1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,560 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Bitcoin 7 00:00:32,880 --> 00:00:36,680 Speaker 1: is up more than one hundred and fifty percent year 8 00:00:36,760 --> 00:00:39,239 Speaker 1: to date. That is a stunning number. And it's not 9 00:00:39,360 --> 00:00:42,720 Speaker 1: just Bitcoin. Cryptocurrencies of all types have been on fire, 10 00:00:42,760 --> 00:00:45,760 Speaker 1: from ethereum to light coin to z cash. All of 11 00:00:45,800 --> 00:00:49,800 Speaker 1: these cryptocurrencies has to have soared over more than ninety 12 00:00:49,840 --> 00:00:52,640 Speaker 1: billion dollars market cap in the past just the past 13 00:00:52,680 --> 00:00:56,320 Speaker 1: seven days. To understand what this is? Is Is this a bubble? 14 00:00:56,720 --> 00:00:59,040 Speaker 1: I am very happy to bring in Ron Quaranta. He 15 00:00:59,320 --> 00:01:02,520 Speaker 1: is the founder and chairman of the Wall Street Blockchain Alliance, 16 00:01:02,560 --> 00:01:04,360 Speaker 1: and he joins me here in the Bloomberg eleven three 17 00:01:04,400 --> 00:01:07,559 Speaker 1: oh studios in New York City. Run what is going 18 00:01:07,640 --> 00:01:10,959 Speaker 1: on here? Are we experiencing a mass bubble that will 19 00:01:11,080 --> 00:01:14,120 Speaker 1: end in tears? Good morning, Good to be here again. UM, 20 00:01:14,360 --> 00:01:17,240 Speaker 1: I would suggest we're actually looking at the emergence and 21 00:01:17,440 --> 00:01:19,000 Speaker 1: we have this conversation with a lot of our members. 22 00:01:19,560 --> 00:01:22,679 Speaker 1: Potentially a new class of asset, a new way to 23 00:01:23,360 --> 00:01:26,120 Speaker 1: gian Alpha. So there's certainly a bit of the hype cycle. 24 00:01:26,160 --> 00:01:30,160 Speaker 1: I mean last evening Bitcoin of course, Mark, And by 25 00:01:30,160 --> 00:01:33,600 Speaker 1: way of context, if you purchased around this time in bitcoin, 26 00:01:33,640 --> 00:01:36,280 Speaker 1: you would have spent eight cents. The total market cap, 27 00:01:36,319 --> 00:01:39,240 Speaker 1: as you mentioned, is approaching over you know. Okay, So 28 00:01:39,400 --> 00:01:41,160 Speaker 1: if you think about a currency, right, there's a lot 29 00:01:41,200 --> 00:01:44,600 Speaker 1: of controversy over is Bitcoin a currency? Are some of 30 00:01:44,640 --> 00:01:47,600 Speaker 1: these other cryptocurrencies truly currencies? And typically for something to 31 00:01:47,600 --> 00:01:50,400 Speaker 1: be considered a currency, it needs to have some level 32 00:01:50,440 --> 00:01:53,400 Speaker 1: of stability. It needs to be backed by at least 33 00:01:53,400 --> 00:01:55,840 Speaker 1: the full faith in a nation and a sovereignty to 34 00:01:56,000 --> 00:01:58,680 Speaker 1: uphold a certain kind of trade agreement or something underneath it. 35 00:01:59,200 --> 00:02:01,040 Speaker 1: And when you see this d of volatility, doesn't that 36 00:02:01,160 --> 00:02:04,240 Speaker 1: challenge the concept of bitcoin as a currency. Yeah, it 37 00:02:04,280 --> 00:02:08,200 Speaker 1: certainly challenges the concept of um the type of investment 38 00:02:08,280 --> 00:02:10,320 Speaker 1: that it might represent. But what I can tell you 39 00:02:10,360 --> 00:02:12,119 Speaker 1: is that again in the conversations with our with our 40 00:02:12,160 --> 00:02:15,040 Speaker 1: members and the market, Bitcoin and ether and all of 41 00:02:15,080 --> 00:02:20,280 Speaker 1: these cryptocurrencies are really representing a different type of investment, 42 00:02:20,280 --> 00:02:22,679 Speaker 1: a different type of asset class. So how industry is 43 00:02:22,720 --> 00:02:25,200 Speaker 1: looking at it, how investment manages. Some of our fastest 44 00:02:25,200 --> 00:02:29,080 Speaker 1: growing demographic are asset managers looking at this different type 45 00:02:29,120 --> 00:02:32,720 Speaker 1: of tradeable commodity. But but okay, so understood. So in 46 00:02:32,760 --> 00:02:34,880 Speaker 1: other words, you're saying, it's institutions that are coming in, 47 00:02:35,440 --> 00:02:38,040 Speaker 1: uh to invest it in it as an asset class. 48 00:02:38,080 --> 00:02:41,200 Speaker 1: Of course, it's a little confusing to me because currency 49 00:02:41,200 --> 00:02:43,800 Speaker 1: typically the reason why people will invest in it is 50 00:02:43,800 --> 00:02:46,640 Speaker 1: a sort of a wager on the health of a country. 51 00:02:47,360 --> 00:02:49,360 Speaker 1: But it just sort of in its own right, what 52 00:02:49,639 --> 00:02:51,240 Speaker 1: is it? If it's not going to be adopted on 53 00:02:51,280 --> 00:02:54,639 Speaker 1: more platforms, then it's it's really a useless kind of asset. Well, 54 00:02:54,680 --> 00:02:56,440 Speaker 1: I think what you're looking at is the the wager 55 00:02:56,440 --> 00:02:59,480 Speaker 1: on the adoption of blockchain, the underlying blockchain technology across 56 00:02:59,520 --> 00:03:03,080 Speaker 1: different indie street segments. That is really where the value 57 00:03:03,080 --> 00:03:05,600 Speaker 1: is being derived with a perceived value over time, the 58 00:03:05,639 --> 00:03:09,520 Speaker 1: digital currencies, the digital assets, these tokens represent what we 59 00:03:09,600 --> 00:03:13,440 Speaker 1: often say is the the seeping of blockchain technology across 60 00:03:13,440 --> 00:03:16,400 Speaker 1: the canvas of financial markets. So it's very interesting. Abby 61 00:03:16,520 --> 00:03:19,640 Speaker 1: Abigail Johnson, CEO of Fidelity this week, can Mountains not 62 00:03:19,720 --> 00:03:23,720 Speaker 1: only expressed her deep interest in underlying blockchain technology, but 63 00:03:23,760 --> 00:03:26,160 Speaker 1: the fact that Fidelity dot com customers will be able 64 00:03:26,200 --> 00:03:29,839 Speaker 1: to see digital currency information on Fidelity dot Com coming 65 00:03:29,919 --> 00:03:33,160 Speaker 1: up soon. So, in other words, as blockchain is adopted, 66 00:03:33,240 --> 00:03:37,800 Speaker 1: these cryptocurrencies will more easily be adaptable to the big 67 00:03:37,840 --> 00:03:40,520 Speaker 1: institutions as far as a transfer of money, and will 68 00:03:40,560 --> 00:03:44,600 Speaker 1: therefore be more useful. One thing that people have speculated 69 00:03:44,800 --> 00:03:48,160 Speaker 1: is that bitcoin in particular has been an instrument for 70 00:03:48,400 --> 00:03:52,839 Speaker 1: Chinese wealthy individuals who want to get their money out 71 00:03:52,840 --> 00:03:55,640 Speaker 1: of the country without having to be slammed down by 72 00:03:55,640 --> 00:03:58,200 Speaker 1: some of these capital control rules. Do you think that 73 00:03:58,200 --> 00:04:01,040 Speaker 1: that's what's going on here? I I don't think it is, 74 00:04:01,160 --> 00:04:03,240 Speaker 1: and I think there's some of that potentially happening, and 75 00:04:03,320 --> 00:04:04,760 Speaker 1: I can tell you in the conversations that we have 76 00:04:04,840 --> 00:04:06,880 Speaker 1: within the w s b A. I don't think that's 77 00:04:06,920 --> 00:04:09,680 Speaker 1: the main driver of the price appreciation that you're seeing 78 00:04:09,680 --> 00:04:12,680 Speaker 1: for bitcoin and other digital currencies, even increase just in 79 00:04:12,720 --> 00:04:15,680 Speaker 1: this past week. Yeah, I really, I truly believe that 80 00:04:15,680 --> 00:04:19,560 Speaker 1: that's representative of global financial markets interest. Um So by 81 00:04:19,560 --> 00:04:22,080 