Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot
Speaker 1: Com and of course on the Bloomberg terminal. Right now,
Speaker 1: the challenges of Europe, the many challenges and as we
Speaker 1: heard from David folks Landau of Deutsche Bank uh Many
Speaker 1: many months ago on a difficult February morning, a Europe
Speaker 1: that at some point will need to rebuild and that
Speaker 1: includes finance, which means it's an appropriate moment to speak
Speaker 1: with the Finance Minister of Germany, Christian Linder, here now
Speaker 1: in Berlin, Maria today. Oh, good morning, Tom, a good
Speaker 1: and market and yes we are joined by the German
Speaker 1: Finance Minister, Christian lenderd Head Leonard, how are you? Thank you,
Speaker 1: thank you for having me. And of course when I
Speaker 1: was preparing this interview and I knew that you were
Speaker 1: coming to our studios in Berlin, I thought, what is
Speaker 1: the first question I can ask Christian Leonard And the
Speaker 1: answer is obvious. Inflation When you hear, and I don't
Speaker 1: want to get you to comment on the us to be,
Speaker 1: but when you hear Christian leguards say inflation is now
Speaker 1: our number one priority. We have to bring it down,
Speaker 1: there's no questions. Is it a good thing for you? Yes,
Speaker 1: of course I completely support the language of the e
Speaker 1: c B and it's measures. It's our top priority as
Speaker 1: well to bring down the inflation rates. They are a
Speaker 1: serious risk for the economic development for people and businesses,
Speaker 1: the investment conditions, and so it's our fiscal priority to
Speaker 1: reduce inflation rates. It's the responsibility of e c B,
Speaker 1: but we play our role as JUM government and European government.
Speaker 1: So as a German finance minister, this is where you
Speaker 1: say this is top of my agenda. It's inforition, top
Speaker 1: of my agenda, not only now. In December, when we
Speaker 1: hosted the G seven meeting in Bonn and Petersburg, we
Speaker 1: underlined that bringing down inflation should be our top priority.
Speaker 1: This has been before the policy change of the central banks,
Speaker 1: and I think it proved to be right to do so.
Speaker 1: You see we were proven right on on the analysis
Speaker 1: that's for the inflation. But then there's a growth story
Speaker 1: and you know, there's a lot of negativity around the
Speaker 1: German story on the medium term and the short term
Speaker 1: perhaps and the energy crisis. It's potentially the blackouts the gas.
Speaker 1: When you look at the German economy, do you worry
Speaker 1: about a recession? Do you predict yourself a recession? This
Speaker 1: year has been a difficult. Of course, we were harmed
Speaker 1: by the Russian energy law due to our too high
Speaker 1: dependence on Russian energy imports. Of course, yes, had been
Speaker 1: a mistake. But now we have changed our policies, um
Speaker 1: with light speeds. We are improving our energy infrastructure. We
Speaker 1: are bringing a more capacity of renewable energy to the grid.
Speaker 1: And well, who thought that Germany would be able to
Speaker 1: build new l energy terminals in less than one year?
Speaker 1: You have done it, and I assure you, um, this
Speaker 1: is the the very best moment to invest in Germany.
Speaker 1: This is the very best moment to buy bonds. The
Speaker 1: best of international business is watching you right now. That's
Speaker 1: your pitch. But let me ask you again though on
Speaker 1: the recession. Is there too much negative again, negativity built
Speaker 1: on the German story. Some people say this recession is
Speaker 1: inevitable for you, as that story overblown. If there is
Speaker 1: you will recover fast. We will recover fast and in
Speaker 1: the midterm um Um, I expect a very positive perspective
Speaker 1: for the German economy. Look um, we are improving the
Speaker 1: framework conditions for private businesses. Immigration UM into the labor
Speaker 1: market will be less bureaucratic than it had been. We
Speaker 1: UM invest a lot public and private money in the
Speaker 1: transition of our economy. There will be some tax benefits
Speaker 1: for investors in Germany. So um, after fighting inflation, my
Speaker 1: second prior party is strengthening the German competitiveness and we
Speaker 1: will do and you say that we'll do it. And
Speaker 1: of course the crucial question, especially for me in Germany.
Speaker 1: I know you like Many Germany, you speak highly about it.
