1
00:00:04,760 --> 00:00:07,720
Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim

2
00:00:07,800 --> 00:00:11,080
Speaker 1: Fox along with my co host Lisa Abramowitz. Each day

3
00:00:11,119 --> 00:00:14,360
Speaker 1: we bring you the most important, noteworthy, and useful interviews

4
00:00:14,400 --> 00:00:16,280
Speaker 1: for you and your money, whether you're at the grocery

5
00:00:16,320 --> 00:00:19,360
Speaker 1: store or the trading floor. Find the Bloomberg P L

6
00:00:19,480 --> 00:00:28,400
Speaker 1: Podcast on iTunes, SoundCloud and at Bloomberg dot com. I

7
00:00:28,440 --> 00:00:29,840
Speaker 1: want to take a look at how much it's going

8
00:00:29,880 --> 00:00:35,159
Speaker 1: to cost this Thanksgiving? Uh, thinking about buying perhaps a

9
00:00:35,640 --> 00:00:39,879
Speaker 1: organic turkey. Jennifer Bartashes is over here. She's a of

10
00:00:40,080 --> 00:00:44,199
Speaker 1: Bloomberg Intelligence US food and drug retail analysts, speaking to

11
00:00:44,320 --> 00:00:47,480
Speaker 1: us from Prinston, New Jersey. Jennifer, what are you cooking

12
00:00:47,479 --> 00:00:51,040
Speaker 1: this this h holiday? Well, I am cooking turkey. Um,

13
00:00:51,040 --> 00:00:53,239
Speaker 1: But I'm actually cooking part of a turkey, and we

14
00:00:53,280 --> 00:00:57,760
Speaker 1: have a small household, so we're not interested in a

15
00:00:57,760 --> 00:01:01,360
Speaker 1: lot of leftover. But it's cheaper this year. It is, um,

16
00:01:01,400 --> 00:01:04,440
Speaker 1: you know, definitely. Food food deflation is taking a toll

17
00:01:04,959 --> 00:01:08,640
Speaker 1: um And on average, Thanksgiving is about three point four

18
00:01:08,680 --> 00:01:12,119
Speaker 1: percent less expensive this year than it was last year. UM.

19
00:01:12,240 --> 00:01:15,200
Speaker 1: And so that that's good news for consumers. Well, so

20
00:01:15,280 --> 00:01:18,480
Speaker 1: where is the decline coming from? Because the actual turkey

21
00:01:18,520 --> 00:01:22,280
Speaker 1: itself is not necessarily cheaper, right exactly. Um, But what's

22
00:01:22,520 --> 00:01:25,520
Speaker 1: the decline is really coming from all the other typical

23
00:01:25,560 --> 00:01:28,399
Speaker 1: items that you would think of for your holiday dinner,

24
00:01:28,560 --> 00:01:33,720
Speaker 1: so um, stuffing, green beans, you know, uh, you know, potatoes,

25
00:01:33,840 --> 00:01:36,520
Speaker 1: things like that. Um. And what's happening is that in

26
00:01:36,560 --> 00:01:40,840
Speaker 1: a deflationary environment, all of the retailers are trying to

27
00:01:40,880 --> 00:01:44,280
Speaker 1: get as many sales as possible, um, and so they're

28
00:01:44,319 --> 00:01:46,880
Speaker 1: discounting all of those common items, and so there's a

29
00:01:46,920 --> 00:01:49,440
Speaker 1: little bit of a price war that's happening that's driving

30
00:01:49,440 --> 00:01:53,640
Speaker 1: those prices lower. What what product is sort of the

31
00:01:53,680 --> 00:01:57,360
Speaker 1: focal point for some of these price wars? Um, well,

32
00:01:57,600 --> 00:02:02,000
Speaker 1: anything you know, obviously aside from the turkey, which which

33
00:02:02,040 --> 00:02:04,600
Speaker 1: is a little bit more expensive this year. Um. You

34
00:02:04,640 --> 00:02:09,200
Speaker 1: see everything from you know, the instant stuffing to cans

35
00:02:09,280 --> 00:02:12,839
Speaker 1: of you know, cream of mushroom soup, pretty much all

36
00:02:12,880 --> 00:02:16,680
Speaker 1: the standard basic items that most people buy. Um. Almost

37
00:02:16,720 --> 00:02:20,120
Speaker 1: every retailer has some sort of promotion happening on a

38
00:02:20,160 --> 00:02:22,360
Speaker 1: lot of those core items. But it seems like there's

39
00:02:22,360 --> 00:02:26,280
Speaker 1: something of a divergence between lower cost grocers and the

40
00:02:26,360 --> 00:02:31,200
Speaker 1: higher end sort of organic focused UH stores. Right. I

41
00:02:31,200 --> 00:02:33,720
Speaker 1: mean it seems like prices are going up for the

42
00:02:33,760 --> 00:02:40,480
Speaker 1: more kind of artists, artisanal producers. It's true, especially once

43
00:02:40,520 --> 00:02:44,640
Speaker 1: you get into more more of the organic type of items,

44
00:02:44,639 --> 00:02:47,280
Speaker 1: that prices are going up a little bit more. Um

45
00:02:47,400 --> 00:02:50,160
Speaker 1: And And what's what's happening is that there are more

46
00:02:50,160 --> 00:02:54,519
Speaker 1: and more stores that are selling organic products these days. Um.

