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Speaker 1: Welcome to the Bloomberg pm L podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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

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

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Speaker 1: the trading floor. Find the Bloomberg p L podcast on iTunes,

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Speaker 1: SoundCloud and at Bloomberg dot com. I want to solve

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Speaker 1: a question that a lot of people have had since

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Speaker 1: November eight, which is what does Donald Trump, presidents you

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Speaker 1: mean for US Russian relations with US? To extrapolate on

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Speaker 1: that is Richard Richard Khan, managing partner at Eurasia Advisors,

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Speaker 1: which is a problem solving and deal making firm focused

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Speaker 1: on Russia advising Russian firms and in his spare time

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Speaker 1: he also is intricately involved in chess. Richard, thank you

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Speaker 1: so much for being with us. Hi great to be here.

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Speaker 1: So what are the applications for US Russian relations now

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Speaker 1: that President Electrump is going to assume the White House

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Speaker 1: in January. Well, from the Russian perspective, we have a

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Speaker 1: shuffling of the deck, an entirely new team. Obviously, the

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Speaker 1: hopes that this relationship will improve dramatically and UH, and

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Speaker 1: I think that this even for those who may not

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Speaker 1: be happy with the Trump presidency, this is certainly one

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Speaker 1: silver lining. He does seem to have a genuine interest

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Speaker 1: in improving relations, looking for areas of common cooperation, and

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Speaker 1: so I think there's a highlighthood. Some of those might

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Speaker 1: be security that obviously the we have common interests in

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Speaker 1: dealing with terrorism, but we could over time set standards

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Speaker 1: for technological security as well, although at the moment that's

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Speaker 1: not something on the forefront, since it's possible Russia is

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Speaker 1: not actually cooperating in that area at this stage. In addition,

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Speaker 1: there's global warming. There are all all types of issues

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Speaker 1: that UH, that are of concern own DestinE that we

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Speaker 1: have difficulty handling without Russian cooperation, and where we might

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Speaker 1: draw lines and say that, well, will cooperate here even

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Speaker 1: if we're not able to work together in other fields.

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Speaker 1: That would be the sort of the easy pickings. But

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Speaker 1: there are other areas where more ambitiously we might solve

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Speaker 1: problems and get back on track eliminating sanctions. And Trump

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Speaker 1: is certainly going to be more amenable to that than

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Speaker 1: I think the Clinton administration would have been. And Richard,

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Speaker 1: how would you expect, Uh, this warmer relationship between the

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Speaker 1: US and Russia, Will it have an influence on Russia's

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Speaker 1: relationship with say Europe, the European Union, and with some

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Speaker 1: of the former Soviet states? How does how does it

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Speaker 1: all play out? Is the US influential enough um to

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Speaker 1: you know, affect the prospects for sanctions from from some

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Speaker 1: of the other countries out there. Well, we we certainly are.

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Speaker 1: I mean, we're really taken a leadership role in promoting

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Speaker 1: sanctions as a response to the Russian activity in Ukraine.

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Speaker 1: But we don't want to jump ahead of ourselves. I mean,

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Speaker 1: having the aspirations as I think the Trump team genuinely

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Speaker 1: does to improve relations doesn't mean that will happen instantly.

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Speaker 1: There's certainly more to this than interpersonal relations, but that's

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Speaker 1: a starting point. And uh, whether he's able to uh

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Speaker 1: master the history of this relationship and think through the

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Speaker 1: complexities will tell us whether he's able to put together

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Speaker 1: deals that address the concerns you're now raising, For example,

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Speaker 1: the interplay between the handling of Ukraine and the Eurozone,

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Speaker 1: as well as the essentially the composition of Europe itself.

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Speaker 1: There are many nations in Europe that are very concerned

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Speaker 1: with Russia right now, and uh so separating that out

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Speaker 1: and just taking the perspective that we can be friendly

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Speaker 1: with Russia without any concern for how Russia's behaving outside

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Speaker 1: of his borders. Uh you know, it's a very complicated issue.

