Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you,
Speaker 1: along with my co host Lisa Brahma wits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. You know, one of the industry
Speaker 1: sectors that just seems to be more and more in
Speaker 1: the news. Maybe this year more than ever has been cannabis.
Speaker 1: We'd we're talking um. Maybe that's because it's been, you know,
Speaker 1: a pretty big business in Canada. We've got more and
Speaker 1: more US states legalizing uh cannabis. To get the latest
Speaker 1: on that end, on kind of all things in Canada,
Speaker 1: we welcome Dave Dan Devio, President and CEO of Canachord
Speaker 1: Genuity Group based in Toronto, Cannaba, joining us here in
Speaker 1: our Bloomberg Interactive Broker Studio. Dan, thanks so much for
Speaker 1: coming down with us so talk to us about the
Speaker 1: state of the cannabis business, because we've certainly heard more
Speaker 1: and more about it as we've gone through the year. Yeah. No,
Speaker 1: it's been. It's first of all, thanks for very much
Speaker 1: for having me. And secondly, it's been it's been a
Speaker 1: very active segment um. You know, throughout the last two
Speaker 1: or three years, we've seen in an incredible time where
Speaker 1: there was a massive rush to the market by you know,
Speaker 1: probably over a hundred companies that went public, raising four
Speaker 1: to five billion dollars, and you know, there was exuberance
Speaker 1: in the market. It's a new market, no one really
Speaker 1: knew how big it was going to be, and a
Speaker 1: lot of companies raise money. You know, it's taken a
Speaker 1: little bit longer for people to realize on their strategic plans.
Speaker 1: Part of its access to capital, part of its government
Speaker 1: regulations taking a little bit longer. So we've seen some
Speaker 1: volatility in the market. We've seen some people lose money
Speaker 1: as a result, but people made a lot of money
Speaker 1: there for a while. Like I can I can remember
Speaker 1: this market three years ago where you couldn't convince somebody
Speaker 1: to invest in the cannabis stock and the guys that
Speaker 1: we took out, you know, we we ended up having
Speaker 1: to pass the hat, you know, around the firm just
Speaker 1: to fill out deals. At the beginning, did you actually
Speaker 1: ask your employees to the senior people really felt strongly
Speaker 1: about the industry at the beginning, and it wasn't about
Speaker 1: asking and it was you know, they decided to do it.
Speaker 1: But certainly, Yeah, some of our employees at the beginning
Speaker 1: invested in it and and did well. The ones who
Speaker 1: invested lately didn't do so well. We've seen the big
Speaker 1: banks come into the market lately, um and unfortunately that
Speaker 1: hasn't worked out as well. A little late to the sector,
Speaker 1: and some of the broadening of the distribution hasn't worked
Speaker 1: out well. Some of those deals haven't performed as well. Well.
Speaker 1: I love the idea of passing a hat around the
Speaker 1: office to say, like, what what are we putting mine
Speaker 1: in for? Hot? Exactly? We call that in a business
Speaker 1: co investing. Yeah, exactly. Well, I will say this, it's
Speaker 1: interesting that you say that the big banks have tried
Speaker 1: to get in lately and it hasn't worked out. Is
Speaker 1: that good for you because that would have potentially been
Speaker 1: competition for you. Yeah. We have dominant market share. When
Speaker 1: I mean dominant, I mean we raise the majority of
Speaker 1: the money in the market and probably represent most of
Speaker 1: the M and A trade, So it's clearly competition you'd
Speaker 1: think would be bad, but but you know, the broadening
Speaker 1: out of the market would be a good thing. That
Speaker 1: market would be five times larger, so our market share
Speaker 1: would go from the right to clee a hundred. We'd
Speaker 1: still do very well as an institution because the market
Speaker 1: would be that much larger. We'll talk to us in
Speaker 1: the US and so Canada, is it federally legalized? Is
Speaker 1: that correct? Okay? And so and that's good? Um, And
Speaker 1: in the US we just have a limited number of states.
Speaker 1: What's the understanding about at a possible federal legalization in
Speaker 1: the United States? Yeah, Well, there's the industry is not
Speaker 1: doesn't have the stigma that it used to have, clearly.