47
00:02:54,680 --> 00:02:58,160
Speaker 1: But the the supply is not necessarily expanding at the

48
00:02:58,200 --> 00:03:00,320
Speaker 1: same rate as a number of people that are starving

49
00:03:00,400 --> 00:03:03,280
Speaker 1: those goods, um. And so that that gives it an

50
00:03:03,440 --> 00:03:07,000
Speaker 1: inherently a little bit of extra inflation or or higher prices,

51
00:03:07,400 --> 00:03:09,600
Speaker 1: as people have to pay a little bit more to

52
00:03:09,639 --> 00:03:11,880
Speaker 1: have the goods in their stores, and then they pass

53
00:03:11,919 --> 00:03:14,760
Speaker 1: it on to consumers. So when you look at retailers

54
00:03:14,760 --> 00:03:19,240
Speaker 1: like Whole Foods, UM, fresh Market, Fairway, Um, these are

55
00:03:19,280 --> 00:03:23,359
Speaker 1: all retailers that have lean more heavily in that organic

56
00:03:23,360 --> 00:03:27,120
Speaker 1: and natural space. And as a result, their Thanksgiving basket

57
00:03:27,160 --> 00:03:30,120
Speaker 1: was a little bit higher this year's than the average supermarkets. Yeah,

58
00:03:30,200 --> 00:03:32,160
Speaker 1: meaning that it was more expensive. Right. So I think

59
00:03:32,240 --> 00:03:35,320
Speaker 1: you had some information that the basket at Whole Foods

60
00:03:35,320 --> 00:03:38,440
Speaker 1: would cost a hundred and thirty four dollars, that's for

61
00:03:38,520 --> 00:03:42,200
Speaker 1: twenty items. Compared with one and seventy eight cents at

62
00:03:42,240 --> 00:03:46,280
Speaker 1: Fairway at nine seven dollars a Trader Joe's and nineties

63
00:03:46,320 --> 00:03:49,440
Speaker 1: six dollars and forty cents at fresh Market. Can we

64
00:03:49,440 --> 00:03:52,440
Speaker 1: talk a little bit about why there is price deflation

65
00:03:52,640 --> 00:03:56,720
Speaker 1: in some of these grocery uh products. Well, you know,

66
00:03:57,120 --> 00:04:00,680
Speaker 1: the the the price deflation. Yeah, this is a pretty

67
00:04:00,680 --> 00:04:03,680
Speaker 1: small basket, you know when you're talking about very specific

68
00:04:03,680 --> 00:04:07,680
Speaker 1: things for Thanksgiving, But the price deflation is is really coming.

69
00:04:07,760 --> 00:04:10,480
Speaker 1: It's a it's an overall industry trend where you're seeing

70
00:04:10,480 --> 00:04:13,600
Speaker 1: deflation across the board and it's been a sustained period

71
00:04:13,600 --> 00:04:16,480
Speaker 1: of deflation. UM. And some of that is coming from

72
00:04:16,560 --> 00:04:19,280
Speaker 1: deflation in produce UM. Some of that is coming from

73
00:04:19,360 --> 00:04:23,360
Speaker 1: deflation in proteins like beef and eggs and chicken UM,

74
00:04:23,400 --> 00:04:26,599
Speaker 1: and in dairy as well. UM. And so when that happens,

75
00:04:26,640 --> 00:04:29,120
Speaker 1: it sort of bleeds through and affects all of the

76
00:04:29,440 --> 00:04:32,160
Speaker 1: you know, all of the retail prices within the industry.

77
00:04:32,400 --> 00:04:34,080
Speaker 1: Is it just that we're getting that much more efficient

78
00:04:34,080 --> 00:04:38,599
Speaker 1: at producing food? Um, That's that's that's part of it. UM.

79
00:04:38,640 --> 00:04:41,679
Speaker 1: You know, there's there's there's always a cycle of supply

80
00:04:41,839 --> 00:04:45,520
Speaker 1: and demand with regards to you know, what's produced UM,

81
00:04:45,600 --> 00:04:48,760
Speaker 1: and so you know, you go through limited supply producers

82
00:04:48,760 --> 00:04:51,839
Speaker 1: that overproduced UM, and then you go through, you know,

83
00:04:51,880 --> 00:04:54,320
Speaker 1: a period where there's there's a little too much in

84
00:04:54,400 --> 00:04:57,800
Speaker 1: prices come down UM, and that's kind of a normal fluctuation.

85
00:04:57,920 --> 00:05:01,039
Speaker 1: But we have had kind of a sustain period where

86
00:05:01,600 --> 00:05:05,240
Speaker 1: UM prices have been coming down or staying well UM

87
00:05:05,320 --> 00:05:08,320
Speaker 1: for quite a while. Jennifer Batasha's thank you so much

88
00:05:08,320 --> 00:05:11,080
Speaker 1: for being with us. Jennifer Patasha's US food and drug

89
00:05:11,200 --> 00:05:15,520
Speaker 1: retail analyst for Bloomberg Intelligence, speaking with us from Princeton,

90
00:05:15,760 --> 00:05:18,679
Speaker 1: New Jersey. I'm Lisa Bramwood's my co host, Pim Fox

91
00:05:18,960 --> 00:05:33,960
Speaker 1: is on vacation. This is Bloomberg. I want to learn

92
00:05:34,000 --> 00:05:38,479
Speaker 1: about what fund managers are thinking right now. A number

93
00:05:38,520 --> 00:05:41,679
Speaker 1: of money managers that we spoke to since President elect

94
00:05:41,839 --> 00:05:45,560
Speaker 1: Trump won the election, they've said that they have not

95
00:05:45,760 --> 00:05:49,160
Speaker 1: changed the way that they structured their portfolios significantly or

96
00:05:49,200 --> 00:05:53,560
Speaker 1: their strategies. But perhaps our next guest disagrees. I want

97
00:05:53,560 --> 00:05:56,400
Speaker 1: to bring in David Kudla, CEO and chief investment strategist

98
00:05:56,440 --> 00:06:00,400
Speaker 1: of Mainstay Capital Management, which oversees about two billion dollars UH.

99
00:06:00,480 --> 00:06:02,760
Speaker 1: David Thank you so much for being with us. Good morning,

100
00:06:03,240 --> 00:06:07,360
Speaker 1: Good morning. So have you changed your base case outlook

101
00:06:07,480 --> 00:06:11,600
Speaker 1: and the way that you invest since the election? Absolutely? Uh.

