WEBVTT - Surveillance: US Inflation Cools Again 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Abramowitz Jaily. We bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot com, 0:00:23.920 --> 0:00:29.600 and of course on the Bloomberg terminal. Long You're going 0:00:29.760 --> 0:00:31.880 far away and we'll help Mike drop in here as 0:00:31.920 --> 0:00:36.120 he gets more information, particularly on those key ratios long 0:00:36.159 --> 0:00:39.280 ago and far away. We used to worry about what 0:00:39.560 --> 0:00:43.559 Sandwich Chairman Greenspan was carrying into the FED meetings or 0:00:43.600 --> 0:00:47.839 maybe into the inflation report. Vincent Reinhardt is expert at that. 0:00:48.520 --> 0:00:50.960 Vincent Reinhardt is with Dreyfus and Mellon and of course 0:00:51.040 --> 0:00:53.520 led all of our economic research at the FED during 0:00:53.520 --> 0:00:57.080 the green Span years. Vince, just perfect to speak to you, 0:00:57.720 --> 0:01:02.520 uh this morning. Thank you for joining this micro analysis 0:01:02.680 --> 0:01:06.280 of data post pandemic. Have you ever seen anything like it? 0:01:07.840 --> 0:01:11.720 You mentioned Alan Greenspan and he loved getting into the 0:01:11.800 --> 0:01:15.520 details of the data. So you know, the fact is 0:01:16.240 --> 0:01:19.600 the Federals are board building is pretty big, and it's 0:01:19.720 --> 0:01:23.240 stock full of economists and they look into the details 0:01:23.280 --> 0:01:28.039 of all these reports. I think that the FED chair 0:01:28.160 --> 0:01:34.560 Pal has been extremely transparent about a very specific mechanism 0:01:35.520 --> 0:01:41.759 about inflation. Uh the super core or the Pal's power core. Uh, 0:01:42.120 --> 0:01:46.760 you know, really getting down into the third level of detail. 0:01:47.240 --> 0:01:49.160 I want to make clear, Jow, we need to continue 0:01:49.200 --> 0:01:51.960 to look at these markets their narrow moves. But nevertheless, 0:01:51.960 --> 0:01:54.840 we were green on the screen with a real plunge 0:01:54.880 --> 0:01:59.000 down and John, just as Mr Reinhard gives us wisdom, boom, 0:01:59.040 --> 0:02:02.160 we come right back. Interesting to say, the FX moves 0:02:02.160 --> 0:02:04.640 as well. That's a tape cent move on Doliena, which 0:02:04.680 --> 0:02:11.720 I think is what you were looking for. Yes, yes, stronger, stronger, 0:02:11.800 --> 0:02:13.760 yain there in a euro dollar one O way. Will 0:02:13.760 --> 0:02:16.519 continue to look at those major pairs. Here with vincent 0:02:16.760 --> 0:02:21.040 rein Artist, Mike McKee dies deeper into the CPI report. 0:02:21.120 --> 0:02:25.520 Vince Reinart, is this inflation completely pandemic induced or do 0:02:25.600 --> 0:02:28.680 we have issues that aarken back to when your lapel's 0:02:28.720 --> 0:02:34.120 were wider? Um so I never wore that wide lapel's, Tom, 0:02:34.240 --> 0:02:38.120 But I think the the answer is why is j 0:02:38.280 --> 0:02:41.880 Pal going into the details, Because it's the mechanics of 0:02:41.960 --> 0:02:48.160 inflation have has been worried inflation is embedded in the 0:02:48.400 --> 0:02:53.880 persistent part of the basket that households consumed, that that 0:02:54.560 --> 0:03:00.079 uh services less shelter, that might keeps mentioning, that a 0:03:00.280 --> 0:03:03.440 pal keeps mentioning. That shows up in all those speeches, 0:03:03.919 --> 0:03:08.320 And in some sense, yes, we got an inflation report 0:03:08.400 --> 0:03:12.200 exactly as as as we expected. We also got a 0:03:12.240 --> 0:03:16.280 reminder that the labor market is running pretty hot. From 0:03:16.280 --> 0:03:21.600 the fence perspective, aggregate demand has momentum that's putting pressure 0:03:21.639 --> 0:03:26.160 on resources, that will put pressure on wages and therefore 0:03:26.240 --> 0:03:30.160 on prices. Maybe not this month on prices or wages, 0:03:30.600 --> 0:03:34.040 but the mechanics are there, the mechanism that you worry 0:03:34.040 --> 0:03:37.400 about inertial inflation is there? Vincent rynrt with us and 0:03:37.400 --> 0:03:40.920 and thrilled he could join this morning, Vincent. Is there 0:03:40.960 --> 0:03:45.240 an underlying theory at the Fed? Or they literally making 0:03:45.280 --> 0:03:48.520 it up as they go? Is there? Oaken? Is there? Phillips? 