Speaker 1: way of example, again, um recently, the SEC had an 82 00:04:22,120 --> 00:04:24,159 Speaker 1: opportunity to review an e t F based on bitcoin, 83 00:04:24,640 --> 00:04:27,840 Speaker 1: which they rejected, but UM did take the opportunity to 84 00:04:27,920 --> 00:04:31,560 Speaker 1: review that rejection. So there is the possibility in the 85 00:04:31,720 --> 00:04:34,560 Speaker 1: not too distant future for a bitcoin based et okay. 86 00:04:34,600 --> 00:04:38,720 Speaker 1: But why now? So? I think the market really is 87 00:04:38,839 --> 00:04:41,839 Speaker 1: looking for something that is unique and differentiating, and digital 88 00:04:41,839 --> 00:04:45,400 Speaker 1: currencies digital assets represent that differentiation. So we can talk 89 00:04:45,440 --> 00:04:48,880 Speaker 1: about blockchain, the underlying technology that's reinventing how Wall Street 90 00:04:48,880 --> 00:04:51,280 Speaker 1: and financial markets do what they do. You can look 91 00:04:51,320 --> 00:04:53,560 Speaker 1: at digital currencies and digital assets as a as a 92 00:04:53,600 --> 00:04:57,280 Speaker 1: different type of exposure to that different asset class. You 93 00:04:57,320 --> 00:05:00,680 Speaker 1: can look at really beginning to understand that cutting edge 94 00:05:00,680 --> 00:05:03,799 Speaker 1: of financial market investment. So when you look at digital tokens, 95 00:05:03,800 --> 00:05:07,800 Speaker 1: for example, you're looking at a re evaluation of how 96 00:05:07,839 --> 00:05:10,760 Speaker 1: investment decisions are made, how asset allocation will happen, how 97 00:05:10,800 --> 00:05:15,080 Speaker 1: alpha is UH pursued, for example. So in other words, 98 00:05:15,279 --> 00:05:19,720 Speaker 1: people are investing in cryptocurrencies is a proxy for investing 99 00:05:19,800 --> 00:05:24,680 Speaker 1: in blockchain technology more broadly, and its adoption across financial 100 00:05:24,680 --> 00:05:27,680 Speaker 1: industries correct and some in some deep measure. It's a 101 00:05:27,720 --> 00:05:30,800 Speaker 1: reflection of that wage of will blockchain reinvent how financial 102 00:05:30,800 --> 00:05:33,360 Speaker 1: services work? Doesn't really serve as a proxy though, because 103 00:05:33,360 --> 00:05:35,320 Speaker 1: if you think about it, not all these cryptocurrencies are 104 00:05:35,320 --> 00:05:37,680 Speaker 1: going to survive. That's absolutely true. When you look at 105 00:05:37,720 --> 00:05:41,080 Speaker 1: the the universe of digital currencies, there's well over seven 106 00:05:41,120 --> 00:05:43,760 Speaker 1: hundred of them. Most of them is not going to stay. 107 00:05:43,920 --> 00:05:46,080 Speaker 1: That will not say that will not sustain. But those 108 00:05:46,160 --> 00:05:51,279 Speaker 1: that have the deepest liquidity, the greatest access to multiple 109 00:05:51,360 --> 00:05:54,359 Speaker 1: market places, those that are representative of the best and 110 00:05:54,400 --> 00:05:56,600 Speaker 1: deepest innovation. So when you look at ether, for example, 111 00:05:56,600 --> 00:06:00,960 Speaker 1: ethereum um. Recently there was an Enterprise are Enterprise alliance 112 00:06:01,000 --> 00:06:05,359 Speaker 1: where global corporate organizations are getting together and we participated 113 00:06:05,360 --> 00:06:08,880 Speaker 1: in that alliance to understand how Ethereum rewrites how certain 114 00:06:08,880 --> 00:06:12,400 Speaker 1: processes across global financial markets operate. Those will be the 115 00:06:12,440 --> 00:06:16,160 Speaker 1: ones that succeed over time. So going forward, what are 116 00:06:16,160 --> 00:06:18,080 Speaker 1: you looking for to make sure that this is not 117 00:06:18,200 --> 00:06:21,880 Speaker 1: a bubble and then it can be sustainable coming out 118 00:06:21,880 --> 00:06:24,200 Speaker 1: of financial services for for many years, when you see 119 00:06:24,279 --> 00:06:27,000 Speaker 1: double digit increases on a day by day basis, you 120 00:06:27,360 --> 00:06:30,440 Speaker 1: begin to be concerned. Um, So there is some and 121 00:06:30,720 --> 00:06:32,800 Speaker 1: I would I don't think anyone certainly within a W 122 00:06:32,960 --> 00:06:35,560 Speaker 1: S B A would deny there's some level of hype 123 00:06:36,400 --> 00:06:39,800 Speaker 1: in in some measure UM. But this this does seem 124 00:06:39,839 --> 00:06:42,880 Speaker 1: to be a sustainable rise UM. So we'll see some 125 00:06:42,960 --> 00:06:45,480 Speaker 1: of the froth come out of the bubble of some 126 00:06:45,560 --> 00:06:49,279 Speaker 1: of this UM. But the conversations we have asset managers 127 00:06:49,279 --> 00:06:52,839 Speaker 1: hedge funds deeply interested in the long term viability of 128 00:06:52,880 --> 00:06:55,760 Speaker 1: digital currency as part of the portfolio fascinating. Thank you 129 00:06:55,880 --> 00:06:58,279 Speaker 1: so much for joining us. It's definitely a hot topic 130 00:06:58,400 --> 00:07:00,440 Speaker 1: and one that we will be talking more about. Run 131 00:07:00,520 --> 00:07:03,800 Speaker 1: quaranta founder and chairman of the Wall Street Blockchain Alliance, 132 00:07:03,800 --> 00:07:05,479 Speaker 1: which is based in New York City, and he joins 133 00:07:05,560 --> 00:07:08,120 Speaker 1: us here in our Bloomberg eleven at three oh Studios 134 00:07:08,120 --> 00:07:22,640 Speaker 1: in New York City. The indusseries have brought into cries 135 00:07:22,680 --> 00:07:25,800 Speaker 1: are crawling to a new record highs. Dave Wilson is 136 00:07:25,840 --> 00:07:27,680 Speaker 1: here in the Bloomberg eleven three oh studios with me 137 00:07:27,760 --> 00:07:32,000 Speaker 1: right now. He is the stocks editor, columnist and blogger 138 00:07:32,080 --> 00:07:35,080 Speaker 1: for m Live Go on the Bloomberg that we all 139 00:07:35,160 --> 00:07:39,320 Speaker 1: love to hear from every day. Dave, what is driving 140 00:07:39,360 --> 00:07:44,600 Speaker 1: this melt up? Oh? Really, it's a pretty broad based advance. 141 00:07:44,680 --> 00:07:47,120 Speaker 1: But if you had to point to one area in particular, 142 00:07:47,240 --> 00:07:50,000 Speaker 1: you look at the retailers. Mean, John Tucker just mentioned 143 00:07:50,000 --> 00:07:52,120 Speaker 1: what's going on with Best Buy, with that stock up 144 00:07:52,120 --> 00:07:56,000 Speaker 1: almost fIF but certainly not the only company that we're 145 00:07:56,040 --> 00:08:00,560 Speaker 1: seeing rising in response to earnings. Uh. You think about 146 00:08:00,640 --> 00:08:03,240 Speaker 1: p v H, which is Calvin Klein and Tommy Hilfiger. 