: there a sense that across the commodity spectrum, uh, that

555
00:29:25,840 --> 00:29:29,440
Speaker 1: China needs to maybe rebuild or restock their inventory and

556
00:29:29,480 --> 00:29:32,360
Speaker 1: say that you could see maybe some unusual surge and

557
00:29:32,400 --> 00:29:36,760
Speaker 1: demand over the first you know, six eighteen months. Yes, absolutely,

558
00:29:36,760 --> 00:29:39,360
Speaker 1: they they they've drawn down their soybean stocks. They've drawn

559
00:29:39,440 --> 00:29:42,960
Speaker 1: down their soy stocks, uh, they of all kinds, and

560
00:29:43,000 --> 00:29:45,320
Speaker 1: they've drawn down their corn stocks. They've also, you know,

561
00:29:45,760 --> 00:29:48,760
Speaker 1: massively drawn down their pork stocks. And so they'll come

562
00:29:48,760 --> 00:29:51,720
Speaker 1: in and immediately buy soybeans to rebuild. They'll buy some

563
00:29:51,800 --> 00:29:54,000
Speaker 1: corn to rebuild and freshen up what they had because

564
00:29:54,040 --> 00:29:56,520
Speaker 1: they had old inventory. They were they were stockpiling for

565
00:29:56,600 --> 00:29:59,480
Speaker 1: quite a while. Um, they've almost run out of pork

566
00:29:59,480 --> 00:30:02,280
Speaker 1: ifew will they really tight the releasing supplies for the

567
00:30:02,320 --> 00:30:04,400
Speaker 1: holiday coming up a week from Saturday when their new

568
00:30:04,480 --> 00:30:08,000
Speaker 1: year starts, where they have enormous pork usage, so they've

569
00:30:08,000 --> 00:30:11,000
Speaker 1: got to replenish their soybeans. They've got to repunish their pork.

570
00:30:11,040 --> 00:30:15,000
Speaker 1: They've also they're supplementing their their meat based protein with beef,

571
00:30:15,120 --> 00:30:17,120
Speaker 1: and so they'll they'll come in and buy beef quite

572
00:30:17,160 --> 00:30:19,360
Speaker 1: a bit too, as well as poultry. Chicken and eggs

573
00:30:19,720 --> 00:30:23,280
Speaker 1: um are are a small part of it, but they've

574
00:30:23,320 --> 00:30:26,000
Speaker 1: just been freed up to buy chicken feet in the

575
00:30:26,080 --> 00:30:27,959
Speaker 1: parts that the Chinese use where we just send their

576
00:30:27,960 --> 00:30:31,440
Speaker 1: rendering plants. So we think, um, soybeans, we think pork,

577
00:30:31,560 --> 00:30:34,560
Speaker 1: we think beef, we think no question poultry. Those will

578
00:30:34,560 --> 00:30:36,440
Speaker 1: be the things they come in and buy immediately. How

579
00:30:36,520 --> 00:30:39,960
Speaker 1: much are we gonna expect these increased purchases to uh

580
00:30:40,280 --> 00:30:42,760
Speaker 1: suspect the price here or to increase the price in

581
00:30:42,800 --> 00:30:45,600
Speaker 1: the US. That's the magic question. I think we can

582
00:30:45,640 --> 00:30:48,360
Speaker 1: expect the floor. I think I think there's no doubt

583
00:30:48,400 --> 00:30:50,720
Speaker 1: that it's reasonable to assume that there could be a

584
00:30:50,760 --> 00:30:54,160
Speaker 1: floor in prices, and understand, we've been trading soybeans and

585
00:30:54,240 --> 00:30:57,640
Speaker 1: corn in particular right near their cost of production anyway,

586
00:30:57,640 --> 00:31:00,280
Speaker 1: and they do trade for quite long periods of time

587
00:31:00,320 --> 00:31:02,720
Speaker 1: at their cost of production. That's the natural thing they do.

588
00:31:02,960 --> 00:31:06,200
Speaker 1: Then when there's a supply disruption, because demand is continually

589
00:31:06,240 --> 00:31:09,040
Speaker 1: growing um, you know, you often see pretty pretty good

590
00:31:09,040 --> 00:31:12,440
Speaker 1: spikes upward in the price. Historically, corns doubled twice in

591
00:31:12,480 --> 00:31:14,680
Speaker 1: the past thirteen years from right where it's trading now,

592
00:31:15,000 --> 00:31:17,960
Speaker 1: So you know, people are starting to layer in acid allocate.