0:03:48.720 --> 0:03:52.320 Is there? Tailor is there Reinhardt? Or they fly and blind. 0:03:53.760 --> 0:03:57.600 They're doing the best they can, and it's actually pretty conventional. 0:03:58.400 --> 0:04:02.800 Inflation has an umber of parts to it. John Williams 0:04:02.840 --> 0:04:06.760 talks about the inflation onion. We've gotten the good news 0:04:06.880 --> 0:04:12.080 on the outer shells commodity prices off energy prices in 0:04:12.160 --> 0:04:16.400 particular awful lot next shell in goods prices are doing 0:04:16.480 --> 0:04:20.719 better because supply chains have mended, market economies work and 0:04:20.760 --> 0:04:25.480 shift resources around. They're worried about the core. They're worried 0:04:25.480 --> 0:04:30.000 about the inertial part of inflation that is importantly gets 0:04:30.040 --> 0:04:34.360 embedded into contracts that are written at different times. And 0:04:34.440 --> 0:04:39.200 so it's a slow slog in which inflation has built 0:04:39.880 --> 0:04:41.960 and they're worried it's going to take a while for 0:04:42.000 --> 0:04:46.160 it to come down. So yes, I think markets got 0:04:46.200 --> 0:04:49.400 what they expected, even though they were hoping from good 0:04:49.560 --> 0:04:53.200 even better news. Don't don't try to get between a 0:04:53.360 --> 0:04:58.040 rally and UH and and reality. But the reality is 0:04:58.880 --> 0:05:02.880 as look at at the details, and the details are 0:05:03.560 --> 0:05:08.279 supportive of two of the three planks to the story. 0:05:07.160 --> 0:05:14.200 They they rely on momentum slack maybe not so much 0:05:14.279 --> 0:05:17.559 right now, wages and prices, but the other two things 0:05:17.560 --> 0:05:22.520 are the reason you worry about future wages and prices. 0:05:22.720 --> 0:05:35.719 I thank you, Vince out of Virginia is really something 0:05:35.839 --> 0:05:39.200 Leland Miller John with China Beige Book, And you know 0:05:39.279 --> 0:05:41.560 you look at you look at Leland Miller folks, and 0:05:41.640 --> 0:05:44.119 you say, well, what's so special about him? He has 0:05:44.160 --> 0:05:48.480 a granularity on China like no one. He frames six 0:05:48.480 --> 0:05:51.359 point two percent GDP this morning, Leland. What do you 0:05:51.400 --> 0:05:53.720 do when you hear six point two percent g d 0:05:53.839 --> 0:05:56.400 P from some competent people like ed him? And how 0:05:56.440 --> 0:06:00.280 do you react to that? In China. I think that 0:06:00.360 --> 0:06:03.880 you could get some extremely high numbers of GDP next year, 0:06:03.920 --> 0:06:06.280 but it's based on the idea that you're not just 0:06:06.400 --> 0:06:09.320 going to have the cyclical bounce back which we expect, 0:06:09.360 --> 0:06:13.479 which is and you know, firms restarting investment after COVID, 0:06:13.520 --> 0:06:17.360 euros pullback, consumers jumping back in I'll be a temporarily 0:06:17.720 --> 0:06:22.240 getting the pop off is very low basis, statistical basis. 0:06:22.480 --> 0:06:24.000 But in addition to that, in order to hit six 0:06:24.000 --> 0:06:26.640 point two, you're gonna have to have them layer on stimulus. 0:06:27.000 --> 0:06:30.200 It could happen. You're seeing headlines about stimulus, but you 0:06:30.480 --> 0:06:32.760 have to you have to expect them to be doing 0:06:32.800 --> 0:06:34.479 all these things at once. So it could happen, but 0:06:34.520 --> 0:06:37.840 it's much too early to be to be uh guessing 0:06:37.880 --> 0:06:40.839 that with any type of you know, clarity, So your expertise, 0:06:40.920 --> 0:06:44.240 like folks, the electrical grid from Shanghai out to the west, 0:06:44.720 --> 0:06:48.960 Leland Miller. If they impute a fiscal policy, can they 0:06:49.080 --> 0:06:53.960 diffuse that stimulus faster because of the power of the government, 0:06:54.040 --> 0:06:58.640 the totalitarian regime, It depends on what kind of you know, 0:06:58.960 --> 0:07:02.200 this is the question