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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you

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Speaker 1: insight from the best and economics, finance, investment, and international relations.

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Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot

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Speaker 1: Com and of course on the Bloomberg terminal. Right now,

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Speaker 1: the challenges of Europe, the many challenges and as we

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Speaker 1: heard from David folks Landau of Deutsche Bank uh Many

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Speaker 1: many months ago on a difficult February morning, a Europe

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Speaker 1: that at some point will need to rebuild and that

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Speaker 1: includes finance, which means it's an appropriate moment to speak

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Speaker 1: with the Finance Minister of Germany, Christian Linder, here now

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Speaker 1: in Berlin, Maria today. Oh, good morning, Tom, a good

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Speaker 1: and market and yes we are joined by the German

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Speaker 1: Finance Minister, Christian lenderd Head Leonard, how are you? Thank you,

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Speaker 1: thank you for having me. And of course when I

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Speaker 1: was preparing this interview and I knew that you were

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Speaker 1: coming to our studios in Berlin, I thought, what is

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Speaker 1: the first question I can ask Christian Leonard And the

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Speaker 1: answer is obvious. Inflation When you hear, and I don't

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Speaker 1: want to get you to comment on the us to be,

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Speaker 1: but when you hear Christian leguards say inflation is now

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Speaker 1: our number one priority. We have to bring it down,

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Speaker 1: there's no questions. Is it a good thing for you? Yes,

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Speaker 1: of course I completely support the language of the e

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Speaker 1: c B and it's measures. It's our top priority as

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Speaker 1: well to bring down the inflation rates. They are a

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Speaker 1: serious risk for the economic development for people and businesses,

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Speaker 1: the investment conditions, and so it's our fiscal priority to

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Speaker 1: reduce inflation rates. It's the responsibility of e c B,

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Speaker 1: but we play our role as JUM government and European government.

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Speaker 1: So as a German finance minister, this is where you

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Speaker 1: say this is top of my agenda. It's inforition, top

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Speaker 1: of my agenda, not only now. In December, when we

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Speaker 1: hosted the G seven meeting in Bonn and Petersburg, we

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Speaker 1: underlined that bringing down inflation should be our top priority.

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Speaker 1: This has been before the policy change of the central banks,

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Speaker 1: and I think it proved to be right to do so.

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Speaker 1: You see we were proven right on on the analysis

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Speaker 1: that's for the inflation. But then there's a growth story

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Speaker 1: and you know, there's a lot of negativity around the

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Speaker 1: German story on the medium term and the short term

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Speaker 1: perhaps and the energy crisis. It's potentially the blackouts the gas.

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Speaker 1: When you look at the German economy, do you worry

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Speaker 1: about a recession? Do you predict yourself a recession? This

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Speaker 1: year has been a difficult. Of course, we were harmed

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Speaker 1: by the Russian energy law due to our too high

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Speaker 1: dependence on Russian energy imports. Of course, yes, had been

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Speaker 1: a mistake. But now we have changed our policies, um

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Speaker 1: with light speeds. We are improving our energy infrastructure. We

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Speaker 1: are bringing a more capacity of renewable energy to the grid.

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Speaker 1: And well, who thought that Germany would be able to

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Speaker 1: build new l energy terminals in less than one year?

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Speaker 1: You have done it, and I assure you, um, this

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Speaker 1: is the the very best moment to invest in Germany.

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Speaker 1: This is the very best moment to buy bonds. The

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Speaker 1: best of international business is watching you right now. That's

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Speaker 1: your pitch. But let me ask you again though on

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Speaker 1: the recession. Is there too much negative again, negativity built

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Speaker 1: on the German story. Some people say this recession is

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Speaker 1: inevitable for you, as that story overblown. If there is

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Speaker 1: you will recover fast. We will recover fast and in

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Speaker 1: the midterm um Um, I expect a very positive perspective

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Speaker 1: for the German economy. Look um, we are improving the

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Speaker 1: framework conditions for private businesses. Immigration UM into the labor

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Speaker 1: market will be less bureaucratic than it had been. We

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Speaker 1: UM invest a lot public and private money in the

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Speaker 1: transition of our economy. There will be some tax benefits

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Speaker 1: for investors in Germany. So um, after fighting inflation, my

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Speaker 1: second prior party is strengthening the German competitiveness and we

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Speaker 1: will do and you say that we'll do it. And

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Speaker 1: of course the crucial question, especially for me in Germany.