147 00:08:03,560 --> 00:08:06,320 Speaker 1: Their numbers are out and that stocks up four point 148 00:08:06,400 --> 00:08:11,840 Speaker 1: eight percent. Uh. You see Alter Beauty, which is everything 149 00:08:11,960 --> 00:08:15,040 Speaker 1: from beauty supplies to a salon to you name it, 150 00:08:15,120 --> 00:08:19,440 Speaker 1: one stop shopping, and those shares are higher by three 151 00:08:19,480 --> 00:08:22,680 Speaker 1: and a half percent. So you know, perhaps some of 152 00:08:22,720 --> 00:08:25,880 Speaker 1: the latest numbers at least, you know, for that area, 153 00:08:25,960 --> 00:08:29,800 Speaker 1: I mean, providing some relief. I mean one interesting example 154 00:08:29,840 --> 00:08:32,920 Speaker 1: of Signet Jeweler's Uh you know, the stock took a 155 00:08:33,000 --> 00:08:36,480 Speaker 1: hit yesterday in response to results from Tiffany. Its numbers 156 00:08:36,520 --> 00:08:40,120 Speaker 1: come out and they're not good. Uh, and the stock 157 00:08:40,200 --> 00:08:43,480 Speaker 1: takes a hit before the opening bell, and it's made 158 00:08:43,480 --> 00:08:46,360 Speaker 1: back that loss and moved higher by nine tenths of 159 00:08:46,440 --> 00:08:48,840 Speaker 1: a per cent. So you know, it goes to show 160 00:08:48,840 --> 00:08:51,080 Speaker 1: you that even for some of these companies that have 161 00:08:51,160 --> 00:08:53,760 Speaker 1: been taking a bit of a beating lately, uh, there 162 00:08:53,960 --> 00:08:59,280 Speaker 1: is at least some uh sense of recovery. So you know, 163 00:08:59,520 --> 00:09:02,200 Speaker 1: you kind of with things in that perspective, and you 164 00:09:02,280 --> 00:09:05,000 Speaker 1: see why you're you're seeing some strength in the market here, 165 00:09:05,160 --> 00:09:07,720 Speaker 1: you know. And before we dig into retailers, I just 166 00:09:07,760 --> 00:09:10,880 Speaker 1: want to note you have bond yields in the US 167 00:09:11,080 --> 00:09:14,880 Speaker 1: headed a touch lower. You had yesterday's meeting minutes which 168 00:09:14,920 --> 00:09:18,679 Speaker 1: were actually really interesting for the first time in a while, 169 00:09:18,760 --> 00:09:20,840 Speaker 1: and actually told us something that we did not know, 170 00:09:20,920 --> 00:09:24,680 Speaker 1: which was details about the fed's plan to unwind its 171 00:09:24,720 --> 00:09:26,880 Speaker 1: balance sheet, and it showed that, frankly, it was not 172 00:09:26,880 --> 00:09:28,319 Speaker 1: going to be done at any kind of pace that 173 00:09:28,320 --> 00:09:30,559 Speaker 1: would cause any disruption to the markets. So it's sort 174 00:09:30,559 --> 00:09:33,760 Speaker 1: of this odd goldilocks scenario that's definitely I'm sure helping 175 00:09:33,800 --> 00:09:37,920 Speaker 1: prop up stocks as well as suppress bond heields and 176 00:09:38,200 --> 00:09:40,720 Speaker 1: boost bond prices. Were still back in this sort of 177 00:09:40,960 --> 00:09:43,679 Speaker 1: you know market that's a wash in central bank cash. 178 00:09:43,720 --> 00:09:46,440 Speaker 1: It's not going away, No, it's not. And let's face 179 00:09:46,520 --> 00:09:49,280 Speaker 1: it to mean the central bankers are doing everything they 180 00:09:49,360 --> 00:09:53,080 Speaker 1: can not to surprise the market because they don't want 181 00:09:53,120 --> 00:09:55,800 Speaker 1: any real sort of shocks. I mean, we certainly had 182 00:09:55,840 --> 00:09:58,240 Speaker 1: a shock, you know, in a sense a week ago 183 00:09:58,720 --> 00:10:01,760 Speaker 1: we saw shares take a it and since then, I mean, 184 00:10:01,800 --> 00:10:04,080 Speaker 1: you're talking about an S and P five hundred that's 185 00:10:04,080 --> 00:10:07,520 Speaker 1: headed for six straight games. What's been up every day 186 00:10:07,600 --> 00:10:10,720 Speaker 1: since that recovery? So it's almost like the by the 187 00:10:10,880 --> 00:10:14,080 Speaker 1: dip behavior that we've seen emerge in the last couple 188 00:10:14,080 --> 00:10:16,840 Speaker 1: of years of stocks and rallied is really kind of 189 00:10:16,920 --> 00:10:19,520 Speaker 1: carrying forth as we go on here. All right, so 190 00:10:19,600 --> 00:10:21,920 Speaker 1: let's dig a little bit more into best Buy and 191 00:10:21,960 --> 00:10:26,040 Speaker 1: some of the retailer results that are propping up some stocks. 192 00:10:26,120 --> 00:10:29,880 Speaker 1: Best Buy in particular up more than fifteen percent so 193 00:10:29,920 --> 00:10:32,839 Speaker 1: far today. I want to bring in Joseph Feldman. He's 194 00:10:32,840 --> 00:10:36,400 Speaker 1: senior managing director and retail analyst at telse Group who 195 00:10:36,440 --> 00:10:39,760 Speaker 1: covers best Buy. And you know, is this just a 196 00:10:39,920 --> 00:10:46,480 Speaker 1: case of a Nintendo console that is boosting everything or 197 00:10:46,840 --> 00:10:50,559 Speaker 1: is Best by actually doing something different to get customers 198 00:10:50,640 --> 00:10:54,480 Speaker 1: into the brick and mortar that distinguishes it from some 199 00:10:54,559 --> 00:10:58,079 Speaker 1: of the online retailers. I think Best by doing something 200 00:10:58,120 --> 00:11:01,480 Speaker 1: different and has been doing something different for a while now. Um, 201 00:11:01,520 --> 00:11:03,880 Speaker 1: you know, they several years ago they embarked on this 202 00:11:03,960 --> 00:11:07,880 Speaker 1: transformation where they re level set their business model and 203 00:11:08,120 --> 00:11:10,840 Speaker 1: you know, brought prices down, They figured out how to 204 00:11:10,960 --> 00:11:14,360 Speaker 1: compete more directly online. They're very good at in terms 205 00:11:14,360 --> 00:11:18,040 Speaker 1: of um, you know, ship from store, pick up at store, 206 00:11:19,040 --> 00:11:22,240 Speaker 1: leveraging all sorts of you know, omni channel or multi 207 00:11:22,320 --> 00:11:25,760 Speaker 1: channel retail, uh, combining digital and physical. And I think 208 00:11:25,800 --> 00:11:28,240 Speaker 1: that's been a big difference for them. Uh, you know, 209 00:11:28,280 --> 00:11:30,320 Speaker 1: they are they go to source at this point. They 210 00:11:30,320 --> 00:11:33,400 Speaker 1: are the last man standing of sorts and they're making 211 00:11:33,440 --> 00:11:35,520 Speaker 1: the most of it. They're a very efficient operator. So 212 00:11:35,559 --> 00:11:37,200 Speaker 1: we can we talk a little bit about how they're 213 00:11:37,240 --> 00:11:39,320 Speaker 1: combining the brick and mortar in the digital in a 214 00:11:39,320 --> 00:11:42,280 Speaker 1: way to give them an edge. Sure, So as an example, 215 00:11:42,679 --> 00:11:46,880 Speaker 1: you know, I think it's over online orders are actually 216 00:11:46,920 --> 00:11:49,959 Speaker 1: picked up at the store. You know. Now one would think, well, oh, 217 00:11:50,040 --> 00:11:52,240 Speaker 1: everybody wants to just buy a TV online and have 218 00:11:52,280 --> 00:11:54,040 Speaker 1: a trip to their house, but you know what, a 219 00:11:54,040 --> 00:11:55,679 Speaker 1: lot of people like to go into the store. They 220 00:11:55,679 --> 00:11:58,000 Speaker 1: may pick up the accessories, they may confirm the order 221 00:11:58,000 --> 00:12:00,120 Speaker 1: that they bought. They may be sitting at their US 222 00:12:00,240 --> 00:12:02,440 Speaker 1: right now at the office and and saying, you know what, 223 00:12:02,520 --> 00:12:04,200 Speaker 1: I need to pick something up on the way home, 224 00:12:04,760 --> 00:12:08,040 Speaker 1: and they'll purchase it and one it the same day. 225 00:12:08,120 --> 00:12:10,719 Speaker 1: So you get the immediate gratification of that. That's one 226 00:12:10,760 --> 00:12:14,920 Speaker 1: thing another thing is again leveraging their inventory to ship 227 00:12:14,960 --> 00:12:17,959 Speaker 1: from the store directly. Um. You know they can do that, 228 00:12:18,559 --> 00:12:21,760 Speaker 1: and they can they so they're combining the best of 229 00:12:21,800 --> 00:12:24,880 Speaker 1: both worlds, you know. And when a few years ago 230 00:12:25,000 --> 00:12:27,600 Speaker 1: when they lowered prices on all their products to be 231 00:12:27,760 --> 00:12:31,360 Speaker 1: everyday same price with Amazon and Walmart and others, it 232 00:12:31,440 --> 00:12:33,880 Speaker 1: took away that showrooming aspect, because if you're in the 233 00:12:33,920 --> 00:12:36,080 Speaker 1: store anyway, you may as