1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,760 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Pim Fox, 7 00:00:32,840 --> 00:00:35,120 Speaker 1: let's take a trip to Greece, because it's beautiful there, 8 00:00:35,120 --> 00:00:37,880 Speaker 1: and it's gray and kind of rainy in New York. Uh. 9 00:00:38,840 --> 00:00:43,760 Speaker 1: In particular, Grease is selling bonds. Five billion dollars of bonds. 10 00:00:43,840 --> 00:00:47,760 Speaker 1: We're back, yeah, exactly, the first bond sale since two 11 00:00:47,760 --> 00:00:52,200 Speaker 1: thousand and fourteen, at least international bond sale. And evidently 12 00:00:52,320 --> 00:00:54,880 Speaker 1: people really want to buy this stuff. To get a 13 00:00:54,880 --> 00:00:58,120 Speaker 1: better sense of why, let's bring in Simon Ballard, global 14 00:00:58,160 --> 00:01:01,440 Speaker 1: credit strategist for Bloomberg. He based in London. He has 15 00:01:01,480 --> 00:01:05,040 Speaker 1: been buying Greek bonds all morning. Simon, why has there 16 00:01:05,120 --> 00:01:08,320 Speaker 1: been so much demand for this debt? Everyone back in 17 00:01:08,360 --> 00:01:11,400 Speaker 1: the pool as they say, um, you know this is 18 00:01:11,440 --> 00:01:14,800 Speaker 1: this is the first public bond issue from Greece since 19 00:01:14,880 --> 00:01:18,000 Speaker 1: two thousand and fourteen. It is seen more importantly than 20 00:01:18,040 --> 00:01:21,480 Speaker 1: the deed itself, it is seen as a lead into 21 00:01:21,880 --> 00:01:24,880 Speaker 1: a continued ability to refinance itself going forward. So it's 22 00:01:24,920 --> 00:01:28,640 Speaker 1: seen as a very very key moment for the Greek economy, 23 00:01:28,680 --> 00:01:32,280 Speaker 1: for the Greek finance ministry in terms of drawing a 24 00:01:32,360 --> 00:01:35,039 Speaker 1: line under the bailout period. If you can do that, 25 00:01:35,600 --> 00:01:37,560 Speaker 1: there are still many questions of course, in terms of 26 00:01:37,600 --> 00:01:41,200 Speaker 1: the indebtedness of the of the sovereign um and you 27 00:01:41,200 --> 00:01:43,720 Speaker 1: know where where it goes from here in terms of growth. 28 00:01:44,000 --> 00:01:46,160 Speaker 1: But nevertheless, as you say, there's been a very solid 29 00:01:46,200 --> 00:01:48,840 Speaker 1: response to the deal, which is looking like it's going 30 00:01:48,880 --> 00:01:52,000 Speaker 1: to be three billion euros in size. We have a 31 00:01:52,040 --> 00:01:54,080 Speaker 1: book reported to be somewhere in the region of six 32 00:01:54,080 --> 00:01:55,800 Speaker 1: and a half billion, to orders of six and a 33 00:01:55,880 --> 00:01:58,560 Speaker 1: half billion for those three billion, and pricing that has 34 00:01:58,600 --> 00:02:01,960 Speaker 1: been tightened from which looked fairly generous um in the 35 00:02:02,040 --> 00:02:05,160 Speaker 1: in the early stages, down to a yield of of 36 00:02:05,360 --> 00:02:08,639 Speaker 1: six and sorry four four and five four or four 37 00:02:08,680 --> 00:02:11,640 Speaker 1: and five eighths, Yeah, four point a little bit more 38 00:02:11,639 --> 00:02:14,799 Speaker 1: than four point six um. And this is tighter, i 39 00:02:14,840 --> 00:02:18,720 Speaker 1: should say, than the last offering of five year bonds 40 00:02:18,840 --> 00:02:22,120 Speaker 1: from Greece in April, when that was priced with a 41 00:02:22,160 --> 00:02:25,400 Speaker 1: nearly five percent coupon. I just have to wonder, you know, 42 00:02:25,760 --> 00:02:30,160 Speaker 1: how much does this just demonstrate the risk on sentiment 43 00:02:30,480 --> 00:02:33,720 Speaker 1: that is washing over the European Union. I mean, you 44 00:02:33,720 --> 00:02:39,320 Speaker 1: could see the peripheral bonds yields just absolutely plummeting relative 45 00:02:39,400 --> 00:02:42,160 Speaker 1: to German and French yields. At what point does this 46 00:02:42,639 --> 00:02:46,480 Speaker 1: become unsustainable? Well, that's a very very good point. And 47 00:02:46,480 --> 00:02:48,919 Speaker 1: I think you know, today's deal would not be being 48 00:02:48,960 --> 00:02:52,399 Speaker 1: done were it not for the demand for yield, the 49 00:02:52,400 --> 00:02:54,440 Speaker 1: the you know, the the the insatiable hunt for yield 50 00:02:54,440 --> 00:02:56,840 Speaker 1: among the investor bases if you wish. And as you know, 51 00:02:56,919 --> 00:03:00,120 Speaker 1: those peripheral yields have been declining to Germany as as 52 00:03:00,120 --> 00:03:03,799 Speaker 1: the investor pushed themselves further down the quality curve within sovereigns, 53 00:03:03,800 --> 00:03:07,520 Speaker 1: within corporates, within financials um as we've as we've reported 54 00:03:07,520 --> 00:03:11,320 Speaker 1: many times, um at what point does this becomes unsustainable? Well, 55 00:03:11,480 --> 00:03:13,639 Speaker 1: the point of which it becomes unsustainable is probably when 56 00:03:13,639 --> 00:03:15,880 Speaker 1: we get a more hawkish rhetoric coming from the FED, 57 00:03:15,919 --> 00:03:19,400 Speaker 1: when we start to talk about normalization of policy within 58 00:03:19,440 --> 00:03:22,000 Speaker 1: the CB, or at least the tapering of of quantitative 59 00:03:22,000 --> 00:03:25,120 Speaker 1: easing more meaningfully within the within the e c B 60 00:03:25,240 --> 00:03:27,160 Speaker 1: and we move into a high yield environment, at which 61 00:03:27,160 --> 00:03:29,800 Speaker 1: point investors don't have to chase yield further and further 62 00:03:29,840 --> 00:03:32,000 Speaker 1: down the quality curve. They can, in fact, you know, 63 00:03:32,160 --> 00:03:34,480 Speaker 1: get their yield bogie. They can hit their yeld target 64 00:03:34,760 --> 00:03:36,880 Speaker 1: in something that's a little bit closer to home with 65 00:03:37,040 --> 00:03:43,120 Speaker 1: stronger fundamentals. Perhaps, Simon, is it at all uh accurate 66 00:03:43,480 --> 00:03:47,280 Speaker 1: that the buyers of this debt are in some way 67 00:03:47,520 --> 00:03:50,880 Speaker 1: forced to buy it because they may be small and 68 00:03:51,000 --> 00:03:55,440 Speaker 1: mid sized banks that in a sense oh their survival 69 00:03:55,920 --> 00:03:59,480 Speaker 1: to their associations with local governments and perhaps even the 70 00:03:59,520 --> 00:04:03,240 Speaker 1: European Union. There will be there will be a degree 71 00:04:03,520 --> 00:04:06,960 Speaker 1: of not benchmark waiting, but a degree of you know, 72 00:04:07,040 --> 00:04:09,440 Speaker 1: having to buy, as you say, from some of the 73 00:04:09,480 --> 00:04:11,880 Speaker 1: smaller from some of the