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Speaker 1: And uh so where you draw those lines, what types

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Speaker 1: of areas you can cooperate in, and where you sort

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Speaker 1: of take the view that Russian sovereignty uh is is

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Speaker 1: to be respected in in other areas where we feel

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Speaker 1: we have a legitimate reason for having some of our

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Speaker 1: policies affected by their behavior. These are very complex issues

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Speaker 1: for a new president to try to master. Well, you know,

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Speaker 1: last week Thursday, President Barack Obama said, I've sought a

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Speaker 1: constructive relationship with Russia, but what I have also been

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Speaker 1: is realistic and recognizing there are some significant differences in

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Speaker 1: how Russia viewsed the world and how we view the world.

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Speaker 1: Do you think that there is a risk that President

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Speaker 1: elect Trump will not treat some of the risks seriously enough?

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Speaker 1: And what are the risks? Well, I do think it's

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Speaker 1: a legitimate concern in terms of how President Trump will

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Speaker 1: look at the world. The Russians have more of a

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Speaker 1: sort of social Darwinistic approach more of a rail politic approach.

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Speaker 1: We in the West have historically been looking to establish

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Speaker 1: international norms that fuel support rule of law and values

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Speaker 1: that the West has traditionally lived by. And whether President

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Speaker 1: Trump fully adopts those or seeks to modify those are

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Speaker 1: certainly areas that I'm sure many people are concerned about.

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Speaker 1: From the Russian perspective, I think they're happy to see

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Speaker 1: someone coming into power who I think instinctively shares some

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Speaker 1: of their values, some of their more real politic values.

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Speaker 1: Certainly in my discussion party well, I can tell you that,

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Speaker 1: you know, I had discussions just recently with was three

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Speaker 1: people with Pskoff, who was his major advisor and spokesperson,

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Speaker 1: Putins right, as well as uh Pilatov, who's heading the

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Speaker 1: Russian chess Federation is here for the big match, and

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Speaker 1: with a member of our team at your Age Advisors

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Speaker 1: who was instrumental in picking Putin to come in after Yeltsin,

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Speaker 1: Ghanadi Barbulas, who was chief of staff for Yelson Um.

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Speaker 1: I think all are very hopeful that the US relations

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Speaker 1: will strike a different chord now and more or less

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Speaker 1: beget a fresh and a genuine manner. But they are

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Speaker 1: I believe boried by the prospect that the president's instincts,

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Speaker 1: that is, President Trump's instincts are designed more to deal

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Speaker 1: with problems on a case by case, ad hoc basis

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Speaker 1: that are practical, as opposed to dominated by philosophy by

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Speaker 1: a doctrine. And from the Russian perspective, that's good news,

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Speaker 1: because that is more or less how they come at it.

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Speaker 1: They're very practical. We no longer have a division, if

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Speaker 1: you will, in the world where Russia is promoting socialism

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Speaker 1: or communism. Those days are long long gone. Uh. They

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Speaker 1: are focused on making money, on promoting their own interests,

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Speaker 1: and so in that respect, they want to do deals,

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Speaker 1: and they're interested in achieving their goals and would very

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Speaker 1: much like to see an administration that is operating on

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Speaker 1: a similar basis as opposed to promoting philosophy. Richard, Let's

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Speaker 1: bring it back to where the real geopolitical drama is

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Speaker 1: these days, and that's obviously the World Chess Championship. Absolutely,

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Speaker 1: Vladimir Putin has vested interest in this. Can you can

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Speaker 1: you tell us about the sure And this is something

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Speaker 1: our our new team would well understand. We we we

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Speaker 1: have a president in the US who is an expert

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Speaker 1: at branding, right, I mean, that's been his business and

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Speaker 1: he's he's spectacular at that. Hopefully now he'll use that

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Speaker 1: to brand the US very well and help us there.