well buy it and walk out. 234 00:12:37,240 --> 00:12:38,920 Speaker 1: You know. It's it's fascinating to me. I'm looking at 235 00:12:38,960 --> 00:12:42,400 Speaker 1: best Buy shares up more than thirty seven percent now 236 00:12:42,520 --> 00:12:45,719 Speaker 1: on the year, a massive increase for a retailer that's 237 00:12:45,720 --> 00:12:48,280 Speaker 1: supposed to be on its deathbed because it's a retailer 238 00:12:48,280 --> 00:12:51,040 Speaker 1: and it's got breaking border shops. You know, I have 239 00:12:51,120 --> 00:12:53,079 Speaker 1: to wonder. I do want to ask you. When Dave 240 00:12:53,080 --> 00:12:55,000 Speaker 1: and I were were here yesterday talking with Sema Shop 241 00:12:55,040 --> 00:12:57,440 Speaker 1: Bloomberg Intelligence, we were talking about Signet and some of 242 00:12:57,480 --> 00:13:02,800 Speaker 1: the other retailers lows which reported disappointing earnings yesterday. UM, 243 00:13:02,840 --> 00:13:06,520 Speaker 1: and she was talking about how one potential headwind is 244 00:13:06,640 --> 00:13:11,440 Speaker 1: a deterior deteriorating consumer credit worthiness that we've seen in 245 00:13:11,440 --> 00:13:16,600 Speaker 1: increasing card charge offs and increasing too linquencies. I'm wondering 246 00:13:16,640 --> 00:13:20,360 Speaker 1: at a place like best Buy, does that matter? No, 247 00:13:20,480 --> 00:13:22,520 Speaker 1: it absolutely doesn't matter. I mean, you know to the 248 00:13:22,559 --> 00:13:25,360 Speaker 1: extent that the consumer you know, has too much debt 249 00:13:25,400 --> 00:13:28,400 Speaker 1: already and then you know, can't maybe get more access 250 00:13:28,880 --> 00:13:31,400 Speaker 1: because you know, with large ticket items like a TV 251 00:13:31,679 --> 00:13:34,880 Speaker 1: or computer or other things, the consumer often is using 252 00:13:34,920 --> 00:13:37,840 Speaker 1: credit to to make that purchase. Uh. And and I 253 00:13:37,880 --> 00:13:41,480 Speaker 1: know that we've seen credit levels have been on the rise, 254 00:13:41,679 --> 00:13:43,760 Speaker 1: you know, more of it's been driven by home and 255 00:13:43,840 --> 00:13:48,000 Speaker 1: car uh than than actual you know, instore retail purchases. 256 00:13:48,080 --> 00:13:51,120 Speaker 1: But we are seeing that. But that also may be 257 00:13:51,200 --> 00:13:53,000 Speaker 1: a sign that the the economy is a little bit 258 00:13:53,080 --> 00:13:56,760 Speaker 1: better employments, better consumers feeling a little bit you know, 259 00:13:57,040 --> 00:13:59,760 Speaker 1: more more secure in their position. Well, does this mean 260 00:13:59,800 --> 00:14:02,120 Speaker 1: she you, the fact that best Buy delivered these results, 261 00:14:02,160 --> 00:14:05,520 Speaker 1: does this mean to you that retail has turned the 262 00:14:05,520 --> 00:14:10,440 Speaker 1: corner and that there is a balancing out between the 263 00:14:10,559 --> 00:14:13,480 Speaker 1: online and the brick and mortar, and the sweet spot 264 00:14:13,559 --> 00:14:16,559 Speaker 1: lies somewhere that some of these retailers can still compete. 265 00:14:17,600 --> 00:14:22,280 Speaker 1: I I I agree with your statements, with the exception 266 00:14:22,320 --> 00:14:25,280 Speaker 1: of I'm not sure that best buys Best Buys emblematic 267 00:14:25,320 --> 00:14:29,680 Speaker 1: of where retail should be or maybe headed um in 268 00:14:29,800 --> 00:14:33,200 Speaker 1: terms of, you know, combining the best of physical and 269 00:14:33,360 --> 00:14:38,960 Speaker 1: digital and leveraging service and and customer you know, information 270 00:14:39,040 --> 00:14:42,120 Speaker 1: within the stores. But at the same time, you know, 271 00:14:42,200 --> 00:14:43,680 Speaker 1: I don't. I think it's hard to say. I mean, 272 00:14:43,880 --> 00:14:47,800 Speaker 1: the department stores have been under a lot of pressure lately. Um, 273 00:14:47,880 --> 00:14:49,960 Speaker 1: you know, some of the apparel retailers have been under 274 00:14:49,960 --> 00:14:52,880 Speaker 1: some pressure. You know, not everybody is Best Buy just 275 00:14:52,920 --> 00:14:57,760 Speaker 1: further along in in resetting that operating format for themselves, 276 00:14:58,320 --> 00:15:01,080 Speaker 1: and it may not translate to every other sector. And 277 00:15:01,120 --> 00:15:03,520 Speaker 1: it's still early days for for a lot of people, 278 00:15:03,520 --> 00:15:05,560 Speaker 1: and it's still really for best By even Well, you know, 279 00:15:05,640 --> 00:15:08,120 Speaker 1: one other story that we're watching today one of the 280 00:15:08,880 --> 00:15:12,240 Speaker 1: retailer Sears. A lot of people have been writing Sears 281 00:15:12,240 --> 00:15:14,360 Speaker 1: obituary for a long time, right, I mean, it's like 282 00:15:14,440 --> 00:15:17,000 Speaker 1: the company that's that just refusing to die but aw 283 00:15:17,080 --> 00:15:19,920 Speaker 1: to right, and then today it reported earnings that were 284 00:15:20,120 --> 00:15:22,560 Speaker 1: way better than people expected, and it shares her up 285 00:15:22,600 --> 00:15:24,520 Speaker 1: more than twenty percent. I mean, I did not think 286 00:15:24,520 --> 00:15:27,240 Speaker 1: I would be saying that about Sears Holding Corporation. I mean, 287 00:15:27,280 --> 00:15:30,280 Speaker 1: this is the retailer that Eddie Lampard has basically been 288 00:15:30,680 --> 00:15:33,080 Speaker 1: pumping with his own personal cash to sort of keep 289 00:15:33,080 --> 00:15:35,440 Speaker 1: it hoppling along. And yet here we are, it's pushing 290 00:15:35,440 --> 00:15:39,040 Speaker 1: out its debt maturities and it's delivering uh sales gains 291 00:15:39,040 --> 00:15:41,800 Speaker 1: that that are better than than people had ever expected. 292 00:15:41,840 --> 00:15:43,800 Speaker 1: How is this possible? I mean again, does this sort 293 00:15:43,800 --> 00:15:46,560 Speaker 1: of speak to that narrative of you know, perhaps not 294 00:15:46,600 --> 00:15:49,240 Speaker 1: all retailers, as you were saying before, not all retailers 295 00:15:49,240 --> 00:15:51,640 Speaker 1: are turning the corner and finding that balance, but there 296 00:15:51,680 --> 00:15:55,000 Speaker 1: are some out there that are finding some edge in 297 00:15:55,040 --> 00:15:57,440 Speaker 1: there to sort of compete with Amazon and get on 298 00:15:57,480 --> 00:16:01,240 Speaker 1: their get on their their feet. Yeah. I think I 299 00:16:01,280 --> 00:16:04,120 Speaker 1: think that the series issue is more one of an 300 00:16:04,120 --> 00:16:09,400 Speaker 1: expectations game where the expectations were so low and so bad, 301 00:16:09,440 --> 00:16:12,400 Speaker 1: and in to your point, yesterday they got a lifeline 302 00:16:12,400 --> 00:16:16,280 Speaker 1: by extending the debt out to January, with even an 303 00:16:16,320 --> 00:16:20,040 Speaker 1: option to extend it to July of next year. So effectively, 304 00:16:20,480 --> 00:16:23,000 Speaker 1: there was a lot of negative sentiment around the name, 305 00:16:23,240 --> 00:16:25,320 Speaker 1: or the assumption that that Sears was going to have 306 00:16:25,360 --> 00:16:28,880 Speaker 1: to file for bankruptcy sometimes this year, and now that 307 00:16:28,960 --> 00:16:31,160 Speaker 1: does not seem to be the case. And then you 308 00:16:31,200 --> 00:16:34,720 Speaker 1: compare the expectations for the performance and in terms of 309 00:16:34,760 --> 00:16:37,880 Speaker 1: their first quarter operating performance, and it did certainly better. 