WEBVTT - P&L: The Thanksgiving Price War 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm Pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.280 for you and your money, whether you're at the grocery 0:00:16.320 --> 0:00:19.360 store or the trading floor. Find the Bloomberg P L 0:00:19.480 --> 0:00:28.400 Podcast on iTunes, SoundCloud and at Bloomberg dot com. I 0:00:28.440 --> 0:00:29.840 want to take a look at how much it's going 0:00:29.880 --> 0:00:35.159 to cost this Thanksgiving? Uh, thinking about buying perhaps a 0:00:35.640 --> 0:00:39.879 organic turkey. Jennifer Bartashes is over here. She's a of 0:00:40.080 --> 0:00:44.199 Bloomberg Intelligence US food and drug retail analysts, speaking to 0:00:44.320 --> 0:00:47.480 us from Prinston, New Jersey. Jennifer, what are you cooking 0:00:47.479 --> 0:00:51.040 this this h holiday? Well, I am cooking turkey. Um, 0:00:51.040 --> 0:00:53.239 But I'm actually cooking part of a turkey, and we 0:00:53.280 --> 0:00:57.760 have a small household, so we're not interested in a 0:00:57.760 --> 0:01:01.360 lot of leftover. But it's cheaper this year. It is, um, 0:01:01.400 --> 0:01:04.440 you know, definitely. Food food deflation is taking a toll 0:01:04.959 --> 0:01:08.640 um And on average, Thanksgiving is about three point four 0:01:08.680 --> 0:01:12.119 percent less expensive this year than it was last year. UM. 0:01:12.240 --> 0:01:15.200 And so that that's good news for consumers. Well, so 0:01:15.280 --> 0:01:18.480 where is the decline coming from? Because the actual turkey 0:01:18.520 --> 0:01:22.280 itself is not necessarily cheaper, right exactly. Um, But what's 0:01:22.520 --> 0:01:25.520 the decline is really coming from all the other typical 0:01:25.560 --> 0:01:28.399 items that you would think of for your holiday dinner, 0:01:28.560 --> 0:01:33.720 so um, stuffing, green beans, you know, uh, you know, potatoes, 0:01:33.840 --> 0:01:36.520 things like that. Um. And what's happening is that in 0:01:36.560 --> 0:01:40.840 a deflationary environment, all of the retailers are trying to 0:01:40.880 --> 0:01:44.280 get as many sales as possible, um, and so they're 0:01:44.319 --> 0:01:46.880 discounting all of those common items, and so there's a 0:01:46.920 --> 0:01:49.440 little bit of a price war that's happening that's driving 0:01:49.440 --> 0:01:53.640 those prices lower. What what product is sort of the 0:01:53.680 --> 0:01:57.360 focal point for some of these price wars? Um, well, 0:01:57.600 --> 0:02:02.000 anything you know, obviously aside from the turkey, which which 0:02:02.040 --> 0:02:04.600 is a little bit more expensive this year. Um. You 0:02:04.640 --> 0:02:09.200 see everything from you know, the instant stuffing to cans 0:02:09.280 --> 0:02:12.839 of you know, cream of mushroom soup, pretty much all 0:02:12.880 --> 0:02:16.680 the standard basic items that most people buy. Um. Almost 0:02:16.720 --> 0:02:20.120 every retailer has some sort of promotion happening on a 0:02:20.160 --> 0:02:22.360 lot of those core items. But it seems like there's 0:02:22.360 --> 0:02:26.280 something of a divergence between lower cost grocers and the 0:02:26.360 --> 0:02:31.200 higher end sort of organic focused UH stores. Right. I 0:02:31.200 --> 0:02:33.720 mean it seems like prices are going up for the 0:02:33.760 --> 0:02:40.480 more kind of artists, artisanal producers. It's true, especially once 0:02:40.520 --> 0:02:44.640 you get into more more of the organic type of items, 0:02:44.639 --> 0:02:47.280 that prices are going up a little bit more. Um 0:02:47.400 --> 0:02:50.160 And And what's what's happening is that there are more 0:02:50.160 --> 0:02:54.519 and more stores that are selling organic products these days. Um. 0:02:54.680 --> 0:02:58.160 But the the supply is not necessarily expanding at the 0:02:58.200 --> 0:03:00.320 same rate as a number of people that are starving 0:03:00.400 --> 0:03:03.280 those goods, um. And so that that gives it an 0:03:03.440 --> 0:03:07.000 inherently a little bit of extra inflation or or higher prices, 0:03:07.400 --> 0:03:09.600 as people have to pay a little bit more to 0:03:09.639 --> 0:03:11.880 have the