three. And we just built a 0:07:02.279 --> 0:07:05.120 proprietary fiscal stimulus index to be able to track the 0:07:05.120 --> 0:07:07.839 flows that are going into physical spending. We have a 0:07:07.839 --> 0:07:10.120 fistical activity on deck to see what's actually happening. And 0:07:10.160 --> 0:07:12.559 what's happened in December, for instance, is they're pumping money 0:07:12.560 --> 0:07:15.320 in and absolutely nothing happened that the activity in decks 0:07:15.320 --> 0:07:17.320 fell off a cliff. So it doesn't you know, just 0:07:17.320 --> 0:07:19.600 because you see a stimulus headline doesn't mean it's being 0:07:20.200 --> 0:07:22.680 worked into the economy. So that's the real problem with 0:07:23.480 --> 0:07:25.920 are we going to actually see these big headline numbers 0:07:25.920 --> 0:07:28.200 and even some of this easing that we see more broadly, 0:07:28.600 --> 0:07:32.440 will it translate an activity? How does this economic discussion 0:07:32.600 --> 0:07:38.680 translate to the medical discussion the nation faces right now? Well, 0:07:39.520 --> 0:07:42.160 Beijing is doing their best to pretend that COVID zero 0:07:42.280 --> 0:07:44.520 is gonna be a you know, a blip for a 0:07:44.600 --> 0:07:47.880 month or two and then they're on their way and 0:07:47.960 --> 0:07:50.000 you know, to some degree this will happen. But I 0:07:50.040 --> 0:07:52.680 think that the fact that you know they're acknowledging virtually 0:07:52.680 --> 0:07:55.360 no deaths and and most people are thinking they're gonna see, 0:07:55.520 --> 0:07:58.480 you know, a million deaths, you have to understand there's 0:07:58.480 --> 0:08:01.040 gonna be a cascading effect, you know, through the rest 0:08:01.080 --> 0:08:02.560 of the year. It doesn't mean you're not going to 0:08:02.600 --> 0:08:04.760 see a nice but cyclical bounce back. It doesn't mean 0:08:04.800 --> 0:08:07.040 that Chinese assets are gonna rally like crazy for a while. 0:08:07.280 --> 0:08:09.920 It just means that you know, this is not something 0:08:09.920 --> 0:08:12.280 where you can dive into, dive out of, and have 0:08:12.400 --> 0:08:15.040 no effect in the middle. And you also have the 0:08:15.040 --> 0:08:17.680 possibility that later on the year you have another problem 0:08:17.720 --> 0:08:21.000 with COVID. So there's a lot of potential risks here 0:08:21.040 --> 0:08:25.160 that are getting camouflaged by people's optimism over the fact 0:08:25.200 --> 0:08:27.120 that the middle of the year should look should look 0:08:27.160 --> 0:08:29.520 quite good. Leland, the China, this real opening is not 0:08:29.520 --> 0:08:31.200 the China that shut down. There is an argument for 0:08:31.320 --> 0:08:33.679 many that perhaps this consumer, the Chinese consumer, is a 0:08:33.720 --> 0:08:36.520 little bit more nationalistic. Leland which trying to work out 0:08:36.520 --> 0:08:39.280 where this demand actually shows up kicks in. Does it 0:08:39.360 --> 0:08:42.440 go abroad to people travel to Canada, Vancouver try and 0:08:42.440 --> 0:08:44.640 buy property like they tried to before. Trudeau is trying 0:08:44.679 --> 0:08:46.800 to stop that. Government scantists is trying to do the 0:08:46.840 --> 0:08:48.800 same thing in Florida. How do you think this is 0:08:48.800 --> 0:08:52.520 going to pan out? Yeah, there's been this idea that 0:08:52.640 --> 0:08:55.000 just because Chinese consumers haven't spent for a while, that 0:08:55.040 --> 0:08:56.679 they're gonna take their money, They're gonna run out of 0:08:56.679 --> 0:08:59.200 the country, They're gonna spread around the world. This is 0:08:59.240 --> 0:09:02.040 never really in the way it works. Chinese travelers used 0:09:02.040 --> 0:09:04.480 to spend a lot of money abroad. They're not buying 0:09:04.480 --> 0:09:07.400 a lot from abroad. But I think even the even 0:09:07.440 --> 0:09:09.840 the travel parts have to be moderated. Right now, people 0:09:09.840 --> 0:09:12.319 are seeing the relatives domestically for the first time, and 0:09:12.520 --> 0:09:15.920 you know, in three years, uh, plane ticket prices are 0:09:16.000 --> 