102
00:06:12,279 --> 00:06:14,279
Speaker 1: You know, when we look at it, we look at

103
00:06:14,320 --> 00:06:19,080
Speaker 1: a Trump presidency with a still Republican controlled Congress, but

104
00:06:19,640 --> 00:06:23,600
Speaker 1: specifically with the Trump presidency, a see change in the

105
00:06:23,640 --> 00:06:27,800
Speaker 1: investment landscape. Um. We've already seen what's happened with bond

106
00:06:27,880 --> 00:06:31,160
Speaker 1: yields in the last two weeks, with the prospect of

107
00:06:32,080 --> 00:06:40,240
Speaker 1: tax policy and infrastructure spending, pro growth policies, regulation regulations

108
00:06:40,240 --> 00:06:45,000
Speaker 1: being rolled back, and you know, we see the that

109
00:06:45,440 --> 00:06:48,279
Speaker 1: there is a path here for rates headed higher. The

110
00:06:48,360 --> 00:06:51,640
Speaker 1: Fed will have cover to raise rates even faster than

111
00:06:51,680 --> 00:06:55,400
Speaker 1: maybe they would have. UM. And we've seen the markets

112
00:06:55,440 --> 00:06:58,680
Speaker 1: performing well in specific sectors in this regard that I

113
00:06:58,680 --> 00:07:01,600
Speaker 1: think investors need to take key to this. It's very

114
00:07:01,600 --> 00:07:04,760
Speaker 1: important for the coming weeks and months in their portfolio. Well, so,

115
00:07:04,839 --> 00:07:08,200
Speaker 1: how do you sort of take what's going on and

116
00:07:08,240 --> 00:07:10,440
Speaker 1: put it into an investment thesis? I mean, how do

117
00:07:10,480 --> 00:07:13,560
Speaker 1: you determine when potentially a rally has gone too far

118
00:07:13,800 --> 00:07:17,800
Speaker 1: or when perhaps people's hopes are getting ahead of the reality. Sure,

119
00:07:17,880 --> 00:07:22,680
Speaker 1: so there's some things that happened immediately. UM that that

120
00:07:22,800 --> 00:07:26,240
Speaker 1: could have been expected if one expected that Trump was

121
00:07:26,280 --> 00:07:28,440
Speaker 1: going to win the election. You know, we saw an

122
00:07:28,440 --> 00:07:32,800
Speaker 1: immediate bounce in biotech because biotech and pharma had been

123
00:07:32,920 --> 00:07:38,360
Speaker 1: under a what we considered a political risk with the

124
00:07:38,440 --> 00:07:44,240
Speaker 1: threat of UH pricing regulation what started really in September

125
00:07:44,280 --> 00:07:47,280
Speaker 1: of last year with the Hillary Clinton tweet. As soon

126
00:07:47,320 --> 00:07:51,720
Speaker 1: as Trump won the presidency rather than Hillary Clinton, that

127
00:07:51,800 --> 00:07:55,960
Speaker 1: political risk was greatly diminished. Biotech popped a lot UH

128
00:07:56,000 --> 00:07:58,840
Speaker 1: that we see maybe you know, as a shorter immediate

129
00:07:58,880 --> 00:08:02,320
Speaker 1: bounce other things like banks. You know, we had already

130
00:08:02,320 --> 00:08:06,160
Speaker 1: been favorable towards the regional banks with the prospect of

131
00:08:06,200 --> 00:08:09,840
Speaker 1: FED raising rates that improves their net interest margin or

132
00:08:09,920 --> 00:08:14,760
Speaker 1: basically their profit on landing. Now the regulatory headwind in

133
00:08:14,800 --> 00:08:19,120
Speaker 1: front of banks will probably be diminished, and we expect

134
00:08:19,200 --> 00:08:21,360
Speaker 1: that and we think there's a long runway for banks

135
00:08:21,360 --> 00:08:24,720
Speaker 1: and financial services UH that's now in front of us

136
00:08:24,760 --> 00:08:28,240
Speaker 1: with the Trump presidency, with the infrastructure spend. We'll see

137
00:08:28,280 --> 00:08:32,160
Speaker 1: what comes there and we'll see what policy statements or

138
00:08:32,200 --> 00:08:36,360
Speaker 1: what statements were made during the campaign actually become policy.

139
00:08:36,360 --> 00:08:39,600
Speaker 1: Because he's walked some back, some like announcing its intent

140
00:08:40,120 --> 00:08:42,680
Speaker 1: to pull out of t p P. He's he's gone

141
00:08:42,679 --> 00:08:45,680
Speaker 1: through with. So I'm looking at a tenure yield right

142
00:08:45,679 --> 00:08:49,560
Speaker 1: now in the treasury UH at about two point four percent,

143
00:08:50,080 --> 00:08:55,240
Speaker 1: up from UH one point five percent as recently as September.

144
00:08:55,320 --> 00:08:57,760
Speaker 1: How high do you think that the tenure could go

145
00:08:58,360 --> 00:09:00,840
Speaker 1: and will this be a messy, unwrapped ing of of

146
00:09:00,880 --> 00:09:04,480
Speaker 1: the bond market? Well, it's it's been a messy, unrattling

147
00:09:04,480 --> 00:09:08,200
Speaker 1: for the last two weeks. We've seen yields, depending on

148
00:09:08,240 --> 00:09:10,480
Speaker 1: where we are on the curve, rise as much as

149
00:09:10,559 --> 00:09:14,040
Speaker 1: fifties sixty seventy basis points, and yields around the world

150
00:09:14,520 --> 00:09:17,840
Speaker 1: have gone quite a bit higher. UM. So it's already

151
00:09:17,880 --> 00:09:20,280
Speaker 1: been a little bit massy. We think we could get

152
00:09:20,800 --> 00:09:23,920
Speaker 1: a pause here at some point, you know, around two

153
00:09:23,920 --> 00:09:26,800
Speaker 1: and a half percent on the ten year UH. But

154
00:09:27,120 --> 00:09:30,280
Speaker 1: when we look out longer term and a lot of

155
00:09:30,320 --> 00:09:33,400
Speaker 1: this will will that will be based on you know,

156
00:09:33,840 --> 00:09:37,520
Speaker 1: our Trump's you know, the actual policies with a Republican

157
00:09:37,520 --> 00:09:40,680
Speaker 1: Congress to get put through. Do we see the inflationary

158
00:09:40,880 --> 00:09:45,400
Speaker 1: the pro growth but also inflationary policies that many think

