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Speaker 3: Okay, to the economic data of the day, you're looking
Speaker 3: at PPI. If you back out food and you back
Speaker 3: out energy in a month, a month basis came in
Speaker 3: up two tenths of one percent. But if you keep
Speaker 3: it all in there, you take a look at PPI
Speaker 3: final demand at four tenths of one percent, and you
Speaker 3: have to wonder, kind of what's going on and we
Speaker 3: how's the.
Speaker 1: Right way to take this.
Speaker 3: On a year on your basis, final demand was up
Speaker 3: by about three percent. So Mike McKee, Bloomberg International Economics
Speaker 3: and Policy correspondent joins.
Speaker 1: Us literally no one better.
Speaker 3: And I know that because he's my bff and emails
Speaker 3: me things all the time like price of eggs alex
Speaker 3: that really contributed to the PPI.
Speaker 4: Eighty percent of the headline PPI was due to goods
Speaker 4: prices going up, and the majority of that was egg
Speaker 4: prices up fifty six percent. In the month.
Speaker 1: It's AV and flu.
Speaker 4: It has happened because.
Speaker 1: Paul like, why can't we make more chickens? But you know,
Speaker 1: well we do, but then we kill them all. Yes,
Speaker 1: get AV and flu.
Speaker 4: That was the major contributor, and that's the biggest reason
Speaker 4: that the core is so much less.
Speaker 1: The important thing for the FAD is.
Speaker 4: That the categories that they take from PPI and put
Speaker 4: into the calculations for PCE all were much lower, like airfares, insurance,
Speaker 4: things like that. So the outlook is much better than
Speaker 4: it looks on the headline basis.
Speaker 5: So net December eighteenth, we're still expecting I guess a
Speaker 5: twenty five basis point cut.
Speaker 4: We haven't seen any reason why we wouldn't at this point.
Speaker 4: A couple of FED officials have said they would be
Speaker 4: ready to pause soon, but they have said when that
Speaker 4: is so, Given that most of them have suggested they're
Speaker 4: still on track to cut rates, that's the bet.
Speaker 1: Here's my question.
Speaker 3: I feel like this is a day two story of
Speaker 3: the CPI that we got yesterday. Is that, I mean,
Speaker 3: inflation isn't conquered, like it's not, so why the still
Speaker 3: impetus to cut in a more aggressive way?
Speaker 4: Well, I don't know that it's any more aggressive. It's
Speaker 4: what they had laid out, and it's twenty five basis points,
Speaker 4: so not going back at fifty, But.
Speaker 3: Why even cut it all and we know that inflation
Speaker 3: isn't well, that's.
Speaker 4: What the pause folks are saying, is that we still
Speaker 4: need to make sure that inflation's going down. And the
Speaker 4: answer to that from the other side is that inflation
Speaker 4: is going down and it would continue to go down
Speaker 4: given even a lower interest rate.
Speaker 1: And one of the.
Speaker 4: Things they can point to from the CPI is that
Speaker 4: owner's equivalent rant the crazy way the government and calculates
Speaker 4: housing costs went down to just a two tenths rise,
Speaker 4: which is the lowest since January of twenty twenty one.
Speaker 1: So they have been waiting.
Speaker 4: For housing prices to roll over, and it may be
Speaker 4: that they're finally doing that. And if that's the case,
Speaker 4: when you back out housing from the CPI, you're pretty
Speaker 4: much at two percent. So the odds are they can
Speaker 4: they're going to look at that and say, we can
Speaker 4: cut some more. Not as much, maybe as we thought
Speaker 4: we would, neutral maybe higher, but we can cut some more.
Speaker 5: We also had jobs claims that came out today the
Speaker 5: highest in a couple of months. But I don't know,
Speaker 5: as long as I still see like a two twenty,
Speaker 5: I don't know.
Speaker 1: What did you take away? You're you're in range.
Speaker 4: The thing to remember about jobless claims this week is
Speaker 4: Thanksgiving was the prior week, and everybody took two days off,
Speaker 4: so nobody went and filed jobless claims during the Thursday
Speaker 4: and Friday, and so they all go last week when
Speaker 4: the office is really open, and we get this bump.
Speaker 1: This is aught of that. Did they teach you that
Speaker 1: in like economic school?
Speaker 4: Yeah, it's all classic holidays, holiday season.
Speaker 1: It is an issue called experience actually.
Speaker 4: Especially this time of year, because the holidays float, you know,
Speaker 4: they're they're at different times every year. And this was
Speaker 4: a very late Thanksgiving, which impacts retail sales.
Speaker 1: Which holidays that Yep, we heard that.