0:09:18.720 through the roof. You know, there's just a lot of 0:09:18.880 --> 0:09:23.320 guessing people are doing in terms of skyrocketing travels coming 0:09:23.360 --> 0:09:25.600 back and skyrocketing. This is coming back, and China's gonna 0:09:25.600 --> 0:09:27.920 guide us into the next stage of uh, you know, 0:09:28.080 --> 0:09:30.760 of global consumption. This has never been true. So I 0:09:30.760 --> 0:09:32.440 think we need to we need to be very very 0:09:32.440 --> 0:09:35.200 cautious on assuming Chinese consumers are gonna do anything for 0:09:35.200 --> 0:09:37.840 the for the world. Even just one final question from 0:09:37.840 --> 0:09:39.400 me as well, I think we're all trying to work 0:09:39.440 --> 0:09:41.559 out how much bad dates will have to look through 0:09:41.960 --> 0:09:44.319 in the near term and for how long, which basically 0:09:44.400 --> 0:09:46.640 is is what you're touching on at the moment, Leland, 0:09:46.679 --> 0:09:48.880 How quickly do you think this will snap back, snap 0:09:48.880 --> 0:09:50.640 back in and we'll start to see that good stuff 0:09:50.920 --> 0:09:54.560 in the future. Well, look, I I think you one 0:09:54.640 --> 0:09:56.440 is going to be a mess. Uh. The second the 0:09:56.480 --> 0:09:59.640 second quarters when you'll see a reactivation of the economy uh, 0:09:59.640 --> 0:10:02.520 and are going off you know, very low numbers. So 0:10:02.559 --> 0:10:05.040 people could be very very pleased with with the with 0:10:05.120 --> 0:10:07.360 the bounce they're seeing the middle of the year. The 0:10:07.480 --> 0:10:09.720 key part is this could be a head fake because 0:10:09.760 --> 0:10:12.080 maybe you see three or four quarters of growth pop 0:10:12.120 --> 0:10:13.959 back up, you're still in the midst of a long 0:10:14.040 --> 0:10:16.840 term structural slowdown. So for the next you know, for 0:10:16.880 --> 0:10:20.760 moste people could be talking about the cyclical uptick. But 0:10:20.840 --> 0:10:23.400 then after that, as we get towards the end of 0:10:23.400 --> 0:10:26.240 the year, we're gonna start re talking about the structural slowdown, 0:10:26.640 --> 0:10:28.480 which is going in the other direction. Lay the minute 0:10:28.480 --> 0:10:30.720 of that. The see China Pacebook one of the best 0:10:30.760 --> 0:10:38.080 leading just fantastic, Canso White Seth, Thank you everybody. We 0:10:38.200 --> 0:10:42.800 talked to folks rights in a certain way. The religion 0:10:43.200 --> 0:10:48.200 of reading high frequency economics is founded on the concision 0:10:48.760 --> 0:10:52.040 and depth of the daily reports of Carl Weinberg. He 0:10:52.120 --> 0:10:55.440 joins us right now, Chief Economists, the force of high 0:10:55.440 --> 0:11:01.400 frequency economics in your eight pages, Carl, with every paragraph 0:11:01.559 --> 0:11:07.000 having value, linking global echo with your concerns into the 0:11:07.080 --> 0:11:11.760 dynamics of yield. What's the single paragraph our audience needs 0:11:11.800 --> 0:11:16.360 to know right now? Well, good morning, tom um. You 0:11:16.400 --> 0:11:19.160 know the I think the most important observation that I've 0:11:19.200 --> 0:11:21.120 had in a long time is that everywhere I look 0:11:21.120 --> 0:11:25.760 in the world, wages are increasing by less than prices. 0:11:26.040 --> 0:11:28.760 And that tells me that you can't explain what you're 0:11:28.800 --> 0:11:32.800 seeing in prices by a wage spiral, because wage prices 0:11:32.840 --> 0:11:35.880 are inspiraling alright, Wages, if anything, are slowing down inflation. 0:11:36.240 --> 0:11:40.480 So we're breaking inflation into two pieces. The first is 0:11:40.679 --> 0:11:44.160 a one time price increase that we experienced in that 0:11:44.200 --> 0:11:46.840 now is leveling off. When we look at the CPI 0:11:46.960 --> 0:11:49.679 this morning, it's almost level months per month, it's almost 0:11:49.960 --> 0:11:53.200 uh and that's bringing down year over year rates of 0:11:53.280 --> 0:11:56.280 CPI increase that we call inflation. Whether it is or not, 0:11:56.880 --> 0:11:59.480 discuss another day. And then there's the bigger problem of 0:11:59.520 --> 0:12:03.000 wages that may occur if the unemployment rate stays as 0:12:03.000 --> 0:12:04.920 low as it is. And that's what we think that 0:12:05.160 --> 0:12:08.200 the FET is watching. So what we'll all see inflation 0:12:08.240 --> 0:12:10.720 metrics come down this year at least early part of 0:12:10.760 --> 0:12:12.480 this year. The FET is still going to keep on 0:12:12.559 --> 0:12:18.280 Hockey rates. Are we still in a supply side analysis? 