593
00:31:18,160 --> 00:31:20,640
Speaker 1: We think once they signed and it's confirmed that they'll

594
00:31:20,680 --> 00:31:22,480
Speaker 1: be buying, and they will be buying because they need

595
00:31:22,480 --> 00:31:26,080
Speaker 1: our agricultural products, there's no question that there should be

596
00:31:26,160 --> 00:31:29,000
Speaker 1: a floor under the price. How much it goes up,

597
00:31:29,080 --> 00:31:31,120
Speaker 1: it remains to be seen. Depends how fast they buy.

598
00:31:31,160 --> 00:31:33,440
Speaker 1: It depends of course on the weather, and it depends

599
00:31:33,480 --> 00:31:36,640
Speaker 1: on some insight into um what the Chimes will be

600
00:31:36,720 --> 00:31:39,880
Speaker 1: doing in their economy, including ethanol. They are blending ethanol

601
00:31:39,920 --> 00:31:43,040
Speaker 1: into their fuel, and while they've um they were going

602
00:31:43,040 --> 00:31:46,040
Speaker 1: to enforce a ten percent mandate, they realized their infrastructure

603
00:31:46,040 --> 00:31:48,920
Speaker 1: is not capable of that. They're not abandoning ethanol in

604
00:31:48,960 --> 00:31:50,920
Speaker 1: any way, shape or form, and that's gonna put some

605
00:31:51,040 --> 00:31:54,720
Speaker 1: big demand on corn globally. And remember this is the

606
00:31:54,800 --> 00:31:57,280
Speaker 1: seventh year in a row that corn demand globally will

607
00:31:57,320 --> 00:31:59,520
Speaker 1: break a record. It's the third year in a row

608
00:31:59,600 --> 00:32:03,800
Speaker 1: the horn demand globally will outpace demand global production. Uh

609
00:32:03,840 --> 00:32:07,560
Speaker 1: this year, soybean demand globally will outpace production. So the

610
00:32:07,640 --> 00:32:10,920
Speaker 1: price is sitting where they are now. You know, you

611
00:32:10,920 --> 00:32:13,479
Speaker 1: can reasonably assume there's certainly for or how high they go,

612
00:32:13,760 --> 00:32:18,880
Speaker 1: we'll say odd question, is there enough inventory? Are the

613
00:32:18,880 --> 00:32:21,280
Speaker 1: American farmers can they meet the surgeon demand? Is there

614
00:32:21,280 --> 00:32:23,320
Speaker 1: a bunch of inventory in the Midwest and the farm

615
00:32:23,360 --> 00:32:27,600
Speaker 1: belt to get meet this surgeon demand? Yes, there is, um,

616
00:32:27,600 --> 00:32:30,960
Speaker 1: there's enough inventory certainly for this year. Um. You know

617
00:32:31,000 --> 00:32:33,680
Speaker 1: that's the interesting part about aggs. That's why prices you know,

618
00:32:33,720 --> 00:32:35,840
Speaker 1: in corn have doubled from these same levels place in

619
00:32:35,840 --> 00:32:38,960
Speaker 1: the past thirteen years. What happens is year to year

620
00:32:39,000 --> 00:32:41,560
Speaker 1: you can replace it. But the one year when you fail,

621
00:32:41,880 --> 00:32:44,920
Speaker 1: you're using eggs, they grow, you harvest them, there's a

622
00:32:44,920 --> 00:32:48,240
Speaker 1: big pile. You're using that pile until the following year's harvest.

623
00:32:48,600 --> 00:32:50,680
Speaker 1: And if the following year has a problem with harvest.

624
00:32:51,080 --> 00:32:53,240
Speaker 1: That's when the issue comes in. And so that's why

625
00:32:53,520 --> 00:32:56,080
Speaker 1: agg markets they always trade kind of at their cost

626
00:32:56,120 --> 00:32:58,960
Speaker 1: of production, and then they explode higher when you get

627
00:32:58,960 --> 00:33:01,840
Speaker 1: that blip and product because remember, demand just keeps going on.