159
00:09:45,440 --> 00:09:47,800
Speaker 1: will go in That has caused the bond market start

160
00:09:47,800 --> 00:09:51,800
Speaker 1: pricing and higher inflation um. You know, but it's easy

161
00:09:51,880 --> 00:09:55,360
Speaker 1: to see that we we now see rates moving higher

162
00:09:55,480 --> 00:09:58,880
Speaker 1: and the one three back in July we saw in

163
00:09:58,960 --> 00:10:03,720
Speaker 1: the tenure um is a generational low bond yields. Well,

164
00:10:03,760 --> 00:10:06,280
Speaker 1: so what argument for why people were going into stocks

165
00:10:06,360 --> 00:10:09,760
Speaker 1: was that, well there was no alternative, right, because bond

166
00:10:09,840 --> 00:10:12,800
Speaker 1: yields were so low. Basically, the dividend you'd you'd be

167
00:10:12,800 --> 00:10:15,040
Speaker 1: paid by owning a broad basket of stocks would be

168
00:10:15,080 --> 00:10:19,480
Speaker 1: more than treasuries. That's changing, and it's changing fast. Do

169
00:10:19,559 --> 00:10:22,040
Speaker 1: you think that this will lead some people to withdraw

170
00:10:22,320 --> 00:10:26,520
Speaker 1: or at least hold back from allocating money to stock.

171
00:10:26,600 --> 00:10:28,120
Speaker 1: So far that has not been the case, but this

172
00:10:28,200 --> 00:10:31,680
Speaker 1: has been one big question among people I speak with. Yeah,

173
00:10:31,679 --> 00:10:35,120
Speaker 1: it's it's an interesting dynamic that will unfold because you know,

174
00:10:35,120 --> 00:10:38,440
Speaker 1: we've talked about the great rotation for a number of years,

175
00:10:38,559 --> 00:10:40,400
Speaker 1: and there have been a lot of false starts where

176
00:10:40,920 --> 00:10:43,920
Speaker 1: where rates have eventually start to go higher. We see

177
00:10:43,920 --> 00:10:48,199
Speaker 1: the rotation from UM from bonds to stocks for that reason,

178
00:10:48,360 --> 00:10:53,320
Speaker 1: although stocks have had a lot of UH stimulus to

179
00:10:53,320 --> 00:10:56,000
Speaker 1: go higher, namely central bank stimulus. I mean, that's what

180
00:10:56,040 --> 00:10:59,560
Speaker 1: we talked about until the election. Is earnings didn't matter.

181
00:10:59,640 --> 00:11:03,440
Speaker 1: Valueations didn't matter. It was about central bank stimulus around

182
00:11:03,480 --> 00:11:06,760
Speaker 1: the world pumping stocks higher. And you know, but the

183
00:11:06,800 --> 00:11:09,600
Speaker 1: way we think the dynamic between stocks and bonds and

184
00:11:09,679 --> 00:11:13,400
Speaker 1: folds initially is investors start to see and again it's

185
00:11:13,440 --> 00:11:16,040
Speaker 1: investors that look at treasuries and high grade corporates is

186
00:11:16,080 --> 00:11:20,040
Speaker 1: a safe investment. But statement after statement they see a

187
00:11:20,080 --> 00:11:23,240
Speaker 1: negative number in terms of their total return because the

188
00:11:23,280 --> 00:11:25,800
Speaker 1: price of bonds moves inversely the yields. As yields go

189
00:11:25,960 --> 00:11:30,360
Speaker 1: higher and stay higher, the bond prices are lower, and

190
00:11:30,720 --> 00:11:34,200
Speaker 1: that will cause people to rethink, you know, how are

191
00:11:34,200 --> 00:11:38,200
Speaker 1: they allocating their investments. And you know, we have been

192
00:11:38,200 --> 00:11:39,959
Speaker 1: saying for a while and continue to say, this is

193
00:11:39,960 --> 00:11:45,280
Speaker 1: where liquid alternative investments are an opportunity when bonds are

194
00:11:45,320 --> 00:11:48,320
Speaker 1: going to be you know, an asset class that potentially

195
00:11:48,320 --> 00:11:51,160
Speaker 1: offers negative returns here for a while. So in terms

196
00:11:51,160 --> 00:11:54,120
Speaker 1: of total return, So, David, what's your what's your best

197
00:11:54,120 --> 00:11:59,280
Speaker 1: bet going forward in the next six months? Banks, financial

198
00:11:59,360 --> 00:12:04,480
Speaker 1: services regionels are bigger, bigger. So we've seen we've seen

199
00:12:04,520 --> 00:12:08,720
Speaker 1: what's happened with the large money center banks we have, um,

200
00:12:08,880 --> 00:12:11,680
Speaker 1: you know, the problem with the Wells Fargo scandal. So

201
00:12:11,880 --> 00:12:15,559
Speaker 1: when we we look at what rising rates will do

202
00:12:16,679 --> 00:12:21,400
Speaker 1: for financial services in general, uh, it is it's help

203
00:12:21,440 --> 00:12:25,559
Speaker 1: with lending. When we look at the regulatory headwinds that

204
00:12:25,640 --> 00:12:28,400
Speaker 1: have been in place, that's affected lending a lot to

205
00:12:28,920 --> 00:12:32,040
Speaker 1: people look at their regional banks. We we think of

206
00:12:32,080 --> 00:12:34,800
Speaker 1: as the hometown lender. People look at at those banks.

207
00:12:34,840 --> 00:12:38,000
Speaker 1: That's where a lot of their revenue comes from. So

208
00:12:38,120 --> 00:12:43,360
Speaker 1: therefore we like the regional banks over larger banks. We like, uh,

209
00:12:43,800 --> 00:12:47,920
Speaker 1: you know, the smaller companies that are domestically oriented versus

210
00:12:48,200 --> 00:12:52,520
Speaker 1: large mauna national conglomerates. So so small regional banks right

211
00:12:52,559 --> 00:12:54,760
Speaker 1: in that fold of a couple of investment themes that

212
00:12:54,800 --> 00:12:56,520
Speaker 1: we think they have a long runway ahead of them,

213
00:12:56,720 --> 00:12:58,520
Speaker 1: even though they've done so great the past two weeks.