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Speaker 1: The Russians have not been, in fact that they diametrically

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Speaker 1: opposed that they've been the worst, arguably in the world

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Speaker 1: at branding, but they used chess as a major part

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Speaker 1: of their brand. They want to win this championship in

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Speaker 1: New York this week, and they've sent over the top

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Speaker 1: people in their chess world and their political world to

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Speaker 1: support it. Very exciting and Richards has been fascinating. Richard

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Speaker 1: con managing partner at Eurasia Advisors, on what President elect

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Speaker 1: Trump's regime will mean for US Russia relations. This is Bloomberg.

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Speaker 1: We're gonna learn more Mike Regan about emerging markets and

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Speaker 1: kind of what the opportunities there are, which with Richard Fees.

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Speaker 1: He's a portfolio manager for dry House Capital Management who

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Speaker 1: focuses on frontier markets. Uh, Richard, thank you so much

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Speaker 1: for joining us. Thank you for having me so go.

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Speaker 1: I want to pose the question to you that a

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Speaker 1: lot of us have been wondering, which is you see

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Speaker 1: that dollar denominated emerging markets dead is down more than

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Speaker 1: three percent so far this month. Is this a buying opportunity, UM?

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Speaker 1: I think it kind of depends on where you're where

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Speaker 1: you're looking, obviously. I think I was listening in on

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Speaker 1: you a little bit earlier, UM and heard the discussion

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Speaker 1: regarding just how much dollar denominated that is out there

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Speaker 1: and how much has been raised. I think the good

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Speaker 1: news UM for emerging markets is that most of that

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Speaker 1: debt is actually in places like the Chinese financial system,

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Speaker 1: which has sort of shorter tenor um, which is a

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Speaker 1: little bit less risky. And I think actually one thing

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Speaker 1: that's getting lost in sort of the negativity towards the

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Speaker 1: m the last couple of weeks is the fact that

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Speaker 1: commodity prices really are increasing a lot UM, and a

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Speaker 1: lot of places like Brazil, for example, UM has a

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Speaker 1: lot of sensitivity to that, and I'm not corollary doesn't

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Speaker 1: have a lot of downside UM from US trade like

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Speaker 1: a lot of emerging markets do. Richard. I was reading

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Speaker 1: one of the notes from your firm, UH called Making

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Speaker 1: Money Mobile, really fascinating report about how in frontier markets,

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Speaker 1: you know, not a lot of people have bank accounts.

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Speaker 1: But more and more people are getting mobile phones and

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Speaker 1: this idea that sort of the fintech revolution will allow

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Speaker 1: them to start doing more banking and banking like services

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Speaker 1: on their phones. Is that like one of the hottest

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Speaker 1: opportunity use in frontier markets. And well, do you expect

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Speaker 1: them to basically just bypass that the whole banking system

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Speaker 1: and and come at it more from a fintech mobile

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Speaker 1: phone up vantage point? Yeah exactly. UM. So that that

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Speaker 1: is how we're seeing it, and that is one of

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Speaker 1: the key areas of focus for our fund UM. And

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Speaker 1: it's something an opportunity that you see in a number

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Speaker 1: of different countries UM. For us, we're most UM interested

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Speaker 1: in in the opportunity provided by mobile money in Bangladesh UM,

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Speaker 1: but also it's it's happening in Kenya and and pretty

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Speaker 1: much everywhere. UM. It's allowing countries to leap frog UM

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Speaker 1: the modern banking system and not have the need for

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Speaker 1: UM physical infrastructure and branches. Usually what they do is

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Speaker 1: use an agency model UM and it allows UH users

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Speaker 1: to be able to do basically anything UM on their phones,

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Speaker 1: from deposits, sending money UM and even in some countries

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Speaker 1: doing some short term borrowing. What's the difference between frontier

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Speaker 1: and emerging markets. UM, Well, there's a classification and that's

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Speaker 1: you know, done by the by the index makers, the

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Speaker 1: gods there UM. But then I think they are UM.