310 00:16:38,120 --> 00:16:40,640 Speaker 1: But let's not let's mistake the fact that I think 311 00:16:40,640 --> 00:16:44,040 Speaker 1: the Seares comp was down twelve and Tamart was down 312 00:16:44,440 --> 00:16:46,560 Speaker 1: ten or eleven percent, you know, like it was not 313 00:16:47,280 --> 00:16:52,040 Speaker 1: uh strong numbers to say the least, with both businesses down. 314 00:16:52,280 --> 00:16:54,200 Speaker 1: You know, this is interesting to me because the fact 315 00:16:54,280 --> 00:16:57,120 Speaker 1: that people are then piling back in suggests to me 316 00:16:57,200 --> 00:17:00,520 Speaker 1: that that traders are desperate to get a deal right, 317 00:17:00,600 --> 00:17:03,560 Speaker 1: and people have been sort of circling the retail industry 318 00:17:03,560 --> 00:17:05,520 Speaker 1: which has been so beaten up, and they're saying, look, 319 00:17:05,720 --> 00:17:08,040 Speaker 1: when can we pump our money in here and get 320 00:17:08,160 --> 00:17:09,480 Speaker 1: in on the bottom right. I mean, I know that 321 00:17:09,480 --> 00:17:11,800 Speaker 1: I've talked to many distress debt investors and people talk 322 00:17:11,840 --> 00:17:14,440 Speaker 1: about that. I mean, uh, dave I want to bring 323 00:17:14,480 --> 00:17:16,439 Speaker 1: in here? I mean, do you get the sense that 324 00:17:16,480 --> 00:17:19,560 Speaker 1: there is some sort of bottom fishing and you know 325 00:17:19,600 --> 00:17:23,439 Speaker 1: the fact that any less disappointing results is going to 326 00:17:23,600 --> 00:17:25,960 Speaker 1: result in some massive pop because people are just desperate 327 00:17:25,960 --> 00:17:29,520 Speaker 1: to find a cheap stock. If I put it that way, 328 00:17:29,640 --> 00:17:32,399 Speaker 1: I mean, the bottom fishing is one of those phrases 329 00:17:32,440 --> 00:17:34,320 Speaker 1: that you kind of fall back on when you lack 330 00:17:34,359 --> 00:17:39,600 Speaker 1: a better idea. Here's another one shortcovering the idea buying 331 00:17:39,720 --> 00:17:43,359 Speaker 1: back shares that you previously sold. Figure the stocks going down, 332 00:17:43,600 --> 00:17:45,960 Speaker 1: and you bring that up in the case of Sears 333 00:17:46,000 --> 00:17:51,080 Speaker 1: because something like six almost of the shares available for 334 00:17:51,200 --> 00:17:54,240 Speaker 1: trading have been sold short. So there's a lot of 335 00:17:54,280 --> 00:17:58,919 Speaker 1: speculation that you know, sears Is future is kind of 336 00:17:58,960 --> 00:18:03,199 Speaker 1: going the way of its past several years. So you know, 337 00:18:03,320 --> 00:18:07,439 Speaker 1: in that context, you get any piece of positive uh news. 338 00:18:07,800 --> 00:18:09,800 Speaker 1: And let's face it that I mean, they did sell 339 00:18:09,840 --> 00:18:12,720 Speaker 1: their Craftsman tool brand to Stanley back Black and Decker 340 00:18:12,800 --> 00:18:16,120 Speaker 1: in the quarter. That figured into the numbers, and so 341 00:18:16,600 --> 00:18:20,040 Speaker 1: that may be explain why the comparisons were off. Nonetheless, 342 00:18:20,680 --> 00:18:23,040 Speaker 1: you've got all these people betting against the company, and 343 00:18:23,119 --> 00:18:25,720 Speaker 1: sometimes that gets a little painful, and you see these 344 00:18:25,800 --> 00:18:32,560 Speaker 1: kinds of reversals and Joe, yeah, alright, fine bottom fishing 345 00:18:32,600 --> 00:18:35,920 Speaker 1: perhaps wasn't the best uh description of it, but Joe, 346 00:18:35,920 --> 00:18:37,399 Speaker 1: I wanted to get your take. I mean, we're getting 347 00:18:37,440 --> 00:18:39,960 Speaker 1: to the end here of the earning season, and a 348 00:18:39,960 --> 00:18:42,600 Speaker 1: lot of these companies that that you cover from lows 349 00:18:42,640 --> 00:18:44,719 Speaker 1: two of Walmart's to home depot of staples. I mean, 350 00:18:44,840 --> 00:18:47,040 Speaker 1: it's sort of a motley crew as far as the 351 00:18:47,160 --> 00:18:50,000 Speaker 1: results go. I mean, is there any theme, any new 352 00:18:50,119 --> 00:18:53,240 Speaker 1: theme that's sort of emerging from this earning season for 353 00:18:53,440 --> 00:18:56,560 Speaker 1: retailers that you think people will take uh going forward 354 00:18:56,680 --> 00:19:00,879 Speaker 1: to influence their investing decisions. I think what you saw 355 00:19:01,119 --> 00:19:06,160 Speaker 1: is that whether delays and tax refunds, there were definitely 356 00:19:06,240 --> 00:19:10,400 Speaker 1: some exogenous factors so to speak, that that really did 357 00:19:10,440 --> 00:19:13,560 Speaker 1: have an impact on retail sales. And I do think that, 358 00:19:14,040 --> 00:19:16,919 Speaker 1: you know, the the relative to expectations that trends have 359 00:19:17,080 --> 00:19:20,560 Speaker 1: been a little bit better. Trends have gotten better in April. 360 00:19:20,640 --> 00:19:23,199 Speaker 1: It seems like they've continued to be better in May. 361 00:19:23,600 --> 00:19:26,159 Speaker 1: And you know, you can't ignore the fact that the 362 00:19:26,200 --> 00:19:30,560 Speaker 1: consumers in relatively healthy position. I mean, obviously there's a 363 00:19:30,560 --> 00:19:33,000 Speaker 1: lot of pressures. There's healthcare costs, and there's you know, 364 00:19:33,040 --> 00:19:36,280 Speaker 1: gas prices going up a little bit, but you know, 365 00:19:36,320 --> 00:19:38,880 Speaker 1: for the most part, you know, employment were at seemingly 366 00:19:38,920 --> 00:19:42,199 Speaker 1: full employment, and interest rates are still relatively low, and 367 00:19:42,320 --> 00:19:45,840 Speaker 1: home prices are going up, so the consumer is armed 368 00:19:46,200 --> 00:19:48,879 Speaker 1: with the ability to spend. And I think that another 369 00:19:48,960 --> 00:19:51,760 Speaker 1: theme that we've seen is I do believe, you know, 370 00:19:51,840 --> 00:19:54,919 Speaker 1: more retail specific You're actually going to start seeing a 371 00:19:54,920 --> 00:19:58,399 Speaker 1: little more investment in the stores again, because the store 372 00:19:58,440 --> 00:20:01,679 Speaker 1: experience is still crucial, even you have to combine it 373 00:20:01,680 --> 00:20:04,680 Speaker 1: with digital. And I think that retailers were so focused 374 00:20:04,720 --> 00:20:07,239 Speaker 1: on technology for the past few years and fixing up 375 00:20:07,320 --> 00:20:09,359 Speaker 1: that side of the business that they're now going to 376 00:20:09,440 --> 00:20:11,439 Speaker 1: be kind of shifting back a little towards the stores. 377 00:20:11,480 --> 00:20:13,240 Speaker 1: But this is interesting. This is interesting to me. In 378 00:20:13,280 --> 00:20:15,920 Speaker 1: other words, you're saying that retailers are going to start 379 00:20:16,119 --> 00:20:20,280 Speaker 1: putting more money into their physical locations and trying to 380 00:20:20,400 --> 00:20:24,080 Speaker 1: combine the digital with those. I'm trying to imagine what 381 00:20:24,160 --> 00:20:27,520 Speaker 1: that would look like. Which company, which retailer would you call? 382 00:20:28,119 --> 00:20:33,520 Speaker 1: You wander over to Columbus Circle today where Amazon has 383 00:20:33,600 --> 00:20:38,000 Speaker 1: started its first New York bookstore now open. So you 384 00:20:38,080 --> 00:20:41,160 Speaker 1: know that's part of it, no doubt. Uh. And when 385 00:20:41,200 --> 00:20:43,920 Speaker 1: you figure that, you know Amazon is going in that direct. 