Speaker 1: So there's three pieces of federal legislation working their way
Speaker 1: through the government. There's a Safe Act, States Act, and
Speaker 1: More Act, all three of them. And who knows exactly
Speaker 1: what we'll get past and when the point is, eventually
Speaker 1: it's coming. Eventually we're gonna see it. So we don't
Speaker 1: I like to make either a prediction or give a
Speaker 1: time frame. I don't like to do both. But eventually
Speaker 1: we're going to see federal legislation in the industry, and
Speaker 1: that's going to help from a state level, there's a
Speaker 1: number of state votes happening every year. This year there's
Speaker 1: four states voting on adult legal use recreational use. So
Speaker 1: that's going to continue to play out. We're going to
Speaker 1: continue to see states uh um, you know, legalize it
Speaker 1: at that level. But until we have federal lead legislation,
Speaker 1: you're not going to see uh companies be able to
Speaker 1: list on the NASDAC or New York Stock Exchange, and
Speaker 1: you're not going to see the big big mutual funds
Speaker 1: and big big money invest in the sector. All right,
Speaker 1: let's just gears a little bit. Uh. I know that
Speaker 1: Ken Accord focuses a lot and a whole host of
Speaker 1: different functions within the financial services, whether it's the wealth
Speaker 1: management business or whether it is facilitating mergers and acquisitions.
Speaker 1: What are you expecting in in terms of corporate health
Speaker 1: and their willingness to complete transactions given how high valuations
Speaker 1: are right now? Yeah, I think high valuations does does
Speaker 1: does a lot of things. I mean, certainly, companies are
Speaker 1: prepared to raise money when their values are high, and
Speaker 1: companies are prepared to buy and sell each other when
Speaker 1: their values are high, and there's pretty good access to capital.
Speaker 1: Still both equity capital, but more importantly credit capital. All
Speaker 1: those things direct you towards a pretty active market, both
Speaker 1: from a new issue perspective and an M and A perspective,
Speaker 1: So we see both markets continue to be active. We're
Speaker 1: busy in technology. It's a huge area of US. We
Speaker 1: bought a firm here called Petski Prunier last year, and
Speaker 1: are you know the share of our M and A
Speaker 1: business has gone up substantially. I think we're number three
Speaker 1: in that mid market TMT area and we continue to
Speaker 1: see that being very active in the US. We've got
Speaker 1: a great healthcare presence, both biotech and healthcare services, and
Speaker 1: that's been very active for us. So broadly speaking, we
Speaker 1: continue to be pretty optimistic. Tony Dwyer, our main market
Speaker 1: strategists continues to see a very strong market over the
Speaker 1: next year. So well, you know, we're pretty bullish on
Speaker 1: that industry. Your stocks down, Third Team cent you today,
Speaker 1: what's what's the story? What's going on? Not in more
Speaker 1: more more sellers than buyers? No, thank you, No, I
Speaker 1: mean it's it's unfortunate that our stock is down because
Speaker 1: our earnings has been Our earnings have been incredibly strong.
Speaker 1: We've been increasingly profitable every year. Last year we did
Speaker 1: about eighty cents of share and earnings. This year today
Speaker 1: we've done forty one census share and earnings. You know,
Speaker 1: we trade at six to seven times earnings, and given
Speaker 1: that most of our earnings come from our wealth business,
Speaker 1: I think people see as as a relatively volatile capital
Speaker 1: markets type stock. But but the truth is seventy of
Speaker 1: our earnings last quarter came from our wealth business and
Speaker 1: that's been a growing area of profitability. We've been able
Speaker 1: to attract a remarkable number of new advisory teams in
Speaker 1: our Canadian wealth business and in our UK wealth business,
Speaker 1: which is forty five billion Canadian dollars. It's a big business.
Speaker 1: We've we've bought a lot of firms and integrated them
Speaker 1: in and our margins keep on going up, our profitability
Speaker 1: goes up. We've also been buying back our stock because
Speaker 1: we see it's relatively cheap. We bought forty million dollars
Speaker 1: Canadian stock last year and we're going to continue that activity. Dan,
Speaker 1: thank you so much for being with us today. Thanks
Speaker 1: so much for having me. Dan Davio. He is president,
Speaker 1: chief executive officer of Kenda cord Enuity Group corporation with
Speaker 1: forty four billion dollars of assets under management, based in Toronto, Canada,
Speaker 1: but he joins us here in our interactive broker studios
Speaker 1: in New York City, where it is just about the
Speaker 1: same type of weather as they normally see in Canada,
Speaker 1: which is absolutely freezing. But really interesting to talk about
Speaker 1: the outlook for cannabis given how much optimism there's been
Speaker 1: around that sector, although of late has been rather beaten up.