0:12:19.080 --> 0:12:23.719 In a timeline of supply side analysis? Even if our 0:12:23.760 --> 0:12:30.040 institutions only can do demand side action, yeah, so um, 0:12:30.640 --> 0:12:33.520 our institutions can also do supply side action. I mean, 0:12:33.559 --> 0:12:36.679 why do prices go up? Alright? One reason is that 0:12:36.720 --> 0:12:39.320 we have too much demand? And that was, as I 0:12:39.360 --> 0:12:43.760 said before, the one time fiscal stimulus monetized gave people 0:12:43.840 --> 0:12:46.439 more money in their cash accounts than they needed. They 0:12:46.480 --> 0:12:49.360 bought more stuff than the economy could produce. Prices went up. 0:12:49.400 --> 0:12:52.240 That's that's history. Now we're moving past them. But the 0:12:52.280 --> 0:12:55.440 supply side issue is that when wages go up, the 0:12:55.440 --> 0:12:59.080 supply curve shifts upward, and that raises prices while at 0:12:59.120 --> 0:13:02.280 the same time reducing output. And that's the spiral that 0:13:02.320 --> 0:13:04.400 we want to make sure that the FED wats to 0:13:04.440 --> 0:13:06.959 make sure that we don't get into That's why we're 0:13:07.000 --> 0:13:10.120 going to see them move rates up to five and 0:13:10.240 --> 0:13:13.120 not move them down later this year, as the market 0:13:13.160 --> 0:13:17.079 currently is believing they're going to. You know, it's it's interesting, 0:13:17.160 --> 0:13:19.400 you know, President Biden's out with a tweet here for 0:13:19.400 --> 0:13:22.199 the six month in a row yearly inflation is down. 0:13:22.400 --> 0:13:25.640 I mean, that is absolutely correct. Does that not give 0:13:25.800 --> 0:13:29.200 maybe the Fed, you know, to see six months of 0:13:29.280 --> 0:13:32.400 declining inflation to say, hey, maybe what we've done so 0:13:32.440 --> 0:13:36.199 far is in fact working, It is cooling this economy. 0:13:36.240 --> 0:13:38.760 Maybe we can take a more cautious approach, maybe even 0:13:38.800 --> 0:13:42.760 pause in the near future. What do you think about that? Well, 0:13:42.800 --> 0:13:45.120 you know, the Fed's job is to make sure that 0:13:45.360 --> 0:13:47.880 the inflation target is hit in the medium term, not 0:13:48.000 --> 0:13:50.760 just in the next two, three or six months. And 0:13:50.800 --> 0:13:53.160 we forget that. It was just less than a week ago, 0:13:53.360 --> 0:13:56.800 five six days ago, that we printed a labor market 0:13:56.840 --> 0:14:00.960 report which showed hundred two hund a thousand jobs two 0:14:01.280 --> 0:14:04.800 and three thousand jobs being created and an unemployment rated 0:14:04.840 --> 0:14:08.120 a fifty year low. So you know, everything we know 0:14:08.160 --> 0:14:11.400 about economics, everything the FED knows about Economics says that 0:14:11.440 --> 0:14:14.120 if the unemployment rate keeps on coming down or even 0:14:14.160 --> 0:14:16.920 just stays at this level, eventually we're gonna wage pressure. 0:14:17.280 --> 0:14:19.280 So that's where their eye is that you know, months 0:14:19.280 --> 0:14:22.400 to months, we will see a year over year increases 0:14:22.400 --> 0:14:25.480 in prices slow down, will decrease, and that will be 0:14:25.520 --> 0:14:28.120 good news. The market will treat that as falling inflation. 0:14:28.480 --> 0:14:32.040 But the FEDS is on the labor market, and every 0:14:32.040 --> 0:14:34.520 FED speaker, if there is only one thing that they 0:14:34.560 --> 0:14:37.400 all talk about without exception, is how tight the labor 0:14:37.480 --> 0:14:40.880 market is. It still is, inflation is still above target. 