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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,

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Speaker 1: SoundCloud and at Bloomberg dot com. Peter koit us economy

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Speaker 1: team covering all the indicators. He's our economic editor for

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Speaker 1: Bloomberg Business Week, and he can be followed on Twitter

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Speaker 1: at Peter Koi CEO. Y all right, Mr ki Uh,

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Speaker 1: tell us a little bit about the economy and the

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Speaker 1: challenges that a Trump administration faces. Well, Donald Trump is

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Speaker 1: uh is a regieved changer. He's he's not your average

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Speaker 1: new president coming into office. He's got incredibly ambitious goals.

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Speaker 1: He wants to really change things a lot, and he

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Speaker 1: has vanquished his political opponents. But can he as easily

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Speaker 1: vanquish his economic challenges? And that's the question I have.

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Speaker 1: I mean, well, yeah, specifically, I mean, he's vowed to

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Speaker 1: cut taxes, but he's also planning to increase spending quite substantially.

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Speaker 1: And the question that I have is, I mean aren't

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Speaker 1: there going to be some Republicans who don't want to

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Speaker 1: see the deficit expanded dramatically? And how is this going

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Speaker 1: to work? Exactly? So, the compare of nonprofits in Washington,

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Speaker 1: the Committee for Responsible Federal Budget and the Urbans Brookings

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Speaker 1: Tax Policy Center did a joint report looking at Trump's

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Speaker 1: sort of the handcuffs on him, the economic handcuffs, and

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Speaker 1: saying that if you look at Trump's plan, as you said,

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Speaker 1: he wants to cut tracks is dramatically, but he wants

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Speaker 1: to preserve the big cost centers of the federal budget,

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Speaker 1: which your Social Security and Medicare, and he must keep

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Speaker 1: defense spending on track or raise it. He said, the

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Speaker 1: new spending over the next decade will be ten times

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Speaker 1: larger than the new revenue. And as you say, there's

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Speaker 1: a political constraint there in the economic constraint. The political

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Speaker 1: constraint is people in his own party might not want

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Speaker 1: to go along with that. The economic constraint is that

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Speaker 1: the bond market vigilantes might not want to go along

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Speaker 1: with it. So we focus a lot on politics because

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Speaker 1: it's been an election, but I think we need to

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Speaker 1: look at finance and economics as well. I want to

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Speaker 1: look at the bond yield the tenure, Peter, because I

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Speaker 1: know you were interested in that as well. Right, two

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Speaker 1: point eight percent right now for the tenure. What does

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Speaker 1: that that sell off in the bond market tell you, Well,

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Speaker 1: you can need to look at the level and you

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Speaker 1: can look at the change. The level is still pretty moderate.

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Speaker 1: We're not talking about a high bond yield historically, it's

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Speaker 1: the change that matters. And it shot up the day

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Speaker 1: after the election. Yield shot up. The yield shot up noticeably.

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Speaker 1: No one wanted to own these ten years, right, and

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Speaker 1: so again you know, the Federal Reserve has been sort

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Speaker 1: of wanting to see inflation higher, and you know what

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Speaker 1: we're probably seeing here is higher inflation expectations being embedded

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Speaker 1: in the bond yield. So it's not a terrible thing.

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Speaker 1: It could be that people are betting that the tax

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Speaker 1: cuts will be stimulative towards the economy and raise inflation

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Speaker 1: a little bit. It could be an infrastructure spending which

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Speaker 1: would also be stimulative. So, uh, what we're seeing is

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Speaker 1: the bond market seeing, hey, this is a new game.

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Speaker 1: You know, one thing that you quoted from Donald Trump's book,

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Speaker 1: The Art of the Deal, is him saying I never

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Speaker 1: get too attached to one deal or one approach. I mean,

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Speaker 1: how much do we actually know about what he wants

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Speaker 1: to do? Um And is it matter more who he's

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Speaker 1: listening to with respect to getting economic advice? Yeah, I

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Speaker 1: think that he aside from making America great again, which

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Speaker 1: he's definitely committed to, I think a lot of the

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Speaker 1: details are ones that he'll play it by ear he'll

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Speaker 1: see what he can get through. Another quote from the

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Speaker 1: Art of the Deal is that he he tends to

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Speaker 1: aim high and then fight and then fall back. That's

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Speaker 1: the typical uh people some people do in real estate, right,

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Speaker 1: They asked for a lot, and they don't always get

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Speaker 1: what they want. So when he asked for this enormous

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Speaker 1: tax cut, he may fully intend to pull back and

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Speaker 1: accept a smaller tax cut. The dollar and the U. S.