Speaker 1: Let's talk about emerging markets. This is another consensus call
Speaker 1: heading into is that emerging markets will outperform on the
Speaker 1: heels in part of a weaker dollar. Joining us now
Speaker 1: to talk about this, Vincent Ward. He is a global
Speaker 1: macro strategist at I N T l F C Stone,
Speaker 1: based in San Francisco. Vincent, thank you so much for
Speaker 1: being with us people saying that there are opportunities here.
Speaker 1: You're going a step further and calling currencies in developing
Speaker 1: markets dirt cheap. Please explain absolutely, um, and I mean
Speaker 1: he's been going on for a wide but uh, last
Speaker 1: year we added to the case, especially if you'll get
Speaker 1: Latin American currencies where in a way declines of like
Speaker 1: in in some of the spaceless currencies like literally and beso. Um,
Speaker 1: if you're going to look at Asia, it strikes me
Speaker 1: as um just in saying that basically the core in
Speaker 1: one or the Thai bath are basically where they were
Speaker 1: in two thousands, just after the station crisis, the Internet
Speaker 1: bubble in the US, and if you look how far
Speaker 1: these countries have come since that time, it seems odd
Speaker 1: that on a real effective basis the currencies have not
Speaker 1: appreciated in the past twenty years. So Vincent, in your
Speaker 1: most recent research note you do a maya culpa here.
Speaker 1: You had a call of overweight em and that's uh
Speaker 1: not been the right cause that e M is once
Speaker 1: again trailed kind of the SMP and broader markets. Why
Speaker 1: do you think emerging markets are in fact not getting
Speaker 1: rewarded Maybe just from evaluation perspective of nothing else right? Um, Well,
Speaker 1: I think last year it really came down to two
Speaker 1: macro developments that the mark get had not anticipated. One
Speaker 1: was the escaation of the trade wars in the summer.
Speaker 1: I mean, if you look at the beginning of the year,
Speaker 1: he looked like the e M trade was going to work,
Speaker 1: and then as soon as we had the new round
Speaker 1: of summer terrists and everything kind of broke down. And
Speaker 1: then the second element was the wave of protests that
Speaker 1: we saw from you know, Santiago to Peru to Baghdad
Speaker 1: to Cairo. UM. So that's what we took down, the
Speaker 1: the m trade down. UM. As far as the valuation gap,
Speaker 1: I mean, it's been there for close to ten years now,
Speaker 1: but it's it's getting too ridiculous proportions. I mean, one
Speaker 1: one way to look at it that I like is
Speaker 1: to compare the growth the valuation of the nastag emerging markets,
Speaker 1: because I feel, you know, we have two big growth narratives.
Speaker 1: For the past twenty years. It's been either you know,
Speaker 1: internet software is going to eat the world or the
Speaker 1: rising emerging market middle class. And right now that gap
Speaker 1: is about forty percent bigger than it was at the
Speaker 1: height of the Internet bubble. So I know people have
Speaker 1: said before, but at some point there will be some
Speaker 1: min reversion that ratio. How much of this hinges entirely
Speaker 1: on the dollar, and I say this because people are
Speaker 1: expecting the dollar to weaken a bit next year. The
Speaker 1: dollar has been the hardest call to get right, uh,
Speaker 1: and it really has driven a lot of what we've
Speaker 1: seen in developing markets. Now, absolutely, I mean this is
Speaker 1: this is indeed the crucial question it comes to. Yeah,
Speaker 1: I mean the emerging market trade is a synthetic short
Speaker 1: data trade. Uh. And the reason is, I mean, part
Speaker 1: of it for commodity explorers. Obviously you have a very
Speaker 1: clear relation. You know, the week of the daughter, the
Speaker 1: more the more to get. But also really what what
Speaker 1: makes makes it special recycle is the amount of data
Speaker 1: debts that these emerging markets have contracted three point six
Speaker 1: trillion UM as of the latest b I S data. UH.