Speaker 3: Okay, so what are you looking at next? So we're
Speaker 3: going to get the FED on Wednesday? But then what
Speaker 3: I mean, like, what's going to be that market moving moment?
Speaker 4: Well, we're going to want to see what happens with
Speaker 4: retail sales next week, which is the same day as
Speaker 4: the first day of the FED meeting. Retail sales are
Speaker 4: expected to have risen. People still hanging in there, still
Speaker 4: spending money. And if that's the case, then that puts
Speaker 4: us in line for continued stronger than expected growth, which
Speaker 4: should be in theory inflationary, but raises the question of
Speaker 4: productivity is at rising and absorbing some of this, So
Speaker 4: a lot to look forward to in.
Speaker 1: The numbers ahead.
Speaker 4: But after the FED, I think everybody looks forward to Christmas, yes,
Speaker 4: and Hadika, and we will get PCE at the end
Speaker 4: of the at the end of the month, but we
Speaker 4: will be on that game. It's going to move markets.
Speaker 1: That's basically like, we're not really going to do much
Speaker 1: until the New.
Speaker 5: York fair enough, it's working that week between Christmas and
Speaker 5: New Years.
Speaker 1: You are pot you are.
Speaker 3: He does it because he takes every Friday off.
Speaker 1: In the summer, So that'sure. Yes, there's an idea. Yeah,
Speaker 1: it works at some point. All right, Thanks so much.
Speaker 3: Mike McKee, Bloomberger International Economics and Policy correspondent. Joining us there.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Just say Alexa playing Bloomberg eleven thirty are good.
Speaker 5: Friends Over in Europe cutting rates yet again, the third
Speaker 5: straight meeting cutting rates, and it doesn't feel like they're
Speaker 5: cutting rates from any kind of particular position of strength.
Speaker 5: There's just some concern about economic struggles across much of
Speaker 5: Europe requiring lower rate. Let's break it down with Hugh Worthington,
Speaker 5: European rate strategists for Bloomberg Intelligence. He joins us from
Speaker 5: London via zoom Q. Again the third straight time, the
Speaker 5: ECB cutting rates here.
Speaker 1: What's your take?
Speaker 6: Yeah, well, the markets had quite an interesting reaction to it,
Speaker 6: actually because I think initially it looked at the headlines
Speaker 6: that came out of the ECB, as you said, we
Speaker 6: fully expected twenty five basis point rate cut. But there's
Speaker 6: a bit of change in language as well, basically saying
Speaker 6: that rates didn't need to stay restrictive going forward, which
Speaker 6: I think initially was taken to be sort of a
Speaker 6: very dubbish indication. And actually markets actually now moved to
Speaker 6: price a fifty basis point cut at their thirtieth of
Speaker 6: January meeting, which is a little bit harder than they
Speaker 6: had previously, basically being driven by worries about activity data.
Speaker 6: But right at the end of the meeting, Christine Leaguard
Speaker 6: did actually sort of put a little bit of spanning
Speaker 6: works and say that that suddenly they weren't so confident
Speaker 6: about the outlook for inflation, and maybe you know, the
Speaker 6: markets were probably or people were expecting her to be
Speaker 6: more saying that there are downside risks to inflation, and
Speaker 6: that seems to put the cats amongst the pigeons and
Speaker 6: basically set the front end bond deals or bondials generally
Speaker 6: in Europe, you know, trading higher again. So they've actually
Speaker 6: moved in a a ten basis point range around the
Speaker 6: ECB meeting, So you know, there's a little bit of
Speaker 6: a bit of mixed messaging going on.
Speaker 3: So it was really that last sentence and let's go
Speaker 3: through that one more time. So Christine Leaguard said that
Speaker 3: she wasn't they weren't as confident in the decline for inflation,
Speaker 3: that she was worried about upside risk. Is that what
Speaker 3: I'm reading It just seems like in Italy a ten
Speaker 3: basis point i'd jumped to the upside in the tenure
Speaker 3: feels a little extreme on that.
Speaker 6: Yeah, I think that also that move might have been
Speaker 6: a little bit something to do as well, that that
Speaker 6: people are concerned about this idea of pe P P
Speaker 6: pandemic que redemption. It's not happening from really actually basically
Speaker 6: she said next week onwards, and that pressuring on the spreads,
Speaker 6: that may be an element there. But yes, she said
Speaker 6: that she basically the I think the idea they that
Speaker 6: with a lot of the economist community is they look
Speaker 6: at the numbers for inflation going forward and they look
Speaker 6: like they're as flutters a pancake in Europe. But then
Speaker 6: she said that, and you know, I think everybody's assuming
Speaker 6: that basically the risks look really biased towards the downside.