goods in their stores, and then they pass 0:03:11.919 --> 0:03:14.760 it on to consumers. So when you look at retailers 0:03:14.760 --> 0:03:19.240 like Whole Foods, UM, fresh Market, Fairway, Um, these are 0:03:19.280 --> 0:03:23.359 all retailers that have lean more heavily in that organic 0:03:23.360 --> 0:03:27.120 and natural space. And as a result, their Thanksgiving basket 0:03:27.160 --> 0:03:30.120 was a little bit higher this year's than the average supermarkets. Yeah, 0:03:30.200 --> 0:03:32.160 meaning that it was more expensive. Right. So I think 0:03:32.240 --> 0:03:35.320 you had some information that the basket at Whole Foods 0:03:35.320 --> 0:03:38.440 would cost a hundred and thirty four dollars, that's for 0:03:38.520 --> 0:03:42.200 twenty items. Compared with one and seventy eight cents at 0:03:42.240 --> 0:03:46.280 Fairway at nine seven dollars a Trader Joe's and nineties 0:03:46.320 --> 0:03:49.440 six dollars and forty cents at fresh Market. Can we 0:03:49.440 --> 0:03:52.440 talk a little bit about why there is price deflation 0:03:52.640 --> 0:03:56.720 in some of these grocery uh products. Well, you know, 0:03:57.120 --> 0:04:00.680 the the the price deflation. Yeah, this is a pretty 0:04:00.680 --> 0:04:03.680 small basket, you know when you're talking about very specific 0:04:03.680 --> 0:04:07.680 things for Thanksgiving, But the price deflation is is really coming. 0:04:07.760 --> 0:04:10.480 It's a it's an overall industry trend where you're seeing 0:04:10.480 --> 0:04:13.600 deflation across the board and it's been a sustained period 0:04:13.600 --> 0:04:16.480 of deflation. UM. And some of that is coming from 0:04:16.560 --> 0:04:19.280 deflation in produce UM. Some of that is coming from 0:04:19.360 --> 0:04:23.360 deflation in proteins like beef and eggs and chicken UM, 0:04:23.400 --> 0:04:26.599 and in dairy as well. UM. And so when that happens, 0:04:26.640 --> 0:04:29.120 it sort of bleeds through and affects all of the 0:04:29.440 --> 0:04:32.160 you know, all of the retail prices within the industry. 0:04:32.400 --> 0:04:34.080 Is it just that we're getting that much more efficient 0:04:34.080 --> 0:04:38.599 at producing food? Um, That's that's that's part of it. UM. 0:04:38.640 --> 0:04:41.679 You know, there's there's there's always a cycle of supply 0:04:41.839 --> 0:04:45.520 and demand with regards to you know, what's produced UM, 0:04:45.600 --> 0:04:48.760 and so you know, you go through limited supply producers 0:04:48.760 --> 0:04:51.839 that overproduced UM, and then you go through, you know, 0:04:51.880 --> 0:04:54.320 a period where there's there's a little too much in 0:04:54.400 --> 0:04:57.800 prices come down UM, and that's kind of a normal fluctuation. 0:04:57.920 --> 0:05:01.039 But we have had kind of a sustain period where 0:05:01.600 --> 0:05:05.240 UM prices have been coming down or staying well UM 0:05:05.320 --> 0:05:08.320 for quite a while. Jennifer Batasha's thank you so much 0:05:08.320 --> 0:05:11.080 for being with us. Jennifer Patasha's US food and drug 0:05:11.200 --> 0:05:15.520 retail analyst for Bloomberg Intelligence, speaking with us from Princeton, 0:05:15.760 --> 0:05:18.679 New Jersey. I'm Lisa Bramwood's my co host, Pim Fox 0:05:18.960 --> 0:05:33.960 is on vacation. This is Bloomberg. I want to learn 0:05:34.000 --> 0:05:38.479 about what fund managers are thinking right now. A number 0:05:38.520 --> 0:05:41.679 of money managers that we spoke to since President elect 0:05:41.839 --> 0:05:45.560 Trump won the election, they've said that they have not 0:05:45.760 --> 0:05:49.160 changed the way that they structured their portfolios significantly or 0:05:49.200 --> 0:05:53.560 their strategies. But perhaps our next guest disagrees. I want 0:05:53.560 --> 0:05:56.400 to bring in David Kudla, CEO and chief investment strategist 0:05:56.440 --> 0:06:00.400 of Mainstay Capital Management, which oversees about two billion dollars UH. 0:06:00.480 --> 0:06:02.760 David Thank you so much for being with us. Good morning, 0:06:03.240 --> 0:06:07.360 Good morning. So have you changed your base case outlook 0:06:07.480 --> 0:06:11.600 and the way that