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Speaker 1: I know you like Many Germany, you speak highly about it.

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Speaker 1: I know you particularly like cars. But my question to

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Speaker 1: you is when you look at the Inflation Reduction Act,

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Speaker 1: can Germany stay competitive when you have the United States

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Speaker 1: coming in with such an aggressive policy on subsidies? Is

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Speaker 1: that something that worries you? Are you on the phone

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Speaker 1: with your US counterparts? What do you want to see

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Speaker 1: out of this? On the one hand, the Germ car

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Speaker 1: manufacturers are competitive. I think they say no, b we

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Speaker 1: mustn't fear Tesla. Tesla produces in Germany as well near Berlin.

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Speaker 1: But I think the German manufacturers they are innovative and

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Speaker 1: competitive and um, well, they have plants in the United

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Speaker 1: States as well, so I think they are less harmed

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Speaker 1: by the inflation Reduction Acts than public opinion in Germany things.

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Speaker 1: But on the other hand, on the other hand, UM,

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Speaker 1: I take the Inflation Reduction Act seriously. I have my

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Speaker 1: concerns regarding a fair level playing field between the US

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Speaker 1: Single Market and the European Union, and this is why

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Speaker 1: we need to negotiate. I'm in favor for viewers for

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Speaker 1: the European businesses in the US markets. You don't want

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Speaker 1: a trade war. We want to get We have to

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Speaker 1: avoid any kind of trade war. Instead of trade war,

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Speaker 1: we need trade diplomacy. We need new free trade agreements.

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Speaker 1: At least we have to make efforts to find a

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Speaker 1: level playing field in the perspective of a free trade

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Speaker 1: between US and European What do you perhaps through some

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Speaker 1: critics in the United States that are you Yes, you're

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Speaker 1: in a mess, but this is not her fault. Why

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Speaker 1: should we give you any waivers? Mm hmm. Value partners? Um,

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Speaker 1: who we are should be preferred trade partners. I think

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Speaker 1: my My vision is a free trade zone of liberal

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Speaker 1: democracies in the world, and one of the first steps

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Speaker 1: could be to improve the trade relationship between United States

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Speaker 1: and European Union. We would benefit both from from this idea,

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Speaker 1: and well, I think there is an openness on the

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Speaker 1: U S side. When I remind you of Janet Jones

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Speaker 1: idea of friend sharing and Inflation Reduction Act should be

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Speaker 1: reconsidered with respect of French showing and your optimistic that

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Speaker 1: can happen. Let's talk about today President Zelinski will be

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Speaker 1: meeting with President Biden. Of course, it does feel the

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Speaker 1: Ukrainians worry about lack of momentum and lack of support

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Speaker 1: this time and the war drags on. When it comes

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Speaker 1: to Germany and the European Union, will you put this

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Speaker 1: bill no matter what? And there's a very serious question

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Speaker 1: about the reparations and what to do with the Russian

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Speaker 1: Central Bank assets. In your view, who's going to pay

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Speaker 1: for this because we're talking about potentially trillion dollars in reconstruction.

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Speaker 1: It's a massive bill. At the moment, there are the

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Speaker 1: current needs of the queen which have to be met.

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Speaker 1: The European Union has decided on the macro economic assistance

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Speaker 1: plus eighteen billion years next year two UM support the

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Speaker 1: State of Queen and we will continue to support Quean bills,

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Speaker 1: military goods such as artillery. And then in the mid

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Speaker 1: tim I hope the sooner the better. Then we will

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Speaker 1: have to find ways for the re construction of Ukraine,

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Speaker 1: and okay, there are reparvations. There is UM macroeconomic assistance.

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Speaker 1: We have se multilateral banks, we have the international financial

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Speaker 1: institutions such as the I m F and the Ukrainian

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Speaker 1: economy itself. I think they have a very good perspectives.

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Speaker 1: The naturally resources UM qualified labor force, so I think

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Speaker 1: they have a very good perspective after the war. I

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Speaker 1: have to let you go, but I have to ask

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Speaker 1: you this question very briefly. Yes or no. What's going

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Speaker 1: to recover faster the German economy or the German national team?

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Speaker 1: Because the World Cup was not good for the economy.