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Speaker 1: But more broadly, I think it's it's just a distinction

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Speaker 1: that's based on overall levels of both economic and capital

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Speaker 1: market development UM, as well as the types of sort

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Speaker 1: of disclosure and UM financial UM, maybe integrity that you

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Speaker 1: you see. So just since November eighth, since Donald Trump

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Speaker 1: was elected the next president of the United States, has

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Speaker 1: anything about your investing thesis changed UM? I would say no, Honestly,

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Speaker 1: I think there's sort of we're struggling with sort of

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Speaker 1: the same bigger picture issues that a lot of people are.

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Speaker 1: You know what Donald Trump means for international institutions like

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Speaker 1: the I m F and frontier obviously relies on that UM.

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Speaker 1: But I think, you know, the trade story and the

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Speaker 1: protectionists from the US is sort of a red herring.

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Speaker 1: I think the the export attractiveness for a lot of

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Speaker 1: these markets, like Vietnam, for example, goes a lot beyond

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Speaker 1: UM trade deals and reliance on the US. For example,

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Speaker 1: you know, a manufacturing worker in China and in other

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Speaker 1: parts of Asia make now already make about thirty dollars

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Speaker 1: a day. In Vietnam that's about six dollars. So you know,

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Speaker 1: companies like Samsung moving all of their production to Vietnam

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Speaker 1: is not going to change because of the TPP or

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Speaker 1: because Donald Trump doesn't like international trade. Richard, I'm curious,

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Speaker 1: what are there any specific frontier regions that have caught

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Speaker 1: your attention that have the best growth prospects. And I'm

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Speaker 1: also curious, is there the potential for sort of non

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Speaker 1: correlated returns from frontier markets or is it you know, basically,

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Speaker 1: are they relying on the same macro trends that developed

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Speaker 1: markets are, just maybe at even a higher beta. Sure,

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Speaker 1: I'll take the second part of that first. I think

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Speaker 1: that's sort of the great thing about the asset classes

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Speaker 1: that it is a little bit more or it's definitely

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Speaker 1: more uncorrelated than an emerging markets. And a lot of

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Speaker 1: that has to do with the fact that, as you

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Speaker 1: were discussing on emerging market debt side, the capital market

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Speaker 1: integration between the developed world and frontier markets is a

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Speaker 1: lot less. So, you know, since the election, um form

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Speaker 1: emerging market equities are down about four percent UM and

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Speaker 1: frontier markets aren't even down one percent, and the reason

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Speaker 1: is that there's not that kind of hot capital UM

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Speaker 1: to risk money inflow UM. So that's that's a nice

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Speaker 1: part of you know, why it's a good portfolio diversifier.

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Speaker 1: UM to the first part of your question. On the

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Speaker 1: regional side, we tend to focus more on the more

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Speaker 1: attractive structural and demographic stories, and we find those to

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Speaker 1: be most attractive in South Asia, So you'd see us

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Speaker 1: having most of our exposure in countries like Bangladesh, Pakistan

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Speaker 1: and Vietnam. UM. Richard, you know, I was looking at

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Speaker 1: your your fun dry House Frontier Emerging Markets fund. There's

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Speaker 1: less than a hundred billion dollars of assets in it.

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Speaker 1: Do you think that there is a big advantage to

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Speaker 1: being smaller? And at what point is a fund too

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Speaker 1: big to really generate the returns in emerging markets? Yeah?

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Speaker 1: So I do you think there is, particularly in frontier UM,

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Speaker 1: there is a huge benefit to having a smaller size UM,

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Speaker 1: and our fund is capacity constrained for that reason. UM.

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Speaker 1: I think once you start managing more than something like

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Speaker 1: seven million dollars and UH in frontier equities, that that

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Speaker 1: becomes a lot more challenging UM and you know the

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Speaker 1: median market cap and our fund is about eight hundred

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Speaker 1: million dollars, so UM, it does allow us to find

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Speaker 1: these like true growth, more idiosyncratic UM, really exciting stories. Richard,

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Speaker 1: Who are some of the investors that UH you target

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Speaker 1: when you talk about frontier funds? I mean, is it

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Speaker 1: sort of a small diverse diversification from pension funds and

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Speaker 1: big institutional investors or do you actually go after retail

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Speaker 1: money to Yeah, no, we don't focus on retail investors. UM.