you invest since the election? Absolutely? Uh. 0:06:12.279 --> 0:06:14.279 You know, when we look at it, we look at 0:06:14.320 --> 0:06:19.080 a Trump presidency with a still Republican controlled Congress, but 0:06:19.640 --> 0:06:23.600 specifically with the Trump presidency, a see change in the 0:06:23.640 --> 0:06:27.800 investment landscape. Um. We've already seen what's happened with bond 0:06:27.880 --> 0:06:31.160 yields in the last two weeks, with the prospect of 0:06:32.080 --> 0:06:40.240 tax policy and infrastructure spending, pro growth policies, regulation regulations 0:06:40.240 --> 0:06:45.000 being rolled back, and you know, we see the that 0:06:45.440 --> 0:06:48.279 there is a path here for rates headed higher. The 0:06:48.360 --> 0:06:51.640 Fed will have cover to raise rates even faster than 0:06:51.680 --> 0:06:55.400 maybe they would have. UM. And we've seen the markets 0:06:55.440 --> 0:06:58.680 performing well in specific sectors in this regard that I 0:06:58.680 --> 0:07:01.600 think investors need to take key to this. It's very 0:07:01.600 --> 0:07:04.760 important for the coming weeks and months in their portfolio. Well, so, 0:07:04.839 --> 0:07:08.200 how do you sort of take what's going on and 0:07:08.240 --> 0:07:10.440 put it into an investment thesis? I mean, how do 0:07:10.480 --> 0:07:13.560 you determine when potentially a rally has gone too far 0:07:13.800 --> 0:07:17.800 or when perhaps people's hopes are getting ahead of the reality. Sure, 0:07:17.880 --> 0:07:22.680 so there's some things that happened immediately. UM that that 0:07:22.800 --> 0:07:26.240 could have been expected if one expected that Trump was 0:07:26.280 --> 0:07:28.440 going to win the election. You know, we saw an 0:07:28.440 --> 0:07:32.800 immediate bounce in biotech because biotech and pharma had been 0:07:32.920 --> 0:07:38.360 under a what we considered a political risk with the 0:07:38.440 --> 0:07:44.240 threat of UH pricing regulation what started really in September 0:07:44.280 --> 0:07:47.280 of last year with the Hillary Clinton tweet. As soon 0:07:47.320 --> 0:07:51.720 as Trump won the presidency rather than Hillary Clinton, that 0:07:51.800 --> 0:07:55.960 political risk was greatly diminished. Biotech popped a lot UH 0:07:56.000 --> 0:07:58.840 that we see maybe you know, as a shorter immediate 0:07:58.880 --> 0:08:02.320 bounce other things like banks. You know, we had already 0:08:02.320 --> 0:08:06.160 been favorable towards the regional banks with the prospect of 0:08:06.200 --> 0:08:09.840 FED raising rates that improves their net interest margin or 0:08:09.920 --> 0:08:14.760 basically their profit on landing. Now the regulatory headwind in 0:08:14.800 --> 0:08:19.120 front of banks will probably be diminished, and we expect 0:08:19.200 --> 0:08:21.360 that and we think there's a long runway for banks 0:08:21.360 --> 0:08:24.720 and financial services UH that's now in front of us 0:08:24.760 --> 0:08:28.240 with the Trump presidency, with the infrastructure spend. We'll see 0:08:28.280 --> 0:08:32.160 what comes there and we'll see what policy statements or 0:08:32.200 --> 0:08:36.360 what statements were made during the campaign actually become policy. 0:08:36.360 --> 0:08:39.600 Because he's walked some back, some like announcing its intent 0:08:40.120 --> 0:08:42.680 to pull out of t p P. He's he's gone 0:08:42.679 --> 0:08:45.680 through with. So I'm looking at a tenure yield right 0:08:45.679 --> 0:08:49.560 now in the treasury UH at about two point four percent, 0:08:50.080 --> 0:08:55.240 up from UH one point five percent as recently as September. 