Speaker 6: She basically refused to or didn't go along with that
Speaker 6: track of thinking, if you like. And that came in
Speaker 6: right at the end of the meeting, and that seems
Speaker 6: to have just literally it. Certainly it made the currency jump,
Speaker 6: and it made the yields jump. And what I think
Speaker 6: we've seen is a little bit whilst we are expecting
Speaker 6: a fifty basis point cut in January, what's markets maybe
Speaker 6: starting to do is just possibly looking for a little
Speaker 6: bit of a pause or less less aggressive cutting cycle
Speaker 6: there after that fifty basis point cut, and that that
Speaker 6: may be, you know what, the people that have taken away.
Speaker 6: We'll see if they sort of trying to lean against
Speaker 6: that as we get sort of reaction, which it tends
Speaker 6: to happen with ECB meetings the way they look at
Speaker 6: market reaction, they may not like it, they tend to
Speaker 6: try and lean against it in subsequent comments. Let's just
Speaker 6: keep an eye on that going forward.
Speaker 5: So Christine Legard, President of the ECB, calling out, you know,
Speaker 5: weaker than expected economic growth or just I guess maybe
Speaker 5: persistently weaker than expected growth here, what's kind of economic
Speaker 5: backdrop that's got the ECB concerned about growth?
Speaker 6: Well, I think we had a we had a it's
Speaker 6: actually people are expecting growth in eure to be pretty
Speaker 6: poor for a lot quite a long time, and it's
Speaker 6: actually held up pretty well. We've certainly had the Olympics
Speaker 6: in France and the summer may may have helped things
Speaker 6: a little bit. But more latterly, you know, I think
Speaker 6: that the there's just the higher instrates and the situation
Speaker 6: obviously into of the energy costs in Europe and the
Speaker 6: Russian Ukraine war and everything else has just weighed on things.
Speaker 6: And frankly, you know, the growth outlook has has It's
Speaker 6: going to be okay in twenty twenty four, you know.
Speaker 6: But it's basically that a lot of the PMI surveys
Speaker 6: and the survey data generally is pointing to at best
Speaker 6: sclerotic growth and in reality probably you know a little
Speaker 6: bit he possibly risk risk of contraction. Again, I think
Speaker 6: they looking at twenty twenty five GDP growth in the
Speaker 6: latest forecast was one point one percent. That was one
Speaker 6: point three percent from September time, and frankly, they'll probably
Speaker 6: be very lucky to be hitting that one point one
Speaker 6: percent set of target.
Speaker 3: Yeah, which really bigs the question. Also when do they
Speaker 3: actually start cutting because growth this week and they need
Speaker 3: to support the economy versus inflation has come down. Therefore
Speaker 3: they can remove that restriction. All right, Grace, thank you
Speaker 3: for explaining that to me, because I was so confused
Speaker 3: all throughout the presser and the statement and then looking
Speaker 3: at what happened to Italy. So I appreciate you. Hethington
Speaker 3: a Bloomberg Intelligence European rates, a strategist, but it is interesting.
Speaker 3: You know, you can't argue with the global cutting cycle.
Speaker 3: I think we're now just in how deep does that
Speaker 3: global cutting cycle go and where and does that actually
Speaker 3: should that inform where you put your money?
Speaker 5: Right in six station today we have the US Federal
Speaker 5: Reserve and the expectation is for a twenty five basis point.
Speaker 3: But you would like the day mat I.
Speaker 5: Got my right there, I got my calendar up there
Speaker 5: and everything I'm on top of it. Fed got is
Speaker 5: everything you need to know about the Federal Reserve.
Speaker 2: Right you're listening to the Bloomberg Intelligence Podcast. Catch us
Speaker 2: live weekdays at ten am Eastern on Apple Cardplay and
Speaker 2: Android Auto with the Bloomberg Business App. Listen on demand
Speaker 2: wherever you get your podcasts, or watch us live on YouTube.
Speaker 5: Alex Seal, Paul Sweeney, you live here in our Bloomberg
Speaker 5: Inactive Broker studio, streaming live on YouTube. It's head over
Speaker 5: there and Barry joins us in studio. She's a founder,
Speaker 5: manager partner of thread Needle. She invests money for a living.
Speaker 5: You know, I wrote in a chat, the surveillance chat
Speaker 5: this morning, I just dropped a note in and I said, hey,
Speaker 5: there is a palpable sense of optimism in this country
Speaker 5: since the election, and I think we've seen it in
Speaker 5: financial markets.
Speaker 1: Did you guys change your outlook.
Speaker 5: For investing opportunities risk post election? Here?