386 00:20:43,960 --> 00:20:45,679 Speaker 1: They have a few of the bookstores they're looking to 387 00:20:45,720 --> 00:20:48,159 Speaker 1: open at least one more in the city here, and 388 00:20:48,760 --> 00:20:52,040 Speaker 1: so it's understandable what have you got as a retailer 389 00:20:52,080 --> 00:20:56,480 Speaker 1: that Amazon doesn't have, at least before these openings. And 390 00:20:56,600 --> 00:20:59,400 Speaker 1: it's a storefront, it's a way for people to get 391 00:20:59,440 --> 00:21:01,960 Speaker 1: to you. But but isn't this more than that, Because 392 00:21:02,000 --> 00:21:04,800 Speaker 1: an investment in a store could mean making it more 393 00:21:04,840 --> 00:21:08,080 Speaker 1: of an experience. It could be making making it into 394 00:21:08,760 --> 00:21:11,240 Speaker 1: an event space in a way where people can even 395 00:21:11,359 --> 00:21:14,080 Speaker 1: order the merchandise and pick it up there. But it 396 00:21:14,080 --> 00:21:16,800 Speaker 1: doesn't necessarily have to be uh, the classic brick and 397 00:21:16,840 --> 00:21:19,280 Speaker 1: mortar experience. Joe, Yeah, I think you're right, And I 398 00:21:19,280 --> 00:21:22,840 Speaker 1: think that's what retails are trying to get at and 399 00:21:22,840 --> 00:21:25,920 Speaker 1: and and to your point, I mean the Amazon there, 400 00:21:25,960 --> 00:21:28,600 Speaker 1: they understand that there's their need to be close to 401 00:21:28,720 --> 00:21:32,159 Speaker 1: the to the consumer. I mean, look, I know the 402 00:21:32,720 --> 00:21:36,800 Speaker 1: rapid growth in retail is all digital or online, whatever 403 00:21:36,840 --> 00:21:40,520 Speaker 1: you want to call it. It's still only what overall 404 00:21:40,560 --> 00:21:43,920 Speaker 1: retail sales. It's going to twenty probably in the next decade. 405 00:21:44,280 --> 00:21:48,160 Speaker 1: But still of the business is still going to be 406 00:21:48,240 --> 00:21:50,920 Speaker 1: touching a store in some way. Returns touch the store. 407 00:21:50,920 --> 00:21:52,520 Speaker 1: And oh, by the way, when you bring in a return, 408 00:21:52,640 --> 00:21:55,159 Speaker 1: oftentimes you buy more or do an add on or 409 00:21:55,200 --> 00:21:57,560 Speaker 1: do something different in the store. If you're picking up 410 00:21:57,600 --> 00:21:59,520 Speaker 1: at the store, you can do add on sales. And 411 00:21:59,560 --> 00:22:01,919 Speaker 1: to your if you can create kind of an experience 412 00:22:01,960 --> 00:22:05,560 Speaker 1: in some theater within the store and better service that 413 00:22:05,720 --> 00:22:09,520 Speaker 1: can help to drive drive sales. Joseph Alban, thank you 414 00:22:09,560 --> 00:22:11,879 Speaker 1: so much for joining us. Joseph Feldman is Senior Managing 415 00:22:11,880 --> 00:22:16,080 Speaker 1: Director and retail analyst Telsea Group, talking about best Buy 416 00:22:16,160 --> 00:22:18,680 Speaker 1: and all things retail, and of course our big thanks 417 00:22:18,720 --> 00:22:22,439 Speaker 1: to Dave Wilson, Bloomberg SX editor, blogger on M Live, 418 00:22:22,640 --> 00:22:26,920 Speaker 1: go on the Bloomberg and a columnist here at Bloomberg News. 419 00:22:35,600 --> 00:22:37,119 Speaker 1: We want to take a moment to let you know 420 00:22:37,200 --> 00:22:40,560 Speaker 1: about something new from Bloomberg. Starting right now, you can 421 00:22:40,720 --> 00:22:43,879 Speaker 1: use our io s app or our new Google Chrome 422 00:22:43,920 --> 00:22:48,199 Speaker 1: extension to scan any news story on any website, instantly 423 00:22:48,240 --> 00:22:51,480 Speaker 1: revealing relevant news and market data from Bloomberg and other 424 00:22:51,560 --> 00:22:55,640 Speaker 1: sources related to companies and people you're reading about. So 425 00:22:55,720 --> 00:22:57,880 Speaker 1: no matter where you're reading the news, you can bring 426 00:22:57,880 --> 00:23:00,720 Speaker 1: the power of Bloomberg's news and data with you. It's 427 00:23:00,720 --> 00:23:04,000 Speaker 1: pretty amazing. Download our io s app or search for 428 00:23:04,000 --> 00:23:06,520 Speaker 1: the Bloomberg Extension on the Chrome Store to try it out. 429 00:23:06,960 --> 00:23:16,800 Speaker 1: Learn more at Bloomberg dot com slash lens. Right now, 430 00:23:17,040 --> 00:23:19,480 Speaker 1: I want to bring in Kolar Kadani's chief US economist 431 00:23:19,480 --> 00:23:23,160 Speaker 1: for Bloomberg Intelligence, who's here to break down what we 432 00:23:23,359 --> 00:23:26,359 Speaker 1: learned yesterday from the meeting minutes that were released from 433 00:23:26,400 --> 00:23:29,680 Speaker 1: the f O m c S May second and third meeting. Uh. 434 00:23:30,240 --> 00:23:35,119 Speaker 1: Usually these minutes are not that instructive people parts specific 435 00:23:35,200 --> 00:23:38,400 Speaker 1: words as far as growth accelerating, whether you know, there's 436 00:23:38,440 --> 00:23:42,760 Speaker 1: any kind of uh, just tenuousness as far as the strength, 437 00:23:42,960 --> 00:23:45,560 Speaker 1: the strength and the economy on the behalf of FED members. 438 00:23:45,560 --> 00:23:49,960 Speaker 1: But this time these were exciting minutes. Yes, they were 439 00:23:50,000 --> 00:23:53,080 Speaker 1: relatively exciting. So you know, as you mentioned, normally the 440 00:23:53,240 --> 00:23:55,359 Speaker 1: minutes kind of fill in some of the gaps of 441 00:23:55,520 --> 00:24:01,320 Speaker 1: the relatively short meeting statement. But recently the minutes have 442 00:24:01,400 --> 00:24:06,840 Speaker 1: been providing clues or additional clues regarding what the FEDS 443 00:24:06,840 --> 00:24:09,880 Speaker 1: balance sheet unwind will look like in terms of when 444 00:24:09,880 --> 00:24:13,080 Speaker 1: it will start and how it will be executed. Just 445 00:24:13,119 --> 00:24:15,239 Speaker 1: to put this into perspective, so, the Federal Reserve has 446 00:24:15,240 --> 00:24:17,560 Speaker 1: about four and a half trillion dollars of assets on 447 00:24:17,600 --> 00:24:20,400 Speaker 1: its books, including about two and a half trillion dollars 448 00:24:20,400 --> 00:24:23,119 Speaker 1: worth of US treasuries. They're one of the biggest holders 449 00:24:23,119 --> 00:24:26,120 Speaker 1: of treasuries in the in the US dept market. Uh. 450 00:24:26,160 --> 00:24:28,280 Speaker 1: And here they are. They've built up this war chest 451 00:24:28,320 --> 00:24:30,920 Speaker 1: of debt and now they're trying to figure out how 452 00:24:30,960 --> 00:24:34,159 Speaker 1: to shrink it, uh, for a variety of different reasons. 