smaller banks. But I think 74 00:04:11,880 --> 00:04:14,840 Speaker 1: a three billion deals such as this is being bought 75 00:04:14,880 --> 00:04:18,120 Speaker 1: with institutional money that is being brought on the basis of, 76 00:04:18,279 --> 00:04:22,080 Speaker 1: you know, the long term sustainability, the optimist optimism around 77 00:04:22,320 --> 00:04:24,760 Speaker 1: long term sustainability of the of the Greek economy and 78 00:04:24,760 --> 00:04:27,599 Speaker 1: continued to war war war hold On, Simon, I'm looking 79 00:04:27,680 --> 00:04:30,919 Speaker 1: right now at the function e c f C on 80 00:04:31,279 --> 00:04:36,800 Speaker 1: the Bloomberg and I'm looking at the unemployment rate of Greece. Yes, 81 00:04:37,080 --> 00:04:40,120 Speaker 1: it has gotten better now. It is expected to be 82 00:04:40,640 --> 00:04:44,560 Speaker 1: UH twenty two point five percent, down from twenty three 83 00:04:44,600 --> 00:04:48,080 Speaker 1: point five percent last year. These are incremental changes. That 84 00:04:48,120 --> 00:04:51,800 Speaker 1: means still nearly a quarter of the population is unemployed, 85 00:04:51,880 --> 00:04:54,240 Speaker 1: or at least are reported to be unemployed, with the 86 00:04:54,279 --> 00:04:57,240 Speaker 1: actual unemployment rate probably being a lot higher. We're still 87 00:04:57,279 --> 00:05:01,400 Speaker 1: looking at a GDP that is a rarely growing and 88 00:05:01,440 --> 00:05:03,640 Speaker 1: we have a huge hall of debt that they still 89 00:05:03,640 --> 00:05:05,400 Speaker 1: need to repair. If you if you saw that, if 90 00:05:05,400 --> 00:05:09,960 Speaker 1: you saw the hand signals that Lisa Brown was right, 91 00:05:11,120 --> 00:05:13,240 Speaker 1: you would be drinking that red Cina wine and it 92 00:05:13,240 --> 00:05:15,320 Speaker 1: wouldn't help. Let me tell us me, pull me, pull 93 00:05:15,320 --> 00:05:17,160 Speaker 1: me under glass. No, let's not. Let's not get this 94 00:05:17,200 --> 00:05:19,640 Speaker 1: out of context. Let's this is nowhere near an investment 95 00:05:19,680 --> 00:05:21,880 Speaker 1: grade credit. The fundamentals are still very weak. This is 96 00:05:21,920 --> 00:05:24,559 Speaker 1: still a C double A two single B minus triple 97 00:05:24,640 --> 00:05:28,080 Speaker 1: C rate. It so very very low quality, high yield 98 00:05:28,160 --> 00:05:33,200 Speaker 1: issue of which the fundamentals are still questionable. Yes, unemployment, 99 00:05:33,279 --> 00:05:35,320 Speaker 1: it's going to be probably near a thirty percent. If 100 00:05:35,320 --> 00:05:37,719 Speaker 1: you look at the youth unemployment, as we've discussed over 101 00:05:37,760 --> 00:05:39,960 Speaker 1: the last several years. But the fact is that they've 102 00:05:39,960 --> 00:05:41,720 Speaker 1: managed to get the deal away for the first time 103 00:05:41,760 --> 00:05:45,320 Speaker 1: since two thousand and fourteen. Um it is seen as 104 00:05:45,360 --> 00:05:48,799 Speaker 1: a window to future financing ability and for that reason 105 00:05:48,800 --> 00:05:50,400 Speaker 1: they had to make sure they still worked. They couldn't 106 00:05:50,440 --> 00:05:52,599 Speaker 1: squeeze it too much. I am not sitting here and 107 00:05:52,640 --> 00:05:54,400 Speaker 1: saying that this is the end, and you know, this 108 00:05:54,480 --> 00:05:56,719 Speaker 1: is the beginning of some form of growth rally within 109 00:05:56,800 --> 00:05:59,440 Speaker 1: sort of the Greek economy. We've still got a one 110 00:05:59,480 --> 00:06:02,880 Speaker 1: eighty debt to GDP ratio. I think it's probably about 111 00:06:02,920 --> 00:06:04,520 Speaker 1: one hundred and seventy six now, depending on where you 112 00:06:04,560 --> 00:06:07,400 Speaker 1: look at the numbers, but certainly a very high debt 113 00:06:07,400 --> 00:06:10,440 Speaker 1: to GDP ratio within the country. But nevertheless, this is 114 00:06:10,480 --> 00:06:15,040 Speaker 1: a positive step forward, albeit with myriad question marks around it. 115 00:06:15,120 --> 00:06:16,880 Speaker 1: All right, well, Simon, I'm just trying to get my 116 00:06:16,920 --> 00:06:18,880 Speaker 1: head around the fact that, you know, if you were 117 00:06:18,920 --> 00:06:21,080 Speaker 1: if if you were the country, if you were Greece 118 00:06:21,640 --> 00:06:24,279 Speaker 1: and you had this big debt load, would I really 119 00:06:24,360 --> 00:06:26,679 Speaker 1: lend you any more money? Wouldn't that be like giving 120 00:06:26,720 --> 00:06:29,320 Speaker 1: you the you know, the gasoline to pour on the fire. 121 00:06:29,800 --> 00:06:31,680 Speaker 1: Well there is that, and that is that is the worry. 122 00:06:31,720 --> 00:06:33,159 Speaker 1: I mean, some of the guys that we've spoken to 123 00:06:33,240 --> 00:06:35,680 Speaker 1: this morning are sort of yes, it's an interesting level 124 00:06:35,680 --> 00:06:38,400 Speaker 1: of yield, but no, there's still the potential for for 125 00:06:38,440 --> 00:06:40,720 Speaker 1: restructuring again when we move into two thousand and eight, 126 00:06:41,360 --> 00:06:44,599 Speaker 1: multi syllabic words to just describe the feeling of fear 127 00:06:44,680 --> 00:06:46,880 Speaker 1: that you would get if you had lent to someone 128 00:06:46,920 --> 00:06:49,280 Speaker 1: like that. We got, we gotta, we gotta, we gotta 129 00:06:49,360 --> 00:06:51,240 Speaker 1: leave it there. But I want to thank you very much. 130 00:06:51,520 --> 00:06:54,800 Speaker 1: Simon Ballard, he's in checting a little bit of rationality 131 00:06:54,800 --> 00:06:57,920 Speaker 1: into this situation. He's our global credit strategist for Bloomberg News, 132 00:06:58,000 --> 00:07:14,760 Speaker 1: joining us from London. Well, I want to take a 133 00:07:14,800 --> 00:07:18,360 Speaker 1: look at emerging markets credit. There's been a lot discussed 134 00:07:18,680 --> 00:07:22,240 Speaker 1: about this asset class. We've seen an unprecedented amount of 135 00:07:22,240 --> 00:07:26,400 Speaker 1: money flow in, largely through indexed funds, and that has 136 00:07:26,480 --> 00:07:29,239 Speaker 1: led a lot of people to wonder has this asset 137 00:07:29,280 --> 00:07:32,880 Speaker 1: class gone too far too fast? With us to let 138 00:07:32,960 --> 00:07:34,960 Speaker 1: us know what he thinks is Stephen oh, Global head 139 00:07:34,960 --> 00:07:38,120 Speaker 1: of Credit and fixed income at pine Bridge Investments. Pine 140 00:07:38,120 --> 00:07:41,600 Speaker 1: Bridge manages more than eighty billion dollars globally and is 141 00:07:41,640 --> 00:07:44,920 Speaker 1: based in Los Angeles. Steven thank you so