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Speaker 1: Well that's a strong bad because you have two years

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Speaker 1: until the euro Cup and you posted right here in

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Speaker 1: this country economy of economy, Well that's a that's a

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Speaker 1: good prediction to make. Well, Mr Lennard, thank you so much,

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Speaker 1: appreciate it. Always good to see you here in our

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Speaker 1: studios in Berlin. Tom, you are ruthless. I mean, Maria,

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Speaker 1: it's just just just just I have to do it.

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Speaker 1: I just can't wait for the friendly of Germany and Spain.

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Speaker 1: It's just gonna be up team coverage Maria today. Mr

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Speaker 1: Lindner of the German government, their finance Minister. This is

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Speaker 1: a joy. And for Joe, for Global Wall Street, you

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Speaker 1: can take notes right now. P JIM is Prudential and

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Speaker 1: when they set up p JIM and resurrected it a

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Speaker 1: good number of years ago, no one could expect the

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Speaker 1: total return award winning portfolios they put together. The force

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Speaker 1: behind that, the thinking behind that was dragging from Morgan Stanley.

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Speaker 1: Greg Peters over is co c i O and he

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Speaker 1: joins this morning for fixed income brief. Greg, I'm gonna

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Speaker 1: cut to the chase. You call for a radical shift

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Speaker 1: next year. Where will that shift? So I think the

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Speaker 1: shift is in the bonds. So this year has been

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Speaker 1: historically difficult to state the obvious, Uh, but yield matters

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Speaker 1: and starting place matters, and so if you think about

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Speaker 1: just the b O J yesterday, right, we've moved from

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Speaker 1: this zero negative interest rate policy to pretty sizeably positive

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Speaker 1: territory for yields, and that matters a lot. Like when

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Speaker 1: we were looking at the tenure at fifty basis points,

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Speaker 1: our future looked really pretty bleak, right, It was hard

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Speaker 1: to kind of earn to return and return off of that.

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Speaker 1: But where we are today, I think we're in a

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Speaker 1: much better place. I think it creates much more balanced portfolios.

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Speaker 1: Those who were calling for the death of fixed income,

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Speaker 1: we're kind of right right for the year, But I

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Speaker 1: think the reset matters a lot, and so we're pretty

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Speaker 1: constructive as we head into two thousands and twenty three.

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Speaker 1: Is this a colon elfriends, a cold on credit, or

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Speaker 1: a cold on the whole universe? It's a sequencing of sorts.

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Speaker 1: So I think the first move is on the sovereign side. Uh.

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Speaker 1: So the defensive nature of fixed income starts to assert itself.

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Speaker 1: Uh it seems like there's a high probability of a recession.

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Speaker 1: Who knows. I think it's very bimordal, and so it's

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Speaker 1: really difficult to ascertain. But I think that protection mechanism

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Speaker 1: matters a lot into two thousand and twenty three, and

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Speaker 1: then I think you roll into credit and other things.

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Speaker 1: So I think it's a sequencing aspect of fixed income

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Speaker 1: that provides different flavors of protection at different times throughout

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Speaker 1: the course of the year. Does that sequencing rely on

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Speaker 1: inflation disinflating If there's a sort of just sort of

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Speaker 1: gradual and linear path to a lower level for inflation,

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Speaker 1: does have to really happen that way to make what

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Speaker 1: you're saying come true? It does. I mean, I think

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Speaker 1: the lesson of two thousand and twenty two was stagflation bad,

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Speaker 1: bad for all financial assets, even commodities are to uh

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Speaker 1: catch the knife for a little bit here towards the

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Speaker 1: end of the year. So I think as we move

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Speaker 1: off the stag inflation narrative, I think it bodes much

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Speaker 1: more favorably. If we're wrong around that. An inflation is

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Speaker 1: incredibly difficult to forecast, of course, but it does seem

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Speaker 1: like all indicators point to lower inflation in two thousand

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Speaker 1: and twenty three. I think the tell risk that we

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Speaker 1: were experiencing in two thousand and twenty three, I'm sorry,

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Speaker 1: two thousand and twenty two gets chopped off in twenty three,

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Speaker 1: and I think that matters a lot. Although if you

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Speaker 1: do see a stickier bottom. Right, let's say we stop

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Speaker 1: at three and a half percent by the end of

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Speaker 1: next year. How does that leave your call? Considering that

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Speaker 1: some people are talking about structurally higher inflation, giving given

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Speaker 1: some of the labor market dynamics, given the gaps there,

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Speaker 1: and given the de globalization that a lot of people

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Speaker 1: are talking about, that's a clear risk. And I think

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Speaker 1: that is an underappreciated risk. That said, go back to

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Speaker 1: starting points. So do we think the FED is going

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Speaker 1: to move another you know, four five hundred basis points

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Speaker 1: from here? No? Right, so we're talking about now incremental.