Speaker 7: I actually didn't. And while I'm optimistic, I don't have
Speaker 7: the same euphoria that I think we're seeing translate into
Speaker 7: the into these market outlooks. And one of the reasons
Speaker 7: actually is pertinent to today, which is I think we're
Speaker 7: going to see interest rates that are higher for longer
Speaker 7: than we expected, not just because of the inflation data
Speaker 7: we saw today, but because the noise around the policies
Speaker 7: that we think are coming in next year don't lend
Speaker 7: themselves in my opinion too, having a rate cut, and
Speaker 7: I think that changes the outlook for tech. I think
Speaker 7: it changes the outlook for some of these AI stories
Speaker 7: that have been getting the biggest pop over the last
Speaker 7: eighteen months. So I don't have the same you know,
Speaker 7: embrace of these massive all time highs that we're looking
Speaker 7: at for next year.
Speaker 3: So the other point though is, and we just heard
Speaker 3: from President like Donald Trump, is that we're going to
Speaker 3: get tax cuts.
Speaker 7: Yea.
Speaker 3: It feels like we're in a very animal spirit place
Speaker 3: right now I appreciate stacks are down today, but like
Speaker 3: I think there was a spac yesterday, like bitcoin in
Speaker 3: one hundred thousand, Like this isn't like a twenty eighteen
Speaker 3: feel in some respects does that offset? Like how does
Speaker 3: that meld with what you're saying?
Speaker 7: Yeah, well, when spacks are back and meme stocks are
Speaker 7: roaring again, then to your pint Alex, you know you're
Speaker 7: in this sort of place of I think we're in
Speaker 7: a bubble in some respects. Look, I think the at
Speaker 7: a minimum, I think we're going to see the tax
Speaker 7: cut extensions, right, we know that that's a certainty. It's
Speaker 7: I think there's a question as to whether we really
Speaker 7: see corporate tax rates coming down to fifteen percent. We'll
Speaker 7: see what the offsets are offsets are with tariffs. But
Speaker 7: I do think where we still have uncertainty. Right we
Speaker 7: don't know what's going to happen to big sectors like
Speaker 7: pharmaceuticals right when there's a change in healthcare policy. We
Speaker 7: don't really know yet what the impact of dog is
Speaker 7: going to be. If we're going to see margins getting
Speaker 7: squeezed in some big sectors like industrials of defense. So
Speaker 7: there is this optimism, but I do think that we
Speaker 7: have yet to understand what specific policies we're going to
Speaker 7: see from incoming President Trump, and until we do, I
Speaker 7: think it's difficult to make a real bed.
Speaker 5: Where do you see opportunities in the markets in general?
Speaker 5: Are there any sectors that are screening well for you
Speaker 5: guys these days?
Speaker 7: Yeah, there's some areas of consumer discretionary that I'm getting
Speaker 7: more excited about. So there's been a period of real
Speaker 7: noise around the state of the consumer. Over the last
Speaker 7: six months, we're getting more data that says it's sort
Speaker 7: of stabilizing to perhaps getting a little bit better as
Speaker 7: inflationary pressure abates for the parts of the population that's
Speaker 7: been hardest hit. Experiential is a place in alex I've
Speaker 7: talked about this with you in the past that I've
Speaker 7: always been excited about, and I think elements of travel.
Speaker 7: The cruise industry is one that was really, really well,
Speaker 7: really well. And this is what I actually bought, you know,
Speaker 7: Carnival Cruise is one I bought in the depths of
Speaker 7: twenty twenty. I bought airlines at the same time. Airlines
Speaker 7: I hung on too. Carnival I sold out of too early.
Speaker 7: And the reason was there was a period of time
Speaker 7: the recovery was much slower than it was for other
Speaker 7: parts of travel. People didn't want to be cooped up
Speaker 7: on these ships that are still that overhang of COVID
Speaker 7: and the leverage of these businesses, these ships. When you
Speaker 7: go buy a ship, you take out massive amounts of
Speaker 7: debt to finance them, and so I got spooked by
Speaker 7: the leverage levels. I now have conviction that the free
Speaker 7: cashlow profile, the margin profile, the ability to take price
Speaker 7: of this business is back where it should be. The
Speaker 7: deleveraging is happening. So that's why I've been going back
Speaker 7: into these kinds of names.
Speaker 3: Sorry you mentioned worried about tech than an AI. Yeah,
Speaker 3: I mean, do you is that really a levered play
Speaker 3: to rates? People talk about it as it's like a
Speaker 3: structural change.
Speaker 7: I think there are some cases where it is a
Speaker 7: levered play for rates. I think you've got some AI
Speaker 7: stories where the free cashlow profile where they part of the
Speaker 7: product that are to profitability remains not obvious. I think
Speaker 7: there are parts that are not leathered plays to rates.