Speaker 1: I know you particularly like cars. But my question to
Speaker 1: you is when you look at the Inflation Reduction Act,
Speaker 1: can Germany stay competitive when you have the United States
Speaker 1: coming in with such an aggressive policy on subsidies? Is
Speaker 1: that something that worries you? Are you on the phone
Speaker 1: with your US counterparts? What do you want to see
Speaker 1: out of this? On the one hand, the Germ car
Speaker 1: manufacturers are competitive. I think they say no, b we
Speaker 1: mustn't fear Tesla. Tesla produces in Germany as well near Berlin.
Speaker 1: But I think the German manufacturers they are innovative and
Speaker 1: competitive and um, well, they have plants in the United
Speaker 1: States as well, so I think they are less harmed
Speaker 1: by the inflation Reduction Acts than public opinion in Germany things.
Speaker 1: But on the other hand, on the other hand, UM,
Speaker 1: I take the Inflation Reduction Act seriously. I have my
Speaker 1: concerns regarding a fair level playing field between the US
Speaker 1: Single Market and the European Union, and this is why
Speaker 1: we need to negotiate. I'm in favor for viewers for
Speaker 1: the European businesses in the US markets. You don't want
Speaker 1: a trade war. We want to get We have to
Speaker 1: avoid any kind of trade war. Instead of trade war,
Speaker 1: we need trade diplomacy. We need new free trade agreements.
Speaker 1: At least we have to make efforts to find a
Speaker 1: level playing field in the perspective of a free trade
Speaker 1: between US and European What do you perhaps through some
Speaker 1: critics in the United States that are you Yes, you're
Speaker 1: in a mess, but this is not her fault. Why
Speaker 1: should we give you any waivers? Mm hmm. Value partners? Um,
Speaker 1: who we are should be preferred trade partners. I think
Speaker 1: my My vision is a free trade zone of liberal
Speaker 1: democracies in the world, and one of the first steps
Speaker 1: could be to improve the trade relationship between United States
Speaker 1: and European Union. We would benefit both from from this idea,
Speaker 1: and well, I think there is an openness on the
Speaker 1: U S side. When I remind you of Janet Jones
Speaker 1: idea of friend sharing and Inflation Reduction Act should be
Speaker 1: reconsidered with respect of French showing and your optimistic that
Speaker 1: can happen. Let's talk about today President Zelinski will be
Speaker 1: meeting with President Biden. Of course, it does feel the
Speaker 1: Ukrainians worry about lack of momentum and lack of support
Speaker 1: this time and the war drags on. When it comes
Speaker 1: to Germany and the European Union, will you put this
Speaker 1: bill no matter what? And there's a very serious question
Speaker 1: about the reparations and what to do with the Russian
Speaker 1: Central Bank assets. In your view, who's going to pay
Speaker 1: for this because we're talking about potentially trillion dollars in reconstruction.
Speaker 1: It's a massive bill. At the moment, there are the
Speaker 1: current needs of the queen which have to be met.
Speaker 1: The European Union has decided on the macro economic assistance
Speaker 1: plus eighteen billion years next year two UM support the
Speaker 1: State of Queen and we will continue to support Quean bills,
Speaker 1: military goods such as artillery. And then in the mid
Speaker 1: tim I hope the sooner the better. Then we will
Speaker 1: have to find ways for the re construction of Ukraine,
Speaker 1: and okay, there are reparvations. There is UM macroeconomic assistance.
Speaker 1: We have se multilateral banks, we have the international financial
Speaker 1: institutions such as the I m F and the Ukrainian
Speaker 1: economy itself. I think they have a very good perspectives.
Speaker 1: The naturally resources UM qualified labor force, so I think
Speaker 1: they have a very good perspective after the war. I
Speaker 1: have to let you go, but I have to ask
Speaker 1: you this question very briefly. Yes or no. What's going
Speaker 1: to recover faster the German economy or the German national team?
Speaker 1: Because the World Cup was not good for the economy.
Speaker 1: Well that's a strong bad because you have two years
Speaker 1: until the euro Cup and you posted right here in
Speaker 1: this country economy of economy, Well that's a that's a
Speaker 1: good prediction to make. Well, Mr Lennard, thank you so much,
Speaker 1: appreciate it. Always good to see you here in our
Speaker 1: studios in Berlin. Tom, you are ruthless. I mean, Maria,
Speaker 1: it's just just just just I have to do it.