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Speaker 1: I do think the markets are wrong in terms of

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Speaker 1: the pricing, where the markets are pushing back on the

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Speaker 1: FED staying higher for longer. Uh. And I don't know

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Speaker 1: if I buy into that myself. I think we are

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Speaker 1: in this higher FED rate regime. But that in and

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Speaker 1: of itself isn't a bad thing for fixed income assets,

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Speaker 1: where it's about role and carry and yield and income

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Speaker 1: um And so I think it boes quite favorably. Percolating

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Speaker 1: is in the equities space, maybe international with week dollar,

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Speaker 1: with what we saw with Japan yesterday, International finally has

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Speaker 1: a day after ten twelve, fifteen years. What will international

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Speaker 1: buns do? Do they outperform, price up, yield down. I

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Speaker 1: still think the preferred habitat is in the US. I

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Speaker 1: think Europe has their struggles. Of course, they're fighting a

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Speaker 1: different inflation monster. It's a shock, right, the energy shock

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Speaker 1: very for then what we've seen here in the US.

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Speaker 1: I think the US is you know, much more on

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Speaker 1: the path and normalization. The b o J yesterday I

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Speaker 1: think was a shock to the system in that it

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Speaker 1: creates volatility that doesn't induce investment, it induces exit. Right,

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Speaker 1: So I think by virtue of that, the US is

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Speaker 1: that preferred place to be. And then if you buy

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Speaker 1: into this weaker dollar story and inflation coming down global story,

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Speaker 1: then e M has to outperform. In that scenario. You

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Speaker 1: expect in that spread between US and Europe to close

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Speaker 1: us O it's LOWA and then actually get Europeans creeping higher.

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Speaker 1: Is that how that spread is going to close? I

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Speaker 1: think that's right. But I think on the margin you'll

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Speaker 1: see a bid to the US market. Uh. And I

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Speaker 1: think Europe and Sterling in the same boat. Where there's

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Speaker 1: a tremendous amount of supply hitting the markets in two

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Speaker 1: thousand and twenty three, there's a clearing level there there's

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Speaker 1: lots of government spending uh and so I do expect

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Speaker 1: things to compress into two thousand and twenty three. Europe

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Speaker 1: is in for a difficult time, that's for sure. Time

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Speaker 1: not just the ukn E, the whold of the continent

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Speaker 1: gun into next year again. To see these numbers coming

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Speaker 1: in from the ECB, that delivery from President to Guard,

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Speaker 1: I was shocked by it last Thursday. I'm in the

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Speaker 1: camp they don't have the nominal GDP to make it work,

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Speaker 1: sort of like Japan. They're better than Japan. Some people

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Speaker 1: disagree with me and that they think the nominal GDPs.

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Speaker 1: Robust I would look at Patriot missile announcements today in

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Speaker 1: Washington is linked directly into La guard theory. He's said

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Speaker 1: this quote from Torston stock Well, this is the detail

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Speaker 1: that made him acclaimed at Deutsche Bank. I remember hanging

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Speaker 1: out with him at Davos. And you know when Torston

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Speaker 1: Slock speaks fancy Davos, people stop and listen. For those

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Speaker 1: on radio, labor demand five million people higher than labor supply,

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Speaker 1: which is why wage inflation is so strong. He goes

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Speaker 1: on to say the solution to the imbalance is either

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Speaker 1: to increase the labor supply, for example through higher immigration,

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Speaker 1: or to lower labor demand, for example, through an increase

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Speaker 1: in the unemployment rate. Great Peters, it looks like we're

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Speaker 1: leaning on the latter pretty hard, doesn't it. It does, indeed,

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Speaker 1: it does, indeed, And so this is the I think

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Speaker 1: the tricky part of the marketplace and why I think

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Speaker 1: it's a bimodal outcome. Right, you know, it's amazing, you're greg.