0:14:41.160 --> 0:14:44.360 We're going to see continued rate increases and sustained high rates. 0:14:44.520 --> 0:14:47.520 Carolinberrg Frequency Economics, Paul, I looked out on my phone 0:14:47.560 --> 0:14:49.400 just to see what the red sox are doing about 0:14:49.400 --> 0:14:52.760 shortstop in the market moved that's where green on the 0:14:52.800 --> 0:14:55.800 screen and now I got futures of negative thirty three 0:14:55.880 --> 0:14:59.240 here that with the opening the VIX twenty zero at six. 0:14:59.280 --> 0:15:02.520 I do want to point not Brent crude and barrel 0:15:02.960 --> 0:15:06.040 is elevated in gold. When is the last time I 0:15:06.080 --> 0:15:11.000 talked about two thousand dollars? I know, and it's interesting 0:15:11.200 --> 0:15:15.560 to bitcoin up as well. So Carl, recession call. How 0:15:15.600 --> 0:15:18.440 are you thinking about this now? Given the latest CPI prane, 0:15:18.520 --> 0:15:24.000 What is your recession scenario? I guess well, growth is 0:15:24.040 --> 0:15:27.640 certainly going to be slower as we move into three 0:15:27.880 --> 0:15:31.200 There's there's no doubt about that. Sets hyped interest rates, 0:15:31.280 --> 0:15:35.800 real incomes are still not keeping up with um price increases, 0:15:35.880 --> 0:15:39.520 households are drawing down savings and pulling up their credit 0:15:39.520 --> 0:15:42.120 card bills in or do maintain lifestyles. Things are going 0:15:42.200 --> 0:15:45.320 to slow and high frequency economics. We think that the 0:15:45.440 --> 0:15:48.720 US economy is strong enough to still power through this 0:15:49.240 --> 0:15:53.280 on the basis of a strong industrial fundamentals and on 0:15:53.320 --> 0:15:57.800 the basis of normalizing economic policy. So we think we're 0:15:57.800 --> 0:16:00.280 going to avoid a recession in the United States. I 0:16:00.360 --> 0:16:02.920 won't rule one out all together, but I think the 0:16:02.920 --> 0:16:05.920 baseline case has to be slower growth in the US 0:16:05.920 --> 0:16:09.760 while the rest of the world, Europe, the UK, Japan 0:16:10.000 --> 0:16:13.880 all see economic contractions for equity investors, that's a better 0:16:13.920 --> 0:16:17.200 fundamental in the US from economics than we're going to 0:16:17.240 --> 0:16:20.160 see elsewhere in the world. Carl, how concerned are you 0:16:20.200 --> 0:16:23.359 about you know, Europe here in terms of their economy 0:16:23.400 --> 0:16:25.720 here and the impact they may have. I mean, China 0:16:25.800 --> 0:16:28.800 reopening certainly a positive for a lot of the European 0:16:28.840 --> 0:16:32.760 manufacturing sector. But what's your view in Europe here, Well, 0:16:32.760 --> 0:16:34.960 before we talk about Europe, I'm just going to double 0:16:35.000 --> 0:16:38.520 back on your China reopening the theory, and the theory 0:16:38.560 --> 0:16:41.480 in my view, has no basis and current experience. You know, 0:16:41.520 --> 0:16:44.640 we've never seen amicron sweep through a country and just see, 0:16:44.640 --> 0:16:46.720 you know, one and done. Everything goes back to normal 0:16:46.760 --> 0:16:50.040 the next day, and the big wave of amicron has 0:16:50.120 --> 0:16:52.200 yet to hit, you know, after the lunar New Year, 0:16:52.280 --> 0:16:54.480 we'll see a big wave and staid theily then we'll 0:16:54.480 --> 0:16:56.560 see more waves after it. And as you guys have 0:16:56.600 --> 0:16:59.920 been talking about on the program earlier, absentee ism keeps 0:17:00.040 --> 0:17:02.640 people out of the office just as much as lockdowns do. 0:17:03.040 --> 0:17:06.760 So I think China's episode with COVID and economic problems 0:17:06.760 --> 0:17:09.399 are a long way off from snapping back. But I 0:17:09.440 --> 0:17:13.679 think it's wrong time about that. It's really Europe. Excuse me, 0:17:13.720 --> 0:17:16.000 answer the question on your my fault I jumped in there. 