Speaker 1: I just can't wait for the friendly of Germany and Spain.
Speaker 1: It's just gonna be up team coverage Maria today. Mr
Speaker 1: Lindner of the German government, their finance Minister. This is
Speaker 1: a joy. And for Joe, for Global Wall Street, you
Speaker 1: can take notes right now. P JIM is Prudential and
Speaker 1: when they set up p JIM and resurrected it a
Speaker 1: good number of years ago, no one could expect the
Speaker 1: total return award winning portfolios they put together. The force
Speaker 1: behind that, the thinking behind that was dragging from Morgan Stanley.
Speaker 1: Greg Peters over is co c i O and he
Speaker 1: joins this morning for fixed income brief. Greg, I'm gonna
Speaker 1: cut to the chase. You call for a radical shift
Speaker 1: next year. Where will that shift? So I think the
Speaker 1: shift is in the bonds. So this year has been
Speaker 1: historically difficult to state the obvious, Uh, but yield matters
Speaker 1: and starting place matters, and so if you think about
Speaker 1: just the b O J yesterday, right, we've moved from
Speaker 1: this zero negative interest rate policy to pretty sizeably positive
Speaker 1: territory for yields, and that matters a lot. Like when
Speaker 1: we were looking at the tenure at fifty basis points,
Speaker 1: our future looked really pretty bleak, right, It was hard
Speaker 1: to kind of earn to return and return off of that.
Speaker 1: But where we are today, I think we're in a
Speaker 1: much better place. I think it creates much more balanced portfolios.
Speaker 1: Those who were calling for the death of fixed income,
Speaker 1: we're kind of right right for the year, But I
Speaker 1: think the reset matters a lot, and so we're pretty
Speaker 1: constructive as we head into two thousands and twenty three.
Speaker 1: Is this a colon elfriends, a cold on credit, or
Speaker 1: a cold on the whole universe? It's a sequencing of sorts.
Speaker 1: So I think the first move is on the sovereign side. Uh.
Speaker 1: So the defensive nature of fixed income starts to assert itself.
Speaker 1: Uh it seems like there's a high probability of a recession.
Speaker 1: Who knows. I think it's very bimordal, and so it's
Speaker 1: really difficult to ascertain. But I think that protection mechanism
Speaker 1: matters a lot into two thousand and twenty three, and
Speaker 1: then I think you roll into credit and other things.
Speaker 1: So I think it's a sequencing aspect of fixed income
Speaker 1: that provides different flavors of protection at different times throughout
Speaker 1: the course of the year. Does that sequencing rely on
Speaker 1: inflation disinflating If there's a sort of just sort of
Speaker 1: gradual and linear path to a lower level for inflation,
Speaker 1: does have to really happen that way to make what
Speaker 1: you're saying come true? It does. I mean, I think
Speaker 1: the lesson of two thousand and twenty two was stagflation bad,
Speaker 1: bad for all financial assets, even commodities are to uh
Speaker 1: catch the knife for a little bit here towards the
Speaker 1: end of the year. So I think as we move
Speaker 1: off the stag inflation narrative, I think it bodes much
Speaker 1: more favorably. If we're wrong around that. An inflation is
Speaker 1: incredibly difficult to forecast, of course, but it does seem
Speaker 1: like all indicators point to lower inflation in two thousand
Speaker 1: and twenty three. I think the tell risk that we
Speaker 1: were experiencing in two thousand and twenty three, I'm sorry,
Speaker 1: two thousand and twenty two gets chopped off in twenty three,
Speaker 1: and I think that matters a lot. Although if you
Speaker 1: do see a stickier bottom. Right, let's say we stop
Speaker 1: at three and a half percent by the end of
Speaker 1: next year. How does that leave your call? Considering that
Speaker 1: some people are talking about structurally higher inflation, giving given
Speaker 1: some of the labor market dynamics, given the gaps there,
Speaker 1: and given the de globalization that a lot of people
Speaker 1: are talking about, that's a clear risk. And I think
Speaker 1: that is an underappreciated risk. That said, go back to
Speaker 1: starting points. So do we think the FED is going
Speaker 1: to move another you know, four five hundred basis points
Speaker 1: from here? No? Right, so we're talking about now incremental.