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Speaker 1: You know they're over in Jersey City. It's so cold

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Speaker 1: in New York. Journey he walked across the Hudson River

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Speaker 1: this morning, skated across, skated across. It's like a Dutch

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Speaker 1: things to do that in the Victorian times and attempts.

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Speaker 1: Remember that. I don't remember that Victorian times of festive humor.

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Speaker 1: That was time that was you know, you guys have

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Speaker 1: to lay off the egg knock so early in the morning,

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Speaker 1: you know, you know, why why are you telling people

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Speaker 1: that's so publicly just a little what do they call that?

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Speaker 1: You call that a festive tipple? Right, you know, just

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Speaker 1: a little drink. Big story. In the last twenty four answer,

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Speaker 1: it's market that b J. This was Verry Nelson of

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Speaker 1: Wells Fargo. He had this to say, Dolly end up

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Speaker 1: trend is likely over more downside ahead the ends days

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Speaker 1: As a no brain of funding currency unlikely, numbered asset

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Speaker 1: managers are likely to unwind short positions further over the

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Speaker 1: next few weeks, driving Dolly back to one five. This

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Speaker 1: morning in the low one thirties, verk Nelson of Wills

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Speaker 1: Farco joins us Right now, Eric, can we start there?

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Speaker 1: How you think we have to rebalance as we shift

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Speaker 1: away from this old regime. Well, yeah, you've you've talked

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Speaker 1: a lot this morning, John, and you and the team

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Speaker 1: have talked about the end of an era in various

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Speaker 1: products and various paradigm shifts. Here one big thing that

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Speaker 1: I noted they are on the funding currency side. We've

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Speaker 1: had a huge shift from the ECB, the Swiss National

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Speaker 1: Bank and the b o J. Now this year I

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Speaker 1: think about those are the really the three big funding

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Speaker 1: currencies for carry traders in the sex market, and they've

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Speaker 1: all just completely shifted on us. This is really a

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Speaker 1: warning shot here for carry traders. I want to focus on.

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Speaker 1: It's sort of an arcane topic maybe some viewers, but

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Speaker 1: at the cross between the Mexican pay so in the

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Speaker 1: Japanese yend provided carry train returns of up until about

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Speaker 1: two or three weeks ago. We lost about a quarter

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Speaker 1: to a third of that in a matter of two weeks.

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Speaker 1: So really, I think the E M carry trade is

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Speaker 1: really at risk here, and frankly the G ten carry

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Speaker 1: trade as well. Pay so yen I'm looking at her quickly, folks.

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Speaker 1: Pay so yenn has gone four standard deviations minus two

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Speaker 1: to plus two in a cup of coffee. Is a

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Speaker 1: dollar going to do the same well? Naturally, Tom, I

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Speaker 1: think you'll see some unwines in these yend crosses and

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Speaker 1: that's going to spill over to the dollar yen exchange rate. Uh. Certainly,

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Speaker 1: if you look at the the asset managed positions in

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Speaker 1: the end, they have been stickier and probably up until now.

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Speaker 1: We'll find out from the data next week. Um. But

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Speaker 1: to me, the question for dollar yen is getting back

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Speaker 1: to will be I'll say easy and quotes in the

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Speaker 1: sense that that's sort of like getting from say seven

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Speaker 1: percent on inflation, but what about from getting from five

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Speaker 1: percent to three percent on inflation or from dollar yen?

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Speaker 1: And that's going to be the challenge. That's the nonlineararities

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Speaker 1: here on real LEASA. I just want to stop and say,

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Speaker 1: this is what the Bloomberg terminals about. We have a

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Speaker 1: guest who talks yen paso and I can bring it

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Speaker 1: up in a cup of coffee. That's what the Bloomberg.

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Speaker 1: That's why there's a gazillion of these Bloomberg terminals out there.

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Speaker 1: A lot of people are doing that and looking at

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Speaker 1: some pretty phenomenal moves over the past forty eight hours.