628
00:33:02,000 --> 00:33:04,440
Speaker 1: That's just a steady bad SalCo birt day. Thank you

629
00:33:04,480 --> 00:33:06,800
Speaker 1: so much for joining a sales president and c I

630
00:33:06,880 --> 00:33:10,040
Speaker 1: O and co founder of Two Cream Trading Limited, based

631
00:33:10,040 --> 00:33:28,360
Speaker 1: in Brattleboro, Vermont, targ The shares are down over seven

632
00:33:28,400 --> 00:33:31,400
Speaker 1: percent this morning. The company posted a rare stumble on

633
00:33:31,600 --> 00:33:34,520
Speaker 1: holiday sales came in a week er than expected. To

634
00:33:34,560 --> 00:33:36,600
Speaker 1: help us dig into the details, we welcome our good

635
00:33:36,600 --> 00:33:40,240
Speaker 1: friend Jen Bartashes, senior US retail staples and a restaurant

636
00:33:40,240 --> 00:33:42,680
Speaker 1: analyst for Bloomberg Intelligence. He joins us on the phone

637
00:33:42,680 --> 00:33:45,959
Speaker 1: from bi's headquarters in Princeton, New Jersey. So, Jen, kind

638
00:33:45,960 --> 00:33:49,040
Speaker 1: of a rare stumble for Target. I seem to be

639
00:33:49,120 --> 00:33:52,080
Speaker 1: calling quarter after quarters some pretty solid top line numbers.

640
00:33:52,080 --> 00:33:55,040
Speaker 1: What happened? Yeah, good morning. UM. So Target has had

641
00:33:55,080 --> 00:33:58,280
Speaker 1: a stellar year thus far. Um, but really going into holiday,

642
00:33:58,720 --> 00:34:00,840
Speaker 1: it seems that perhaps there was a little bit of

643
00:34:00,920 --> 00:34:04,760
Speaker 1: a miscalculation with regards to the shorter selling season, but

644
00:34:04,840 --> 00:34:10,280
Speaker 1: they really underperformed in critical categories for holiday, which included toys, electronics,

645
00:34:10,320 --> 00:34:13,240
Speaker 1: and parts of the home decre part part of the store.

646
00:34:13,440 --> 00:34:16,239
Speaker 1: So we've had a bunch of hours to digest the

647
00:34:16,280 --> 00:34:19,600
Speaker 1: release and some of the possible explanations for it. Has

648
00:34:19,640 --> 00:34:22,560
Speaker 1: anything become clear in terms of how much this is

649
00:34:22,600 --> 00:34:25,480
Speaker 1: a Target specific issue and how much this is a

650
00:34:25,520 --> 00:34:30,640
Speaker 1: widespread likely disappointment for all retailers and the last holiday season, right,

651
00:34:30,760 --> 00:34:33,600
Speaker 1: So to put that into context, you know, you know, Target,

652
00:34:33,800 --> 00:34:36,239
Speaker 1: you know still posted positive same store sales growth, it

653
00:34:36,280 --> 00:34:38,920
Speaker 1: was just below expectations. Some of this seems to be

654
00:34:39,000 --> 00:34:43,080
Speaker 1: Targets specific because in certain categories at Target they did

655
00:34:43,200 --> 00:34:45,839
Speaker 1: very well. Apparel was up five percent, Beauty was up

656
00:34:45,840 --> 00:34:48,840
Speaker 1: seven um. And so it seems that there were some

657
00:34:48,880 --> 00:34:52,640
Speaker 1: miscalculations specific to Target in a couple of those critical areas.

658
00:34:52,880 --> 00:34:55,480
Speaker 1: But when you look at the broader retail landscape, you know,

659
00:34:55,520 --> 00:34:58,200
Speaker 1: it's been a really mixed holiday season, and so even

660
00:34:58,239 --> 00:35:02,560
Speaker 1: though consumer spending has been up, especially online spending um,

661
00:35:02,600 --> 00:35:06,920
Speaker 1: different retailers have really had posted mixed results. So, Jen,

662
00:35:07,000 --> 00:35:09,319
Speaker 1: I know from reading your research over the years, I

663
00:35:09,400 --> 00:35:12,000
Speaker 1: can't just look at top line same store sales also

664
00:35:12,200 --> 00:35:15,000
Speaker 1: have to look at promotion activities that goes right the

665
00:35:15,000 --> 00:35:17,640
Speaker 1: profit Margins did. What did we learn from target ors

666
00:35:17,640 --> 00:35:19,320
Speaker 1: maybe some of the other retailers you follow about the

667
00:35:19,320 --> 00:35:22,960
Speaker 1: promotional activity to drop those holiday sales. Yeah, so, so

668
00:35:23,200 --> 00:35:26,240
Speaker 1: one of the categories that we tracked very closely is toys,

669
00:35:26,360 --> 00:35:29,759
Speaker 1: and we tracked toy prices throughout the holiday season, and

670
00:35:29,800 --> 00:35:33,680
Speaker 1: Target consistently was more expensive than both Amazon and Walmart.