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Speaker 1: I think the so far, there was a little bit

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Speaker 1: of a retail excitement a couple of years ago when

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Speaker 1: frontier was hot and oil prices were really high UM.

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Speaker 1: But since then, most of the the inquiries we get

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Speaker 1: are from pension funds who are looking for UM diversifier

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Speaker 1: and specifically UM using it as sort of a better

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Speaker 1: emerging markets exposure. It is amazing. Eight point six is

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Speaker 1: the total return on emerging markets debt so far this year.

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Speaker 1: So certainly the declines that we've seen recently are really

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Speaker 1: a divergence from that and really don't even cut into

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Speaker 1: the bulk of the returns which are these. Thank you

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Speaker 1: so much for being with us. Richards, these portfolio manager

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Speaker 1: at dry House Capital Management. My breaking. There is a

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Speaker 1: book with a very scary title, The Road to Ruin,

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Speaker 1: the Global Elite's Secret Plan for the Next Financial Crisis. Um.

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Speaker 1: Perhaps it would be easy to dismiss if it wasn't

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Speaker 1: written by Jim Rickards, who is an advisor to the

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Speaker 1: Defense Department, among many other areas, and is the best

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Speaker 1: selling author of The Currency War is the Death of

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Speaker 1: Money in the New Case for Cold Jim, thank you

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Speaker 1: for being with us. I really appreciate it, thanksfully. So

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Speaker 1: it's great to be with you. So, um, why don't

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Speaker 1: we start with the line in the title of this book,

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Speaker 1: what is the secret plan for the next financial crisis

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Speaker 1: by the global elites? Well, it's been in preparation for

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Speaker 1: a long time. At least I make the point in

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Speaker 1: the book. There are a lot of There are a

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Speaker 1: hundred end notes. Readers don't have to read them, but

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Speaker 1: they're there. But every claim, everything I say in the

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Speaker 1: book is very well documented. For example, um brisben Australia.

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Speaker 1: In November two thousand, fourteen g twanty meetings. So the

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Speaker 1: leaders of the Gouger twenty nations agreed on the final

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Speaker 1: communic k and then that was a plan. You have

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Speaker 1: to go to the working papers man. This is a

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Speaker 1: little bit kiki. But then there is the the global

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Speaker 1: bail and plan to freeze the financial system. So they're

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Speaker 1: not going to do bailouts anymore. They're going to do

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Speaker 1: bail in. The SEC recently changed money market regulations, so

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Speaker 1: the first time money market funds can suspend redemptions in

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Speaker 1: the crisis, they can act exactly like hedge funds. That

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Speaker 1: was not true in two thousand and eight when everybody

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Speaker 1: wanted their money back, there's money mark. The funds had

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Speaker 1: to give it to them. That meant they couldn't roll

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Speaker 1: over dollar liabilities to European banks. The European banks couldn't

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Speaker 1: get dollars. They went to the European Central Bank. The

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Speaker 1: European Central Bank had to do ten trillion dollars swap

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Speaker 1: print up euros given to the FED. The Fed up yours.

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Speaker 1: My point is always machinations were going on behind the scenes.

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Speaker 1: They fixed it by saying no. The next time, the

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Speaker 1: money market funds can suspend redemption. So Americans think they

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Speaker 1: can call the money market found sell the units. The

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Speaker 1: money's in the bank. The next day they're going to

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Speaker 1: find out the hardware in the next crisis. That's not true,

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Speaker 1: I guess, Jim. The question is when is the next crisis?

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Speaker 1: What would cause the next financial crisis that would trigger

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Speaker 1: these steps? Well, it's a long list, Mike and that.