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Speaker 1: In response to this action from the Bank of Japan,

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Speaker 1: you noted, Eric that the action that they took does

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Speaker 1: not necessarily show that the willing is that the bank

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Speaker 1: is going to ease, just simply that they are willing

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Speaker 1: to act in some sort of shift, but not necessarily

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Speaker 1: a breakup of yield curve control. Given that's the case,

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Speaker 1: what would it take for the end to appreciate that

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Speaker 1: much more? Why is there so much enthusiasm around the

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Speaker 1: strength and the end the confidence of getting inflation under

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Speaker 1: control if this is just kicking up the the target

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Speaker 1: by bits. Well, Lisa, like I mentioned, there's there's the

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Speaker 1: unwind of the carry trade, and that certainly can can

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Speaker 1: take yen to some extent. The bigger question here is

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Speaker 1: are we going to see a longer shift in capital

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Speaker 1: flows from Japan. Japan for twenty thirty years has been

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Speaker 1: a huge buyer of foreign assets, probably the biggest in

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Speaker 1: the world. Question now is, if we have some real

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Speaker 1: positive wage price dynamic taking hold in Japan and we

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Speaker 1: have some real increase in nominal rates, here is a

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Speaker 1: substantial amount of money going to come back from abroad

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Speaker 1: back to Japan that can drive that move from one

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Speaker 1: or so down to a hundred. But crucially this relies

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Speaker 1: on inflation in Japan, continuing growth remaining quite strong UH

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Speaker 1: and the b O J at least providing a little

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Speaker 1: bit more upward lift in those nominally yields. So, Eric,

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Speaker 1: who are you looking for them? Where are you looking

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Speaker 1: for a Japanese demand? That supported European bond markets for

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Speaker 1: sure over the few years, and the treasury market, where

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Speaker 1: are you looking for that to wine? Well, yeah, John,

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Speaker 1: you mentioned the US and European bonds, and look at

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Speaker 1: the hedge yield on that when you when you swap

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Speaker 1: these these returns back into UH and y end it's

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Speaker 1: it's really a brutal picture for Japanese investors buying US treasuries,

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Speaker 1: buying French bonds, and so this this really accelerates that

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Speaker 1: trend of UH, probably net selling of treasuries and French bonds. UM.

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Speaker 1: You certainly have to also watch for UH some some

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Speaker 1: asset back products in the United States, where Japan has

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Speaker 1: historically been a pretty big present. UM. So that's really

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Speaker 1: where I'm focusing my attention. Just to wrap things up

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Speaker 1: big picture, Erica was speaking of Jim Caren and Morgan

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Speaker 1: Stanley just yesterday over the Bloomberg and I'll catch up

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Speaker 1: with him a little bit later this morning. He's asking

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Speaker 1: the following question the second order effects of markets leveraged

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Speaker 1: to low and stable yields. Muhammadalarian brought that up yesterday

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Speaker 1: as well on the program. Eric, can you tell me

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Speaker 1: what you think those effects will be as we shift

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Speaker 1: away from this regime leveraged to low and staple yields

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Speaker 1: for much of the last ten years. Well, John, I

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Speaker 1: think central banks really need to be careful here. And

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Speaker 1: this comes back to why the b o J has

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Speaker 1: sort of couched. This move is not a tightening of

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Speaker 1: policy and there's not more to come. They've increased their

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Speaker 1: buying of of jgbs because they know just how fragile

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Speaker 1: the b o J or the Japanese system is and

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Speaker 1: how leveraged this to low yields. UM. So you certainly

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Speaker 1: have to watch some of the Japanese banks and there

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Speaker 1: exposure and duration risk. I think the bigger point here, though, John,

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Speaker 1: is central banks. We talked about the end of the

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Speaker 1: central bank. Put in the equity context, what about the

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Speaker 1: bond context. You know, every central bank is doing quantitative

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Speaker 1: Titan next year. They're hiking pretty aggressively. We've really never

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Speaker 1: seen this environment before, especially given our starting points, so

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Speaker 1: we've got to really watch out for for long term

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Speaker 1: bond yields. Ine, Eric, this is wonderful. Thank you, sir Nowson.

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Speaker 1: That of last Faco Alicia Sherman joins us now with Bernstein,

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Speaker 1: double degree, Warton Kellogg, all the rest of it, forget

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Speaker 1: about it. She enjoyed the trenches at Ross stores with

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Speaker 1: a real job before she ended up in securities analysis

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Speaker 1: and nation thrilled that you're with us. Your note on

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Speaker 1: Nike seems from another planet. Your optimism on their view

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Speaker 1: forward is extraordinary. What does the gloom crew have wrong

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Speaker 1: about the American consumer buying Nike shoes? Um? Thank you

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Speaker 1: for having me on so so the negative sentiment around

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Speaker 1: Nike going into this quarter was all about the next

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Speaker 1: kind of three to six months. It was about an

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Speaker 1: inventory in North American promotions, the pace of China recovery.