0:08:55.320 --> 0:08:57.760 How high do you think that the tenure could go 0:08:58.360 --> 0:09:00.840 and will this be a messy, unwrapped ing of of 0:09:00.880 --> 0:09:04.480 the bond market? Well, it's it's been a messy, unrattling 0:09:04.480 --> 0:09:08.200 for the last two weeks. We've seen yields, depending on 0:09:08.240 --> 0:09:10.480 where we are on the curve, rise as much as 0:09:10.559 --> 0:09:14.040 fifties sixty seventy basis points, and yields around the world 0:09:14.520 --> 0:09:17.840 have gone quite a bit higher. UM. So it's already 0:09:17.880 --> 0:09:20.280 been a little bit massy. We think we could get 0:09:20.800 --> 0:09:23.920 a pause here at some point, you know, around two 0:09:23.920 --> 0:09:26.800 and a half percent on the ten year UH. But 0:09:27.120 --> 0:09:30.280 when we look out longer term and a lot of 0:09:30.320 --> 0:09:33.400 this will will that will be based on you know, 0:09:33.840 --> 0:09:37.520 our Trump's you know, the actual policies with a Republican 0:09:37.520 --> 0:09:40.680 Congress to get put through. Do we see the inflationary 0:09:40.880 --> 0:09:45.400 the pro growth but also inflationary policies that many think 0:09:45.440 --> 0:09:47.800 will go in That has caused the bond market start 0:09:47.800 --> 0:09:51.800 pricing and higher inflation um. You know, but it's easy 0:09:51.880 --> 0:09:55.360 to see that we we now see rates moving higher 0:09:55.480 --> 0:09:58.880 and the one three back in July we saw in 0:09:58.960 --> 0:10:03.720 the tenure um is a generational low bond yields. Well, 0:10:03.760 --> 0:10:06.280 so what argument for why people were going into stocks 0:10:06.360 --> 0:10:09.760 was that, well there was no alternative, right, because bond 0:10:09.840 --> 0:10:12.800 yields were so low. Basically, the dividend you'd you'd be 0:10:12.800 --> 0:10:15.040 paid by owning a broad basket of stocks would be 0:10:15.080 --> 0:10:19.480 more than treasuries. That's changing, and it's changing fast. Do 0:10:19.559 --> 0:10:22.040 you think that this will lead some people to withdraw 0:10:22.320 --> 0:10:26.520 or at least hold back from allocating money to stock. 0:10:26.600 --> 0:10:28.120 So far that has not been the case, but this 0:10:28.200 --> 0:10:31.680 has been one big question among people I speak with. Yeah, 0:10:31.679 --> 0:10:35.120 it's it's an interesting dynamic that will unfold because you know, 0:10:35.120 --> 0:10:38.440 we've talked about the great rotation for a number of years, 0:10:38.559 --> 0:10:40.400 and there have been a lot of false starts where 0:10:40.920 --> 0:10:43.920 where rates have eventually start to go higher. We see 0:10:43.920 --> 0:10:48.199 the rotation from UM from bonds to stocks for that reason, 0:10:48.360 --> 0:10:53.320 although stocks have had a lot of UH stimulus to 0:10:53.320 --> 0:10:56.000 go higher, namely central bank stimulus. I mean, that's what 0:10:56.040 --> 0:10:59.560 we talked about until the election. Is earnings didn't matter. 0:10:59.640 --> 0:11:03.440 Valueations didn't matter. It was about central bank stimulus around 0:11:03.480 --> 0:11:06.760 the world pumping stocks higher. And you know, but the 0:11:06.800 --> 0:11:09.600 way we think the dynamic between stocks and bonds and 0:11:09.679 --> 0:11:13.400 folds initially is investors start to see and again it's 0:11:13.440 --> 0:11:16.040 investors that look at treasuries and high grade corporates is 0:11:16.080 --> 0:11:20.040 a safe investment. But statement after statement they see a 0:11:20.080 --> 0:11:23.240 negative number in terms of their total return because the 0:11:23.280 --> 0:11:25.800 price of bonds moves inversely the yields. As yields go 0:11:25.960 --> 0:11:30.360 higher and stay higher, the bond prices are lower, and 0:11:30.720 --> 0:11:34.200 that will cause people to rethink, you know, how are 0:11:34.200 --> 0:11:38.200 they allocating their investments. And you know, we have been 0:11:38.200 --> 0:11:39.959 saying for a while and continue to say, this is 0:11:39.960 --> 0:11:45.280 where liquid alternative investments are an opportunity when bonds are 0:11:45.320 --> 0:11:48.320 going to be you know, an asset class that potentially 0:11:48.320 --> 0:11:51.160 offers negative returns here for a while. So in terms 0:11:51.160 --> 0:11:54.120 of total return, So, David, what's your what's your best 0:11:54.120 --> 0:11:59.280 bet going forward in the next six months? Banks, financial 0:11:59.360 --> 0:12:04.480 services regionels are bigger, bigger. So we've seen we've seen 0:12:04.520 --> 0:12:08.720 what's happened with the large money center banks we have, um, 0:12:08.880 --> 0:12:11.680 you know, the problem with the Wells Fargo scandal. So 0:12:11.880 --> 0:12:15.559 when we we look at what rising rates will do 0:12:16.679 --> 0:12:21.400 for financial services in general, uh, it is it's help 0:12:21.440 --> 0:12:25.559 with lending. When we look at the regulatory headwinds that 0:12:25.640 --> 0:12:28.400 have been in place, that's affected lending a lot to 0:12:28.920 --> 0:12:32.040 people look at their regional banks. We we think of 0:12:32.080 --> 0:12:34.800 as the hometown lender. People look at at those banks. 