much for 142 00:07:45,000 --> 00:07:47,200 Speaker 1: joining us. So what's your take. I mean, there has 143 00:07:47,240 --> 00:07:50,960 Speaker 1: been a lot of concern recently kind of highlighted about 144 00:07:51,000 --> 00:07:55,760 Speaker 1: the ongoing rally within emerging markets credit. I think emerging 145 00:07:55,800 --> 00:07:58,280 Speaker 1: markets and thanks for having me as well, But emerging 146 00:07:58,360 --> 00:08:01,920 Speaker 1: markets is really following the broad trend across all risk 147 00:08:02,000 --> 00:08:06,400 Speaker 1: and credit markets currently where there is substantial demand across 148 00:08:06,480 --> 00:08:09,800 Speaker 1: the board given the low yield environment that we're operating 149 00:08:09,800 --> 00:08:13,600 Speaker 1: in with specifically within emerging markets itself. While there is 150 00:08:13,640 --> 00:08:17,000 Speaker 1: some concerned that perhaps there is too much money flowing 151 00:08:17,080 --> 00:08:22,160 Speaker 1: in and valuations are getting relatively tight and somewhauld argue 152 00:08:22,160 --> 00:08:27,240 Speaker 1: in spots overvalued, uh, the underpinning longer term outlook is 153 00:08:27,280 --> 00:08:31,200 Speaker 1: that the fundamentals of emerging markets are on the uptrend 154 00:08:31,040 --> 00:08:35,720 Speaker 1: and positive, and it supports an environment of somewhat overvaluation, 155 00:08:35,800 --> 00:08:39,000 Speaker 1: although if fund flows continues to come in, there is 156 00:08:39,040 --> 00:08:42,640 Speaker 1: the risk, of course that we could become very overvalued 157 00:08:42,640 --> 00:08:45,040 Speaker 1: sometime in the near future. Steven, I wonder if you 158 00:08:45,080 --> 00:08:48,000 Speaker 1: could focus your attention on China and just explain to 159 00:08:48,040 --> 00:08:51,160 Speaker 1: people how you physically buy Chinese that are there are 160 00:08:51,200 --> 00:08:53,559 Speaker 1: lots of buyers, are there lots of sellers? Is that 161 00:08:53,679 --> 00:08:56,880 Speaker 1: a big liquid market, how do you know what to buy? 162 00:08:57,200 --> 00:08:59,720 Speaker 1: You know, And and that's a great question. And within 163 00:09:00,040 --> 00:09:02,679 Speaker 1: China there's a variety of different types of that's to 164 00:09:03,080 --> 00:09:07,640 Speaker 1: purchase within the areas that we like to look at. 165 00:09:07,760 --> 00:09:10,120 Speaker 1: You know, it's primarily on the corporate side. There are 166 00:09:10,160 --> 00:09:15,880 Speaker 1: a significant amount of corporate issuers from China or have 167 00:09:16,120 --> 00:09:19,760 Speaker 1: Chinese exposure that are actively issuing debt out in the 168 00:09:19,800 --> 00:09:23,360 Speaker 1: marketplace overall. And I think it's a situation where rather 169 00:09:23,440 --> 00:09:27,000 Speaker 1: than buying China, uh, this theme in emerging markets overall 170 00:09:27,120 --> 00:09:30,040 Speaker 1: is selecting the right bonds, the right companies, the right 171 00:09:30,120 --> 00:09:33,520 Speaker 1: countries because unlike the past where there was a lot 172 00:09:33,600 --> 00:09:37,760 Speaker 1: of beta exposure, I think what we see is dispersion 173 00:09:37,960 --> 00:09:42,559 Speaker 1: that's taking place with good performers versus uh, poor performers, 174 00:09:42,800 --> 00:09:45,360 Speaker 1: and being selective is the key to how you purchase debt, 175 00:09:45,600 --> 00:09:48,880 Speaker 1: not only in China but across all of emerging Okay, 176 00:09:48,920 --> 00:09:51,240 Speaker 1: so let's talk about where you think there's still is 177 00:09:51,320 --> 00:09:54,240 Speaker 1: value and where you think, uh, some of the securities 178 00:09:54,240 --> 00:09:57,920 Speaker 1: have gotten completely overvalued at this point. Sure, you know, 179 00:09:58,000 --> 00:10:00,840 Speaker 1: starting off from a broad standpoint, we do think that 180 00:10:00,960 --> 00:10:05,199 Speaker 1: given that valuations are stretched generally across the board that 181 00:10:05,400 --> 00:10:07,600 Speaker 1: taking a little bit of a defensive bias is the 182 00:10:07,679 --> 00:10:12,040 Speaker 1: right approach. So what that means is UH favoring the 183 00:10:12,160 --> 00:10:16,320 Speaker 1: higher quality investment grade where you're getting paid less but 184 00:10:16,440 --> 00:10:19,240 Speaker 1: on a risk adjusted basis. We think that's a better 185 00:10:19,280 --> 00:10:22,560 Speaker 1: place to be on the versus the below investment grade 186 00:10:22,559 --> 00:10:25,240 Speaker 1: and high your composente, are you talking sovereign and you're 187 00:10:25,240 --> 00:10:27,880 Speaker 1: talking corporate at this point, I'm talking primarily on the 188 00:10:27,920 --> 00:10:31,280 Speaker 1: corporate side, but it really relates to sovereign as well, frankly, 189 00:10:31,360 --> 00:10:33,680 Speaker 1: but more so on the corporate side. And local currency 190 00:10:33,880 --> 00:10:37,199 Speaker 1: or hard currency. You know, we like aspects of local currency, 191 00:10:37,200 --> 00:10:39,920 Speaker 1: but again I think you have to be careful because 192 00:10:40,000 --> 00:10:44,280 Speaker 1: we like specific countries and local currency. We like Indonesia, 193 00:10:44,440 --> 00:10:48,200 Speaker 1: we like Peru, UH as opposed to you know, blindly 194 00:10:48,240 --> 00:10:51,400 Speaker 1: saying we like local currency overall. And the reason why 195 00:10:51,440 --> 00:10:54,040 Speaker 1: we do have a favorable outlook on many parts of 196 00:10:54,080 --> 00:10:57,880 Speaker 1: local currency is the fact that you know, many countries 197 00:10:58,000 --> 00:11:02,880 Speaker 1: are shifting UH their policy mix in their macro approach 198 00:11:03,360 --> 00:11:07,360 Speaker 1: toward having come out of a highly inflationary environment where 199 00:11:07,360 --> 00:11:11,640 Speaker 1: they were aggressively raising interest rates to defend the currency, 200 00:11:11,720 --> 00:11:17,199 Speaker 1: to an environment of more declining UH inflationary expectations, as 201 00:11:17,240 --> 00:11:21,200 Speaker 1: well as policies that will either maintain a stable rate 202 00:11:21,360 --> 00:11:24,840 Speaker 1: or perhaps even in some cases reducing interest rates, which 203 00:11:24,920 --> 00:11:28,640 Speaker 1: is very supportive of dead instruments. Stephen, how how do 204 00:11:28,679 --> 00:11:32,960 Speaker 1: you reassure investors that number one, the collateral that would 205 00:11:33,000 --> 00:11:36,200 Speaker 1: be offered for any of these corporate bonds is actually 206 00:11:36,559 --> 00:11:39,920 Speaker 1: good and gettable, meaning you could actually access it, and 207 00:11:40,040 --> 00:11:44,840 Speaker 1: isn't there at disadvantage in many emerging markets because, for example, 208 00:11:44,840 --> 00:11:47,160 Speaker 1: in China, if you're going to go to court, chances 209 00:11:47,160 --> 00:11:48,520 Speaker 1: are you going to be there for a long time 210 00:11:48,720 --> 00:11:51,840 Speaker 1: and then eventually lose. I think it's fair to say 211 00:11:51,880 --> 00:11:57,439 Speaker 1: that if you're evaluating the potential default outcomes, you're in 212 00:11:57,480 --> 00:12:00,400 Speaker 1: a bad situation. Uh. You don't want to go there. 