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Speaker 1: But the way to understand it I used the dynamic

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Speaker 1: systems analysis and complexity theory. So I magine snow and

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Speaker 1: you've got a big pile snow on the side of

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Speaker 1: the mountain. Now one snowflight comes along, disturbs a few

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Speaker 1: more snow flights. That creates momentum and hoping post loose,

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Speaker 1: and you have an avalanche. Who do you blame in

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Speaker 1: that situation? What do you study? Do you blame the

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Speaker 1: snow flake or do you look at the instability of

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Speaker 1: the system. I look at the instabilit of the system.

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Speaker 1: But in terms of snowflakes, there could be a lot

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Speaker 1: of things, and it could be Deutsche Bank, it could

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Speaker 1: be the entire with random Chinese credit crisis. The biggest

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Speaker 1: thing right now there's a global dollar shortest. And that

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Speaker 1: sounds strange because I just say, hey, didn't the Fed

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Speaker 1: print you know, four trillion dollars after the Less crisis?

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Speaker 1: How could there be a dollar short as well. The

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Speaker 1: answer is said, yes, that's I printed four trillion dollars,

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Speaker 1: But the world created seventy trillion dollars of dollars denominated debt.

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Speaker 1: You have nine trillion dollars of dollars denominated corporate debts

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Speaker 1: from emerging markets. This is places like Turkey, Indonesia, Brazil, Malaysia, etcetera.

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Speaker 1: That's not sovereign debt, which the ion that can bail

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Speaker 1: out if they want to. That's corporate debt. Now, look

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Speaker 1: at you've been reporting since the election. I'm a strong dollar,

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Speaker 1: and that's right. The dollars going to the moon, and

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Speaker 1: that makes a dollar debt harder to repay, and we're

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Speaker 1: gonna have an emerging markets dollar default crisis worse than

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Speaker 1: what happened in UH and the eighties with the Latin market.

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Speaker 1: So there are a lot of things out there, But

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Speaker 1: my view is it doesn't really matter because it's one thing,

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Speaker 1: it will be another, and it could happen tomorrow. So

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Speaker 1: you know about the dollar shortage. People have been talking

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Speaker 1: about the dollar shortage. Is that just another way of

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Speaker 1: saying that the dollar could appreciate very suddenly and rapidly. Well, yes,

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Speaker 1: because there's a there's a mad scramble for dollars. That

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Speaker 1: the point is, yes, and more dollars around, but there's

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Speaker 1: a lot more dollar debt, and and these emerging markets,

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Speaker 1: you know the news turkeepers. So to anyone you like,

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Speaker 1: Nigeria is a good example South Africa. These countries borrowed

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Speaker 1: dollars during these seven years of zero interest rates. Why

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Speaker 1: wouldn't you get a little spreads for credit? But why

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Speaker 1: wouldn't you borrow the lowest possible rate? The local ecouncies

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Speaker 1: and were were more expensive, etcetera. But it was sort

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Speaker 1: of one an assumption that the rates would stay low

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Speaker 1: and the dollar would stay weak. That's not playing out.

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Speaker 1: The rates are going up, that's clear, the dollars getting

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Speaker 1: a lot stronger. Well. Trade is actually declining. That's one

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Speaker 1: of the scariest things you can think of me. It's

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Speaker 1: not I'm not doing that. Trade deficits and surpluses, those

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Speaker 1: things bounce around, but the absolute level of global imports

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Speaker 1: and exports is declining for very similar to what happened

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Speaker 1: in two thousand and eight. And the Great Depression was

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Speaker 1: the time before that. So these are these are dangerous warnings.

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Speaker 1: The other point I make least is that. Um, you know,

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Speaker 1: everyone's kind of excited about President Trump and his economic

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Speaker 1: policies and trying to figure them out. The stock markets

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Speaker 1: going out because you know he's gonna cut regulation in,

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Speaker 1: lower taxes, more infrastructure spending, so Caterpillar and John Deere

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Speaker 1: go up, and transportations. I understand all that, but these

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Speaker 1: dynamic uh, this dynamic systems analysis, this instability doesn't care

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Speaker 1: if you're a Republican or Democrat. These are the kinds

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Speaker 1: of things that can play out regardless of who's who's impacted.