0:12:34.840 --> 0:12:38.000 That's where a lot of their revenue comes from. So 0:12:38.120 --> 0:12:43.360 therefore we like the regional banks over larger banks. We like, uh, 0:12:43.800 --> 0:12:47.920 you know, the smaller companies that are domestically oriented versus 0:12:48.200 --> 0:12:52.520 large mauna national conglomerates. So so small regional banks right 0:12:52.559 --> 0:12:54.760 in that fold of a couple of investment themes that 0:12:54.800 --> 0:12:56.520 we think they have a long runway ahead of them, 0:12:56.720 --> 0:12:58.520 even though they've done so great the past two weeks. 0:12:59.160 --> 0:13:04.040 David Kudla, CEO and chief investment strategist at Mainstay Capital Management, 0:13:04.080 --> 0:13:18.280 talking about how banks is his bet going forward, te 0:13:18.440 --> 0:13:21.760 you with the enemy. Donald Trump went to visit The 0:13:21.760 --> 0:13:24.560 New York Times yesterday, a publication that he has maligned 0:13:25.080 --> 0:13:29.080 greatly and that they've had a pretty contentious relationship, and uh. 0:13:29.120 --> 0:13:33.079 He had a wide ranging interview with editors and reporters 0:13:33.120 --> 0:13:36.440 at the New York Times, Ben Brody, Bloomberg Politics supporter 0:13:36.600 --> 0:13:39.640 here in the studio at Bloomberg eleven three oh, to 0:13:39.679 --> 0:13:41.960 talk a little bit about what the three most important 0:13:42.000 --> 0:13:45.439 points were that we learned from that interview. Right, Well, 0:13:45.480 --> 0:13:48.120 as you said, it was certainly wide ranging them. But 0:13:48.120 --> 0:13:50.160 one of the things that I think a lot of 0:13:50.160 --> 0:13:52.400 people took away from it was him saying suddenly that 0:13:52.480 --> 0:13:56.160 he was open to not exiting the Paris Climate Accords. 0:13:56.440 --> 0:13:59.120 This is somebody who has labeled climate change, uh, you 0:13:59.160 --> 0:14:02.720 know what Chinese designed to make America less competitive, and 0:14:02.760 --> 0:14:05.440 suddenly he's saying that, well, he might keep an open 0:14:05.440 --> 0:14:08.120 mind about this. It was a little unclear what exactly 0:14:08.120 --> 0:14:10.320 would sway him one way or the other, but that 0:14:10.440 --> 0:14:14.199 certainly made headlines. Um. He also backed away a little 0:14:14.200 --> 0:14:17.080 bit from some of the neo Nazis have been supporting 0:14:17.120 --> 0:14:20.960 from him, who have been supporting him backed away a 0:14:21.040 --> 0:14:24.840 lot from this campaign, promised to prosecute Hillary Clinton for 0:14:24.920 --> 0:14:27.960 her use of a private email server, and then raising 0:14:27.960 --> 0:14:30.520 a lot of eyebrows in my world, was him saying 0:14:30.560 --> 0:14:33.000 that the president of the United States simply can't have 0:14:33.120 --> 0:14:35.840 a conflict of interest. This was this was quite exceptional. 0:14:36.040 --> 0:14:39.360 The laws totally on my side, meaning the president can't 0:14:39.440 --> 0:14:45.080 have a conflict of interest. UM. There was a great 0:14:45.120 --> 0:14:49.920 story by Bloomberg reporters Caleb Melby and Stephanie Baker about 0:14:50.080 --> 0:14:53.800 how President elect Trump would have a hard time divesting 0:14:54.280 --> 0:14:57.600 his businesses even if he wanted to. UM, can you 0:14:57.680 --> 0:15:01.520 talk a little bit about that and just how conflicted 0:15:01.760 --> 0:15:05.480 he may be? Sure? Well, for one thing, you know, 0:15:05.720 --> 0:15:09.720 he has a broad international empire with a lot of 0:15:09.800 --> 0:15:14.040 international partners, including in the Philippines somebody who is uh 0:15:14.080 --> 0:15:18.080 an envoy to the US. UH. So