213 00:12:00,400 --> 00:12:05,440 Speaker 1: The outcome is not particularly forecast double per se. Uh. 214 00:12:05,440 --> 00:12:09,120 Speaker 1: And so the key in emerging market investing is rather 215 00:12:09,200 --> 00:12:12,720 Speaker 1: than relying on the collateral and the bankruptcy default loss 216 00:12:12,840 --> 00:12:14,920 Speaker 1: risk in the way that you would with you know, 217 00:12:15,160 --> 00:12:18,400 Speaker 1: US bank debt or even high your bonds, UH, you're 218 00:12:18,520 --> 00:12:22,440 Speaker 1: looking to investing companies that will not ever get into 219 00:12:22,480 --> 00:12:27,160 Speaker 1: those situations and businesses that will continue to show resilient 220 00:12:27,200 --> 00:12:30,839 Speaker 1: cash flow characteristics. Okay, So Stephen where do you think 221 00:12:31,280 --> 00:12:38,439 Speaker 1: is the most overvalued asset in emerging market step right now? Uh, 222 00:12:38,480 --> 00:12:42,240 Speaker 1: that's a good question. I would say in pockets of 223 00:12:43,120 --> 00:12:49,360 Speaker 1: high yield corporate credit, where you have spreads across many 224 00:12:49,400 --> 00:12:53,000 Speaker 1: parts of the corporate credit landscape, where the yield that 225 00:12:53,040 --> 00:12:56,520 Speaker 1: you're getting is right on top of developed market and 226 00:12:56,600 --> 00:12:59,600 Speaker 1: so you're not getting a risk premium. And even though 227 00:12:59,640 --> 00:13:02,679 Speaker 1: the fund mentals as I mentioned are looking more attractive 228 00:13:03,240 --> 00:13:08,000 Speaker 1: longer term for emerging market areas, there is absolutely incremental 229 00:13:08,120 --> 00:13:11,120 Speaker 1: risk that investors need to get paid for. And then 230 00:13:11,320 --> 00:13:13,480 Speaker 1: there are many pockets where you're simply not getting paid 231 00:13:13,480 --> 00:13:15,360 Speaker 1: for that right now, particular in the high yield segment, 232 00:13:15,400 --> 00:13:17,679 Speaker 1: any any countries in particular, and a we're talking hard 233 00:13:17,720 --> 00:13:22,360 Speaker 1: currency or local at this point, primarily hard currency overall. Uh. 234 00:13:22,520 --> 00:13:25,040 Speaker 1: And you know, I think it's fair to say that 235 00:13:25,400 --> 00:13:29,160 Speaker 1: the way we think about overvaluation isn't necessarily on an 236 00:13:29,200 --> 00:13:32,520 Speaker 1: absolute basis, but on a relative basis. And so we 237 00:13:32,640 --> 00:13:36,199 Speaker 1: tend to be a bit more cautious of areas where 238 00:13:36,559 --> 00:13:39,959 Speaker 1: everyone thinks they're great investments and more money is chasing those. 239 00:13:40,000 --> 00:13:44,240 Speaker 1: And conversely, when no one wants to touch a situation 240 00:13:44,320 --> 00:13:47,800 Speaker 1: because perhaps they think the risk is too high. Now. Oftentimes, 241 00:13:48,160 --> 00:13:50,920 Speaker 1: even though the risk may be high, investors tend to 242 00:13:50,960 --> 00:13:53,640 Speaker 1: overshoot any of those circumstances. So let's talk e t 243 00:13:53,840 --> 00:13:56,240 Speaker 1: F because there's been a huge focus on the incredible 244 00:13:56,240 --> 00:13:59,080 Speaker 1: amount of money that's flowed into emerging markets debt through 245 00:13:59,120 --> 00:14:01,200 Speaker 1: e t F s. In this raises a liquidity concern. 246 00:14:01,240 --> 00:14:03,360 Speaker 1: In other words, the shares of ETFs are liquid, the 247 00:14:03,400 --> 00:14:06,840 Speaker 1: underlying not so much. What happens if you get an exodus. 248 00:14:06,840 --> 00:14:09,559 Speaker 1: How concerned are you? The e t F as well 249 00:14:09,559 --> 00:14:14,320 Speaker 1: as retail fund flows does create a liquidity concern because 250 00:14:14,600 --> 00:14:17,920 Speaker 1: even though emerging markets is a very large market, you know, 251 00:14:18,080 --> 00:14:23,120 Speaker 1: it is a market where in times of stress, it's 252 00:14:23,320 --> 00:14:26,920 Speaker 1: very difficult to execute on selling bonds uh and and 253 00:14:27,000 --> 00:14:30,440 Speaker 1: so with the e t F growth, there is a 254 00:14:30,480 --> 00:14:33,240 Speaker 1: greater level of risk that if everyone heads for the 255 00:14:33,320 --> 00:14:36,160 Speaker 1: exit doors at the same time, you could get price 256 00:14:36,200 --> 00:14:39,120 Speaker 1: gaps overall, but off setting some of that, and what's 257 00:14:39,200 --> 00:14:42,640 Speaker 1: less talked about is technicals and emerging market debts is 258 00:14:42,680 --> 00:14:47,600 Speaker 1: actually improving because there is a substantial amount of institutional 259 00:14:47,640 --> 00:14:50,320 Speaker 1: money that has come into the marketplace, which is much 260 00:14:50,320 --> 00:14:52,800 Speaker 1: more difficult to track. Because I like E t F s. 261 00:14:53,120 --> 00:14:55,840 Speaker 1: There is no easy scorecard where you can see the 262 00:14:55,880 --> 00:14:58,760 Speaker 1: fund flows on a daily or weekly basis, but we 263 00:14:58,840 --> 00:15:03,560 Speaker 1: do see the institutional flows coming in both directly from 264 00:15:03,640 --> 00:15:06,880 Speaker 1: the investors that we talked to and from our competitors 265 00:15:06,920 --> 00:15:11,119 Speaker 1: as well as our execution counterparties overall, and that represents 266 00:15:11,160 --> 00:15:14,680 Speaker 1: a very stable source demand. We've got to leave it there, Stephen, Oh, 267 00:15:14,720 --> 00:15:16,960 Speaker 1: thank you very much, Global head of Credit and Fixed 268 00:15:16,960 --> 00:15:20,920 Speaker 1: Income pine Bridge Investments, helping to manage more than eighty 269 00:15:21,120 --> 00:15:36,040 Speaker 1: billion dollars. Shares of McDonald's are up more than three 270 00:15:36,080 --> 00:15:39,960 Speaker 1: and a half percent after reporting results that exceeded analyst estimates. 