214
00:12:59,160 --> 00:13:04,040
Speaker 1: David Kudla, CEO and chief investment strategist at Mainstay Capital Management,

215
00:13:04,080 --> 00:13:18,280
Speaker 1: talking about how banks is his bet going forward, te

216
00:13:18,440 --> 00:13:21,760
Speaker 1: you with the enemy. Donald Trump went to visit The

217
00:13:21,760 --> 00:13:24,560
Speaker 1: New York Times yesterday, a publication that he has maligned

218
00:13:25,080 --> 00:13:29,080
Speaker 1: greatly and that they've had a pretty contentious relationship, and uh.

219
00:13:29,120 --> 00:13:33,079
Speaker 1: He had a wide ranging interview with editors and reporters

220
00:13:33,120 --> 00:13:36,440
Speaker 1: at the New York Times, Ben Brody, Bloomberg Politics supporter

221
00:13:36,600 --> 00:13:39,640
Speaker 1: here in the studio at Bloomberg eleven three oh, to

222
00:13:39,679 --> 00:13:41,960
Speaker 1: talk a little bit about what the three most important

223
00:13:42,000 --> 00:13:45,439
Speaker 1: points were that we learned from that interview. Right, Well,

224
00:13:45,480 --> 00:13:48,120
Speaker 1: as you said, it was certainly wide ranging them. But

225
00:13:48,120 --> 00:13:50,160
Speaker 1: one of the things that I think a lot of

226
00:13:50,160 --> 00:13:52,400
Speaker 1: people took away from it was him saying suddenly that

227
00:13:52,480 --> 00:13:56,160
Speaker 1: he was open to not exiting the Paris Climate Accords.

228
00:13:56,440 --> 00:13:59,120
Speaker 1: This is somebody who has labeled climate change, uh, you

229
00:13:59,160 --> 00:14:02,720
Speaker 1: know what Chinese designed to make America less competitive, and

230
00:14:02,760 --> 00:14:05,440
Speaker 1: suddenly he's saying that, well, he might keep an open

231
00:14:05,440 --> 00:14:08,120
Speaker 1: mind about this. It was a little unclear what exactly

232
00:14:08,120 --> 00:14:10,320
Speaker 1: would sway him one way or the other, but that

233
00:14:10,440 --> 00:14:14,199
Speaker 1: certainly made headlines. Um. He also backed away a little

234
00:14:14,200 --> 00:14:17,080
Speaker 1: bit from some of the neo Nazis have been supporting

235
00:14:17,120 --> 00:14:20,960
Speaker 1: from him, who have been supporting him backed away a

236
00:14:21,040 --> 00:14:24,840
Speaker 1: lot from this campaign, promised to prosecute Hillary Clinton for

237
00:14:24,920 --> 00:14:27,960
Speaker 1: her use of a private email server, and then raising

238
00:14:27,960 --> 00:14:30,520
Speaker 1: a lot of eyebrows in my world, was him saying

239
00:14:30,560 --> 00:14:33,000
Speaker 1: that the president of the United States simply can't have

240
00:14:33,120 --> 00:14:35,840
Speaker 1: a conflict of interest. This was this was quite exceptional.

241
00:14:36,040 --> 00:14:39,360
Speaker 1: The laws totally on my side, meaning the president can't

242
00:14:39,440 --> 00:14:45,080
Speaker 1: have a conflict of interest. UM. There was a great

243
00:14:45,120 --> 00:14:49,920
Speaker 1: story by Bloomberg reporters Caleb Melby and Stephanie Baker about

244
00:14:50,080 --> 00:14:53,800
Speaker 1: how President elect Trump would have a hard time divesting

245
00:14:54,280 --> 00:14:57,600
Speaker 1: his businesses even if he wanted to. UM, can you

246
00:14:57,680 --> 00:15:01,520
Speaker 1: talk a little bit about that and just how conflicted

247
00:15:01,760 --> 00:15:05,480
Speaker 1: he may be? Sure? Well, for one thing, you know,

248
00:15:05,720 --> 00:15:09,720
Speaker 1: he has a broad international empire with a lot of

249
00:15:09,800 --> 00:15:14,040
Speaker 1: international partners, including in the Philippines somebody who is uh

250
00:15:14,080 --> 00:15:18,080
Speaker 1: an envoy to the US. UH. So the level of

251
00:15:18,120 --> 00:15:21,600
Speaker 1: the conflicts and the level of the involvement is just

252
00:15:21,800 --> 00:15:25,400
Speaker 1: so incredibly vast and really unprecedented UH in the history

253
00:15:25,400 --> 00:15:27,440
Speaker 1: of the U. S presidency. But of course there's also

254
00:15:27,480 --> 00:15:30,560
Speaker 1: the real estate issue. A lot of his holdings are

255
00:15:30,600 --> 00:15:33,760
Speaker 1: relatively a liquid and it's not clear exactly what fair

256
00:15:33,840 --> 00:15:38,080
Speaker 1: market value would be UH for him to divest again

257
00:15:38,160 --> 00:15:40,480
Speaker 1: if he were interested, which he does not seem to

258
00:15:40,520 --> 00:15:45,960
Speaker 1: be coming across as he says, an such thing. It's fine,

259
00:15:46,680 --> 00:15:49,880
Speaker 1: And in a strange way, he actually is right about

260
00:15:49,920 --> 00:15:53,680
Speaker 1: the law conflict of interest. UH laws generally exempt the

261
00:15:53,680 --> 00:15:57,400
Speaker 1: president because they have such a wide purview that there

262
00:15:57,400 --> 00:16:01,400
Speaker 1: would constantly be raising questions of that doesn't undo his

263
00:16:01,560 --> 00:16:04,280
Speaker 1: moral or ethical obligation, nor is it going to stop

264
00:16:04,520 --> 00:16:07,560
Speaker 1: his political enemies from raising questions about it or for

265
00:16:07,640 --> 00:16:09,960
Speaker 1: that a matter of reporters who seeing a story yesterday