671
00:35:33,760 --> 00:35:35,880
Speaker 1: So that may be playing into some of the results

672
00:35:35,920 --> 00:35:39,120
Speaker 1: in toys that they had. UM With regards to promotions

673
00:35:39,160 --> 00:35:43,360
Speaker 1: over Black Friday and and Cyber Monday, UM, Targets promotions

674
00:35:43,400 --> 00:35:45,880
Speaker 1: were different this year. So last year on Cyber Monday

675
00:35:45,920 --> 00:35:48,240
Speaker 1: they gave fifteen percent off on everything on their site.

676
00:35:48,600 --> 00:35:53,440
Speaker 1: This year it was very strategic specific UM discounts. And

677
00:35:53,520 --> 00:35:56,040
Speaker 1: so even though that may be better for Margins overall,

678
00:35:56,160 --> 00:35:58,279
Speaker 1: it seems that it did have a definite impact on

679
00:35:58,320 --> 00:36:01,880
Speaker 1: top line sales going forward. Do we have a sense

680
00:36:01,960 --> 00:36:04,160
Speaker 1: of Walmart. We know that their shares also fell in

681
00:36:04,200 --> 00:36:06,279
Speaker 1: sympathy with Target, Are they going to face some of

682
00:36:06,320 --> 00:36:12,200
Speaker 1: the same issues, well, you know, with regards to specifically toys, UM,

683
00:36:12,239 --> 00:36:14,560
Speaker 1: you know, we think that they may have fared a

684
00:36:14,640 --> 00:36:17,120
Speaker 1: little bit better just because they were more price competitive

685
00:36:17,160 --> 00:36:19,480
Speaker 1: and they're out of stocks Rose, which implies that they

686
00:36:19,520 --> 00:36:21,600
Speaker 1: ran through their inventory at a little bit of a

687
00:36:21,640 --> 00:36:25,120
Speaker 1: faster pace than Target did across the season. Um, across

688
00:36:25,160 --> 00:36:27,880
Speaker 1: the broader store. UM, it's hard to say. Um. They

689
00:36:27,880 --> 00:36:30,920
Speaker 1: also had a strong holiday last year. UM. And so

690
00:36:31,160 --> 00:36:33,400
Speaker 1: it could well be that they did well in certain

691
00:36:33,440 --> 00:36:36,040
Speaker 1: categories and less well in other category as much as

692
00:36:36,080 --> 00:36:38,680
Speaker 1: Target did. JEN what do we learn from the e

693
00:36:38,760 --> 00:36:42,319
Speaker 1: commerce side of Target? I remember, you know, last four

694
00:36:42,920 --> 00:36:46,480
Speaker 1: quarters really strong e commerce reven or growth kind of

695
00:36:46,680 --> 00:36:48,880
Speaker 1: led me to believe that the Targets and the Walmarts

696
00:36:48,880 --> 00:36:50,120
Speaker 1: of the world have kind of figured out how to

697
00:36:50,160 --> 00:36:54,560
Speaker 1: compete against Amazon. Well, what was interesting about the revenue

698
00:36:54,600 --> 00:36:57,960
Speaker 1: growth and and the percentage it was for Target over

699
00:36:58,000 --> 00:37:01,680
Speaker 1: the holiday season, which is not bad, um, But what

700
00:37:01,719 --> 00:37:04,319
Speaker 1: we're really seeing is that a big portion of that

701
00:37:04,400 --> 00:37:07,319
Speaker 1: overall growth came from same day fulfillment options. So that's

702
00:37:07,360 --> 00:37:08,920
Speaker 1: where you order it Neither you pick it up at

703
00:37:08,960 --> 00:37:11,600
Speaker 1: the store, um, delivered to your car, or you go

704
00:37:11,640 --> 00:37:14,160
Speaker 1: in the store to pick it up. And that actually

705
00:37:14,239 --> 00:37:16,640
Speaker 1: is the part that is interesting with regards to competition

706
00:37:16,680 --> 00:37:19,760
Speaker 1: against Amazon, because even though Amazon has free next Days,

707
00:37:19,800 --> 00:37:22,760
Speaker 1: you know, shipping and in some markets free same day shipping.