271 00:15:39,960 --> 00:15:42,560 Speaker 1: Here to tell us more is Michael Halen. He is 272 00:15:42,600 --> 00:15:44,840 Speaker 1: our expert when it comes to the restaurant and food 273 00:15:44,880 --> 00:15:48,040 Speaker 1: industry for Bloomberg Intelligence. Michael, always a pleasure, Thanks for 274 00:15:48,080 --> 00:15:52,160 Speaker 1: being here. Mick. Delivery one dollar soft drinks and oh yes, 275 00:15:52,280 --> 00:15:55,920 Speaker 1: the rollo mcflurry with chocolate and caramel. Is this what's 276 00:15:55,920 --> 00:15:58,840 Speaker 1: really making it happen for McDonald's. That's a big that's 277 00:15:58,840 --> 00:16:01,480 Speaker 1: a big part of this quarter. Um. And there also 278 00:16:01,600 --> 00:16:04,840 Speaker 1: is these new signature crafted burgers which are in you know, 279 00:16:04,880 --> 00:16:08,480 Speaker 1: an improvement in the quality. Um. But delivery is that 280 00:16:08,520 --> 00:16:12,000 Speaker 1: really a thing. Yeah, that's a thing. Um, you don't 281 00:16:12,000 --> 00:16:14,280 Speaker 1: get to make delivery in a in the second go ahead? 282 00:16:14,480 --> 00:16:17,080 Speaker 1: What what happened here? But I sound like a broken record, 283 00:16:17,120 --> 00:16:19,400 Speaker 1: But it's a lot of things. For to change the 284 00:16:19,440 --> 00:16:22,680 Speaker 1: momentum at a company this large, you know, it takes 285 00:16:22,720 --> 00:16:25,520 Speaker 1: a lot of things. And um, they've been aggressive from 286 00:16:25,560 --> 00:16:28,280 Speaker 1: the beginning. Easter Brook has been very aggressive, whether it's 287 00:16:28,760 --> 00:16:32,920 Speaker 1: UM with the refranchising initiatives, with the UM restructuring of 288 00:16:32,960 --> 00:16:36,280 Speaker 1: the company, making sure the restaurant operations are as good 289 00:16:36,320 --> 00:16:38,840 Speaker 1: as they need to be, new stores, and and and 290 00:16:38,880 --> 00:16:40,920 Speaker 1: getting rid of as many as possible because they want 291 00:16:40,920 --> 00:16:43,440 Speaker 1: to go to UH an ownership light model. They don't 292 00:16:44,400 --> 00:16:49,000 Speaker 1: the stores. Yeah, so they've they've been aggressively refranchising and 293 00:16:49,000 --> 00:16:52,200 Speaker 1: they're going to hit their four thousand store goal a 294 00:16:52,320 --> 00:16:55,480 Speaker 1: year earlier than expected when Hong Kong and and UH 295 00:16:55,720 --> 00:16:59,400 Speaker 1: China refranchise next quarters. So they've been aggressive with all 296 00:16:59,440 --> 00:17:02,120 Speaker 1: of these things, including you know, in the restaurants with 297 00:17:02,160 --> 00:17:05,840 Speaker 1: the service, and then also improving the technology and the 298 00:17:05,920 --> 00:17:09,199 Speaker 1: food and all those other good things. So you know 299 00:17:10,000 --> 00:17:12,959 Speaker 1: how much of the growth is coming from overseas and 300 00:17:13,000 --> 00:17:16,200 Speaker 1: how much of the changes can be implemented more quickly 301 00:17:17,119 --> 00:17:22,120 Speaker 1: because of its aggressive expansion in some of these areas. 302 00:17:22,160 --> 00:17:25,719 Speaker 1: So what's interesting is that the results were very strong 303 00:17:26,160 --> 00:17:30,240 Speaker 1: all over the world. You know, they've posted strong same 304 00:17:30,280 --> 00:17:33,960 Speaker 1: source sales gains and traffic increases in every single one 305 00:17:33,960 --> 00:17:36,800 Speaker 1: of their segments across the globe for the first time 306 00:17:36,840 --> 00:17:39,400 Speaker 1: since two thousand and eight. So you know, the strength 307 00:17:39,440 --> 00:17:43,800 Speaker 1: is broad based, UM, which you know obviously is extremely 308 00:17:43,840 --> 00:17:47,360 Speaker 1: positive for the outlook moving forward. But UM, so it's 309 00:17:47,400 --> 00:17:51,080 Speaker 1: kind of interesting internationally, UM, they have very strong opertas 310 00:17:51,160 --> 00:17:53,159 Speaker 1: that can roll out a lot of the technology and 311 00:17:53,200 --> 00:17:56,320 Speaker 1: spend money to grow grow the system, UM, which will 312 00:17:56,359 --> 00:17:59,520 Speaker 1: be key. Hey, Michael, just let's go to some detail. 313 00:17:59,640 --> 00:18:03,280 Speaker 1: You say, cheaper drinks, right, less expensive drinks. I already 314 00:18:03,280 --> 00:18:05,320 Speaker 1: noted that what one dollar soda and I think it's 315 00:18:05,359 --> 00:18:09,920 Speaker 1: any size, right one? And then okay, coffee? Right? All 316 00:18:10,000 --> 00:18:13,040 Speaker 1: day breakfast, that's is that doing well? Yeah? All day 317 00:18:13,080 --> 00:18:15,880 Speaker 1: breakfast was one of the first things that they adopted, 318 00:18:15,880 --> 00:18:17,840 Speaker 1: and there was a lot of pushback from franchisees because 319 00:18:17,840 --> 00:18:20,480 Speaker 1: there's questions about, you know, as the kitchen configured right 320 00:18:20,520 --> 00:18:22,119 Speaker 1: that we have the right equipment, We're gonna have to 321 00:18:22,160 --> 00:18:23,880 Speaker 1: spend money We're not making a lot of money right now. 322 00:18:23,920 --> 00:18:26,680 Speaker 1: So all of those things were kind of caused some pushback, 323 00:18:26,720 --> 00:18:29,040 Speaker 1: but that really got the ball rolling here, there's no 324 00:18:29,080 --> 00:18:31,880 Speaker 1: doubt about And is it still accelerating. They haven't given 325 00:18:31,880 --> 00:18:35,320 Speaker 1: too much color on that in particular. Um, but it's 326 00:18:35,359 --> 00:18:37,160 Speaker 1: just like I said from the beginning, it's like part 327 00:18:37,200 --> 00:18:39,560 Speaker 1: of the puzzle, you know. Um, but the one and 328 00:18:39,600 --> 00:18:43,240 Speaker 1: two dollar drinks is interesting because, um, you know, that 329 00:18:43,240 --> 00:18:46,600 Speaker 1: could hurt Sonic. Sonic sells more than of you know, 330 00:18:46,800 --> 00:18:49,120 Speaker 1: more than of their sales are in beverages and that's 331 00:18:49,200 --> 00:18:52,919 Speaker 1: very high. That's like and it gets traffic. Yeah, so 332 00:18:53,320 --> 00:18:55,800 Speaker 1: you know, McDonald's could be taking share from them. Another 333 00:18:55,840 --> 00:18:57,919 Speaker 1: one to maybe that may feel a little bit a 334 00:18:57,920 --> 00:19:01,120 Speaker 1: bit of pain here, could be Burger King right because um, 335 00:19:01,160 --> 00:19:04,040 Speaker 1: they're same source of sales. Trends were pretty strong until 336 00:19:04,080 --> 00:19:06,879 Speaker 1: the third quarter of last year, and that's when McDonald's 337 00:19:06,880 --> 00:19:08,919 Speaker 1: really started to pick up. So being number two in 338 00:19:08,920 --> 00:19:11,600 Speaker 1: the US having a lot of overlap is probably not 339 00:19:11,760 --> 00:19:13,639 Speaker 1: a good place to be right now for Bardaking. You 340 00:19:13,680 --> 00:19:15,439 Speaker 1: know what Lisa wants to know. She wants to know 341 00:19:15,600 --> 00:19:18,159 Speaker 1: what is going to happen to those Chippotle stores are 342 00:19:18,200 --> 00:19:21,880 Speaker 1: they gonna all turn into McDonald What is going on 343 00:19:22,000 --> 00:19:24,920 Speaker 1: with K like a breakfast burrito? I mean, I don't 344 00:19:24,920 --> 00:19:27,160 Speaker 1: see what. I haven't done a breakfast burrito. I want 345 00:19:27,200 --> 00:19:30,639 Speaker 1: to breakfast burrito, like now. Everyone loves breakfast burritos, don't they. 346 00:19:30,680 --> 00:19:35,280 Speaker 1: I mean, I get them. What's going on here and 347 00:19:35,320 --> 00:19:38,159 Speaker 1: doesn't matter right because it's going to be backward looking anyway. 