the level of 0:15:18.120 --> 0:15:21.600 the conflicts and the level of the involvement is just 0:15:21.800 --> 0:15:25.400 so incredibly vast and really unprecedented UH in the history 0:15:25.400 --> 0:15:27.440 of the U. S presidency. But of course there's also 0:15:27.480 --> 0:15:30.560 the real estate issue. A lot of his holdings are 0:15:30.600 --> 0:15:33.760 relatively a liquid and it's not clear exactly what fair 0:15:33.840 --> 0:15:38.080 market value would be UH for him to divest again 0:15:38.160 --> 0:15:40.480 if he were interested, which he does not seem to 0:15:40.520 --> 0:15:45.960 be coming across as he says, an such thing. It's fine, 0:15:46.680 --> 0:15:49.880 And in a strange way, he actually is right about 0:15:49.920 --> 0:15:53.680 the law conflict of interest. UH laws generally exempt the 0:15:53.680 --> 0:15:57.400 president because they have such a wide purview that there 0:15:57.400 --> 0:16:01.400 would constantly be raising questions of that doesn't undo his 0:16:01.560 --> 0:16:04.280 moral or ethical obligation, nor is it going to stop 0:16:04.520 --> 0:16:07.560 his political enemies from raising questions about it or for 0:16:07.640 --> 0:16:09.960 that a matter of reporters who seeing a story yesterday 0:16:09.960 --> 0:16:12.840 that George Washington too had a lot of property. Um, 0:16:12.880 --> 0:16:15.960 but it might not have been as as quite as lucrative, 0:16:16.000 --> 0:16:18.600 but people are sort of looking, uh for some kind 0:16:18.760 --> 0:16:23.479 of precedent that far back. There was another report yesterday 0:16:23.520 --> 0:16:27.040 that the Trump Foundation admitted violating I R S rules 0:16:27.080 --> 0:16:31.560 by uh improperly giving money to someone close to the organization. Um, 0:16:32.160 --> 0:16:33.720 is this an important thing? Is this something that people 0:16:33.720 --> 0:16:36.760 should pay attention to? Does it matter? Well, you know, 0:16:36.800 --> 0:16:39.840 I'll just sort of use Trump's own logic. You know, 0:16:39.960 --> 0:16:43.400 he said that the Hillary Clara the Clinton Foundation, that 0:16:43.480 --> 0:16:46.720 Bill Hilly and Chelsea Clinton Foundation was worthy of looking 0:16:46.720 --> 0:16:49.520 into because people could use it giving to it as 0:16:49.520 --> 0:16:52.680 a way to get access to the precedent to the president. 0:16:53.080 --> 0:16:54.760 They had used it as a way to get access 0:16:54.800 --> 0:16:57.360 to the Secretary of State, and that you know, this 0:16:57.480 --> 0:17:02.240 basically was issue number one or piece of evidence number 0:17:02.280 --> 0:17:05.520 one about the ways that the economy is rigged and 0:17:05.560 --> 0:17:07.679 the way that Washington is rigged. So I think it 0:17:07.760 --> 0:17:11.920 is something that people should be looking into. Uh, it's 0:17:11.920 --> 0:17:14.600 not exactly clear what the nature of that self dealing was. 0:17:14.920 --> 0:17:16.439 They just sort of checked a box on the I R. 0:17:16.520 --> 0:17:19.080 S Form. But yeah, well we're certainly gonna be looking 0:17:19.080 --> 0:17:21.000 into it. Yeah. It seems pretty unclear at this point 0:17:21.080 --> 0:17:22.800 with the scope of it is or sort of how 0:17:22.840 --> 0:17:24.919 how important it is. Um, but it's something to keep 0:17:24.920 --> 0:17:28.280 an eye on. Another thing making headlines today, uh, and 0:17:28.440 --> 0:17:31.480 President elect Trump plans to nominate South Carolina Governor Nicki 0:17:31.600 --> 0:17:34.639 Haley to be United Nations ambassador. Is he getting pushed 0:17:34.640 --> 0:17:39.199 back from his Republican colleagues even though Nicki Haley is 0:17:39.200 --> 0:17:44.560 a Republican herself. Nikki Haley is very popular in the party. 