Speaker 1: I do think the markets are wrong in terms of
Speaker 1: the pricing, where the markets are pushing back on the
Speaker 1: FED staying higher for longer. Uh. And I don't know
Speaker 1: if I buy into that myself. I think we are
Speaker 1: in this higher FED rate regime. But that in and
Speaker 1: of itself isn't a bad thing for fixed income assets,
Speaker 1: where it's about role and carry and yield and income
Speaker 1: um And so I think it boes quite favorably. Percolating
Speaker 1: is in the equities space, maybe international with week dollar,
Speaker 1: with what we saw with Japan yesterday, International finally has
Speaker 1: a day after ten twelve, fifteen years. What will international
Speaker 1: buns do? Do they outperform, price up, yield down. I
Speaker 1: still think the preferred habitat is in the US. I
Speaker 1: think Europe has their struggles. Of course, they're fighting a
Speaker 1: different inflation monster. It's a shock, right, the energy shock
Speaker 1: very for then what we've seen here in the US.
Speaker 1: I think the US is you know, much more on
Speaker 1: the path and normalization. The b o J yesterday I
Speaker 1: think was a shock to the system in that it
Speaker 1: creates volatility that doesn't induce investment, it induces exit. Right,
Speaker 1: So I think by virtue of that, the US is
Speaker 1: that preferred place to be. And then if you buy
Speaker 1: into this weaker dollar story and inflation coming down global story,
Speaker 1: then e M has to outperform. In that scenario. You
Speaker 1: expect in that spread between US and Europe to close
Speaker 1: us O it's LOWA and then actually get Europeans creeping higher.
Speaker 1: Is that how that spread is going to close? I
Speaker 1: think that's right. But I think on the margin you'll
Speaker 1: see a bid to the US market. Uh. And I
Speaker 1: think Europe and Sterling in the same boat. Where there's
Speaker 1: a tremendous amount of supply hitting the markets in two
Speaker 1: thousand and twenty three, there's a clearing level there there's
Speaker 1: lots of government spending uh and so I do expect
Speaker 1: things to compress into two thousand and twenty three. Europe
Speaker 1: is in for a difficult time, that's for sure. Time
Speaker 1: not just the ukn E, the whold of the continent
Speaker 1: gun into next year again. To see these numbers coming
Speaker 1: in from the ECB, that delivery from President to Guard,
Speaker 1: I was shocked by it last Thursday. I'm in the
Speaker 1: camp they don't have the nominal GDP to make it work,
Speaker 1: sort of like Japan. They're better than Japan. Some people
Speaker 1: disagree with me and that they think the nominal GDPs.
Speaker 1: Robust I would look at Patriot missile announcements today in
Speaker 1: Washington is linked directly into La guard theory. He's said
Speaker 1: this quote from Torston stock Well, this is the detail
Speaker 1: that made him acclaimed at Deutsche Bank. I remember hanging
Speaker 1: out with him at Davos. And you know when Torston
Speaker 1: Slock speaks fancy Davos, people stop and listen. For those
Speaker 1: on radio, labor demand five million people higher than labor supply,
Speaker 1: which is why wage inflation is so strong. He goes
Speaker 1: on to say the solution to the imbalance is either
Speaker 1: to increase the labor supply, for example through higher immigration,
Speaker 1: or to lower labor demand, for example, through an increase
Speaker 1: in the unemployment rate. Great Peters, it looks like we're
Speaker 1: leaning on the latter pretty hard, doesn't it. It does, indeed,
Speaker 1: it does, indeed, And so this is the I think
Speaker 1: the tricky part of the marketplace and why I think
Speaker 1: it's a bimodal outcome. Right, you know, it's amazing, you're greg.
Speaker 1: You know they're over in Jersey City. It's so cold
Speaker 1: in New York. Journey he walked across the Hudson River
Speaker 1: this morning, skated across, skated across. It's like a Dutch
Speaker 1: things to do that in the Victorian times and attempts.
Speaker 1: Remember that. I don't remember that Victorian times of festive humor.
Speaker 1: That was time that was you know, you guys have
Speaker 1: to lay off the egg knock so early in the morning,
Speaker 1: you know, you know, why why are you telling people
Speaker 1: that's so publicly just a little what do they call that?