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Speaker 1: Treasuries opposite directions is the greatest correlation since December. What

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Speaker 1: do you make of the fact that you've got this

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Speaker 1: major difference between people wanting to own the dollar and

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Speaker 1: people wanting to own US treasuries? Well, think about it.

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Speaker 1: Higher yields actually attract money into the the U. S.

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Speaker 1: A that's I think that might be what's going on

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Speaker 1: in the currency. Well, there's also the flip side of that,

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Speaker 1: which is the depreciation of some currencies that might be

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Speaker 1: of nations that might be negatively effect to dry a

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Speaker 1: newly h new new trade deals from the US. So

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Speaker 1: you've got a Mexican pay so moving quite a bit,

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Speaker 1: and you've got to you know, Europe with its own issues.

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Speaker 1: There's a lot of dynamic action behind there, and there

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Speaker 1: are a lot of people who are stepping back entirely

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Speaker 1: at this point in trying to wait and see how

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Speaker 1: that takes out. Peter koy Uh, us economy editor at Bloomberg,

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Speaker 1: thank you so much for being with us. It's really

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Speaker 1: fascinating to see the negotiations going forward and how this

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Speaker 1: will work um when you actually have to get to

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Speaker 1: the bottom line. One other place that is seeing some

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Speaker 1: big money and potentially even bigger money is the marijuana industry.

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Speaker 1: I want to bring in Rickford, CEO and executive chairman

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Speaker 1: of Pure Agro, which is a company that applies goods

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Speaker 1: to help with the growth of marijuana plans. This was

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Speaker 1: a big This was a big election for you, wasn't it.

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Speaker 1: It sure was. I want to clarify we're kind of

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Speaker 1: a picks and shovels play for what we're calling the rush.

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Speaker 1: So just like the Gold Rush, picks and Shovels were

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Speaker 1: the companies that made it, we feel we're picks and shovels.

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Speaker 1: We we just supply the equipment, nutrients, and typical farming products. So, um,

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Speaker 1: let's let's go over what happened on Tuesday. California voters

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Speaker 1: uh and those in Massachusetts, Nevada, and Florida North Dakota

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Speaker 1: all past some measures, whether it was medical marijuana or

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Speaker 1: also recreational marijuana, making it legal. How concerned are you

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Speaker 1: that this could get reversed with an anti drug Republican administration.

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Speaker 1: I think the Republicans have had a conservative platform on

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Speaker 1: states rights, and I think as long as they stick

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Speaker 1: to that platform and let the states do what they want,

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Speaker 1: which has historically been their platform, I think we're in

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Speaker 1: a good position. Now. You have been credited with creating

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Speaker 1: the first, uh, well the first in the country custom

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Speaker 1: platinum certified home when it comes to energy efficiency. Yeah.

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Speaker 1: My my background is environmental construction, so I built the

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Speaker 1: first Lead platinum home and helped the Lead rating system

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Speaker 1: in their progress into the residential market. All right. And

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Speaker 1: the reason I bring that up is because I'm curious

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Speaker 1: if you can give us an estimate for how much

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Speaker 1: energy And as you said, picks and shovels, it's not

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Speaker 1: just picks and shovels. It's all of the farming equipment,

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Speaker 1: but it's the energy also that it is taking off

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Speaker 1: the grid. If you, uh, let's say, just set aside

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Speaker 1: the legal issues of the marijuana industry, what kind of

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Speaker 1: energy consumption is are we talking about? You know, it's

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Speaker 1: hard to put a dollar amount or a percentage because

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Speaker 1: I don't have the data from the growers, but I'll

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Speaker 1: tell you it's a big line item for them. And

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Speaker 1: actually the marijuana industry is what's fueling the R and

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Speaker 1: D for these lighting manufacturers and such to bring down

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Speaker 1: the cost of it. And as we see in Colorado,

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Speaker 1: the price of cannabis has been dropping due to the

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Speaker 1: recreational that's forcing these guys to look at their P

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Speaker 1: and l's and actually pull up. Are there specific companies

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Speaker 1: or technologies that you can point to that are being developed. Yeah,

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Speaker 1: there's a lot of technology, and I think we're seeing

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Speaker 1: in L e D. L E D really hasn't been

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Speaker 1: able to break into the cannabis market yet, but what

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Speaker 1: I see on the horizon, I think it will be

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Speaker 1: so one thing that pure predicts is that the legal

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Speaker 1: marijuana industry will grow to be a fifty billion dollar industry.