Speaker 1: And really, by the way, that is the one common
Speaker 1: team about emerging markets. I mean, emerging market has been
Speaker 1: a misnomer for you know, twenty years now. The only
Speaker 1: one thing in your monkey is like China, Malaysia, Turkey
Speaker 1: or Argentina having common is that they all borrowing dollars
Speaker 1: and they can print it um. So when the daughter weekends,
Speaker 1: they're you know, servicing plants get easier, they can eat
Speaker 1: morning if we policy at home, and you see both
Speaker 1: when the daughters strengthens, as it has in much of
Speaker 1: the past five years, you have balance of fame and
Speaker 1: critis all over the board. So it is indeed a
Speaker 1: daughter's short call, So Vincent, the trade deal between China
Speaker 1: and the US. It appears that we're making some progress
Speaker 1: on a phase one deal. We might even actually see
Speaker 1: something on paper one day. How critical is the trade deal,
Speaker 1: even if it's just a phase one or a light
Speaker 1: trade deal. How important is that for the psyche of
Speaker 1: emerging market investors? I think psyche is the is the
Speaker 1: right word again. I mean, we we've been, you know,
Speaker 1: very close to a trade deal. Four year, talks are
Speaker 1: going away. You get these tweets every day for four
Speaker 1: year now. Um, I have no instad as to what
Speaker 1: there is in that trade deal or you know, even
Speaker 1: if the trade deal is going to be the same
Speaker 1: in the from the perspective of China as it will
Speaker 1: be from the US. But all that matters, I think
Speaker 1: is is just no more insanity, as long as we
Speaker 1: don't have you know, we had, uh, you know, out
Speaker 1: of the blue, we say I'm going to hike Carris
Speaker 1: some you know, this country or whatever next year, which
Speaker 1: I think is unlikely because that's of the electoral cycle,
Speaker 1: just the promise of stability. I mean, we don't need
Speaker 1: to solve I t there's probably no solution there anyway
Speaker 1: or states on enterprise. Just no more insanity and there's
Speaker 1: some really The other thing to you know, think about
Speaker 1: is it's not just about the trade deal. I mean
Speaker 1: if you look at the auto cycle in China or
Speaker 1: you know, even even cell phones, these things are bottoming
Speaker 1: on their own. So as long as we don't kind
Speaker 1: of you know, run the market with with unpredicted policies,
Speaker 1: things should get better. I love it. Our headline for
Speaker 1: this segment is going to be, uh emerging market global
Speaker 1: macro strategist says, no more insanity, Just stop the insanity
Speaker 1: and emerging markets can rally. I'm wondering, are there any
Speaker 1: developing market currencies that you do not like that you
Speaker 1: think are going to underperform? Sorry developing market currencies? Yeah, okay,
Speaker 1: I mean you still have the the generally the most
Speaker 1: vulnerable ones, right, I mean I don't ones to have
Speaker 1: that you know a lot of either other death current
Speaker 1: account deficits. Uh so. But again so that would be
Speaker 1: the Argentine pezo, the South African rand to something ex
Speaker 1: maybe the Indonesian rupiah. But all these currencies have been
Speaker 1: so massacreed, uh you know in the past two to
Speaker 1: three years that you've gotta wonder if despite the vulnerabrilities,
Speaker 1: they could actually be kind of the the best on
Speaker 1: on on the bottoming on the bottoming process. Um, it's
Speaker 1: the same suffering up all the Chilean peso you know
Speaker 1: got down. I'm sure people would you know that that's
Speaker 1: one of the ones that will come come come top
Speaker 1: of mind. But again there's so much damage that have
Speaker 1: been done that even a week emerging market currencies may
Speaker 1: actually do well next year. Vincent Ward, thank you so
Speaker 1: much for joining us Vincent as global macro strategist for
Speaker 1: I N T l f C Stone, based in San Francisco.
Speaker 1: I like his note basically saying, all right, we were
Speaker 1: really wrong in twenty nineteen with our overweight call on
Speaker 1: emerging markets, but we're sticking with it. And here are
Speaker 1: the reasons why that takes um some gumption. Certainly right now,
Speaker 1: we want to focus on everything else going on in Washington,
Speaker 1: d C. Other than impeachment, which brings us to healthcare
Speaker 1: backstas and joining us now in our interactive broker studio
Speaker 1: is and the reason why we wanted to have you here,
Speaker 1: uh is because we always love having you on. You
Speaker 1: cover biotech and Pharma and healthcare over at Bloomberg opinion.