Speaker 1: You call that a festive tipple? Right, you know, just
Speaker 1: a little drink. Big story. In the last twenty four answer,
Speaker 1: it's market that b J. This was Verry Nelson of
Speaker 1: Wells Fargo. He had this to say, Dolly end up
Speaker 1: trend is likely over more downside ahead the ends days
Speaker 1: As a no brain of funding currency unlikely, numbered asset
Speaker 1: managers are likely to unwind short positions further over the
Speaker 1: next few weeks, driving Dolly back to one five. This
Speaker 1: morning in the low one thirties, verk Nelson of Wills
Speaker 1: Farco joins us Right now, Eric, can we start there?
Speaker 1: How you think we have to rebalance as we shift
Speaker 1: away from this old regime. Well, yeah, you've you've talked
Speaker 1: a lot this morning, John, and you and the team
Speaker 1: have talked about the end of an era in various
Speaker 1: products and various paradigm shifts. Here one big thing that
Speaker 1: I noted they are on the funding currency side. We've
Speaker 1: had a huge shift from the ECB, the Swiss National
Speaker 1: Bank and the b o J. Now this year I
Speaker 1: think about those are the really the three big funding
Speaker 1: currencies for carry traders in the sex market, and they've
Speaker 1: all just completely shifted on us. This is really a
Speaker 1: warning shot here for carry traders. I want to focus on.
Speaker 1: It's sort of an arcane topic maybe some viewers, but
Speaker 1: at the cross between the Mexican pay so in the
Speaker 1: Japanese yend provided carry train returns of up until about
Speaker 1: two or three weeks ago. We lost about a quarter
Speaker 1: to a third of that in a matter of two weeks.
Speaker 1: So really, I think the E M carry trade is
Speaker 1: really at risk here, and frankly the G ten carry
Speaker 1: trade as well. Pay so yen I'm looking at her quickly, folks.
Speaker 1: Pay so yenn has gone four standard deviations minus two
Speaker 1: to plus two in a cup of coffee. Is a
Speaker 1: dollar going to do the same well? Naturally, Tom, I
Speaker 1: think you'll see some unwines in these yend crosses and
Speaker 1: that's going to spill over to the dollar yen exchange rate. Uh. Certainly,
Speaker 1: if you look at the the asset managed positions in
Speaker 1: the end, they have been stickier and probably up until now.
Speaker 1: We'll find out from the data next week. Um. But
Speaker 1: to me, the question for dollar yen is getting back
Speaker 1: to will be I'll say easy and quotes in the
Speaker 1: sense that that's sort of like getting from say seven
Speaker 1: percent on inflation, but what about from getting from five
Speaker 1: percent to three percent on inflation or from dollar yen?
Speaker 1: And that's going to be the challenge. That's the nonlineararities
Speaker 1: here on real LEASA. I just want to stop and say,
Speaker 1: this is what the Bloomberg terminals about. We have a
Speaker 1: guest who talks yen paso and I can bring it
Speaker 1: up in a cup of coffee. That's what the Bloomberg.
Speaker 1: That's why there's a gazillion of these Bloomberg terminals out there.
Speaker 1: A lot of people are doing that and looking at
Speaker 1: some pretty phenomenal moves over the past forty eight hours.
Speaker 1: In response to this action from the Bank of Japan,
Speaker 1: you noted, Eric that the action that they took does
Speaker 1: not necessarily show that the willing is that the bank
Speaker 1: is going to ease, just simply that they are willing
Speaker 1: to act in some sort of shift, but not necessarily
Speaker 1: a breakup of yield curve control. Given that's the case,
Speaker 1: what would it take for the end to appreciate that
Speaker 1: much more? Why is there so much enthusiasm around the
Speaker 1: strength and the end the confidence of getting inflation under
Speaker 1: control if this is just kicking up the the target
Speaker 1: by bits. Well, Lisa, like I mentioned, there's there's the
Speaker 1: unwind of the carry trade, and that certainly can can
Speaker 1: take yen to some extent. The bigger question here is
Speaker 1: are we going to see a longer shift in capital
Speaker 1: flows from Japan. Japan for twenty thirty years has been
Speaker 1: a huge buyer of foreign assets, probably the biggest in
Speaker 1: the world. Question now is, if we have some real
Speaker 1: positive wage price dynamic taking hold in Japan and we
Speaker 1: have some real increase in nominal rates, here is a
Speaker 1: substantial amount of money going to come back from abroad
Speaker 1: back to Japan that can drive that move from one
Speaker 1: or so down to a hundred. But crucially this relies
Speaker 1: on inflation in Japan, continuing growth remaining quite strong UH
Speaker 1: and the b O J at least providing a little
Speaker 1: bit more upward lift in those nominally yields. So, Eric,
Speaker 1: who are you looking for them? Where are you looking
Speaker 1: for a Japanese demand? That supported European bond markets for
Speaker 1: sure over the few years, and the treasury market, where
Speaker 1: are you looking for that to wine? Well, yeah, John,
Speaker 1: you mentioned the US and European bonds, and look at
Speaker 1: the hedge yield on that when you when you swap
Speaker 1: these these returns back into UH and y end it's
Speaker 1: it's really a brutal picture for Japanese investors buying US treasuries,
Speaker 1: buying French bonds, and so this this really accelerates that
Speaker 1: trend of UH, probably net selling of treasuries and French bonds. UM.