Speaker 7: For example, the big tech businesses that are already free
Speaker 7: cashlow generative where they've gone through this twenty four month
Speaker 7: cycle of cost cutting and they're regress aggressing, aggressively reinvesting
Speaker 7: behind AI. That to me is not a levered play
Speaker 7: on rais. What that is, though, is setting up twenty
Speaker 7: twenty five for a real year of show me the
Speaker 7: money right, show me the productivity is coming through in
Speaker 7: your KPI is show me that your margin is truly
Speaker 7: being enhanced, showing you're getting adoption and you're taking price
Speaker 7: and this is not just becoming table stakes that I
Speaker 7: think is going to be the big question work for
Speaker 7: twenty twenty five is execution turning into dollars?
Speaker 5: On the consumer? What's your view on the consumer? How
Speaker 5: do you think the consumer's doing out there? Because if
Speaker 5: you're going along a cruise, yeah, company, I would think
Speaker 5: it's pretty constructive.
Speaker 7: Well, I'll answer your question in two parts. When it
Speaker 7: comes to cruises specifically, the value proposition for consumers is great.
Speaker 7: You're getting a vacation at a twenty five to fifty
Speaker 7: percent discount of the land based equivalent.
Speaker 5: So I say that again on cruise ship, I'm getting
Speaker 5: a vacation at a discount of the land based the
Speaker 5: land based equivalent.
Speaker 7: So if you were to go and fly.
Speaker 6: You're looking at that.
Speaker 7: Yeah, if you go to go fly to a hotel
Speaker 7: and that's saying Florida or a Vegas and then all
Speaker 7: you fly to a villa. Right, You've got the transportation
Speaker 7: and post a lot of these places. For cruises, you
Speaker 7: can drive to the ports of cool. It's all inclusive
Speaker 7: and if you you've got to think about it. Travel
Speaker 7: in the US has been really impacted by the cost
Speaker 7: of labor, by the services inflation that we've seen. A
Speaker 7: lot of these cruise lines are staffing with international labor.
Speaker 7: They're going out to nations outside the US to hire
Speaker 7: their staff, so that we haven't seen the same wage
Speaker 7: inflation that you've seen for domestic travel. So that's why
Speaker 7: when you're a consumer that's perhaps been pressured over the
Speaker 7: last year or so, this is actually an interesting value
Speaker 7: proposition for you if you want to take a vacation.
Speaker 7: More broadly, though, to answer your question, you know, I've
Speaker 7: been looking very closely at default rates on consumer credit cards,
Speaker 7: on auto loans, are looking at BNPL take up what
Speaker 7: that means for consumer spending. We saw these default rates
Speaker 7: creep up over the last sort of three to six months.
Speaker 7: It looks like they're now stabilizing if you look at
Speaker 7: the last amounts of data, so it feels as though
Speaker 7: there's a little bit of a reprieve coming.
Speaker 3: Does that a consumer call extend in to say retail?
Speaker 3: I mean talk about stocks on a terror. I can't
Speaker 3: tell you the number of days that Walmart has been
Speaker 3: in a fifty two week high.
Speaker 7: Yes, I love Walmart. I loved Walmart for a long time.
Speaker 7: I think Walmart's a little bit special and I think
Speaker 7: retail we have to break it down into a couple
Speaker 7: of considents parts Walmart. Let's look ahead to next year.
Speaker 7: Something like two thirds of Walmart's portfolio, by the way,
Speaker 7: is US sourced. So if we're now looking at retail
Speaker 7: and looking ahead to the tariff impact, I think Walmart's
Speaker 7: particularly well positioned in terms of its scale, it's ability
Speaker 7: to buy at lower costs, but also it's geographic mix.
Speaker 7: You look at retail like Macy's for example, and what
Speaker 7: happened Jesse. Department stores are still really really struggling. You
Speaker 7: look at certain specialty retail names. I never saw this coming. Abber,
Speaker 7: Crombie and Fitch has been on this unbelievable tear so
Speaker 7: you've had some brown turnarounds that have been very successful.
Speaker 7: You've got other retailers. Let's take the dollar stores, dollar generals.
Speaker 7: They're struggling right. Their share prices are absolutely in the toilet.
Speaker 7: So I think again, it comes back to what is
Speaker 7: the value proposition? How is a consumer being sliced and
Speaker 7: dice and who's playing to their strengths most effectively.
Speaker 5: One of my favorite deals back in the day doing
Speaker 5: deals was Live Nation putting that thing together. You like
Speaker 5: that one, don't you.
Speaker 7: I liked that for a while.
Speaker 5: The regulators approved that.
Speaker 7: I have no idea, Yeah right, Live Nation.
Speaker 1: Look, I went into that.
Speaker 7: I lost money in a bit for a while.
Speaker 8: I'm now up.