Speaker 1: But it's because there was a court decision having to
Speaker 1: do with Obamacare that seemed to be potentially detrimental to
Speaker 1: the healthcare program. Can you talk a little bit about
Speaker 1: what the decision was. Yeah, absolutely, So. This is a
Speaker 1: long running case that that made its way to the
Speaker 1: Fifth Circuit, And what they essentially decided was that the
Speaker 1: individual mandate, which is you know from a prior core case.
Speaker 1: You know, this is a decade of legal back and forth,
Speaker 1: was deemed at tax. Then Congress zeroed out the tax.
Speaker 1: So because it's zeroed out, it can no longer be
Speaker 1: seen as attacks. Therefore it's once again unconstitutional. But they
Speaker 1: punted essentially on the more important part the case. Because
Speaker 1: the individual mandate is zeroed out, it doesn't really matter
Speaker 1: that it's unconstitutional. What matters is whether that means that
Speaker 1: the rest of the law or parts of the rest
Speaker 1: of the law have to go with did And instead
Speaker 1: of making some kind of decision on that, they kicked
Speaker 1: it back down to the lower court judge you already
Speaker 1: ruled that he thought the whole law was unconstitutional. They
Speaker 1: just thought he wasn't careful enough or didn't look at
Speaker 1: the details enough to make that decision, although he probably
Speaker 1: will end up making the same decision. He's a he's
Speaker 1: a pretty conservative guy. So what our next steps here?
Speaker 1: Because I'm just thinking about the election coming up, and boy,
Speaker 1: it's once again healthcare is going to be a you know,
Speaker 1: a hot button issue for the candidates. How's the timing
Speaker 1: of this gonna play into what do youthink? Yeah, so
Speaker 1: it mostly depends on what the Supreme Court decides to do.
Speaker 1: They could wait until we get another decision from from
Speaker 1: that lower court judge and then um, you know that
Speaker 1: it might be appealed up to them. I believe that
Speaker 1: Democrats are going to try and take it directly to
Speaker 1: the Supreme Court, um, you know, in the hope of
Speaker 1: a faster resolution and putting this front and center in
Speaker 1: the election, because it is probably not a court case
Speaker 1: that at this point is is of benefits of the
Speaker 1: Trump administration, even though it's his Justice Department that continues
Speaker 1: to push it because we saw in in the midterm elections, uh,
Speaker 1: portions of the law that that could be struck down
Speaker 1: by this case. Protections for people with prehisting conditions, staying
Speaker 1: on your parents and surrow stuff like that could go
Speaker 1: with it, and that's become wildly popular. So if this
Speaker 1: lawsuit does strike the law down in its entirety, it
Speaker 1: would create a big mess for the election and the
Speaker 1: healthcare system at large. I'm wondering, we we've been talking
Speaker 1: for years now about uncertainty around Obamacare. What's the practical
Speaker 1: implication of having a sort of overhang of a cloud
Speaker 1: on the healthcare program given the fact that insurance companies
Speaker 1: and healthcare providers have to have you know, two year,
Speaker 1: three year or four year outlooks for their financial plans. Yeah,
Speaker 1: I mean it's created uh, you know, there's been a
Speaker 1: whole series of messes um. You know, if you go
Speaker 1: back all the way, so the earliers of law, the
Speaker 1: fact that the Medicaid expansion wouldn't be universally implemented, throwing
Speaker 1: out certain categories of subsidies for insurers all along, and
Speaker 1: then losing the individual mandate all along. This is sort
Speaker 1: of made it harder to price plans to to profitably
Speaker 1: participate in the market UM. And and and that's created a
Speaker 1: lot of disruption and made insurance UM on the individual
Speaker 1: market pretty unaffordable for people that don't qualify for for subsidies,
Speaker 1: the fact that their income linked subsidies. That's kept the
Speaker 1: market stable enough to survive. But um, you know, enrollment
Speaker 1: is way down from what was initially initially forecasted, and
Speaker 1: and it you know, it's down again this year. It persists,
Speaker 1: but not in the form that the people who are
Speaker 1: the law would have voped. Yeah, that's kind of where
Speaker 1: I wanted to go. It just seems like at Leasta mentioned,
Speaker 1: you know, it's since Obamacare has been passed, it's been
Speaker 1: it seems like it's the opposition forces and now the
Speaker 1: Republicans over the last three years have been chipping away,
Speaker 1: chipping away, chipping away at the Affordable Care Act. Is
Speaker 1: there a sense of like how much has even left
Speaker 1: of the original plan? Yeah, you know it it it
Speaker 1: is not what was originally envisioned. There are still you know,
Speaker 1: more than twenty million people that's still that are covered
Speaker 1: for the first time, that have insurance that might not
Speaker 1: otherwise not because of the individual market and because of
Speaker 1: the Medicaid expansion and then a variety of other you know,
Speaker 1: changes throughout the U system. Still enormously impactful and beneficial, uh,
Speaker 1: you know, but at the same time, it's it's not
Speaker 1: what it might have been. Or on the other you know,
Speaker 1: you might say it's not what it could be with
Speaker 1: a few tweaks to to some some loopholes and errors
Speaker 1: that that I'm sure the drafters would like to get back.