266
00:16:09,960 --> 00:16:12,840
Speaker 1: that George Washington too had a lot of property. Um,

267
00:16:12,880 --> 00:16:15,960
Speaker 1: but it might not have been as as quite as lucrative,

268
00:16:16,000 --> 00:16:18,600
Speaker 1: but people are sort of looking, uh for some kind

269
00:16:18,760 --> 00:16:23,479
Speaker 1: of precedent that far back. There was another report yesterday

270
00:16:23,520 --> 00:16:27,040
Speaker 1: that the Trump Foundation admitted violating I R S rules

271
00:16:27,080 --> 00:16:31,560
Speaker 1: by uh improperly giving money to someone close to the organization. Um,

272
00:16:32,160 --> 00:16:33,720
Speaker 1: is this an important thing? Is this something that people

273
00:16:33,720 --> 00:16:36,760
Speaker 1: should pay attention to? Does it matter? Well, you know,

274
00:16:36,800 --> 00:16:39,840
Speaker 1: I'll just sort of use Trump's own logic. You know,

275
00:16:39,960 --> 00:16:43,400
Speaker 1: he said that the Hillary Clara the Clinton Foundation, that

276
00:16:43,480 --> 00:16:46,720
Speaker 1: Bill Hilly and Chelsea Clinton Foundation was worthy of looking

277
00:16:46,720 --> 00:16:49,520
Speaker 1: into because people could use it giving to it as

278
00:16:49,520 --> 00:16:52,680
Speaker 1: a way to get access to the precedent to the president.

279
00:16:53,080 --> 00:16:54,760
Speaker 1: They had used it as a way to get access

280
00:16:54,800 --> 00:16:57,360
Speaker 1: to the Secretary of State, and that you know, this

281
00:16:57,480 --> 00:17:02,240
Speaker 1: basically was issue number one or piece of evidence number

282
00:17:02,280 --> 00:17:05,520
Speaker 1: one about the ways that the economy is rigged and

283
00:17:05,560 --> 00:17:07,679
Speaker 1: the way that Washington is rigged. So I think it

284
00:17:07,760 --> 00:17:11,920
Speaker 1: is something that people should be looking into. Uh, it's

285
00:17:11,920 --> 00:17:14,600
Speaker 1: not exactly clear what the nature of that self dealing was.

286
00:17:14,920 --> 00:17:16,439
Speaker 1: They just sort of checked a box on the I R.

287
00:17:16,520 --> 00:17:19,080
Speaker 1: S Form. But yeah, well we're certainly gonna be looking

288
00:17:19,080 --> 00:17:21,000
Speaker 1: into it. Yeah. It seems pretty unclear at this point

289
00:17:21,080 --> 00:17:22,800
Speaker 1: with the scope of it is or sort of how

290
00:17:22,840 --> 00:17:24,919
Speaker 1: how important it is. Um, but it's something to keep

291
00:17:24,920 --> 00:17:28,280
Speaker 1: an eye on. Another thing making headlines today, uh, and

292
00:17:28,440 --> 00:17:31,480
Speaker 1: President elect Trump plans to nominate South Carolina Governor Nicki

293
00:17:31,600 --> 00:17:34,639
Speaker 1: Haley to be United Nations ambassador. Is he getting pushed

294
00:17:34,640 --> 00:17:39,199
Speaker 1: back from his Republican colleagues even though Nicki Haley is

295
00:17:39,200 --> 00:17:44,560
Speaker 1: a Republican herself. Nikki Haley is very popular in the party.

296
00:17:44,840 --> 00:17:48,240
Speaker 1: Nikki Haley is very popular in her state. Of course,

297
00:17:48,400 --> 00:17:52,920
Speaker 1: she was a vocal Trump opponent for much of the primaries,

298
00:17:52,960 --> 00:17:55,640
Speaker 1: never really came around to him. Uh. It's a little

299
00:17:55,680 --> 00:18:00,400
Speaker 1: bit unclear just how comfortable mainstream Republicans are right now

300
00:18:00,400 --> 00:18:02,000
Speaker 1: with some of his picks who have been a little

301
00:18:02,000 --> 00:18:03,879
Speaker 1: bit more outside of the mainstream where they've been a

302
00:18:03,920 --> 00:18:06,600
Speaker 1: little bit more insiders, uh and loyalists. But we do

303
00:18:06,680 --> 00:18:09,840
Speaker 1: know that they are broadly very happy with the choice

304
00:18:09,840 --> 00:18:12,960
Speaker 1: of NICKI Haley, which one are theyt least happy about? Uh,

305
00:18:13,000 --> 00:18:16,840
Speaker 1: that's uh, that's a big question. Steve Bannon is certainly

306
00:18:17,359 --> 00:18:20,360
Speaker 1: someone who they who's gonna be uh a senior strategistic

307
00:18:20,400 --> 00:18:23,760
Speaker 1: counselor uh, somebody who is drawing sort of a headache

308
00:18:23,800 --> 00:18:26,760
Speaker 1: for them insofar as it's brought some pressure and some

309
00:18:26,800 --> 00:18:30,080
Speaker 1: examination from liberal groups who are concerned about his ties

310
00:18:30,119 --> 00:18:33,879
Speaker 1: to white nationalist movements. But uh, you know, picks like

311
00:18:33,960 --> 00:18:36,600
Speaker 1: Ryant's previous for chief of staff, who's the chairman of

312
00:18:36,640 --> 00:18:38,679
Speaker 1: the r n C, they're pretty happy about those. So

313
00:18:38,760 --> 00:18:40,280
Speaker 1: you know, it's a mixed bag for some of them.