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Speaker 1: If you fast forward six months, the brand is stronger

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Speaker 1: than it's ever been. It has more customers, more sales,

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Speaker 1: more distribution points. Um. It is number one in every

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Speaker 1: market in the world. It continues to hold onto its

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Speaker 1: number one China position even despite everything that's happened in

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Speaker 1: the last two years. And we saw evidence of that

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Speaker 1: in the print yesterday. I mean, you know, we're talking

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Speaker 1: about a cautious consumer. But Nike did thirty plus percent

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Speaker 1: constant currency growth in India and in North America in

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Speaker 1: this quarter. Um. Now, some of that was lapping a

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Speaker 1: softer quarter last year, but you know, it's still shows resilience.

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Speaker 1: It was number one on to mall in China. There

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Speaker 1: is a path to recovery. So I think the bloom

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Speaker 1: and doom is very short term and if you skip

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Speaker 1: forward the short from difficulties, this is a really strong stock.

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Speaker 1: And these the stock usually does well in a recession

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Speaker 1: coming out of recessionary environment. So long term, I in

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Speaker 1: Varya Bus and Thesa, the gentleman from Argentina were as

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Speaker 1: Adidas the gentleman from France, he have three goals. Where's

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Speaker 1: the Nike Zoom Mercurial super Fly nine km soccer cleats

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Speaker 1: to peep will buy the product? Do they see unit

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Speaker 1: sales because their heroes still where this stuff? Is that

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Speaker 1: still ger Maine? Yeah? Actually, I mean they highlighted they

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Speaker 1: did not mention Argentina's win, but they did highlights Boot

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Speaker 1: the Mercurial as one of their best selling products. Um,

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Speaker 1: it's not just a football. Boot is also the kids.

431
00:26:19,880 --> 00:26:22,800
Speaker 1: It's also the merch. So does drive a huge amount

432
00:26:22,920 --> 00:26:25,640
Speaker 1: of um, you know kind of merchandising sales. And both

433
00:26:25,760 --> 00:26:28,359
Speaker 1: Nike and NATIDSK because of this big final will have

434
00:26:28,440 --> 00:26:31,439
Speaker 1: benefited from that. As you say merch, I see Tom's

435
00:26:31,480 --> 00:26:33,680
Speaker 1: eyes light up. He wants merch and he's been asking

436
00:26:33,720 --> 00:26:35,720
Speaker 1: for March for a long time. And I went to

437
00:26:35,840 --> 00:26:37,480
Speaker 1: the Tots and they were sold out of all the

438
00:26:37,600 --> 00:26:39,760
Speaker 1: Nike stuff. John showed me the store in the way out,

439
00:26:39,880 --> 00:26:43,600
Speaker 1: and I was lower. I got I got the sun

440
00:26:43,760 --> 00:26:45,880
Speaker 1: jersey from Mrs trying and get in the messy Jesse.

441
00:26:46,040 --> 00:26:48,680
Speaker 1: Now I forget about Yeah. Well, I will say that

442
00:26:48,720 --> 00:26:51,600
Speaker 1: there's a question about whether Ansia this is a Nike

443
00:26:51,760 --> 00:26:55,960
Speaker 1: specific story and a hero specific story, or whether this

444
00:26:56,080 --> 00:26:59,120
Speaker 1: is a broader retail resilience and the sense that people

445
00:26:59,160 --> 00:27:01,200
Speaker 1: are going to keep dying. There was a lull and

446
00:27:01,280 --> 00:27:03,040
Speaker 1: then people will go back to the brands that they

447
00:27:03,080 --> 00:27:07,960
Speaker 1: know and love. No, I think I'm not that bullish

448
00:27:08,000 --> 00:27:10,840
Speaker 1: about the about the broader consumer environment. I think I

449
00:27:10,880 --> 00:27:12,800
Speaker 1: think there is a softening, and you see it in

450
00:27:12,920 --> 00:27:16,200
Speaker 1: the traffic data, you see it in the guidance of