708
00:37:23,160 --> 00:37:26,319
Speaker 1: UM it's still very difficult to compete with UM a

709
00:37:26,360 --> 00:37:29,080
Speaker 1: Target or a Walmart who can offer that same service

710
00:37:29,320 --> 00:37:30,799
Speaker 1: and you know that you're going to have it in

711
00:37:30,840 --> 00:37:33,279
Speaker 1: hand by the end of the day. Just real quick here, Jed.

712
00:37:33,360 --> 00:37:37,960
Speaker 1: Earlier you're speaking about the target experience. What is the

713
00:37:38,000 --> 00:37:41,959
Speaker 1: target experience? Well, when you know, when when their their

714
00:37:41,960 --> 00:37:44,600
Speaker 1: core customers go in and they expect to be delighted,

715
00:37:44,640 --> 00:37:48,359
Speaker 1: and a lot of the they do. I mean, you know,

716
00:37:48,440 --> 00:37:50,640
Speaker 1: when when you go in, you're a lot of the

717
00:37:50,680 --> 00:37:54,560
Speaker 1: target core customers are into looking for that new piece

718
00:37:54,600 --> 00:37:58,399
Speaker 1: of fashion, that new accessory, the new beauty product. Um

719
00:37:58,440 --> 00:38:01,279
Speaker 1: And and a lot of the Turket has made in

720
00:38:01,320 --> 00:38:04,160
Speaker 1: their stores has really been to reformat the stores to

721
00:38:04,200 --> 00:38:07,279
Speaker 1: make it easier to you know, access and to be

722
00:38:07,360 --> 00:38:09,960
Speaker 1: inspired by the products that they have their UM and

723
00:38:10,000 --> 00:38:12,600
Speaker 1: that has really bolstered same store sales over the last year.

724
00:38:12,719 --> 00:38:14,880
Speaker 1: Now they're coming to where they've done a lot of

725
00:38:14,880 --> 00:38:18,040
Speaker 1: those remodels, so it'll be interesting to see going forward

726
00:38:18,080 --> 00:38:20,520
Speaker 1: whether they're able to sustain that same amount of traffic

727
00:38:20,600 --> 00:38:23,279
Speaker 1: into their stores that they were able to generate off

728
00:38:23,320 --> 00:38:26,000
Speaker 1: the heels of those renovations. Jen Bratashes, thank you so

729
00:38:26,080 --> 00:38:29,320
Speaker 1: much of Bloomberg Intelligence. Paul literally turning my mic off

730
00:38:29,520 --> 00:38:32,320
Speaker 1: and saying, don't do it. Whatever you're gonna say, don't

731
00:38:32,320 --> 00:38:35,120
Speaker 1: do it, and I gotta say my My only point

732
00:38:35,200 --> 00:38:38,040
Speaker 1: is the big box stores. The whole design of them

733
00:38:38,360 --> 00:38:40,080
Speaker 1: was to make it look like you're going to get

734
00:38:40,080 --> 00:38:42,640
Speaker 1: a deal, not an experience, right, I mean that was

735
00:38:42,680 --> 00:38:45,399
Speaker 1: sort of the idea. I understand going in and being

736
00:38:45,440 --> 00:38:48,440
Speaker 1: excited about getting something that you can get, but delighted.

737
00:38:48,520 --> 00:38:51,440
Speaker 1: I mean, yes, I guess that's what the millennials and

738
00:38:51,480 --> 00:38:56,120
Speaker 1: the gen xers want. They want experiences. I don't disagree

739
00:38:56,200 --> 00:38:58,719
Speaker 1: with that, but I'm just I think people just want

740
00:38:58,760 --> 00:39:01,400
Speaker 1: a good deal. Okay, thanks for listening to the Bloomberg

741
00:39:01,440 --> 00:39:04,080
Speaker 1: pen L podcast. You can subscribe and listen to interviews

742
00:39:04,160 --> 00:39:07,319
Speaker 1: at Apple Podcasts or whatever podcast platform you prefer. I'm

743
00:39:07,320 --> 00:39:10,759
Speaker 1: Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa Bramwoyits.

744
00:39:10,800 --> 00:39:13,800
Speaker 1: I'm on Twitter at Lisa Bramwoyits one before the podcast.

745
00:39:13,840 --> 00:39:16,440
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio