Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
Speaker 1: SoundCloud and at Bloomberg dot com. Peter koit us economy
Speaker 1: team covering all the indicators. He's our economic editor for
Speaker 1: Bloomberg Business Week, and he can be followed on Twitter
Speaker 1: at Peter Koi CEO. Y all right, Mr ki Uh,
Speaker 1: tell us a little bit about the economy and the
Speaker 1: challenges that a Trump administration faces. Well, Donald Trump is
Speaker 1: uh is a regieved changer. He's he's not your average
Speaker 1: new president coming into office. He's got incredibly ambitious goals.
Speaker 1: He wants to really change things a lot, and he
Speaker 1: has vanquished his political opponents. But can he as easily
Speaker 1: vanquish his economic challenges? And that's the question I have.
Speaker 1: I mean, well, yeah, specifically, I mean, he's vowed to
Speaker 1: cut taxes, but he's also planning to increase spending quite substantially.
Speaker 1: And the question that I have is, I mean aren't
Speaker 1: there going to be some Republicans who don't want to
Speaker 1: see the deficit expanded dramatically? And how is this going
Speaker 1: to work? Exactly? So, the compare of nonprofits in Washington,
Speaker 1: the Committee for Responsible Federal Budget and the Urbans Brookings
Speaker 1: Tax Policy Center did a joint report looking at Trump's
Speaker 1: sort of the handcuffs on him, the economic handcuffs, and
Speaker 1: saying that if you look at Trump's plan, as you said,
Speaker 1: he wants to cut tracks is dramatically, but he wants
Speaker 1: to preserve the big cost centers of the federal budget,
Speaker 1: which your Social Security and Medicare, and he must keep
Speaker 1: defense spending on track or raise it. He said, the
Speaker 1: new spending over the next decade will be ten times
Speaker 1: larger than the new revenue. And as you say, there's
Speaker 1: a political constraint there in the economic constraint. The political
Speaker 1: constraint is people in his own party might not want
Speaker 1: to go along with that. The economic constraint is that
Speaker 1: the bond market vigilantes might not want to go along
Speaker 1: with it. So we focus a lot on politics because
Speaker 1: it's been an election, but I think we need to
Speaker 1: look at finance and economics as well. I want to
Speaker 1: look at the bond yield the tenure, Peter, because I
Speaker 1: know you were interested in that as well. Right, two
Speaker 1: point eight percent right now for the tenure. What does
Speaker 1: that that sell off in the bond market tell you, Well,
Speaker 1: you can need to look at the level and you
Speaker 1: can look at the change. The level is still pretty moderate.
Speaker 1: We're not talking about a high bond yield historically, it's
Speaker 1: the change that matters. And it shot up the day
Speaker 1: after the election. Yield shot up. The yield shot up noticeably.
Speaker 1: No one wanted to own these ten years, right, and
Speaker 1: so again you know, the Federal Reserve has been sort
Speaker 1: of wanting to see inflation higher, and you know what
Speaker 1: we're probably seeing here is higher inflation expectations being embedded
Speaker 1: in the bond yield. So it's not a terrible thing.
Speaker 1: It could be that people are betting that the tax
Speaker 1: cuts will be stimulative towards the economy and raise inflation
Speaker 1: a little bit. It could be an infrastructure spending which
Speaker 1: would also be stimulative. So, uh, what we're seeing is
Speaker 1: the bond market seeing, hey, this is a new game.
Speaker 1: You know, one thing that you quoted from Donald Trump's book,
Speaker 1: The Art of the Deal, is him saying I never
Speaker 1: get too attached to one deal or one approach. I mean,
Speaker 1: how much do we actually know about what he wants
Speaker 1: to do? Um And is it matter more who he's
Speaker 1: listening to with respect to getting economic advice? Yeah, I
Speaker 1: think that he aside from making America great again, which
Speaker 1: he's definitely committed to, I think a lot of the
Speaker 1: details are ones that he'll play it by ear he'll
Speaker 1: see what he can get through. Another quote from the
Speaker 1: Art of the Deal is that he he tends to
Speaker 1: aim high and then fight and then fall back. That's
Speaker 1: the typical uh people some people do in real estate, right,
Speaker 1: They asked for a lot, and they don't always get
Speaker 1: what they want. So when he asked for this enormous
Speaker 1: tax cut, he may fully intend to pull back and
Speaker 1: accept a smaller tax cut. The dollar and the U. S.
Speaker 1: Treasuries opposite directions is the greatest correlation since December. What
Speaker 1: do you make of the fact that you've got this
Speaker 1: major difference between people wanting to own the dollar and
Speaker 1: people wanting to own US treasuries? Well, think about it.
Speaker 1: Higher yields actually attract money into the the U. S.
Speaker 1: A that's I think that might be what's going on
Speaker 1: in the currency. Well, there's also the flip side of that,
Speaker 1: which is the depreciation of some currencies that might be
Speaker 1: of nations that might be negatively effect to dry a
Speaker 1: newly h new new trade deals from the US. So
Speaker 1: you've got a Mexican pay so moving quite a bit,
Speaker 1: and you've got to you know, Europe with its own issues.
Speaker 1: There's a lot of dynamic action behind there, and there
Speaker 1: are a lot of people who are stepping back entirely
Speaker 1: at this point in trying to wait and see how
Speaker 1: that takes out. Peter koy Uh, us economy editor at Bloomberg,
Speaker 1: thank you so much for being with us. It's really
Speaker 1: fascinating to see the negotiations going forward and how this
Speaker 1: will work um when you actually have to get to
Speaker 1: the bottom line. One other place that is seeing some
Speaker 1: big money and potentially even bigger money is the marijuana industry.
Speaker 1: I want to bring in Rickford, CEO and executive chairman
Speaker 1: of Pure Agro, which is a company that applies goods
Speaker 1: to help with the growth of marijuana plans. This was
Speaker 1: a big This was a big election for you, wasn't it.
Speaker 1: It sure was. I want to clarify we're kind of
Speaker 1: a picks and shovels play for what we're calling the rush.
Speaker 1: So just like the Gold Rush, picks and Shovels were
Speaker 1: the companies that made it, we feel we're picks and shovels.
Speaker 1: We we just supply the equipment, nutrients, and typical farming products. So, um,
Speaker 1: let's let's go over what happened on Tuesday. California voters
Speaker 1: uh and those in Massachusetts, Nevada, and Florida North Dakota
Speaker 1: all past some measures, whether it was medical marijuana or
Speaker 1: also recreational marijuana, making it legal. How concerned are you
Speaker 1: that this could get reversed with an anti drug Republican administration.
Speaker 1: I think the Republicans have had a conservative platform on
Speaker 1: states rights, and I think as long as they stick
Speaker 1: to that platform and let the states do what they want,
Speaker 1: which has historically been their platform, I think we're in
Speaker 1: a good position. Now. You have been credited with creating
Speaker 1: the first, uh, well the first in the country custom
Speaker 1: platinum certified home when it comes to energy efficiency. Yeah.
Speaker 1: My my background is environmental construction, so I built the
Speaker 1: first Lead platinum home and helped the Lead rating system
Speaker 1: in their progress into the residential market. All right. And
Speaker 1: the reason I bring that up is because I'm curious
Speaker 1: if you can give us an estimate for how much
Speaker 1: energy And as you said, picks and shovels, it's not
Speaker 1: just picks and shovels. It's all of the farming equipment,
Speaker 1: but it's the energy also that it is taking off
Speaker 1: the grid. If you, uh, let's say, just set aside
Speaker 1: the legal issues of the marijuana industry, what kind of
Speaker 1: energy consumption is are we talking about? You know, it's
Speaker 1: hard to put a dollar amount or a percentage because
Speaker 1: I don't have the data from the growers, but I'll
Speaker 1: tell you it's a big line item for them. And
Speaker 1: actually the marijuana industry is what's fueling the R and
Speaker 1: D for these lighting manufacturers and such to bring down
Speaker 1: the cost of it. And as we see in Colorado,
Speaker 1: the price of cannabis has been dropping due to the
Speaker 1: recreational that's forcing these guys to look at their P
Speaker 1: and l's and actually pull up. Are there specific companies
Speaker 1: or technologies that you can point to that are being developed. Yeah,
Speaker 1: there's a lot of technology, and I think we're seeing
Speaker 1: in L e D. L E D really hasn't been
Speaker 1: able to break into the cannabis market yet, but what
Speaker 1: I see on the horizon, I think it will be
Speaker 1: so one thing that pure predicts is that the legal
Speaker 1: marijuana industry will grow to be a fifty billion dollar industry.