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Speaker 1: By what has to happen for that to happen? Right now?

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Speaker 1: You askedimate that is about a six billion dollars. Yeah,

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Speaker 1: I really think that we're seeing it happen with what

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Speaker 1: you just said about these votes. I mean, Florida going

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Speaker 1: medical is just huge. That once again, that's a Florida

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Speaker 1: passing the bill legalizing medical marijuana exactly, and then California

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Speaker 1: going recreational. So California, by a couple of estimates, represents

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Speaker 1: either sixty two or eighty two percent of the totals

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Speaker 1: country country's cannabis markets. So when you look at it

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Speaker 1: like that, just California alone could throw a big chunk

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Speaker 1: of the number you just quoted. Yeah, I love him.

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Speaker 1: I love that every industry has their uh lingo and

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Speaker 1: that this is going medical or going or going recreational.

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Speaker 1: I love it the different expressions that come up. Um,

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Speaker 1: how about going just to run down some of the initiatives, right,

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Speaker 1: because Massachusetts approved voted for recreational marijuana. Also extending a

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Speaker 1: legal marijuana that makes it a coast to coast situation,

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Speaker 1: doesn't it? It It sure does. So there are still those

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Speaker 1: that oppose this or that are sort of trying to

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Speaker 1: get court orders to halt some of the bills from

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Speaker 1: getting implemented or for allowing people to exercise their new rights. Um,

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Speaker 1: basically before there's a social study to look at whether

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Speaker 1: this does have a bad effect on social fabric. Um,

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Speaker 1: How concerned are you about that kind of activity? Well,

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Speaker 1: since you know, my company owns the largest player in Colorado,

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Speaker 1: and Colorado was really the social experiment. So what we're

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Speaker 1: seeing with Colorado is that they love the tax revenue.

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Speaker 1: There is no other consumption of other drugs, that gateway

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Speaker 1: drugs sort of mentality. I think that's been put to rest.

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Speaker 1: And um, I feel that Colorado, since they've already done it,

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Speaker 1: we'll see the same thing happened in California. We'll see

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Speaker 1: public opinion be very high after the recreational passes real quick.

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Speaker 1: Which state do you think is next to legalize marijuana? Wow? Um,

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Speaker 1: I'd like to see New York. Is that where you're from?

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Speaker 1: I'm bi coastal Ah, thank you so much for being

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Speaker 1: with us, Rick Bird a fascinating time for the marijuana industry. Rickbird,

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Speaker 1: CEO and executive chairman chairman of Pure Agro. On the

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Speaker 1: marijuana business, thank you grow to be fifty billion dollars

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Speaker 1: in the next ten years. Definitely a big industry, Definitely

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Speaker 1: something to watch, and I know anecdotally speaking too many

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Speaker 1: traders out there, that it is something that they're watching

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Speaker 1: as a potential profit boon and something to to bet on.

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Speaker 1: So it'll be interesting to see how they do that

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Speaker 1: with the picks and Shovel's type of play or not.

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Speaker 1: This is Bloomer all right, Let's solve the issue of

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Speaker 1: retail sales with an expert our own Punam Goyle, senior

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Speaker 1: US retail analyst for Bloomberg Intelligence. Put them, where do

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Speaker 1: you want to start? You want to start with Macy's

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Speaker 1: and Coals and then I know we get Nordstrom's after

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Speaker 1: the close today. Yeah, sure, we can start with Macy's.

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Speaker 1: I guess that's the largest department store, so let's start there.