Speaker 1: Or if you, you know, you boost this up to
Speaker 1: these a little bit, you could get that coverage number
Speaker 1: a lot higher and make that coverage a lot more useful.
Speaker 1: But that will take a very different Congress than the
Speaker 1: one we have right now. So just real, quoc, twenty
Speaker 1: million people covered that wouldn't be covered. What's the bad
Speaker 1: part of that? I mean, what's the opposition saying about
Speaker 1: that it's just too expensive? Um? Well, the the argument
Speaker 1: in is that by forcing insurance to cover, you know,
Speaker 1: make women, making sure have give the same place to
Speaker 1: women as men um, that's basically cuts it freedom and
Speaker 1: kills the market. You know, I'm I'm I'm articulating for
Speaker 1: a certain angle because I think the arguments are bad.
Speaker 1: But but more or less, it's okay, they've made the
Speaker 1: market um less functional by adding these regulations. Yeah. Max Neeson, Biotech,
Speaker 1: Farm and Healthcare Commus for Bloomberg Opinion. Every time you
Speaker 1: walk in here, I think I'm gonna get smarter, but
Speaker 1: I just it just reminds me this healthcare thing is
Speaker 1: brutally complex. Max. Thanks so much for joining us. We
Speaker 1: appreciate it. It's something that you constantly have to pay
Speaker 1: attention to it because it is constantly changing. We are
Speaker 1: right smack in the middle of the holiday shopping season
Speaker 1: to get an update on what's going on out there
Speaker 1: in the world of retail. We welcome back our good
Speaker 1: friends Sema Shaw. She is director of Consumer and Retail
Speaker 1: Trends at Credit Intel, formerly a Bloomberg Intelligence. She joins
Speaker 1: us here in our Bloomberg Interactive Broker studios. Sama, thanks
Speaker 1: so much for joining us again. We always love having
Speaker 1: you talking retail. How is the holiday selling season going.
Speaker 1: It seems like the consumers in pretty good shape, so
Speaker 1: our retail sales kind of following suit. No, they're not so.
Speaker 1: I don't know if you saw November retail sales missed
Speaker 1: by thirty basis points. There was even though that included Thanksgiving,
Speaker 1: Black Friday and sup what Small Business Saturday, and they
Speaker 1: were still missed. I know a lot of holiday is
Speaker 1: very compressed this year. It's only twenty six days versus
Speaker 1: thirty two last year, so it's Christmas is literally in
Speaker 1: five ft six days from now. And with the fact
Speaker 1: that you had Prime Day in the summer and you
Speaker 1: basically have promotions all year round, there's a lot less urgency,
Speaker 1: so you know, and there's still that shift to online,
Speaker 1: so the consumer is still spending where they want to,
Speaker 1: but they want to deal and you know, they it's
Speaker 1: a little cramped though for them in terms of spending.