Speaker 7: I'm off about forty percent. But I hung onto it
Speaker 7: because I really had conviction. This googlements is tied into
Speaker 7: the cruise discussion that as the world gets more digital,
Speaker 7: as more of our lives go online, the flip side
Speaker 7: of that coy is people are going to look for
Speaker 7: more opportunities for differentiated in person experiences. And Live Nation,
Speaker 7: and specifically the concert piece, has been a big part
Speaker 7: of that thesis. I've invested in other privately, in other
Speaker 7: events based businesses, music festivals, smaller localized venues and there's
Speaker 7: this huge demand for them. I don't think it's stopping yet.
Speaker 7: Antitrust is a question, the ticket masterpiece is a question,
Speaker 7: but for now I'm very approved it.
Speaker 3: Yeah, well they are approved Googles and things, and they're
Speaker 3: under fire for stuff as well.
Speaker 5: You put the largest concert promoter together with the largest
Speaker 5: ticket agency, I.
Speaker 3: Mean, what do you think what's going to happen? Yeah?
Speaker 3: What about We talked about tech and AI, So where
Speaker 3: do you want to be a positioned.
Speaker 7: In that sect? Specifically, where I've been more enthusiastic has
Speaker 7: been around some of these platformization plays. That's such a
Speaker 7: lot of syllables, but some examples are two specific examples
Speaker 7: auto networks. If we look in the cybersecurity space, So
Speaker 7: if you take a look at the way in which
Speaker 7: a lot of enterprises right now have put together at
Speaker 7: their cybersecurity infrastructure, they tended to stitch together lots of
Speaker 7: esoteric solutions. And if you're sitting in the IT department
Speaker 7: or the risk department of these enterprises, getting all of
Speaker 7: these systems to talk to each other, to integrate to
Speaker 7: how the holistic solution is really difficult. The auto networks
Speaker 7: in the world turning up and saying, now, come to
Speaker 7: us as a one stop shop. We'll provide all the
Speaker 7: solutions for you. That's platformization. It's the coming together of
Speaker 7: all the constituent solutions. PA ANDW has been doing it
Speaker 7: very well. They've been executing. They're willing to take pricing hits,
Speaker 7: they are willing to sell at losses to get people
Speaker 7: to switch.
Speaker 1: Over to their platform.
Speaker 7: It's panning out, it's working. Salesforce has been another one
Speaker 7: of those. Again, there was a moment where it wasn't
Speaker 7: looking so bright, but they've actually had been delivered delivering
Speaker 7: on that platformization play. And the reason I like these
Speaker 7: alex is twofold and on boards. I spend a lot
Speaker 7: of time on companies that are doing the buying. I
Speaker 7: know that they're actively looking for these kinds of solutions
Speaker 7: as buyers Number one number two when it comes to AI,
Speaker 7: I am a big believer that the big are going
Speaker 7: to get bigger. That scale is going to be what
Speaker 7: ultimately wins in the collection of data, in the scrubbing
Speaker 7: of data, and the application of data, and so I
Speaker 7: think these platforms are going to be the big data
Speaker 7: gatherers and the big winners as we go forward.
Speaker 5: Any part of tech that scares you at this point, Yeah,
Speaker 5: there are.
Speaker 7: Some parts of tech that I feel more. On the
Speaker 7: hardware side, I feel a bit nervous about. And I've
Speaker 7: done a little bit of a one at on this
Speaker 7: because I do believe that there is going to be
Speaker 7: a reinvestment cycle as a lot of hardware companies and
Speaker 7: they're pitching at the Lenova's the world of talking about it.
Speaker 7: The apples are the world are talking about it, where
Speaker 7: AI is now being built into the actual underlying devices.
Speaker 7: I did make a play to try and go into
Speaker 7: an industrial hardware around this, an industrial tech, and I
Speaker 7: think it's just moving a lot more slowly than I
Speaker 7: would have hoped. So I'm watching that with a little
Speaker 7: bit more nervousness than.
Speaker 8: I was before.
Speaker 3: All right, and great stuff. Really appreciate it. Ann Barry, founder,
Speaker 3: managing partner over at Thread Needle.
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Speaker 5: Thirty, Alex Stel Paul Sweeney. We're live here in our
Speaker 5: Bloomberg Interactive Broker studio. We're streaming live on YouTube as well,
Speaker 5: so check us out there. I'd say, anytime I want
Speaker 5: to get the latest poop on China, there is no
Speaker 5: one I want to talk to more than Lena Miller.
Speaker 5: He's the sea of the China Beige Book. They have
Speaker 5: extraordinary data on China, the economy of China, that really
Speaker 5: no one else has, and it really gives them a
Speaker 5: unique insight to what's happening there in China. Leland joins
Speaker 5: us from Washington, DC via zoom and I love to
Speaker 5: just start really thirty thousand foot with you in China.