314
00:18:40,400 --> 00:18:42,280
Speaker 1: And I've heard um kind of mixed reports about Mitt

315
00:18:42,320 --> 00:18:45,080
Speaker 1: Romney and how seriously uh President elect Trump is is

316
00:18:45,119 --> 00:18:47,200
Speaker 1: considering putting up a secretary of state. Is that it

317
00:18:47,200 --> 00:18:49,240
Speaker 1: is still Is that still on the table too? I

318
00:18:49,240 --> 00:18:51,120
Speaker 1: think it's definitely still on the table. I think he's

319
00:18:51,119 --> 00:18:54,000
Speaker 1: also definitely still considering a lot of people. This is

320
00:18:54,040 --> 00:18:56,760
Speaker 1: a you know, this is a blue ribbon appointment, and

321
00:18:56,800 --> 00:18:59,119
Speaker 1: he's taking it seriously, and I think he's entertaining a

322
00:18:59,280 --> 00:19:01,760
Speaker 1: really wide iety of people from it. And he's somebody

323
00:19:01,760 --> 00:19:05,119
Speaker 1: who uh kind of goes through a lot of different

324
00:19:05,160 --> 00:19:10,000
Speaker 1: possibilities for big choices like this, and UH often doesn't

325
00:19:10,000 --> 00:19:12,040
Speaker 1: sort of commit one way or the other until his

326
00:19:12,160 --> 00:19:14,439
Speaker 1: gut knows, And so you'll hear leaks from this or

327
00:19:14,520 --> 00:19:19,040
Speaker 1: that quarter representing what's purported to be his choice at

328
00:19:19,040 --> 00:19:22,119
Speaker 1: a given moment. But very often once it's made, UH,

329
00:19:22,200 --> 00:19:23,639
Speaker 1: it looks a little bit different from what people on

330
00:19:23,680 --> 00:19:26,679
Speaker 1: the inside for telling us. Ben Brody, Blumber Politics reporter,

331
00:19:26,800 --> 00:19:40,320
Speaker 1: you have an interesting job. I want to talk about

332
00:19:40,359 --> 00:19:44,720
Speaker 1: the story of UH construction companies and that have just

333
00:19:45,000 --> 00:19:48,760
Speaker 1: absolutely searched in the wake of Donald Trump's victory as

334
00:19:49,080 --> 00:19:53,240
Speaker 1: the next US president. And they seem to be soaring

335
00:19:53,320 --> 00:19:57,359
Speaker 1: on the expectation that construction will pick up. But is

336
00:19:57,440 --> 00:20:00,200
Speaker 1: this actually what's going to happen with us? To break

337
00:20:00,200 --> 00:20:02,880
Speaker 1: it all down, is Karen Eubile, Heart and industrials analyst

338
00:20:03,160 --> 00:20:06,080
Speaker 1: at Bloomberg Intelligence. First, Karen, let's talk a little bit

339
00:20:06,119 --> 00:20:09,680
Speaker 1: about Deer earnings. They came out. They were better than expected,

340
00:20:09,760 --> 00:20:12,960
Speaker 1: still down from last year, but better than expected. The

341
00:20:13,000 --> 00:20:17,000
Speaker 1: stock now up more than nine percent. What's going on, UH,

342
00:20:17,240 --> 00:20:20,240
Speaker 1: Deer is consistently beat throughout this cycle. This was a

343
00:20:20,280 --> 00:20:23,199
Speaker 1: big beat. The expectations were thirty cents. That came in

344
00:20:23,240 --> 00:20:26,119
Speaker 1: almost a dollar, So that's part of it. UM. The

345
00:20:26,160 --> 00:20:29,240
Speaker 1: second thing is they sort of signaled that they think

346
00:20:29,280 --> 00:20:32,879
Speaker 1: the bottom is here in aug equipment. UM. And you know,

347
00:20:32,920 --> 00:20:35,280
Speaker 1: I think it's just that they've executed well, and there's

348
00:20:35,320 --> 00:20:37,159
Speaker 1: a lot of hype around these stocks right now, so

349
00:20:37,359 --> 00:20:39,560
Speaker 1: any any news is good news, it seems like. But

350
00:20:39,600 --> 00:20:43,080
Speaker 1: it seems like it's not necessarily that they're predicting such

351
00:20:43,160 --> 00:20:46,840
Speaker 1: an uptick in revenue next year even and frankly, a

352
00:20:46,840 --> 00:20:49,200
Speaker 1: lot of their gains have come from or better than

353
00:20:49,240 --> 00:20:54,000
Speaker 1: expected performance has come from cost cutting. Correct. They still

354
00:20:54,080 --> 00:20:56,320
Speaker 1: expect the North American market to be down five to

355
00:20:56,400 --> 00:20:59,280
Speaker 1: ten percent. That's the most important market for them. Uh.

356
00:20:59,280 --> 00:21:02,200
Speaker 1: They expect lard equipment to be down in a similar amount,

357
00:21:02,560 --> 00:21:06,199
Speaker 1: But they were down twenty five tot in uh in

358
00:21:06,440 --> 00:21:09,040
Speaker 1: uh fifth school sixteen, so I guess five to ten

359
00:21:09,119 --> 00:21:11,720
Speaker 1: looks better. Uh. You know it. It is still going

360
00:21:11,760 --> 00:21:14,280
Speaker 1: to be down in their high margin project products. So

361
00:21:14,320 --> 00:21:17,560
Speaker 1: it's still going to be about execution next year, but

362
00:21:17,640 --> 00:21:19,360
Speaker 1: people have a lot of confidence in it because they've

363
00:21:19,400 --> 00:21:23,160
Speaker 1: done a good job. Did they talk at all about

364
00:21:23,400 --> 00:21:28,719
Speaker 1: what a Trump administration would mean for their outlook going forward,

365
00:21:28,720 --> 00:21:31,000
Speaker 1: do they have any sense of that. The conference call

366
00:21:31,119 --> 00:21:34,080
Speaker 1: is on right now, but um, I so you know,

367
00:21:34,240 --> 00:21:37,600
Speaker 1: I haven't heard the commentary. But what's going on is

368
00:21:37,640 --> 00:21:41,119
Speaker 1: of course everything moved with Trump, right, But infrastructure was

369
00:21:41,160 --> 00:21:45,600
Speaker 1: the big, big excitement around these docks. And interestingly for Deer,

370
00:21:45,680 --> 00:21:48,520
Speaker 1: it's twelve percent of their sales construction equipment, so it

371
00:21:48,560 --> 00:21:51,800
Speaker 1: should not have moved on that. But um, you know, Caterpillar,

372
00:21:51,880 --> 00:21:54,320
Speaker 1: some of the others, they all moved in anticipation. What

373
00:21:54,400 --> 00:21:56,119
Speaker 1: he what he said he wants to do is a

374
00:21:56,160 --> 00:22:00,439
Speaker 1: big number, a trillion dollars over ten years on likely

375
00:22:00,680 --> 00:22:03,920
Speaker 1: very unlikely. Also probably not gonna help next year, maybe

376
00:22:03,960 --> 00:22:07,600
Speaker 1: help if we get anything through. But there's other things.