348 00:19:38,200 --> 00:19:41,399 Speaker 1: And this whole scanning issue with health and sickness and 349 00:19:41,440 --> 00:19:44,080 Speaker 1: all that just nailed it. You just nailed it so 350 00:19:44,400 --> 00:19:48,840 Speaker 1: um from where I sat, um, the street was very 351 00:19:48,880 --> 00:19:51,600 Speaker 1: negative and there's a lot of um dropping of numbers 352 00:19:51,600 --> 00:19:53,719 Speaker 1: on the second quarter mid quarter, I think they kind 353 00:19:53,720 --> 00:19:57,800 Speaker 1: of looked into some um margin guidance a little too closely. 354 00:19:58,240 --> 00:20:01,240 Speaker 1: You know, they slightly lowered more guidance like ten twenty 355 00:20:01,240 --> 00:20:03,440 Speaker 1: basis points, and then everyone came out of What Works 356 00:20:03,440 --> 00:20:05,320 Speaker 1: saying their sales are going to go down. This means 357 00:20:05,320 --> 00:20:07,440 Speaker 1: there's gonna be deleveraging. It's not gonna be as good 358 00:20:07,440 --> 00:20:08,920 Speaker 1: as you thought. So I thought it was just kind 359 00:20:08,920 --> 00:20:10,439 Speaker 1: of a chance for a lot of cell side analysts 360 00:20:10,520 --> 00:20:12,159 Speaker 1: kind of kick them when they were down. Everybody's got 361 00:20:12,240 --> 00:20:14,480 Speaker 1: a celebrating on it. They you know, see an opportunity 362 00:20:14,480 --> 00:20:16,440 Speaker 1: to kick them, they do it. Um. So I thought 363 00:20:16,480 --> 00:20:18,359 Speaker 1: it was actually setting up for a good quarter, that 364 00:20:18,400 --> 00:20:20,880 Speaker 1: the expectations have been lowered to a point where they 365 00:20:20,920 --> 00:20:22,760 Speaker 1: may have a decent beat. But like you said, it's 366 00:20:23,080 --> 00:20:26,320 Speaker 1: not even gonna matter. What's really gonna you know, people 367 00:20:26,400 --> 00:20:29,359 Speaker 1: want to hear what they're saying about this outbreak. Everyone 368 00:20:29,400 --> 00:20:32,880 Speaker 1: wants a neurovirus in the Virginia store, I believe, yes, exactly. 369 00:20:32,920 --> 00:20:35,480 Speaker 1: It wasn't just that, right, there were some other issues too, 370 00:20:35,600 --> 00:20:38,159 Speaker 1: and so people are starting to wonder whether again the 371 00:20:38,240 --> 00:20:41,240 Speaker 1: supply chain or whether there's something that is unable to 372 00:20:41,800 --> 00:20:46,280 Speaker 1: catch these viruses. Yeah. So it's it's tough because else 373 00:20:46,320 --> 00:20:49,280 Speaker 1: has kind of set himself up for some um backlash 374 00:20:49,280 --> 00:20:51,320 Speaker 1: because he went out and said last year that we're 375 00:20:51,359 --> 00:20:53,000 Speaker 1: going to be the safest restaurant you can need at. 376 00:20:53,000 --> 00:20:56,320 Speaker 1: But that's impossible because they have sneeze cards, so anyone, 377 00:20:56,520 --> 00:20:58,480 Speaker 1: you know, somebody as an employee can be sick and 378 00:20:58,520 --> 00:21:00,680 Speaker 1: not know it, or somebody could sneeze over the glass 379 00:21:00,720 --> 00:21:04,920 Speaker 1: into your let's not go there. Okay, So you're talking 380 00:21:04,920 --> 00:21:08,000 Speaker 1: to Stevels is the chairman, the CEO, and the founder 381 00:21:08,119 --> 00:21:10,720 Speaker 1: of Chippells. Alright, let's let's you know, I I said, 382 00:21:10,840 --> 00:21:12,480 Speaker 1: we started off, I said, you know, I'm kind of 383 00:21:12,520 --> 00:21:16,359 Speaker 1: hungry as getting Please please don't talk about anything to appetising. 384 00:21:16,440 --> 00:21:19,159 Speaker 1: You did it, absolutely did it when Yeah, you're the 385 00:21:19,200 --> 00:21:21,840 Speaker 1: diet or. Um, all right, we're gonna be looking for 386 00:21:21,880 --> 00:21:27,399 Speaker 1: those results just after the close of trading today for Chippotle. Uh, Domino's. 387 00:21:27,600 --> 00:21:30,119 Speaker 1: What's going on in the pizza market. So pizza market 388 00:21:30,160 --> 00:21:32,640 Speaker 1: in terms of sales is great, and Domino's is continuing 389 00:21:32,680 --> 00:21:35,359 Speaker 1: to take share their two year trends and sales are 390 00:21:35,520 --> 00:21:38,880 Speaker 1: off the charts. But um, you know that stock is up, 391 00:21:39,680 --> 00:21:42,480 Speaker 1: was up over two from you know, maybe two dollars 392 00:21:42,480 --> 00:21:45,600 Speaker 1: and fifty cents during the depths of the depression of 393 00:21:45,640 --> 00:21:48,119 Speaker 1: the recession. I'm sorry. And uh so it's been a 394 00:21:48,160 --> 00:21:52,200 Speaker 1: great run. There's very high expectations baked in, so to speak. 395 00:21:52,200 --> 00:21:54,360 Speaker 1: But also it's been like a tech company, right, They've 396 00:21:54,400 --> 00:21:57,800 Speaker 1: gotten really good at delivery and online. Yeah, and they 397 00:21:58,000 --> 00:22:00,600 Speaker 1: and they you know, they're the best in class technology. Well, 398 00:22:00,640 --> 00:22:03,160 Speaker 1: and that's what McDonald's is trying to become. And they're 399 00:22:03,160 --> 00:22:06,480 Speaker 1: catching up pretty fast. But Dominoes is way ahead of everyone. 