Speaker 1: You certainly have to also watch for UH some some
Speaker 1: asset back products in the United States, where Japan has
Speaker 1: historically been a pretty big present. UM. So that's really
Speaker 1: where I'm focusing my attention. Just to wrap things up
Speaker 1: big picture, Erica was speaking of Jim Caren and Morgan
Speaker 1: Stanley just yesterday over the Bloomberg and I'll catch up
Speaker 1: with him a little bit later this morning. He's asking
Speaker 1: the following question the second order effects of markets leveraged
Speaker 1: to low and stable yields. Muhammadalarian brought that up yesterday
Speaker 1: as well on the program. Eric, can you tell me
Speaker 1: what you think those effects will be as we shift
Speaker 1: away from this regime leveraged to low and staple yields
Speaker 1: for much of the last ten years. Well, John, I
Speaker 1: think central banks really need to be careful here. And
Speaker 1: this comes back to why the b o J has
Speaker 1: sort of couched. This move is not a tightening of
Speaker 1: policy and there's not more to come. They've increased their
Speaker 1: buying of of jgbs because they know just how fragile
Speaker 1: the b o J or the Japanese system is and
Speaker 1: how leveraged this to low yields. UM. So you certainly
Speaker 1: have to watch some of the Japanese banks and there
Speaker 1: exposure and duration risk. I think the bigger point here, though, John,
Speaker 1: is central banks. We talked about the end of the
Speaker 1: central bank. Put in the equity context, what about the
Speaker 1: bond context. You know, every central bank is doing quantitative
Speaker 1: Titan next year. They're hiking pretty aggressively. We've really never
Speaker 1: seen this environment before, especially given our starting points, so
Speaker 1: we've got to really watch out for for long term
Speaker 1: bond yields. Ine, Eric, this is wonderful. Thank you, sir Nowson.
Speaker 1: That of last Faco Alicia Sherman joins us now with Bernstein,
Speaker 1: double degree, Warton Kellogg, all the rest of it, forget
Speaker 1: about it. She enjoyed the trenches at Ross stores with
Speaker 1: a real job before she ended up in securities analysis
Speaker 1: and nation thrilled that you're with us. Your note on
Speaker 1: Nike seems from another planet. Your optimism on their view
Speaker 1: forward is extraordinary. What does the gloom crew have wrong
Speaker 1: about the American consumer buying Nike shoes? Um? Thank you
Speaker 1: for having me on so so the negative sentiment around
Speaker 1: Nike going into this quarter was all about the next
Speaker 1: kind of three to six months. It was about an
Speaker 1: inventory in North American promotions, the pace of China recovery.
Speaker 1: If you fast forward six months, the brand is stronger
Speaker 1: than it's ever been. It has more customers, more sales,
Speaker 1: more distribution points. Um. It is number one in every
Speaker 1: market in the world. It continues to hold onto its
Speaker 1: number one China position even despite everything that's happened in
Speaker 1: the last two years. And we saw evidence of that
Speaker 1: in the print yesterday. I mean, you know, we're talking
Speaker 1: about a cautious consumer. But Nike did thirty plus percent
Speaker 1: constant currency growth in India and in North America in
Speaker 1: this quarter. Um. Now, some of that was lapping a
Speaker 1: softer quarter last year, but you know, it's still shows resilience.