Speaker 1: One thing that's hard to gauge given the dynamic right
Speaker 1: now in retail is how much of the weakness that
Speaker 1: we're seeing in select retailers is their lack of adapting
Speaker 1: to the modern era and how much is due to
Speaker 1: a consumer that just really isn't capable or willing to
Speaker 1: spend the way that they used to. So don't you
Speaker 1: have a sense of what it is? So I think
Speaker 1: part of a lot of it from sort of some
Speaker 1: of the players it is that that they were slow
Speaker 1: to change. You know, they sort of got taken over
Speaker 1: by maths who expanded to that category. So you see
Speaker 1: the department stores, you see someone like a bed bath,
Speaker 1: but now you see it like for bed Bath, for example,
Speaker 1: they have a new CEO. He's basically cleaned House is
Speaker 1: going to add a new management team. He's known. He
Speaker 1: came from Target, from adding private label and omni channel.
Speaker 1: So I think if you see somebody doing that, or
Speaker 1: you see like the return of a retailer like best Buy,
Speaker 1: it's possible. But if you're too slow and you don't
Speaker 1: do it, that's when you miss the opportunity. So I
Speaker 1: think a lot of it is that, But I also
Speaker 1: think that people just really want to deal and when
Speaker 1: you have things like tariffs, even if there's a threat
Speaker 1: of tariffs or rising costs or wages, that puts pressure
Speaker 1: on the retailer because people are like, I'm not gonna
Speaker 1: buy it. T like Socima. I know the folks are
Speaker 1: Credit Intel. You guys look at kind of the financial
Speaker 1: health that credit health across the retail ecosystem. We know
Speaker 1: the retailers, particularly some of them. I guess department stores
Speaker 1: continue to struggle. Is there any light at the end
Speaker 1: of the tunnel. What are you kind of telling your clients? Um,
Speaker 1: it really depends on a sector by sector basis. We
Speaker 1: just mentioned best by doing very very well, had a
Speaker 1: great quarter, Probably you're going to have a good holiday,
Speaker 1: But then you also have somebody like an L Brands
Speaker 1: who Victoria's Secrets is really struggling. They're almost all in
Speaker 1: the mall. They're losing share to airy, so how do
Speaker 1: they revive that business without losing the momentum they have
Speaker 1: in bath and body work? So it's definitely uh hit
Speaker 1: or miss there, definitely, But you know, like home Furnishings
Speaker 1: for example, at Home is someone I'd keep an eye
Speaker 1: out from a risk perspective, right, they slowed their store growth,
Speaker 1: they have to suadly invest in an omni channel, so
Speaker 1: I don't see any margin improvement in the near future.
Speaker 1: So these are things that we sort of look at
Speaker 1: and see, like what's the prospect for them in terms
Speaker 1: of cash flow? And given the fact that you are
Speaker 1: focused on the dead side perhaps more than just EPs
Speaker 1: or other sort of top line growth areas, I'm wondering,
Speaker 1: what do you think the prospects are of an ongoing
Speaker 1: retail apocalypse or ongoing kind of wash out that we've seen.
Speaker 1: I mean, are we going to continue to see that
Speaker 1: or is this pretty much terms of store closures. I
Speaker 1: don't know that you'll see as much as you do,
Speaker 1: but it will continue to probably be people optimizing their
Speaker 1: fleet as lisas come up or move to better locations,
Speaker 1: or trying to figure out how they can improve the
Speaker 1: productivity of the box. Because retail still in the store,
Speaker 1: it's still important, but you have to make it appealing.
Speaker 1: It has to be a nice experience. And if you
Speaker 1: want to do things like by online pickup in store,
Speaker 1: which helps the retailer's margin and people like that service,
Speaker 1: you have to be prepared and have the associates trained
Speaker 1: to do so. If you go in there and nobody
Speaker 1: knows what you're talking about, you're not going to do
Speaker 1: it again. So these are things I think people have
Speaker 1: to do. So I think it passed conversations we've talked
Speaker 1: about the number of stores in American Home America is
Speaker 1: still overstored. What are you guys saying to your clients
Speaker 1: now or what are you hearing from some of your
Speaker 1: clients about how much more do we have to go
Speaker 1: in terms of kind of reducing the footprint of retail America. UM.