400 00:22:06,480 --> 00:22:09,120 Speaker 1: I would say, Dominoes and Para are one and two. Um, 401 00:22:09,160 --> 00:22:11,480 Speaker 1: But the thing is, it's not the sales, it's not 402 00:22:11,520 --> 00:22:14,800 Speaker 1: the technology. The issues are some of the restaurant margin 403 00:22:14,960 --> 00:22:18,199 Speaker 1: issues like labor insurance costs were way up. Also, they 404 00:22:18,200 --> 00:22:21,720 Speaker 1: have a high class problem of having to build more 405 00:22:21,760 --> 00:22:24,760 Speaker 1: distribution centers because sales grew so much, it's gonna cost 406 00:22:24,800 --> 00:22:27,679 Speaker 1: cap bax. So the streets used to getting, you know, 407 00:22:28,400 --> 00:22:30,840 Speaker 1: a few hundred million dollars worth of share buybacks every year, 408 00:22:30,840 --> 00:22:33,240 Speaker 1: and that those are gonna happen. That white DPC is down, 409 00:22:33,280 --> 00:22:35,480 Speaker 1: it's done eight and a half percent today. Yeah, that's 410 00:22:35,600 --> 00:22:37,640 Speaker 1: those are all a big part of it. I would say. 411 00:22:37,640 --> 00:22:40,840 Speaker 1: Also international slowed a bit, only increased about two and 412 00:22:40,840 --> 00:22:45,480 Speaker 1: a half percent, real quick, Who is Domino's stealing share 413 00:22:45,560 --> 00:22:49,280 Speaker 1: from Pizza Hutt and Mom, Mom and Pops Regional uh 414 00:22:49,400 --> 00:22:52,040 Speaker 1: pizza joints. To Michael Helen, thank you so much for 415 00:22:52,119 --> 00:22:54,119 Speaker 1: joining us. It's always a pleasure. Michael Helen is our 416 00:22:54,160 --> 00:22:58,320 Speaker 1: senior restaurant analyst for Bloomberg Intelligence. Pizza. I was about 417 00:22:58,320 --> 00:22:59,800 Speaker 1: to say, we can usually find him if we go 418 00:22:59,840 --> 00:23:14,640 Speaker 1: down stairs and survey the local restaurants. Well, Michael Core's 419 00:23:14,720 --> 00:23:18,000 Speaker 1: holdings agreed to buy Jimmy Chew for about one point 420 00:23:18,040 --> 00:23:22,080 Speaker 1: two billion dollars. It's combining handbags with shoes. I guess 421 00:23:22,080 --> 00:23:26,000 Speaker 1: that's got the retail landscape well covered. Sarah Halzack is 422 00:23:26,280 --> 00:23:29,840 Speaker 1: our Bloomberg Gadfly columnists covering retail, and Sarah, thank you 423 00:23:29,880 --> 00:23:32,960 Speaker 1: for being with us. Why is uh, why is Michael 424 00:23:33,000 --> 00:23:36,399 Speaker 1: Core's doing this? Sure? So, Michael Cores is on a 425 00:23:36,400 --> 00:23:40,240 Speaker 1: mission to be an international luxury conglomerate. It wants to 426 00:23:40,760 --> 00:23:43,439 Speaker 1: compete more with the likes of an LVMH or a 427 00:23:43,520 --> 00:23:46,360 Speaker 1: carrying over in Europe, and it's watching when it's competitor 428 00:23:46,440 --> 00:23:48,959 Speaker 1: coaches doing on this front. It just bought Cape Spade 429 00:23:48,960 --> 00:23:51,320 Speaker 1: for two point four billion dollars, so it wants to 430 00:23:51,320 --> 00:23:53,600 Speaker 1: be a more diversified company, and Jimmy cho looked like 431 00:23:53,600 --> 00:23:58,000 Speaker 1: a good target. So Michael Core's shares are down nearly 432 00:23:58,040 --> 00:24:01,360 Speaker 1: a percent that there is some concluding by our GATFI 433 00:24:01,480 --> 00:24:07,159 Speaker 1: columnist colleagues that perhaps Michael Core's overpaid for Jimmy Choose 434 00:24:07,280 --> 00:24:12,080 Speaker 1: in their ambition to become something more like LVMH. Was 435 00:24:12,160 --> 00:24:15,479 Speaker 1: your take on that, Yeah, so they did pay like 436 00:24:15,520 --> 00:24:18,760 Speaker 1: a premium on yesterday's share price. That is a little 437 00:24:18,760 --> 00:24:20,760 Speaker 1: bit high, but I think what it's going to come 438 00:24:20,760 --> 00:24:23,679 Speaker 1: down to is the execution, right. So one thing that 439 00:24:23,760 --> 00:24:25,840 Speaker 1: they said today was that they really planned to stick 440 00:24:25,880 --> 00:24:28,600 Speaker 1: with this idea of opening just ten stores a year 441 00:24:28,720 --> 00:24:32,040 Speaker 1: in the Jimmy Chow brand, And that's probably an encouraging 442 00:24:32,080 --> 00:24:34,359 Speaker 1: sign given that one of the things that is really 443 00:24:34,480 --> 00:24:36,520 Speaker 1: felt cores in the last couple of years is just 444 00:24:36,560 --> 00:24:39,280 Speaker 1: this break connect page of store openings. They had four 445 00:24:39,359 --> 00:24:42,760 Speaker 1: hundred stores now up to nine hundred and sixty stores, 446 00:24:43,040 --> 00:24:45,400 Speaker 1: and they're having to pull back that throttle. So it's 447 00:24:45,400 --> 00:24:49,480 Speaker 1: an encouraging sign that they planned to pump the brakes 448 00:24:49,480 --> 00:24:52,159 Speaker 1: with Jimmy Chew and do a more realistic pace and 449 00:24:52,200 --> 00:24:54,560 Speaker 1: not get overstored. I think the thing that gives me 450 00:24:54,640 --> 00:24:57,359 Speaker 1: pause is that they said they planned to double sales 451 00:24:57,400 --> 00:25:00,360 Speaker 1: to one billion dollars by and it's are to see 452 00:25:00,359 --> 00:25:02,040 Speaker 1: how they're going to be able to pull that off well, 453 00:25:02,080 --> 00:25:04,439 Speaker 1: and not just be able to pull it off, but 454 00:25:04,520 --> 00:25:08,119 Speaker 1: how they continued to maintain the sheen around Jimmy Choose 455 00:25:08,240 --> 00:25:10,680 Speaker 1: when the sex and the city allure and the high 456 00:25:10,840 --> 00:25:15,600 Speaker 1: end nature of the shoes, while also increasing the volume 457 00:25:15,640 --> 00:25:18,640 Speaker 1: of sales to such a degree where they become more commonplace. 458 00:25:18,720 --> 00:25:20,760 Speaker 1: I would think that to do that they would have 459 00:25:20,800 --> 00:25:23,760 Speaker 1: to lower prices or at least offer something that is 460 00:25:23,840 --> 00:25:27,320 Speaker 1: at a lower price point. Yeah, that's a good possibility, 461 00:25:27,359 --> 00:25:29,360 Speaker 1: and I agree that that would be sort of concerning 462 00:25:29,359 --> 00:25:31,560 Speaker 1: for them because we saw what happened with Michael Core's 463 00:25:31,560 --> 00:25:33,880 Speaker 1: and Coach when they did the same thing. Right, their 464 00:25:33,960 --> 00:25:37,000 Speaker 1: product lost cache when it became too widespread and they 465 00:25:37,040 --> 00:25:40,080 Speaker 1: were selling too many things at entry level price points. UM. 466 00:25:40,119 --> 00:25:42,119 Speaker 1: Some of the things that the executives said today that 467 00:25:42,200 --> 00:25:44,600 Speaker 1: might suggest they have an alternative path getting to that 468 00:25:44,640 --> 00:25:47,080 Speaker 1: billion dollars UM. So they kept saying that the men's 469 00:25:47,160 --> 00:25:50,399 Speaker 1: shoes line was a hidden jewel. UM. That was their wording. 