Speaker 1: By what has to happen for that to happen? Right now?
Speaker 1: You askedimate that is about a six billion dollars. Yeah,
Speaker 1: I really think that we're seeing it happen with what
Speaker 1: you just said about these votes. I mean, Florida going
Speaker 1: medical is just huge. That once again, that's a Florida
Speaker 1: passing the bill legalizing medical marijuana exactly, and then California
Speaker 1: going recreational. So California, by a couple of estimates, represents
Speaker 1: either sixty two or eighty two percent of the totals
Speaker 1: country country's cannabis markets. So when you look at it
Speaker 1: like that, just California alone could throw a big chunk
Speaker 1: of the number you just quoted. Yeah, I love him.
Speaker 1: I love that every industry has their uh lingo and
Speaker 1: that this is going medical or going or going recreational.
Speaker 1: I love it the different expressions that come up. Um,
Speaker 1: how about going just to run down some of the initiatives, right,
Speaker 1: because Massachusetts approved voted for recreational marijuana. Also extending a
Speaker 1: legal marijuana that makes it a coast to coast situation,
Speaker 1: doesn't it? It It sure does. So there are still those
Speaker 1: that oppose this or that are sort of trying to
Speaker 1: get court orders to halt some of the bills from
Speaker 1: getting implemented or for allowing people to exercise their new rights. Um,
Speaker 1: basically before there's a social study to look at whether
Speaker 1: this does have a bad effect on social fabric. Um,
Speaker 1: How concerned are you about that kind of activity? Well,
Speaker 1: since you know, my company owns the largest player in Colorado,
Speaker 1: and Colorado was really the social experiment. So what we're
Speaker 1: seeing with Colorado is that they love the tax revenue.
Speaker 1: There is no other consumption of other drugs, that gateway
Speaker 1: drugs sort of mentality. I think that's been put to rest.
Speaker 1: And um, I feel that Colorado, since they've already done it,
Speaker 1: we'll see the same thing happened in California. We'll see
Speaker 1: public opinion be very high after the recreational passes real quick.
Speaker 1: Which state do you think is next to legalize marijuana? Wow? Um,
Speaker 1: I'd like to see New York. Is that where you're from?
Speaker 1: I'm bi coastal Ah, thank you so much for being
Speaker 1: with us, Rick Bird a fascinating time for the marijuana industry. Rickbird,
Speaker 1: CEO and executive chairman chairman of Pure Agro. On the
Speaker 1: marijuana business, thank you grow to be fifty billion dollars
Speaker 1: in the next ten years. Definitely a big industry, Definitely
Speaker 1: something to watch, and I know anecdotally speaking too many
Speaker 1: traders out there, that it is something that they're watching
Speaker 1: as a potential profit boon and something to to bet on.
Speaker 1: So it'll be interesting to see how they do that
Speaker 1: with the picks and Shovel's type of play or not.
Speaker 1: This is Bloomer all right, Let's solve the issue of
Speaker 1: retail sales with an expert our own Punam Goyle, senior
Speaker 1: US retail analyst for Bloomberg Intelligence. Put them, where do
Speaker 1: you want to start? You want to start with Macy's
Speaker 1: and Coals and then I know we get Nordstrom's after
Speaker 1: the close today. Yeah, sure, we can start with Macy's.
Speaker 1: I guess that's the largest department store, so let's start there.