0:17:16.520 --> 0:17:18.520 You know it's my fault. I didn't answer the question 0:17:18.520 --> 0:17:20.960 on you know Europe is headed for a recession. It's 0:17:21.000 --> 0:17:23.679 been headed for a recession for a long time. Industrial 0:17:23.760 --> 0:17:27.040 output is flat. They're suffering from an energy shortage. They're 0:17:27.040 --> 0:17:29.399 in a war zone. They're in an economic war zone, 0:17:29.640 --> 0:17:32.640 and they're going to be diverting resources to defense over 0:17:32.680 --> 0:17:35.399 the course of the next year. Um interest rates are 0:17:35.440 --> 0:17:38.720 going up, and again wages aren't up with price increases. 0:17:38.760 --> 0:17:42.520 I got thirty seconds. You're acclaimed China. Note what's your 0:17:42.560 --> 0:17:47.439 GDP view on China? We got people sucking five. You 0:17:47.480 --> 0:17:50.359 don't buy that. Now, those people need to get a 0:17:50.400 --> 0:17:53.800 spreadsheet and learn about arithmetic. If the economy contracts in 0:17:53.840 --> 0:17:57.479 the fourth quarters, we'll know about next week, all right, 0:17:57.520 --> 0:18:00.360 then it's going to be impossible for China to grow 0:18:00.440 --> 0:18:06.080 more than over the course of Caroline brig thank you 0:18:06.760 --> 0:18:09.320 so much. You know he says that, and he doesn't 0:18:09.359 --> 0:18:13.159 realize I'm the worst user of Excel spreadsheets on the street. 0:18:23.920 --> 0:18:26.480 And we are privileged for a repeat performance from Dana 0:18:26.520 --> 0:18:30.240 Telsa's chief executive officer and also of research and tells 0:18:30.240 --> 0:18:33.439 the advisory group on the pulse of American at retail. 0:18:33.480 --> 0:18:35.200 I've got to go to the gossip of the moment, 0:18:35.680 --> 0:18:38.199 and I'm gonna say this with respect. Richest guy in 0:18:38.200 --> 0:18:41.119 the world, a guy that took Louis Vuitton and figured 0:18:41.119 --> 0:18:45.960 out how to do luxury fashion. There's nepotism involved here. 0:18:46.000 --> 0:18:49.280 How do you address is one of the most grizzled 0:18:49.359 --> 0:18:53.040 veterans on the street when it is about relationships. If 0:18:53.040 --> 0:18:57.960 it's product in relationships or it's lvm H with his 0:18:58.119 --> 0:19:00.520 daughter coming over to run, do you are? Is that 0:19:00.560 --> 0:19:03.159 a plus or minus? Right now? It's a plus? And 0:19:03.200 --> 0:19:06.200 the reason why these aren't new people going into those 0:19:06.240 --> 0:19:09.960 business lines. She's been involved into yor she's been there 0:19:09.960 --> 0:19:13.000 twenty years, so you're getting experience and you have to 0:19:13.040 --> 0:19:15.760 say the succession planning. But look at the depth of 0:19:15.840 --> 0:19:19.080 talent underneath her and Franklin each of the brands. What 0:19:19.200 --> 0:19:22.320 they have with seventy five brands at LVMH, they have 0:19:22.440 --> 0:19:25.480 the experiential talent to move everyone up the line and 0:19:25.480 --> 0:19:28.840 that's what they do. These have log convexity. These luxury 0:19:28.840 --> 0:19:31.639 groups off China opening and the rest. You predicted this 0:19:31.720 --> 0:19:35.959 with your team. They're a moonshot right now. Can you 0:19:36.160 --> 0:19:41.080 acquire shares this morning in these heritage luxury brands? You 0:19:41.160 --> 0:19:44.159 can because the next development will be the reopening in 0:19:44.280 --> 0:19:47.639 China and that China consumer. We've already heard from others. 0:19:47.680 --> 0:19:50.359 I mean, look at what Neiman Marcus most recently said 0:19:50.400 --> 0:19:53.160 about the strength of the holiday season, and you're seeing 0:19:53.160 --> 0:19:56.560 the product innovation driving demand. So I think it's going 0:19:56.600 --> 0:19:58.840 to be a good season. But let's keep in mind 0:19:59.280 --> 0:20:03.400 we're still having consumers in all areas. With the volatility 0:20:03.400 --> 0:20:06.399 of the market, there's been a step down in terms 0:20:06.400 --> 0:20:09.720 of what the rate of growth is compared to last year. 0:20:09.760 --> 0:20:13.520 And even so one more question on luxury, can you 0:20:13.680 --> 0:20:18.240 overweight luxury now? Is the market is overweighting luxury. I 0:20:18.280 --> 0:20:21.240 don't think the market's overweighting luxury yet. Really were the 0:20:21.240 --> 0:20:23.520 moon shots were seeing in some of these things. I 0:20:23.520 --> 0:20:26.600 think there's more opportunity when the holiday sales come in 0:20:26.920 --> 0:20:30.080 because also the ability to drive strength out of China 0:20:30.480 --> 0:20:34.200 that's going and luxury, particularly when you look at to China. 