Speaker 5: Give us a sense of how the economy is in
Speaker 5: China today really from your data, and what can the
Speaker 5: government do to the extend it once improve things there.
Speaker 8: I think if you look back earlier this fall, we
Speaker 8: saw some of the worst data we've seen it in
Speaker 8: a long while, and I think that's one of the
Speaker 8: reasons that you saw these big stimulus announcements in September.
Speaker 1: And they did do something.
Speaker 8: I mean, they did spur a little bit of a
Speaker 8: increased activity and a little bit increased confidence. If you
Speaker 8: look at what happened in October, our data were much better.
Speaker 8: November the data were also much better than September. So
Speaker 8: you've seen a pickup in the economy. Some of that
Speaker 8: may be manufacturing exports being expedited a head of Trump tariffs,
Speaker 8: but you're seeing an economy that's better than it was.
Speaker 8: It's not great, it's not strong, but it's also not
Speaker 8: catastrophically weak. So that's the position we're in going into
Speaker 8: twenty twenty five. It's sort of ironic seeing all these
Speaker 8: headlines about you know, giant stimulus happening, and you know
Speaker 8: they flood the economy.
Speaker 1: You know, the economy doesn't need it right now.
Speaker 8: If it needs it in twenty twenty five, it's because
Speaker 8: something's happening in the teriff in the tariff world.
Speaker 7: Okay, so this.
Speaker 3: Is such a great point because that's all I was
Speaker 3: going to say. So that signaling for more government stimulus
Speaker 3: and racus you think that is not at all true.
Speaker 3: I'm going it has to come from a tariff issue
Speaker 3: that that will then provide stress.
Speaker 8: He Look, this is the important, the important point to
Speaker 8: take away from the second half of twenty twenty four,
Speaker 8: even in September, when the economy is much worse than
Speaker 8: it is right now.
Speaker 1: It's bad, it can be weak.
Speaker 8: It doesn't mean it's catastrophically meet weak, and it doesn't
Speaker 8: mean that it needs big stimulus in order, you know,
Speaker 8: in order for things not to fall apart. So what
Speaker 8: the government wants to do is just do just enough
Speaker 8: to be able to keep the economy stable. It's not
Speaker 8: reaching for higher ceiling, it's not trying to juice things.
Speaker 1: What it wants to do is.
Speaker 8: Get the economy stable, so they could worry about other priorities,
Speaker 8: mostly national security priorities, building up a domestic chip ecosystem,
Speaker 8: working on supply chain resiliency, you know, working on vulnerability
Speaker 8: to US sanctions, these types of things. Certainly a lot
Speaker 8: of things with advanced technology. What it doesn't want to
Speaker 8: do is juice high levels of growth. So it's trying
Speaker 8: to figure out what the minimum amount needed in order
Speaker 8: to keep going, keep going, keep going, and to not
Speaker 8: have to worry about the economy. It's not a priority,
Speaker 8: but it's also doesn't want it to be it's downfall.
Speaker 5: To what extent are they concerned? Are the Chinese government
Speaker 5: and officials concerned about tariffs that president like Trump is
Speaker 5: talking about.
Speaker 1: I think they are concerned.
Speaker 8: I think they should be concerned because you know, tariffs
Speaker 8: are coming in twenty twenty five. You know, we'll see
Speaker 8: as the administration fills itself out and as the policy
Speaker 8: gets gets more sequenced out, you know what exactly we
Speaker 8: see on what timing. But I think they understand that
Speaker 8: that there is a very high level chance that they're
Speaker 8: going to see increased pressure on their major growth drive
Speaker 8: right now, which is exports. You know, in twenty twenty four.
Speaker 8: It's the timing of this is remarkable because twenty twenty four,
Speaker 8: China spent the entire year, including through she including at
Speaker 8: the Plunum, saying we are going to double down on
Speaker 8: our manufacturing and export model. We're going to talk about
Speaker 8: new quality, productive forces. And even though we have the
Speaker 8: highest trade surplus ever and we have a you know,
Speaker 8: record manufacturing goods surplus, we are going to still double
Speaker 8: down on exports in a holy government effort to just
Speaker 8: keep pushing them out, pushing them out, pushing them out
Speaker 8: to the world. This is causing friction everywhere. But with
Speaker 8: Trump coming in too, who's particularly sensitive to these issues,
Speaker 8: you know, you're going to see you're going to see
Speaker 8: a problem. So I think that they should be very
Speaker 8: worried about the terrifs are on the way.
Speaker 3: What do you think where in China in terms of
Speaker 3: sectors are still the weakest and what can really be
Speaker 3: done for that?