377
00:22:07,600 --> 00:22:11,280
Speaker 1: Tax rates are expected to be lower, UH, clean it

378
00:22:11,400 --> 00:22:13,879
Speaker 1: regulations are supposed to be lower. So there's just a

379
00:22:13,880 --> 00:22:17,199
Speaker 1: lot of height that it's a very favorable environment for

380
00:22:17,280 --> 00:22:21,440
Speaker 1: business in general, and UH cyclicals even more because of

381
00:22:20,880 --> 00:22:24,520
Speaker 1: the construction spending and they're just really running. And yet

382
00:22:24,560 --> 00:22:29,719
Speaker 1: on Monday, S and P Global downgraded the outlook for Caterpillar,

383
00:22:29,720 --> 00:22:33,560
Speaker 1: which is often thought of as a rival too dear UH,

384
00:22:33,880 --> 00:22:38,399
Speaker 1: saying that the outlook looks less less positive going forward.

385
00:22:38,640 --> 00:22:41,359
Speaker 1: I mean, is Caterpillar facing a different outlook for some

386
00:22:41,440 --> 00:22:45,600
Speaker 1: reason than Deer Uh yeah, Um, Deer's Cats in the

387
00:22:45,680 --> 00:22:48,280
Speaker 1: money market, big market for them, it's down you know

388
00:22:48,359 --> 00:22:52,199
Speaker 1: sixty um and uh so that looks like that's going

389
00:22:52,240 --> 00:22:54,960
Speaker 1: to be bad again next year, maybe not as bad again,

390
00:22:55,040 --> 00:22:59,760
Speaker 1: leveling off Deer's largely. Yeah, Dad Deer's egg. Um, cats

391
00:22:59,760 --> 00:23:02,840
Speaker 1: got mining and construction. They overlap in construction, but the

392
00:23:02,880 --> 00:23:07,080
Speaker 1: outlook is is different and Cat's financial situation is more

393
00:23:07,160 --> 00:23:09,960
Speaker 1: stretched than DearS and that's part of why. Um, you know,

394
00:23:10,119 --> 00:23:14,600
Speaker 1: SMP made the adjustment as well. Um. So they are

395
00:23:14,760 --> 00:23:17,200
Speaker 1: similar in that that the two largest cap stocks in

396
00:23:17,240 --> 00:23:20,000
Speaker 1: the group, but the end markets are really quite different

397
00:23:20,520 --> 00:23:25,000
Speaker 1: with respect to Dear. How much more can make cut? Uh,

398
00:23:25,040 --> 00:23:29,439
Speaker 1: they expect to cut another another hundred and fifteen million

399
00:23:29,480 --> 00:23:32,280
Speaker 1: dollars again, Um, it's going to be probably largely people

400
00:23:32,320 --> 00:23:35,359
Speaker 1: at this point. I think, you know, you can always

401
00:23:35,440 --> 00:23:38,600
Speaker 1: find something. I think they're they're doing some restructuring in Europe.

402
00:23:39,119 --> 00:23:41,920
Speaker 1: I think they're getting to the end of the cost cutting.

403
00:23:41,960 --> 00:23:45,040
Speaker 1: At some point, they've got to start getting some top

404
00:23:45,080 --> 00:23:47,920
Speaker 1: line and and you know, maybe they'll get it by

405
00:23:48,000 --> 00:23:49,520
Speaker 1: the end of next year, but it's certainly not gonna

406
00:23:49,520 --> 00:23:51,080
Speaker 1: happen in the in the first half. You know, I

407
00:23:51,119 --> 00:23:52,960
Speaker 1: have to wonder, I mean, are they replacing people with

408
00:23:53,000 --> 00:23:56,720
Speaker 1: machines or it's just as excess. Uh now they're running there,

409
00:23:56,800 --> 00:24:00,000
Speaker 1: they're running their plants at much lower levels, like they've

410
00:24:00,080 --> 00:24:03,879
Speaker 1: they've shut down their capacity and large equipment is like

411
00:24:03,920 --> 00:24:06,120
Speaker 1: a third of what it was, for example, so they'd

412
00:24:06,119 --> 00:24:08,959
Speaker 1: simply need less people. But that is happening that, you know,

413
00:24:09,040 --> 00:24:11,800
Speaker 1: the longer term trend is that is happening. Karen Yubil,

414
00:24:11,840 --> 00:24:15,879
Speaker 1: Heart Industrials analyst at Bloomberg Intelligence, here with us in

415
00:24:16,000 --> 00:24:19,639
Speaker 1: our Bloomberg eleven three oh studio in New York, talking

416
00:24:19,720 --> 00:24:24,280
Speaker 1: about uh Dear's beat big beat, its stocks are responding,

417
00:24:24,600 --> 00:24:29,080
Speaker 1: and counterpillars more negative outlook. The big question remains, will

418
00:24:29,440 --> 00:24:33,640
Speaker 1: the positive expectations of the market beefa filled with actual

419
00:24:33,720 --> 00:24:43,119
Speaker 1: infrastructure spending. Thanks for listening to the Bloomberg pian L podcast.

420
00:24:43,480 --> 00:24:47,280
Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,

421
00:24:47,480 --> 00:24:51,680
Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm

422
00:24:51,680 --> 00:24:54,640
Speaker 1: out there on Twitter at pim Fox. I'm out there

423
00:24:54,640 --> 00:24:57,960
Speaker 1: on Twitter at Lisa Abramo it's one before the podcast.

424
00:24:57,960 --> 00:25:08,760
Speaker 1: You can always catch us worldwide. I'm Boomberg Radio m