Speaker 1: It was number one on to mall in China. There
Speaker 1: is a path to recovery. So I think the bloom
Speaker 1: and doom is very short term and if you skip
Speaker 1: forward the short from difficulties, this is a really strong stock.
Speaker 1: And these the stock usually does well in a recession
Speaker 1: coming out of recessionary environment. So long term, I in
Speaker 1: Varya Bus and Thesa, the gentleman from Argentina were as
Speaker 1: Adidas the gentleman from France, he have three goals. Where's
Speaker 1: the Nike Zoom Mercurial super Fly nine km soccer cleats
Speaker 1: to peep will buy the product? Do they see unit
Speaker 1: sales because their heroes still where this stuff? Is that
Speaker 1: still ger Maine? Yeah? Actually, I mean they highlighted they
Speaker 1: did not mention Argentina's win, but they did highlights Boot
Speaker 1: the Mercurial as one of their best selling products. Um,
Speaker 1: it's not just a football. Boot is also the kids.
Speaker 1: It's also the merch. So does drive a huge amount
Speaker 1: of um, you know kind of merchandising sales. And both
Speaker 1: Nike and NATIDSK because of this big final will have
Speaker 1: benefited from that. As you say merch, I see Tom's
Speaker 1: eyes light up. He wants merch and he's been asking
Speaker 1: for March for a long time. And I went to
Speaker 1: the Tots and they were sold out of all the
Speaker 1: Nike stuff. John showed me the store in the way out,
Speaker 1: and I was lower. I got I got the sun
Speaker 1: jersey from Mrs trying and get in the messy Jesse.
Speaker 1: Now I forget about Yeah. Well, I will say that
Speaker 1: there's a question about whether Ansia this is a Nike
Speaker 1: specific story and a hero specific story, or whether this
Speaker 1: is a broader retail resilience and the sense that people
Speaker 1: are going to keep dying. There was a lull and
Speaker 1: then people will go back to the brands that they
Speaker 1: know and love. No, I think I'm not that bullish
Speaker 1: about the about the broader consumer environment. I think I
Speaker 1: think there is a softening, and you see it in
Speaker 1: the traffic data, you see it in the guidance of
Speaker 1: many of the company would just come out of a
Speaker 1: wave of earnings, and the performance in the current quarter
Speaker 1: has been strong. The guidance has been a lot more
Speaker 1: cautious across the board except for the very hard value
Speaker 1: retailers and the hard value retailers. You know, I covered
Speaker 1: the off preisers. They did terribly this year and they're
Speaker 1: much more abulition about next year. But the mainstream and
Speaker 1: slightly premium retailers are facing the opposite issue. And you know,
Speaker 1: when you look at Nike's guidance, despite the strong performance
Speaker 1: dis order, they only inched up their guidance a tiny
Speaker 1: bit because they are being cautious on China and on
Speaker 1: North America in particularly. How much do you see consolidation
Speaker 1: right now in the show around the strongest brands, this
Speaker 1: idea that we've been waiting for this washout and retail
Speaker 1: for so long, and suddenly we might actually see something
Speaker 1: more like the wave of consolidation, the if you will
Speaker 1: Tom's phrase zombie roll up that a lot of people
Speaker 1: have been looking for in this sector. We see it
Speaker 1: every time we come out of a recession. So if
Speaker 1: you look at the numbers coming out of the GFC,
Speaker 1: Nike was the single biggest share gainer in North America.
Speaker 1: If you look at the numbers even more recently coming
Speaker 1: out of COVID one, Nike was the single biggest share gainer.
Speaker 1: And the share losers are the Tier two, Tier three brands.
Speaker 1: Some of them closed down stores, some of them shut
Speaker 1: down entirely. So there is a share reallocation, and being
Speaker 1: the biggest in the market gives you that outsized benefit
Speaker 1: when you get your fair share. So I expected to
Speaker 1: be more coming out of rather than going into a
Speaker 1: recessionary environment. But yes, I mean that's part of the
Speaker 1: reason why in the sportswear sector, strong brands do better
Speaker 1: because they tend to consolidate share over time, particularly when
Speaker 1: the market is coming out of an area of weakness.
Speaker 1: An Assia Shaman of Burnstain and Assha. Thank you just wonderful.
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