470 00:25:50,480 --> 00:25:52,480 Speaker 1: And so perhaps if they can ring more growth out 471 00:25:52,480 --> 00:25:54,840 Speaker 1: of that UM, they could do that without sort of 472 00:25:54,840 --> 00:25:57,800 Speaker 1: tipping away at that sex in the city cache. Another 473 00:25:57,880 --> 00:26:00,919 Speaker 1: thing to keep in mind, I is that UM, they 474 00:26:00,960 --> 00:26:04,400 Speaker 1: only get about of their revenue from wholesale, and so 475 00:26:04,560 --> 00:26:07,760 Speaker 1: they could perhaps do some more in department stores without 476 00:26:07,760 --> 00:26:10,840 Speaker 1: tripping away at cache. Is there any way that Michael 477 00:26:10,920 --> 00:26:15,200 Speaker 1: Cores as a brand is done. Is that possible? Because 478 00:26:15,200 --> 00:26:16,800 Speaker 1: this was a stock that was you know, this was 479 00:26:16,840 --> 00:26:20,640 Speaker 1: like a stock and now we're trading at thirty four 480 00:26:20,640 --> 00:26:23,440 Speaker 1: and a half, that the duel of Men's Well yeah, 481 00:26:23,440 --> 00:26:25,879 Speaker 1: I mean really, I mean, if you know, it's like okay, 482 00:26:25,920 --> 00:26:28,280 Speaker 1: if if it's if Jimmy Choo is such a great business, 483 00:26:28,400 --> 00:26:31,360 Speaker 1: then why would they sell it? First of all? And second, 484 00:26:31,760 --> 00:26:35,000 Speaker 1: does Michael Cores have any experience actually making this kind 485 00:26:35,040 --> 00:26:38,440 Speaker 1: of acquisition work? So in terms of why it would 486 00:26:38,440 --> 00:26:41,879 Speaker 1: be sold, Jab Holdings, who is the majority stakeholder, is 487 00:26:41,920 --> 00:26:43,840 Speaker 1: really trying to get in this pasture of focusing more 488 00:26:43,880 --> 00:26:47,080 Speaker 1: on food and beverage. That's why they purchased Panera earlier 489 00:26:47,119 --> 00:26:50,239 Speaker 1: this year. Um. And in terms of Cores, No, you're right, 490 00:26:50,280 --> 00:26:52,080 Speaker 1: they don't have a track record of pulling off an 491 00:26:52,080 --> 00:26:54,200 Speaker 1: acquisition like this, And a lot of it may come 492 00:26:54,240 --> 00:26:56,080 Speaker 1: down to, you know, how they're able to do in 493 00:26:56,160 --> 00:26:59,639 Speaker 1: less penetrated markets like Asia Pacific. Jimmy Choo doesn't have 494 00:26:59,640 --> 00:27:01,800 Speaker 1: a big presence over there, and if they can get 495 00:27:01,840 --> 00:27:04,800 Speaker 1: that right, then course can really capitalize on that. Can 496 00:27:04,840 --> 00:27:06,600 Speaker 1: we get a sense of who else was in the 497 00:27:06,680 --> 00:27:09,639 Speaker 1: running to buy Jimmy Choose, because I assume that, uh, 498 00:27:09,920 --> 00:27:12,960 Speaker 1: there was a competitor, otherwise they wouldn't have paid such 499 00:27:13,000 --> 00:27:16,840 Speaker 1: a high price. I'm not quite sure, but I'm sure 500 00:27:16,960 --> 00:27:19,560 Speaker 1: there's there's a case to be made that an lvmhor 501 00:27:19,560 --> 00:27:22,199 Speaker 1: Are Caring or Richmond could have looked at it and 502 00:27:22,240 --> 00:27:24,440 Speaker 1: that might have been better for Jimmy Choo in some way, 503 00:27:24,600 --> 00:27:28,480 Speaker 1: right because perhaps um, by being tied up with those 504 00:27:28,600 --> 00:27:32,000 Speaker 1: I'm really premium high on luxury brands as opposed to 505 00:27:32,040 --> 00:27:34,760 Speaker 1: the core is accessible luxury brand that could have been 506 00:27:35,040 --> 00:27:39,000 Speaker 1: good for their reputation. Not Jimmy Choo, as you said, 507 00:27:39,240 --> 00:27:43,840 Speaker 1: is a perhaps not as well distributed in Asia, yet 508 00:27:43,840 --> 00:27:48,640 Speaker 1: it was founded by a Malaysian based in the UK. Correct, Yes, 509 00:27:48,880 --> 00:27:51,760 Speaker 1: that's right, um and so, and that's still a very 510 00:27:51,760 --> 00:27:55,960 Speaker 1: promising marketplace for them. And uh, we'll see, you know what, 511 00:27:56,040 --> 00:27:57,920 Speaker 1: cores of strategy. I think they have an investor day 512 00:27:57,960 --> 00:27:59,960 Speaker 1: coming up in August and we'll kind of see when 513 00:28:00,000 --> 00:28:03,040 Speaker 1: the articulate a clear strategy for penetration there that it's 514 00:28:03,040 --> 00:28:06,480 Speaker 1: something that seems to make sense, you know. I gotta say, 515 00:28:06,560 --> 00:28:08,960 Speaker 1: on a broader level, are you expecting when you talk 516 00:28:09,000 --> 00:28:12,119 Speaker 1: to your sources, are you expecting a lot more M 517 00:28:12,160 --> 00:28:15,439 Speaker 1: and a activity among retailers or do you think that 518 00:28:15,480 --> 00:28:17,639 Speaker 1: it's going to slow just due to the high valuations 519 00:28:17,760 --> 00:28:21,119 Speaker 1: right now. I think they're all hungry for more of it, 520 00:28:21,200 --> 00:28:23,240 Speaker 1: and so I think we can expect to see more 521 00:28:23,280 --> 00:28:26,040 Speaker 1: of these kinds of tie ups. Coaching cores really both 522 00:28:26,080 --> 00:28:29,320 Speaker 1: see this as their strategy for competing going forward. U, 523 00:28:29,560 --> 00:28:30,880 Speaker 1: and so I think we should keep an eye out 524 00:28:30,920 --> 00:28:34,919 Speaker 1: for more. Is Tomorrow Melan at all involved in the 525 00:28:34,920 --> 00:28:39,040 Speaker 1: company anymore? No, not to my knowledge. Okay, all right, 526 00:28:39,080 --> 00:28:42,000 Speaker 1: well that's very asked an answer. I don't know. I mean, 527 00:28:42,040 --> 00:28:46,760 Speaker 1: because Tomorrow Melan, who was the accessories editor at Vogue, 528 00:28:46,880 --> 00:28:50,040 Speaker 1: I believe was really responsible for turning this into such 529 00:28:50,600 --> 00:28:53,800 Speaker 1: a huge global brand. Jimmy Choo. Well, and I think 530 00:28:53,840 --> 00:28:56,280 Speaker 1: Sex in the City really did have also just the 531 00:28:56,320 --> 00:28:58,200 Speaker 1: whole thing. It was like, get my Jimmy choose on 532 00:28:58,240 --> 00:29:00,360 Speaker 1: and go out in New York City. Sarah How's, thank 533 00:29:00,400 --> 00:29:02,360 Speaker 1: you so much for joining us. She has our new 534 00:29:02,400 --> 00:29:05,320 Speaker 1: Bloomberg Gadfly columnist. She is fabulous. She comes from the 535 00:29:05,360 --> 00:29:09,120 Speaker 1: Washington Post and she writes a great stuff. Sarah how Zac, 536 00:29:09,680 --> 00:29:14,800 Speaker 1: thank you so much. Thanks for listening to the Bloomberg 537 00:29:14,880 --> 00:29:17,520 Speaker 1: P and L podcast. You can subscribe and listen to 538 00:29:17,560 --> 00:29:21,720 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you 539 00:29:21,800 --> 00:29:25,560 Speaker 1: prefer I'm pim Fox. I'm on Twitter at pim Fox. 540 00:29:25,880 --> 00:29:29,400 Speaker 1: I'm on Twitter at Lisa Abramo wits one Before the podcast, 541 00:29:29,440 --> 00:29:32,040 Speaker 1: you can always catch us worldwide on Bloomberg Radio