0:17:44.840 --> 0:17:48.240 Nikki Haley is very popular in her state. Of course, 0:17:48.400 --> 0:17:52.920 she was a vocal Trump opponent for much of the primaries, 0:17:52.960 --> 0:17:55.640 never really came around to him. Uh. It's a little 0:17:55.680 --> 0:18:00.400 bit unclear just how comfortable mainstream Republicans are right now 0:18:00.400 --> 0:18:02.000 with some of his picks who have been a little 0:18:02.000 --> 0:18:03.879 bit more outside of the mainstream where they've been a 0:18:03.920 --> 0:18:06.600 little bit more insiders, uh and loyalists. But we do 0:18:06.680 --> 0:18:09.840 know that they are broadly very happy with the choice 0:18:09.840 --> 0:18:12.960 of NICKI Haley, which one are theyt least happy about? Uh, 0:18:13.000 --> 0:18:16.840 that's uh, that's a big question. Steve Bannon is certainly 0:18:17.359 --> 0:18:20.360 someone who they who's gonna be uh a senior strategistic 0:18:20.400 --> 0:18:23.760 counselor uh, somebody who is drawing sort of a headache 0:18:23.800 --> 0:18:26.760 for them insofar as it's brought some pressure and some 0:18:26.800 --> 0:18:30.080 examination from liberal groups who are concerned about his ties 0:18:30.119 --> 0:18:33.879 to white nationalist movements. But uh, you know, picks like 0:18:33.960 --> 0:18:36.600 Ryant's previous for chief of staff, who's the chairman of 0:18:36.640 --> 0:18:38.679 the r n C, they're pretty happy about those. So 0:18:38.760 --> 0:18:40.280 you know, it's a mixed bag for some of them. 0:18:40.400 --> 0:18:42.280 And I've heard um kind of mixed reports about Mitt 0:18:42.320 --> 0:18:45.080 Romney and how seriously uh President elect Trump is is 0:18:45.119 --> 0:18:47.200 considering putting up a secretary of state. Is that it 0:18:47.200 --> 0:18:49.240 is still Is that still on the table too? I 0:18:49.240 --> 0:18:51.120 think it's definitely still on the table. I think he's 0:18:51.119 --> 0:18:54.000 also definitely still considering a lot of people. This is 0:18:54.040 --> 0:18:56.760 a you know, this is a blue ribbon appointment, and 0:18:56.800 --> 0:18:59.119 he's taking it seriously, and I think he's entertaining a 0:18:59.280 --> 0:19:01.760 really wide iety of people from it. And he's somebody 0:19:01.760 --> 0:19:05.119 who uh kind of goes through a lot of different 0:19:05.160 --> 0:19:10.000 possibilities for big choices like this, and UH often doesn't 0:19:10.000 --> 0:19:12.040 sort of commit one way or the other until his 0:19:12.160 --> 0:19:14.439 gut knows, And so you'll hear leaks from this or 0:19:14.520 --> 0:19:19.040 that quarter representing what's purported to be his choice at 0:19:19.040 --> 0:19:22.119 a given moment. But very often once it's made, UH, 0:19:22.200 --> 0:19:23.639 it looks a little bit different from what people on 0:19:23.680 --> 0:19:26.679 the inside for telling us. Ben Brody, Blumber Politics reporter, 0:19:26.800 --> 0:19:40.320 you have an interesting job. I want to talk about 0:19:40.359 --> 0:19:44.720 the story of UH construction companies and that have just 0:19:45.000 --> 0:19:48.760 absolutely searched in the wake of Donald Trump's victory as 0:19:49.080 --> 0:19:53.240 the next US president. And they seem to be soaring 0:19:53.320 --> 0:19:57.359 on the expectation that construction will pick up. But is 0:19:57.440 --> 0:20:00.200 this actually what's going to happen with us? To break 0:20:00.200 --> 0:20:02.880 it all down, is Karen Eubile, Heart and industrials analyst 0:20:03.160 --> 0:20:06.080 at Bloomberg Intelligence. First, Karen, let's talk a little bit 0:20:06.119 --> 0:20:09.680 about Deer earnings. They came out. They were better than expected, 0:20:09.760 --> 0:20:12.960 still down from last year, but better than expected. The 0:20:13.000 --> 0:20:17.000 stock now up more than nine percent. What's going on, UH, 0:20:17.240 --> 0:20:20.240 Deer is consistently beat throughout this cycle. This was a 0:20:20.280 --> 0:20:23.199 big beat. The expectations were thirty cents. That came in 0:20:23.240 --> 0:20:26.119 almost a dollar, So that's part of it. UM. The 0:20:26.160 --> 0:20:29.240 second thing is they sort of signaled that they think 0:20:29.280 --> 0:20:32.879 the bottom is here in aug equipment. UM. And you know, 0:20:32.920 --> 0:20:35.280 I think it's just that they've executed well, and there's 0:20:35.320 --> 0:20:37.159 a lot of hype around these stocks right now, so 0:20:37.359 --> 0:20:39.560 any any news is good news, it seems like. But 0:20:39.600 --> 0:20:43.080 it seems like it's not necessarily that they're predicting such 0:20:43.160 --> 0:20:46.840 an