Speaker 1: I think some of the legacy retailers that were closing
Speaker 1: stores the sears of the world J C. Penny had closer,
Speaker 1: some of those locations were not optimal as people changed
Speaker 1: and have its change, But I think a lot of
Speaker 1: retail it's just a matter if some people overexpanded, but
Speaker 1: that box might be good for let's say a smaller,
Speaker 1: maybe non public retailer. So I think, you know, there's
Speaker 1: still lots of room for stores. It just has to
Speaker 1: be in the right location. And part of our analysis
Speaker 1: to show like how close you already your competitors. Is
Speaker 1: it going to be worth your while to open a
Speaker 1: store here? And I think a lot of it was
Speaker 1: just opening stores without really thinking about it strategically. So
Speaker 1: everyone wants a deal, So why don't these stores just
Speaker 1: mark things up twice as much and then it's going
Speaker 1: to be sixty off. In order for all of them
Speaker 1: to do that, I guess they would have to collude,
Speaker 1: which is illegal. But but I mean, in all seriousness, Uh,
Speaker 1: you know our stores trying to get away from sort
Speaker 1: of training consumed brands are Yeah, as many as possible
Speaker 1: they are. They're trying to pull back, but the immediate
Speaker 1: effect is that you see a negative impact with example
Speaker 1: GAP for example. But and that's also the ones that
Speaker 1: are in the middle tier r H completely pulled back.
Speaker 1: But they're high in luxury so they can pass through
Speaker 1: the price and you really like, it doesn't really matter.
Speaker 1: But for the middle tier where you're and if you
Speaker 1: don't have a unique product and you can do like
Speaker 1: for like comparison, then it's very hard to do that.
Speaker 1: And that's where you see the problem. So, Sam, I'm
Speaker 1: just looking at one of the recent reports from your firm,
Speaker 1: and you know, looking at the Thanksgiving period Black Friday
Speaker 1: online sales, some people putting up some good numbers. It's
Speaker 1: not just Amazon, I mean Walmart up fifty percent north
Speaker 1: is it? Can we say that the tradition retailers have
Speaker 1: finally figured out how to compete against Amazon. The larger
Speaker 1: ones have and I think that the mass is the
Speaker 1: probably the best example, uh even I mean a specialty
Speaker 1: maybe best by Williams Sonomas Over, but they have really
Speaker 1: figured out how to appeal to the customer wherever they
Speaker 1: want to shop, make it easy for them to fulfill
Speaker 1: their goods, you know, in the store on the way home,
Speaker 1: will sell you know, whatever you want to do. They
Speaker 1: make it as easy as possible. But they also have
Speaker 1: the scale to do that, and a lot of the
Speaker 1: smaller retailers don't have a lot of a lot of
Speaker 1: capital to invest in this logistics and so I think
Speaker 1: there are ways to do it, and there are ways
Speaker 1: to be competitive, but you really have to step up
Speaker 1: that investment. Have you finished your holiday shopping? I have
Speaker 1: for the most Yeah, I can. I can imagine that
Speaker 1: most people probably who are organized like I know you are,
Speaker 1: I know personally, just how organized we still have six days?
Speaker 1: What's the problem? Pickup and store? Our same day delivery?
Speaker 1: You know, these are all things that they're doing to
Speaker 1: make the consumer. Hey, like you have basically up until
Speaker 1: Christmas Eve, right, except they can get it, except that
Speaker 1: you're you're organized enough to Thank you so much. Thank you.
Speaker 1: It's nice to be bas director of Consumer and Retail
Speaker 1: Trends at Credit Intel based in New York. Talking about
Speaker 1: the retail landscape. It's kind of an interesting shift that
Speaker 1: we've seen going on. People talk about the retail apocalypse,
Speaker 1: but it's more like the retail kind of uh, I
Speaker 1: don't know, morphologists or something. I mean, it's just changing.
Speaker 1: I mean, it's a what what what Semens talked about is,
Speaker 1: you know then the omni channel experience. I mean, if
Speaker 1: you're if you can get that right like some of
Speaker 1: the big mass merchants mass merchants, then you can compete,
Speaker 1: but if you're not, maybe some of these small companies
Speaker 1: you can invest in the technology needed. That could be
Speaker 1: the big challenge. Thanks for listening to the Bloomberg Penl podcast.
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Woyds. I'm on
Speaker 1: Twitter at Lisa A. Bramwood's one before the podcast. You
Speaker 1: can always catch us worldwide on Bloomberg Radio