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Speaker 1: These forces are bigger tan domestic economic policy. As George

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Speaker 1: Bush conduct two thousand, the next crisis will be bigger.

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Speaker 1: Jim Records with a frightening but fascinating look at what

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Speaker 1: to expect in the days and weeks and years ahead

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Speaker 1: in the financial system. Thank you so much, Jim Records.

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Speaker 1: In the grocery stores in England, a battle is raging.

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Speaker 1: Andrea Felsted of Bloomberg gad Fly in London, thank you

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Speaker 1: for joining us. Hello, Hi, um, you know I loved

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Speaker 1: your story today. It was talking about how supermarkets in

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Speaker 1: London are bracing for food price hikes as a result

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Speaker 1: of the depreciating pound. And can we talk a little

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Speaker 1: bit about which supermarkets will get hurt the most by this? Well,

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Speaker 1: all of the British supermarkets will be affected. Um, I

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Speaker 1: think the one that will probably do best is Tesco

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Speaker 1: because Tesco has had a terrible time over the last

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Speaker 1: few years, but it is actually growing sales for the

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Speaker 1: first time in three years. It's also the biggest so

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Speaker 1: it's growing from a bigger base. So if you're a supplier,

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Speaker 1: you want more volume, and Tesco gives you the most volume,

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Speaker 1: so you're likely to give it to your best deals.

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Speaker 1: The others are not so good. Morrison's william More, they

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Speaker 1: make about a quarter of all the food they sell,

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Speaker 1: so they've got their own factories and their chief executive

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Speaker 1: has been doing some deals with Amazon to supply them,

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Speaker 1: so he's putting more volume through those factories. But Sainsbury's

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Speaker 1: and Asday they are their sales are falling and so

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Speaker 1: they're not going to get as good deals from suppliers.

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Speaker 1: Andry I'm I'm amazed at your lead on this calm today,

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Speaker 1: Marma geddon to shrinking fish fingers. Fish fingers are shrinking,

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Speaker 1: I mean riots in the streets. This is a big,

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Speaker 1: big thing that's been happening. It's called sort of shrink

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Speaker 1: inflation or defilling, and basically so that retailers don't have

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Speaker 1: to put the price up. They they can keep the

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Speaker 1: price the same, but they make the products smaller. So

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Speaker 1: a classic one's been chocolate bars. The chocolate bars have

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Speaker 1: been getting smaller, or a boxing off in flakes. So

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Speaker 1: a box of conflicts is the same size box, but

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00:23:04,840 --> 00:23:06,960
Speaker 1: it used to be full of conflicts and now it's

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Speaker 1: only half full. So expect much more of this um

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Speaker 1: as retailers deal with this inflation. Everybody is losing weight,

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Speaker 1: right you walk around the streets, No, not not yet.

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Speaker 1: How much money is on the line here, I mean

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Speaker 1: how much of these price increases potentially eating into grocery stores,

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Speaker 1: bottom wines. Well. Um, Retailers that I've talked to think

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Speaker 1: that this time next year, food prices could be up

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Speaker 1: by about five cent. And if you think over the

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Speaker 1: last two years they've been falling steadily, UM, then that's

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Speaker 1: a big impact. But the funny thing about this story

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Speaker 1: is there's kind of lots of moving parts because the

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Speaker 1: supermarket's actually been moaning for the past two years about

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Speaker 1: falling prices because it means they have to sell more

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Speaker 1: products to get the same value of sales. I mean,

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Speaker 1: it's great for the consumer with price is coming down,

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Speaker 1: and you know, notwithstanding you know, shrinking sizes, So if

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Speaker 1: there is a bit of inflation, they actually don't have

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Speaker 1: to sell so much to get the same amount of sales.