uptick in revenue next year even and frankly, a 0:20:46.840 --> 0:20:49.200 lot of their gains have come from or better than 0:20:49.240 --> 0:20:54.000 expected performance has come from cost cutting. Correct. They still 0:20:54.080 --> 0:20:56.320 expect the North American market to be down five to 0:20:56.400 --> 0:20:59.280 ten percent. That's the most important market for them. Uh. 0:20:59.280 --> 0:21:02.200 They expect lard equipment to be down in a similar amount, 0:21:02.560 --> 0:21:06.199 But they were down twenty five tot in uh in 0:21:06.440 --> 0:21:09.040 uh fifth school sixteen, so I guess five to ten 0:21:09.119 --> 0:21:11.720 looks better. Uh. You know it. It is still going 0:21:11.760 --> 0:21:14.280 to be down in their high margin project products. So 0:21:14.320 --> 0:21:17.560 it's still going to be about execution next year, but 0:21:17.640 --> 0:21:19.360 people have a lot of confidence in it because they've 0:21:19.400 --> 0:21:23.160 done a good job. Did they talk at all about 0:21:23.400 --> 0:21:28.719 what a Trump administration would mean for their outlook going forward, 0:21:28.720 --> 0:21:31.000 do they have any sense of that. The conference call 0:21:31.119 --> 0:21:34.080 is on right now, but um, I so you know, 0:21:34.240 --> 0:21:37.600 I haven't heard the commentary. But what's going on is 0:21:37.640 --> 0:21:41.119 of course everything moved with Trump, right, But infrastructure was 0:21:41.160 --> 0:21:45.600 the big, big excitement around these docks. And interestingly for Deer, 0:21:45.680 --> 0:21:48.520 it's twelve percent of their sales construction equipment, so it 0:21:48.560 --> 0:21:51.800 should not have moved on that. But um, you know, Caterpillar, 0:21:51.880 --> 0:21:54.320 some of the others, they all moved in anticipation. What 0:21:54.400 --> 0:21:56.119 he what he said he wants to do is a 0:21:56.160 --> 0:22:00.439 big number, a trillion dollars over ten years on likely 0:22:00.680 --> 0:22:03.920 very unlikely. Also probably not gonna help next year, maybe 0:22:03.960 --> 0:22:07.600 help if we get anything through. But there's other things. 0:22:07.600 --> 0:22:11.280 Tax rates are expected to be lower, UH, clean it 0:22:11.400 --> 0:22:13.879 regulations are supposed to be lower. So there's just a 0:22:13.880 --> 0:22:17.199 lot of height that it's a very favorable environment for 0:22:17.280 --> 0:22:21.440 business in general, and UH cyclicals even more because of 0:22:20.880 --> 0:22:24.520 the construction spending and they're just really running. And yet 0:22:24.560 --> 0:22:29.719 on Monday, S and P Global downgraded the outlook for Caterpillar, 0:22:29.720 --> 0:22:33.560 which is often thought of as a rival too dear UH, 0:22:33.880 --> 0:22:38.399 saying that the outlook looks less less positive going forward. 0:22:38.640 --> 0:22:41.359 I mean, is Caterpillar facing a different outlook for some 0:22:41.440 --> 0:22:45.600 reason than Deer Uh yeah, Um, Deer's Cats in the 0:22:45.680 --> 0:22:48.280 money market, big market for them, it's down you know 0:22:48.359 --> 0:22:52.199 sixty um and uh so that looks like that's going 0:22:52.240 --> 0:22:54.960 to be bad again next year, maybe not as bad again, 0:22:55.040 --> 0:22:59.760 leveling off Deer's largely. Yeah, Dad Deer's egg. Um, cats 0:22:59.760 --> 0:23:02.840 got mining and construction. They overlap in construction, but the 0:23:02.880 --> 0:23:07.080 outlook is is different and Cat's financial situation is more 0:23:07.160 --> 0:23:09.960 stretched than DearS and that's part of why. Um, you know, 0:23:10.119 --> 0:23:14.600 SMP made the adjustment as well. Um. So they are 0:23:14.760 --> 0:23:17.200 similar in that that the two largest cap stocks in 0:23:17.240 --> 0:23:20.000 the group, but the end markets are really quite different 0:23:20.520 --> 0:23:25.000 with respect to Dear. How much more can make cut? Uh, 0:23:25.040 --> 0:23:29.439 they expect to cut another another hundred and fifteen million 0:23:29.480 --> 0:23:32.280 dollars again, Um, it's going to be probably largely people 0:23:32.320 --> 0:23:35.359 at this point. I think, you know, you can always 0:23:35.440 --> 0:23:38.600