0:20:34.280 --> 0:20:36.399 What's your single best buy right now, I mean it's LVI, 0:20:36.560 --> 0:20:39.680 m H in the international, it's Tapestry in the domestic, 0:20:40.000 --> 0:20:42.840 and the other one Ralph Lauren. Ralph Lauren has a 0:20:42.880 --> 0:20:45.320 significant opportunity, So we'll go to that in a moment. 0:20:45.400 --> 0:20:47.639 I mean, tap, this is killing me. You know how 0:20:47.680 --> 0:20:50.879 much I hate this. This is Coach right, Yes, but 0:20:50.960 --> 0:20:54.199 it's coach, it's Stewart Whiteman and Skate Spade and what 0:20:54.280 --> 0:20:57.639 they've been able to do in resetting prices, updating the 0:20:57.680 --> 0:21:02.480 brands Wesselman, they did the Tom Wesselman thing. Is that 0:21:02.520 --> 0:21:04.760 where we're going. Where these brands come in and they 0:21:04.760 --> 0:21:07.680 get famous celebrities and artists like they'll do a Dana 0:21:07.720 --> 0:21:09.600 Telsey code or something like. I don't know about that. 0:21:09.640 --> 0:21:13.680 It's collaborations, they matter. Collaborations drive demanding. You know why 0:21:13.960 --> 0:21:17.119 they go viral on social media? Everyone sees them and 0:21:17.160 --> 0:21:19.520 there you go sell through. Hat does social media help 0:21:19.640 --> 0:21:22.600 Macy's move forward to the big boxes that Joe Felman 0:21:22.640 --> 0:21:24.720 looks at, Yeah, it does. I mean we just had 0:21:24.720 --> 0:21:27.439 a dinner with Macy's the other night. The personalization and 0:21:27.520 --> 0:21:32.080 pricing science that's being allocated to their merchandising is really 0:21:32.119 --> 0:21:35.680 helping them navigate a consumer environment that's definitely a bit 0:21:35.680 --> 0:21:38.320 more challenging for the income level of the Macy's consumer. 0:21:38.520 --> 0:21:41.000 How do they manage expenses? At that dinner that they 0:21:41.040 --> 0:21:44.159 talk about the cross rationalization of suburban malls that are 0:21:44.200 --> 0:21:46.960 off the mark, Well, not only that, but what about 0:21:46.960 --> 0:21:49.119 the bed Bath and Beyond stores? That could come up 0:21:49.160 --> 0:21:52.399 for play and there's a healthy demand. Even a marketplace 0:21:52.440 --> 0:21:55.480 by Macy's or the off prices want those boxes. Those 0:21:55.520 --> 0:21:58.160 are good boxes in great location for the same concept. 0:21:59.080 --> 0:22:01.840 For Macy's, it's a from concept. It's a smaller marketplace 0:22:01.880 --> 0:22:04.480 by Macy's concept that they put in there. But let's 0:22:04.480 --> 0:22:06.800 see what develops with these bed bath and beyond location. 0:22:06.840 --> 0:22:10.080 My recollection is tells the advisor group avoided the carnage 0:22:10.080 --> 0:22:12.959 of bed bathroom Beyond. Let's be constructive. Why did they 0:22:13.000 --> 0:22:16.840 feel what's the best practice forward for retail not to 0:22:16.920 --> 0:22:21.240 do a bed bathroom beyond. You need branded merchandise under 0:22:21.280 --> 0:22:24.720 a halo, not just private label brands. And also you 0:22:24.760 --> 0:22:28.280 need to be able to continue to innovate the offering. 0:22:28.520 --> 0:22:31.280 And yet home goods out there taking share and you 0:22:31.320 --> 0:22:34.000 didn't play up what made bed bathroom beyond so special? 0:22:34.359 --> 0:22:36.880 Go in there and buy more than you originally expected, 0:22:36.960 --> 0:22:38.720 got a lift to the market. The vixen a stick 0:22:38.760 --> 0:22:41.640 here with Dana Telsey and tells the advisory I grew 0:22:41.680 --> 0:22:44.399 up watching this carefully less curve and version than what 0:22:44.480 --> 0:22:47.520 we saw off the CPI report. Dana, I've got to 0:22:47.520 --> 0:22:51.520 wrap up with the guy who is iconic, Relf is ralf. 0:22:51.680 --> 0:22:54.359 Does he have nepotism and play like Mr Arnault or 0:22:54.359 --> 0:22:57.840