Speaker 8: Well, I mean, I think you need to put property
Speaker 8: off to the side, because property is weak in large
Speaker 8: part because they want it to be weak. You know,
Speaker 8: they have spent the last four plus years, you know,
Speaker 8: diminishing property as a growth driver, popping the property bubble,
Speaker 8: trying to keep prices down, trying to trying to extend
Speaker 8: as little credit as possible into the sector. So property
Speaker 8: is weak, but it's sort of separate because that's part
Speaker 8: of the game plan. What could continues to be weak
Speaker 8: and two weak for China's future growth is consumption. So
Speaker 8: if you look at retail, you look at services, you
Speaker 8: look at these areas of the economy that should be
Speaker 8: should be soaring if the leadership was really paying attention
Speaker 8: to this consumption as a priority. You know, mantra. Those
Speaker 8: that are not doing too well, they're they're doing a
Speaker 8: little bit better than they were earlier in the fall,
Speaker 8: but they're not doing well, so everyone keeps thinking that
Speaker 8: there's going to be this giant fiscal blast and consumptions
Speaker 8: is going to flip like this. In order for there
Speaker 8: to be a major restructure of the Chinese economy, you
Speaker 8: do have to incentivize greater consumption, and you can't do
Speaker 8: that through one off vouchers.
Speaker 1: Leland.
Speaker 5: If I were to chat with some folks on the street,
Speaker 5: whether it's in urban centers like Beijing or shang Higher
Speaker 5: on the countryside, what would they tell me? Are they
Speaker 5: concerned about this economy?
Speaker 1: Are they happy with the economy? Where are we? I
Speaker 1: think they're concerned.
Speaker 8: I mean, if they're traders, then they're trying to listen
Speaker 8: very closely to hear every time there's a stimulus announcement.
Speaker 8: Then they're running their computers and buying. Because this is
Speaker 8: about storturemasset market trading. You know, most of these things
Speaker 8: are complete nonsense, and they're being you know, being basically
Speaker 8: broadcast by the street by others because they're trading opportunities.
Speaker 8: They're not macro changes to the landscape. So I think
Speaker 8: most of the people who are on the ground trying
Speaker 8: to live their lives are very disappointed in what they see. Yes,
Speaker 8: there's more policy support that's come in twenty twenty four.
Speaker 8: Yes there will be more on the way in twenty
Speaker 8: twenty five. But is this going to fix what ails China?
Speaker 8: China has extraordinarily low domestic demand and they're over reliant
Speaker 8: on an export model that's about to be hit hard
Speaker 8: with tariffs. So with that combination, I would be very
Speaker 8: concerned if I were a Chinese you know, a Chinese
Speaker 8: household just trying to figure out what's.
Speaker 1: Next for me.
Speaker 3: So based on that, what do you think is going
Speaker 3: to happen with tariffs? Like we were all talking about
Speaker 3: how President elect Trump, but by the president g to
Speaker 3: his inauguration, Like, do you really think that tariffs are
Speaker 3: going to be in the cards in a material way?
Speaker 3: Are this still the bargaining chip playbook?
Speaker 1: Yes? I think tariffs are going to be coming in
Speaker 1: a material way.
Speaker 8: It's funny because you know, the Street commentary and I
Speaker 8: get these things flooding my inbox every day. They like
Speaker 8: to pick up on some sort of personnel something or other,
Speaker 8: some sort of anecdote, and then that is their reason
Speaker 8: why they think all this is it's going to be
Speaker 8: a total, you know, a total non issue you know,
Speaker 8: Scott Bessen doesn't like tariffs, or you know, you know,
Speaker 8: or or Bob Leithheiser is not the administration, or she
Speaker 8: may come the inauguration, and therefore this whole tariff thing
Speaker 8: was was was non existent and it's not real. I
Speaker 8: would I would spend a lot of time second guessing
Speaker 8: these things because it's very important to understand that in
Speaker 8: a core recept of what the Trump administration is coming
Speaker 8: to do is reorder the domestic economy and reorder international relations,
Speaker 8: economic relationships, and part of that is going to be
Speaker 8: with tariffs. You know, we we still to be still
Speaker 8: to be seen who gets tariffs and and how hard
Speaker 8: and what's sequencing. I think the administration is going to
Speaker 8: work on that and transition in the administration as things
Speaker 8: come along.
Speaker 1: The idea that China is not.
Speaker 8: Going to see tariffs in a big way in twenty
Speaker 8: twenty five, I think is is a is a very
Speaker 8: optimistic take by the Street.
Speaker 3: Really great stuff. Super appreciate, Alylan, Thank you very much.
Speaker 3: Lelan Miller at CEO of the Beige Book.
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