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Speaker 1: I think you know, overall in the department store channel,

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Speaker 1: you're seeing the stocks rise the last I checked high

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Speaker 1: single digits, and that strength is coming from the sales

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Speaker 1: warrant that bad. I mean, that's really it. They were

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Speaker 1: still but they weren't that bad, so I think the

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Speaker 1: optimism really comes from their coals. Was a big surprise. Um,

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Speaker 1: they actually beat by ten cents UM, which is a

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Speaker 1: big number. Sales they missed a little. The beat was

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Speaker 1: entirely on better expense management. So very good numbers out

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Speaker 1: of colds. On Macy's, the numbers were weaker, but the

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Speaker 1: guidance was better. Um. They expect same stert sales to

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Speaker 1: be less negative UM for the year, which is good

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Speaker 1: for the fourth quarter. So what's behind the less negative outlook,

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Speaker 1: which is, by the way, so encouraging. I mean, it

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Speaker 1: makes it makes me just want to run out and

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Speaker 1: buy something. Uh, what's behind it? It's all about inventory.

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Speaker 1: It's all about inventory management. Retailers have been really in

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Speaker 1: the spiral of you know, too much inventory, have to

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Speaker 1: discount um reduce the sales. And at the end of

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Speaker 1: the second quarter they were lean on inventory. They maintained

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Speaker 1: that inventory discipline. They're continuing to pull back orders from

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Speaker 1: wholesale and that's helping their margins and it's allowing them

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Speaker 1: to discount less. So that's really the magic behind why

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Speaker 1: things are less bad. Traffic is still down, so that

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Speaker 1: that continues to be the case. Do you think that

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Speaker 1: this is worth it? I mean, I'm looking at Macy's

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Speaker 1: shares and they're up eight percent. Well, I just I'm just,

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Speaker 1: you know, like I got to hear, I mean put

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Speaker 1: I was saying, well, here, they're basically less bad. Let

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Speaker 1: me let me add to this. Let me let me

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Speaker 1: add to this. This is the seventh consecutive quarter in

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Speaker 1: which sales and profits have both declined. Correct, Um, Macy's

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Speaker 1: made I love this zero point two cents for every

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Speaker 1: dollar it took in in revenue, adding to the math.

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Speaker 1: But I assume you're right, right, Okay, but you can't

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Speaker 1: do that for very long, can you? No? You know,

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Speaker 1: I think that's the problem for retail though. Right in general,

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Speaker 1: we're in this position where consumers are not going to stores,

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Speaker 1: and if they are, they're choosing one and how and

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Speaker 1: where they shop. They're shopping more online. So these retailers,

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Speaker 1: by nature have to evolve. And Macy's today said something

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Speaker 1: about that they hired m Brookfield Brookfield Asset Management because

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Speaker 1: that they got a big base of real estate, right,

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Speaker 1: I mean, they got that Union Square store in San Francisco,

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Speaker 1: for example, two and fifty million dollars. Yeah, but you know,

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Speaker 1: Hall Square is still on the table, and that's what

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Speaker 1: everyone's dying for. So I think they're taking baby steps

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Speaker 1: on their real estate. Eight. But when the Herald Square

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Speaker 1: deal strikes, what it is, um, you know, what do

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Speaker 1: you think that's going to look like? Can you give

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Speaker 1: us some idea of the shape? So I think it's

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Speaker 1: going to be the last one that they do, because

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Speaker 1: it is the largest and the most complex. This is

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Speaker 1: for the New York City flaship, for the New York

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Speaker 1: City Harald Square, the you know, the iconic Macy store. Um.

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Speaker 1: It's valued at four billion dollars from Starboard. That's what

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Speaker 1: it was valued at in January. So that's the big deal.

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Speaker 1: And when that happens, who knows, But I think it'll

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Speaker 1: be the last. They're kind of just scratching the surface

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Speaker 1: pleasing investors by making these baby sales. Um. But that's

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Speaker 1: what everyone's waiting for for Macy's. I'm looking at Nordstrom

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Speaker 1: shares at Nordstrom Reports after the bell today and they're

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Speaker 1: up about almost the exact same amount is macy shares

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Speaker 1: More than eight percent UM. Why I mean, I think

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Speaker 1: everyone's just expecting less negative news, but probably more positive

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Speaker 1: from Nordstrom. So Nordstrom wasn't really supposed to follow the

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Speaker 1: weakness that we had expected originally from Macy's and Coals

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Speaker 1: because had an anniversary sales shift. So if you recall

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Speaker 1: their anniversary sale that they have every year, a week