453 00:24:34,160 --> 00:24:35,600 Speaker 1: And now they're coming out with a plan that could 454 00:24:35,640 --> 00:24:39,600 Speaker 1: potentially shake the markets absolutely and so just under two 455 00:24:39,600 --> 00:24:42,840 Speaker 1: trillion and mortgage backed securities as well. So this does 456 00:24:42,920 --> 00:24:46,480 Speaker 1: provide some distortion into the markets, which was desirable at 457 00:24:46,520 --> 00:24:48,200 Speaker 1: the time they were doing it. It was a form 458 00:24:48,240 --> 00:24:52,160 Speaker 1: of economic stimulus. But you know, as as with most things, 459 00:24:52,200 --> 00:24:54,200 Speaker 1: say the party comes to an end and they need 460 00:24:54,200 --> 00:24:56,960 Speaker 1: to unwind and need to but they want to for 461 00:24:57,000 --> 00:25:00,280 Speaker 1: a variety of reasons. Well, they do need to, uh 462 00:25:00,480 --> 00:25:05,439 Speaker 1: basically start removing policy accommodation and so uh you know, 463 00:25:05,480 --> 00:25:08,320 Speaker 1: whether they're doing that through interest rate increases or balance 464 00:25:08,359 --> 00:25:10,560 Speaker 1: sheet production, right, you know, you could make the argument 465 00:25:10,560 --> 00:25:12,320 Speaker 1: they need to do one versus the other. But they 466 00:25:12,359 --> 00:25:17,120 Speaker 1: do need to start normalizing policy as the economy normalizes, 467 00:25:17,200 --> 00:25:20,800 Speaker 1: meaning that the unemployment rate has basically returned to normal, 468 00:25:21,240 --> 00:25:24,879 Speaker 1: GDP growth is back to normal, inflation is very nearly 469 00:25:24,880 --> 00:25:28,000 Speaker 1: back to normal, but policy is set at day still 470 00:25:28,320 --> 00:25:32,760 Speaker 1: very accommodative stance. Assuming they raise rates at the June meeting, 471 00:25:32,840 --> 00:25:35,040 Speaker 1: which in the minutes they suggested that that was a 472 00:25:35,119 --> 00:25:40,320 Speaker 1: very strong possibility it's priced in on future is almost right. 473 00:25:40,440 --> 00:25:43,720 Speaker 1: So assuming that they raise rates at the June meeting, 474 00:25:43,760 --> 00:25:47,520 Speaker 1: now they are just back to where rates stood at 475 00:25:47,560 --> 00:25:50,800 Speaker 1: the low point of the last economic cycle, the low 476 00:25:51,080 --> 00:25:53,919 Speaker 1: level that actually was part of the reason for the 477 00:25:53,960 --> 00:25:56,080 Speaker 1: inflation of the housing bubble. So the FED is very 478 00:25:56,119 --> 00:25:59,160 Speaker 1: sensitive that if you keep rates too low for too long, 479 00:25:59,400 --> 00:26:02,760 Speaker 1: you create financial and market distortions. Uh, and I think 480 00:26:02,840 --> 00:26:05,919 Speaker 1: that's a significant motivating factor for them to continue on 481 00:26:05,960 --> 00:26:08,800 Speaker 1: this very gradual path towards a higher level of interest rates. 482 00:26:08,960 --> 00:26:11,280 Speaker 1: And sort of to get to the minutes, what they outlined, 483 00:26:11,280 --> 00:26:14,439 Speaker 1: which I thought was so fascinating was, uh, the way 484 00:26:14,480 --> 00:26:17,720 Speaker 1: that they would stop reinvesting the money that they got 485 00:26:17,760 --> 00:26:19,719 Speaker 1: back from bonds that they hold. In other words, as 486 00:26:19,760 --> 00:26:22,400 Speaker 1: things paid down, do they put that money back into 487 00:26:22,440 --> 00:26:25,160 Speaker 1: the market or not? And they basically said, we will 488 00:26:25,200 --> 00:26:27,240 Speaker 1: put it, we will, will will not put some of 489 00:26:27,240 --> 00:26:29,840 Speaker 1: it in the market, and we will tap the amount 490 00:26:29,840 --> 00:26:31,560 Speaker 1: that we won't put back in the market at a 491 00:26:31,600 --> 00:26:34,840 Speaker 1: certain level, and then we'll increase that cap every three months, 492 00:26:34,920 --> 00:26:38,160 Speaker 1: right exactly. So they've continually narrowed down the range of options. 493 00:26:38,160 --> 00:26:41,600 Speaker 1: One option, which was dismissed a while ago, was actively 494 00:26:41,680 --> 00:26:44,200 Speaker 1: selling the assets on the balance sheet. They ruled that out. 495 00:26:44,760 --> 00:26:48,520 Speaker 1: The next most aggressive scenario was to just end reinvestment, 496 00:26:48,600 --> 00:26:53,040 Speaker 1: so for mortgages prepaid or a treasury security matures, they 497 00:26:53,080 --> 00:26:57,359 Speaker 1: would not reinvest that into what new securities now what 498 00:26:57,440 --> 00:27:00,240 Speaker 1: they're doing. If they had done that, that would to 499 00:27:00,359 --> 00:27:04,000 Speaker 1: an wild unwind of the balance sheet. I I compare 500 00:27:04,040 --> 00:27:06,040 Speaker 1: this to a fire hose that you're not holding onto 501 00:27:06,040 --> 00:27:08,760 Speaker 1: the end, just whipping back and forth. Some months you'd 502 00:27:08,800 --> 00:27:11,760 Speaker 1: have as little as about five billion rolling off, and 503 00:27:11,800 --> 00:27:15,280 Speaker 1: then other months you might have to billion rolling off, 504 00:27:15,640 --> 00:27:17,920 Speaker 1: and that would be very difficult for the markets to digest. 505 00:27:17,960 --> 00:27:23,520 Speaker 1: So instead they have this UH cap basically where they'll say, okay, 506 00:27:23,520 --> 00:27:26,520 Speaker 1: well let x amount run off and the rest will 507 00:27:26,520 --> 00:27:30,080 Speaker 1: be reinvested, and the cap will start off very small 508 00:27:30,160 --> 00:27:33,760 Speaker 1: I think probably two billion as a reasonable estimate, UH, 509 00:27:33,800 --> 00:27:36,840 Speaker 1: and then that will be that's extremely small. This is 510 00:27:36,960 --> 00:27:39,600 Speaker 1: tiptoeing in because they don't want the markets to have 511 00:27:39,600 --> 00:27:42,520 Speaker 1: a tantrum. So you start off at maybe two billion, 512 00:27:42,840 --> 00:27:46,240 Speaker 1: and then inch that up to what we'll call cruising speed, 513 00:27:46,320 --> 00:27:48,879 Speaker 1: which I think could reasonably be in the vicinity of 514 00:27:49,359 --> 00:27:51,560 Speaker 1: ten billion. When are they going to give more details? 515 00:27:52,119 --> 00:27:55,240 Speaker 1: They said that more details will be coming soon. They'll 516 00:27:55,280 --> 00:27:58,400 Speaker 1: continue to the discussions at the June meeting, which again 517 00:27:58,440 --> 00:28:00,760 Speaker 1: should be a light lift because they're raising rates that's 518 00:28:00,760 --> 00:28:04,400 Speaker 1: already agreed upon basically by between the markets and the Fed. 519 00:28:04,720 --> 00:28:08,280 Speaker 1: UH the economic assessment fairly straightforward. That gives him a 520 00:28:08,320 --> 00:28:10,479 Speaker 1: lot more time to discuss this. I think over the 521 00:28:10,480 --> 00:28:12,800 Speaker 1: course of the summer, and there's a number of instances. 522 00:28:12,840 --> 00:28:15,520 Speaker 1: So we have a June press conference, we have midyear 523 00:28:15,560 --> 00:28:18,040 Speaker 1: testimony before Congress, and we have the Jackson Hole FED 524 00:28:18,080 --> 00:28:21,000 Speaker 1: conference in late August. Lots of details to come soon. 525 00:28:21,080 --> 00:28:24,360 Speaker 1: This was kind of a brilliant move to calm down markets, 526 00:28:24,359 --> 00:28:27,080 Speaker 1: and markets certainly rallied in response to this because it 527 00:28:27,240 --> 00:28:30,160 Speaker 1: was not the fire hose situation. Car Ka Donna always 528 00:28:30,160 --> 00:28:33,240 Speaker 1: wonderful to talk with you. Kadonna's chief US economist for 529 00:28:33,560 --> 00:28:49,480 Speaker 1: Bloomberg Intelligence. We are hearing more about what's going to 530 00:28:49,520 --> 00:28:51,800 Speaker 1: happen with James Comee, the former head of the FBI, 531 00:28:52,000 --> 00:28:55,640 Speaker 1: and his potential testimony in front of Congress. He had 532 00:28:55,880 --> 00:28:59,120 Speaker 1: has agreed to testify, but that may not happen due 533 00:28:59,160 --> 00:29:01,640 Speaker 1: to a number of things. And before we get to that, 534 00:29:01,680 --> 00:29:04,760 Speaker 1: I just want to uh tell you about a statement 535 00:29:04,800 --> 00:29:07,480 Speaker 1: that was just released from President Trump issued by the 536 00:29:07,480 --> 00:29:10,600 Speaker 1: White House, talking about leaks, he said, the alleged leaks 537 00:29:10,600 --> 00:29:14,200 Speaker 1: coming out of government agencies