451
00:27:16,320 --> 00:27:17,960
Speaker 1: many of the company would just come out of a

452
00:27:18,000 --> 00:27:20,680
Speaker 1: wave of earnings, and the performance in the current quarter

453
00:27:20,760 --> 00:27:23,360
Speaker 1: has been strong. The guidance has been a lot more

454
00:27:23,440 --> 00:27:26,840
Speaker 1: cautious across the board except for the very hard value

455
00:27:26,880 --> 00:27:29,160
Speaker 1: retailers and the hard value retailers. You know, I covered

456
00:27:29,160 --> 00:27:32,080
Speaker 1: the off preisers. They did terribly this year and they're

457
00:27:32,200 --> 00:27:34,680
Speaker 1: much more abulition about next year. But the mainstream and

458
00:27:34,720 --> 00:27:37,600
Speaker 1: slightly premium retailers are facing the opposite issue. And you know,

459
00:27:37,640 --> 00:27:40,640
Speaker 1: when you look at Nike's guidance, despite the strong performance

460
00:27:40,720 --> 00:27:43,440
Speaker 1: dis order, they only inched up their guidance a tiny

461
00:27:43,520 --> 00:27:46,119
Speaker 1: bit because they are being cautious on China and on

462
00:27:46,240 --> 00:27:49,159
Speaker 1: North America in particularly. How much do you see consolidation

463
00:27:49,280 --> 00:27:51,639
Speaker 1: right now in the show around the strongest brands, this

464
00:27:51,800 --> 00:27:54,320
Speaker 1: idea that we've been waiting for this washout and retail

465
00:27:54,400 --> 00:27:57,359
Speaker 1: for so long, and suddenly we might actually see something

466
00:27:57,720 --> 00:28:00,520
Speaker 1: more like the wave of consolidation, the if you will

467
00:28:01,040 --> 00:28:03,520
Speaker 1: Tom's phrase zombie roll up that a lot of people

468
00:28:03,560 --> 00:28:07,080
Speaker 1: have been looking for in this sector. We see it

469
00:28:07,280 --> 00:28:09,399
Speaker 1: every time we come out of a recession. So if

470
00:28:09,440 --> 00:28:11,880
Speaker 1: you look at the numbers coming out of the GFC,

471
00:28:12,400 --> 00:28:15,160
Speaker 1: Nike was the single biggest share gainer in North America.

472
00:28:15,400 --> 00:28:17,440
Speaker 1: If you look at the numbers even more recently coming

473
00:28:17,480 --> 00:28:22,320
Speaker 1: out of COVID one, Nike was the single biggest share gainer.

474
00:28:22,600 --> 00:28:26,040
Speaker 1: And the share losers are the Tier two, Tier three brands.

475
00:28:26,080 --> 00:28:28,120
Speaker 1: Some of them closed down stores, some of them shut

476
00:28:28,200 --> 00:28:31,320
Speaker 1: down entirely. So there is a share reallocation, and being

477
00:28:31,359 --> 00:28:34,200
Speaker 1: the biggest in the market gives you that outsized benefit

478
00:28:34,240 --> 00:28:36,520
Speaker 1: when you get your fair share. So I expected to

479
00:28:36,560 --> 00:28:39,160
Speaker 1: be more coming out of rather than going into a

480
00:28:39,240 --> 00:28:41,880
Speaker 1: recessionary environment. But yes, I mean that's part of the

481
00:28:41,960 --> 00:28:45,200
Speaker 1: reason why in the sportswear sector, strong brands do better

482
00:28:45,280 --> 00:28:49,040
Speaker 1: because they tend to consolidate share over time, particularly when

483
00:28:49,080 --> 00:28:51,000
Speaker 1: the market is coming out of an area of weakness.

484
00:28:51,160 --> 00:28:54,120
Speaker 1: An Assia Shaman of Burnstain and Assha. Thank you just wonderful.

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00:28:54,200 --> 00:28:57,880
Speaker 1: This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

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00:28:58,000 --> 00:29:01,360
Speaker 1: us live weekdays from seven to in am Eastern on

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00:29:01,440 --> 00:29:05,640
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six

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00:29:05,800 --> 00:29:10,640
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489
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Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course on

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00:29:19,840 --> 00:29:23,960
Speaker 1: the terminal. I'm Tom keene In. This is Bloomberg