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Speaker 1: of that moved from the second quarter into the third quarter,

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Speaker 1: and that was supposed to help nord Storms results. We

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Speaker 1: expected to help nord Storms results. But just by seeing

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Speaker 1: UM better numbers out of Macy's and Cold, I think

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Speaker 1: the market in general is more positive on the department

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Speaker 1: stores could have. Could the better better than expected numbers

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Speaker 1: have anything to do with a stronger economy than many

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Speaker 1: UH analysts were expecting, You know, I don't think there's

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Speaker 1: much that has changed and the economy. If you look

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Speaker 1: at the third quarter, macy cited very good back to

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Speaker 1: school and so did Colds, so I think that's encouraging.

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Speaker 1: But things ZiT soften in September and then we're kind

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Speaker 1: of flatish in October. So I'd say less to do

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Speaker 1: the economy, more to do with maybe tourism for Macy's,

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Speaker 1: UM they had a hundred two hundred and fifty basis

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Speaker 1: point impact from tourism and most of the last eighteen months,

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Speaker 1: and now tourism sales are just in line with their comps.

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Speaker 1: So that's helping Macy's too. J C. Penny, they will

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Speaker 1: be reporting of results tomorrow and the stock is up

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Speaker 1: more than eight and a half percent today. What's the

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Speaker 1: j C. Penny turnaround story looking like it's you know,

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Speaker 1: it's on its way to a turnaround. It's proven it um.

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Speaker 1: We expect no different tomorrow results where it's going to

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Speaker 1: be better than Macy's and Coals And now it just

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Speaker 1: reinforces if they didn't do that bad, they probably did

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Speaker 1: even better. Appliances focused on home, private label Sephora. I mean,

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Speaker 1: those are all positives for the company. The company probably

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Speaker 1: will not or will take a long time to go

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Speaker 1: back to seventeen billion dollars in sales. It's right now

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Speaker 1: at under thirteen billion UM. But it's growing and its

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Speaker 1: stores look better. It's digital platform is improving. They're making

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Speaker 1: all the right steps to differentiate. Marvin Allison is really

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Speaker 1: pulling this one out. He is. He's doing a good job.

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Speaker 1: He's differentiating the department store. Well, you know, you talked

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Speaker 1: just general about the online presence. I mean, how much

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Speaker 1: you learning given Coals and UH and Macy's earnings today,

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Speaker 1: how much have you learned about the progress they've made

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Speaker 1: on that front. I think they've all made a lot

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Speaker 1: of progress. But online still isn't the bulk of their sales.

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Speaker 1: Does it need to be? It probably will have to

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Speaker 1: be at some point as a closed store. So you know,

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Speaker 1: we've been calling that stores need to close. Macy's announced

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Speaker 1: a hundred for next year, but a hundred out of

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Speaker 1: seven hundred some odd store macy stores is still too

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Speaker 1: many stores. There's about four hundred to six hundred a

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Speaker 1: b malls, the malls that you want to be in,

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Speaker 1: and UM, do they need to be in more than that?

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Speaker 1: That's the question. So will online grow to be more

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Speaker 1: than just ten percent of retail sales? Absolutely, At some

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Speaker 1: specialty apparel retailers anywhere from UM department stores I think

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Speaker 1: are still scratching in the low double digits. So there

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Speaker 1: is more opportunity there. Buy online, pickup in store has

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Speaker 1: great attachment rates. That's helping them. That's a plus for

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Speaker 1: them when they compete against Amazon. That doesn't have those locations,

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Speaker 1: but we should see fewer stories down the line, if

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Speaker 1: not few or at least smaller stores. Smaller store for

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Speaker 1: Macy's indeed. And we're also going to be getting Walmart

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Speaker 1: results next a week actually from today right Walmart, this

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Speaker 1: stock is up so far this year. Thanks for listening

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Speaker 1: to the Bloomberg pien L podcast. You can subscribe and

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Speaker 1: listen to interviews at iTunes, SoundCloud, or whatever podcast platform

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Speaker 1: you prefer. I'm pim Fox. I'm out there on Twitter

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Speaker 1: at pim Fox. I'm out there on Twitter at Lisa Abramo.

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Speaker 1: It's one before the podcast. You can always catch us

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Speaker 1: worldwide on Bloomberg Radio