are deeply troubling. This comes 538 00:29:14,280 --> 00:29:18,240 Speaker 1: after the United Kingdom Prime Minister Tresa May raised questions 539 00:29:18,320 --> 00:29:21,920 Speaker 1: about its relationship, the UK's relationship with the US and 540 00:29:21,960 --> 00:29:25,760 Speaker 1: its willingness to share information with the US given the 541 00:29:25,840 --> 00:29:28,720 Speaker 1: degree of leaks and how frequently they seem to be 542 00:29:28,800 --> 00:29:33,240 Speaker 1: happening with private information getting shared in newspapers. Chris Strom 543 00:29:33,240 --> 00:29:37,240 Speaker 1: as national security reporter for Bloomberg, and before we get 544 00:29:37,280 --> 00:29:40,320 Speaker 1: to what's going to happen with James, comey uh, and 545 00:29:40,640 --> 00:29:42,600 Speaker 1: we are awaiting. Just to sort of remind you we 546 00:29:42,640 --> 00:29:45,080 Speaker 1: are waiting. President Trump is going to speak at NATO 547 00:29:45,160 --> 00:29:47,200 Speaker 1: headquarters in Brussels, and we will bring that to you 548 00:29:47,280 --> 00:29:49,160 Speaker 1: live when we get there. But Chris, I wanted to 549 00:29:49,160 --> 00:29:51,640 Speaker 1: get your take on leaks. And you know, we have 550 00:29:51,760 --> 00:29:54,160 Speaker 1: heard so much about you know, there are too many 551 00:29:54,200 --> 00:29:58,200 Speaker 1: leaks coming out of national intelligence agencies. What is your 552 00:29:58,280 --> 00:30:00,960 Speaker 1: sense of the path forward were the White House with 553 00:30:01,000 --> 00:30:03,480 Speaker 1: respect to cracking down on these leaks and are these 554 00:30:03,520 --> 00:30:05,880 Speaker 1: leaks really coming at a much faster pace than ever before? 555 00:30:06,720 --> 00:30:08,480 Speaker 1: But yeah, I think a lot of people have been 556 00:30:08,480 --> 00:30:12,200 Speaker 1: expecting the White House to take action against the leaks 557 00:30:12,200 --> 00:30:15,120 Speaker 1: that have been happening. Uh they kind of it's also 558 00:30:15,120 --> 00:30:17,920 Speaker 1: important to kind of recognize that they're falling into different categories. 559 00:30:18,360 --> 00:30:21,400 Speaker 1: The pressure that Trump is facing right now is coming 560 00:30:21,520 --> 00:30:24,520 Speaker 1: from you know, the the the UK in terms of 561 00:30:24,760 --> 00:30:28,680 Speaker 1: leaking the information about the uh, the bombing suspect um, 562 00:30:28,920 --> 00:30:33,960 Speaker 1: and that tends has become from law enforcement uh officials. UM. 563 00:30:34,040 --> 00:30:37,040 Speaker 1: The other leaking that's that's been happening has been uh, 564 00:30:37,120 --> 00:30:39,360 Speaker 1: you know, on the on the intelligence side of things, 565 00:30:39,480 --> 00:30:42,800 Speaker 1: and about the Trump Russia investigation, and so you know, 566 00:30:42,880 --> 00:30:46,080 Speaker 1: for a while now, the administration has been indicating, indicating 567 00:30:46,080 --> 00:30:48,520 Speaker 1: that they're going to ramp up their their pursuit of leakers, 568 00:30:48,560 --> 00:30:51,800 Speaker 1: and that's what we're seeing now. You know. I do 569 00:30:51,920 --> 00:30:55,760 Speaker 1: want to, uh just reiterate that we are awaiting comments 570 00:30:55,800 --> 00:30:59,280 Speaker 1: from President Trump and he is walking to the podium 571 00:30:59,680 --> 00:31:02,960 Speaker 1: uh with NATO leaders, Chris, I know that you will 572 00:31:03,000 --> 00:31:05,920 Speaker 1: be listening to this as well everybody in the intelligence community, 573 00:31:05,920 --> 00:31:08,280 Speaker 1: as this has to do with how much potentially he 574 00:31:08,320 --> 00:31:11,760 Speaker 1: may talk about how much NATO members will contribute to 575 00:31:11,960 --> 00:31:14,320 Speaker 1: the effort to fight ISIS and this has been a 576 00:31:14,360 --> 00:31:17,720 Speaker 1: big focus and UH there has been an increased uh 577 00:31:18,200 --> 00:31:22,520 Speaker 1: sort of agreement on fighting isis based on what we 578 00:31:22,680 --> 00:31:26,000 Speaker 1: just saw in Manchester, the tragedy where there was a 579 00:31:26,000 --> 00:31:29,560 Speaker 1: bombing at an Ariana Grande concert. Real quick, Chris, can 580 00:31:29,600 --> 00:31:32,240 Speaker 1: you just give me a quick sense what's your under 581 00:31:32,280 --> 00:31:35,160 Speaker 1: over about whether James Comey is actually going to testify 582 00:31:35,640 --> 00:31:38,479 Speaker 1: uh in front of US Congress. I would say at 583 00:31:38,480 --> 00:31:41,080 Speaker 1: this point probably not in the in the near term. 584 00:31:41,200 --> 00:31:44,040 Speaker 1: I think that what's going to happen is that Jim 585 00:31:44,080 --> 00:31:47,440 Speaker 1: Comey is going to defer to h to Maller, the 586 00:31:47,480 --> 00:31:50,360 Speaker 1: Special Council. They have a long history and I think 587 00:31:50,440 --> 00:31:53,280 Speaker 1: for for Mulla's point of view, Comy is one of 588 00:31:53,320 --> 00:31:58,200 Speaker 1: his core core witnesses UH to potential crimes being committed 589 00:31:58,200 --> 00:32:00,239 Speaker 1: in a lot of knowledge about the investigation, I think 590 00:32:00,320 --> 00:32:02,720 Speaker 1: Toomey will defer them all. So you think that he's 591 00:32:02,720 --> 00:32:05,240 Speaker 1: probably not going to end up testifying in front of Congress. 592 00:32:06,120 --> 00:32:08,360 Speaker 1: Not in the short term. I think like we're gonna 593 00:32:08,400 --> 00:32:10,400 Speaker 1: have to wait and get through some of the initial 594 00:32:10,440 --> 00:32:12,640 Speaker 1: investigative steps that Muller wants to take. He wants to 595 00:32:12,640 --> 00:32:15,080 Speaker 1: get things kind of nailed down and then see if 596 00:32:15,080 --> 00:32:18,120 Speaker 1: he can allow Comey to go forward. And what about 597 00:32:18,120 --> 00:32:20,320 Speaker 1: the White House? Could the White House engage in any 598 00:32:20,360 --> 00:32:22,840 Speaker 1: actions to prevent Comey from testifying? Is that even on 599 00:32:22,880 --> 00:32:25,920 Speaker 1: the table at this point, Yes, we have, we have 600 00:32:26,080 --> 00:32:29,080 Speaker 1: heard that there's there's consideration being given to the White 601 00:32:29,120 --> 00:32:33,600 Speaker 1: House exerting executive privilege over over Comey's ability to testify 602 00:32:33,720 --> 00:32:37,440 Speaker 1: and over Comey's the ability of of lawmakers to get 603 00:32:37,480 --> 00:32:41,560 Speaker 1: access to the memos that Comey, that Comey wrote. And 604 00:32:41,680 --> 00:32:43,960 Speaker 1: um that then that's the whole different that's that's a 605 00:32:43,960 --> 00:32:45,720 Speaker 1: whole different situation at the White House is in a 606 00:32:45,800 --> 00:32:49,120 Speaker 1: cert executive Chris, Chris Strom, thank you so much for 607 00:32:49,160 --> 00:32:55,880 Speaker 1: joining us. Chris Troms, National Security Port for Bloomberg. Thanks 608 00:32:55,920 --> 00:32:58,560 Speaker 1: for listening to the Bloomberg P and L podcast. You 609 00:32:58,600 --> 00:33:02,360 Speaker 1: can subscribe and listen to into Views at Apple Podcasts, SoundCloud, 610 00:33:02,480 --> 00:33:05,960 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 611 00:33:06,000 --> 00:33:09,520 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa 612 00:33:09,560 --> 00:33:12,719 Speaker 1: abramowits one before the podcast. You can always catch us 613 00:33:12,760 --> 00:33:14,320 Speaker 1: worldwide on Bloomberg Radio.