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Speaker 1: So why are they're sort of saying we're trying to

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Speaker 1: keep the prices down for consumers. Really they'd love a

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Speaker 1: bit of inflation just to get that top line going

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Speaker 1: a bit. And I'm curious how the dynamics between grocery

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Speaker 1: stores and restaurants are working. You know, I would think

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Speaker 1: is the same phenomenon happening at restaurants higher prices and

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Speaker 1: smaller portions, And is that actually buffering the supermarkets a

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Speaker 1: little bit? People eating out as much, and but you know,

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00:24:38,440 --> 00:24:40,320
Speaker 1: cooking it on all that it could do. I mean,

432
00:24:40,760 --> 00:24:43,159
Speaker 1: the restaurants aren't going to be immune for this. They

433
00:24:43,320 --> 00:24:45,600
Speaker 1: they're going to either have to put prices up or

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00:24:45,720 --> 00:24:50,880
Speaker 1: shrink portions if you know, this trend continues. And it's

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00:24:50,920 --> 00:24:53,560
Speaker 1: funny because the restaurants have actually been a big competitor

436
00:24:53,720 --> 00:24:56,520
Speaker 1: to the grocers as as we've come out of recession.

437
00:24:57,600 --> 00:25:01,119
Speaker 1: We've been eating out more rather than petting more food

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00:25:01,240 --> 00:25:03,840
Speaker 1: in our supermarkets another thing that the retailers have been

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00:25:03,880 --> 00:25:08,399
Speaker 1: complaining about. So actually, if incomes do become squeezed a

440
00:25:08,480 --> 00:25:11,440
Speaker 1: bit next year, as as he's likely to happen, that

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00:25:11,640 --> 00:25:14,080
Speaker 1: could in the short term be a bit of boost

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00:25:14,160 --> 00:25:17,360
Speaker 1: grocers as they're eating at as people are eating out

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00:25:17,520 --> 00:25:20,159
Speaker 1: less and maybe buying more in the supermarket. It was

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00:25:20,240 --> 00:25:24,320
Speaker 1: a phenomenon in the last downturn. There was a big thing,

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00:25:24,440 --> 00:25:27,040
Speaker 1: you know, people would eat at home or cook at

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00:25:27,119 --> 00:25:32,120
Speaker 1: home rather than go out and more. Upmarket supermarkets such

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00:25:32,200 --> 00:25:34,879
Speaker 1: as wait Trows and Mark Suspens has actually made a

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00:25:35,000 --> 00:25:38,639
Speaker 1: virtue of this and they did these dining deals and

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00:25:38,720 --> 00:25:40,760
Speaker 1: things like that. But that's kind of taken a bit

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00:25:40,800 --> 00:25:43,639
Speaker 1: of a hit with the um as people have more

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00:25:43,680 --> 00:25:49,680
Speaker 1: money and they go out again. Bloomberg Gadfly speaking to

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Speaker 1: us from London. Thank you so much, Mike. You're gonna

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Speaker 1: go get some tobler. Yeah, we should have saved that

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00:25:55,320 --> 00:25:57,919
Speaker 1: one for after lunch and we said round on here

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00:25:57,960 --> 00:26:05,320
Speaker 1: with my Greg and this is Bloomberg. Thanks for listening

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00:26:05,359 --> 00:26:08,399
Speaker 1: to the Bloomberg pien L podcast. You can subscribe and

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00:26:08,520 --> 00:26:13,480
Speaker 1: listen to interviews at iTunes, SoundCloud, or whatever podcast platform

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00:26:13,680 --> 00:26:16,359
Speaker 1: you prefer. I'm pim Fox. I'm out there on Twitter

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00:26:16,520 --> 00:26:20,200
Speaker 1: at pim Fox. I'm out there on Twitter at Lisa Abramo.

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00:26:20,320 --> 00:26:22,919
Speaker 1: It's One before the Podcast. You can always catch us

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00:26:23,040 --> 00:26:24,560
Speaker 1: worldwide on Bloomberg Radio