Speaker 1: I think you know, overall in the department store channel,
Speaker 1: you're seeing the stocks rise the last I checked high
Speaker 1: single digits, and that strength is coming from the sales
Speaker 1: warrant that bad. I mean, that's really it. They were
Speaker 1: still but they weren't that bad, so I think the
Speaker 1: optimism really comes from their coals. Was a big surprise. Um,
Speaker 1: they actually beat by ten cents UM, which is a
Speaker 1: big number. Sales they missed a little. The beat was
Speaker 1: entirely on better expense management. So very good numbers out
Speaker 1: of colds. On Macy's, the numbers were weaker, but the
Speaker 1: guidance was better. Um. They expect same stert sales to
Speaker 1: be less negative UM for the year, which is good
Speaker 1: for the fourth quarter. So what's behind the less negative outlook,
Speaker 1: which is, by the way, so encouraging. I mean, it
Speaker 1: makes it makes me just want to run out and
Speaker 1: buy something. Uh, what's behind it? It's all about inventory.
Speaker 1: It's all about inventory management. Retailers have been really in
Speaker 1: the spiral of you know, too much inventory, have to
Speaker 1: discount um reduce the sales. And at the end of
Speaker 1: the second quarter they were lean on inventory. They maintained
Speaker 1: that inventory discipline. They're continuing to pull back orders from
Speaker 1: wholesale and that's helping their margins and it's allowing them
Speaker 1: to discount less. So that's really the magic behind why
Speaker 1: things are less bad. Traffic is still down, so that
Speaker 1: that continues to be the case. Do you think that
Speaker 1: this is worth it? I mean, I'm looking at Macy's
Speaker 1: shares and they're up eight percent. Well, I just I'm just,
Speaker 1: you know, like I got to hear, I mean put
Speaker 1: I was saying, well, here, they're basically less bad. Let
Speaker 1: me let me add to this. Let me let me
Speaker 1: add to this. This is the seventh consecutive quarter in
Speaker 1: which sales and profits have both declined. Correct, Um, Macy's
Speaker 1: made I love this zero point two cents for every
Speaker 1: dollar it took in in revenue, adding to the math.
Speaker 1: But I assume you're right, right, Okay, but you can't
Speaker 1: do that for very long, can you? No? You know,
Speaker 1: I think that's the problem for retail though. Right in general,
Speaker 1: we're in this position where consumers are not going to stores,
Speaker 1: and if they are, they're choosing one and how and
Speaker 1: where they shop. They're shopping more online. So these retailers,
Speaker 1: by nature have to evolve. And Macy's today said something
Speaker 1: about that they hired m Brookfield Brookfield Asset Management because
Speaker 1: that they got a big base of real estate, right,
Speaker 1: I mean, they got that Union Square store in San Francisco,
Speaker 1: for example, two and fifty million dollars. Yeah, but you know,
Speaker 1: Hall Square is still on the table, and that's what
Speaker 1: everyone's dying for. So I think they're taking baby steps
Speaker 1: on their real estate. Eight. But when the Herald Square
Speaker 1: deal strikes, what it is, um, you know, what do
Speaker 1: you think that's going to look like? Can you give
Speaker 1: us some idea of the shape? So I think it's
Speaker 1: going to be the last one that they do, because
Speaker 1: it is the largest and the most complex. This is
Speaker 1: for the New York City flaship, for the New York
Speaker 1: City Harald Square, the you know, the iconic Macy store. Um.
Speaker 1: It's valued at four billion dollars from Starboard. That's what
Speaker 1: it was valued at in January. So that's the big deal.
Speaker 1: And when that happens, who knows, But I think it'll
Speaker 1: be the last. They're kind of just scratching the surface
Speaker 1: pleasing investors by making these baby sales. Um. But that's
Speaker 1: what everyone's waiting for for Macy's. I'm looking at Nordstrom
Speaker 1: shares at Nordstrom Reports after the bell today and they're
Speaker 1: up about almost the exact same amount is macy shares
Speaker 1: More than eight percent UM. Why I mean, I think
Speaker 1: everyone's just expecting less negative news, but probably more positive
Speaker 1: from Nordstrom. So Nordstrom wasn't really supposed to follow the
Speaker 1: weakness that we had expected originally from Macy's and Coals
Speaker 1: because had an anniversary sales shift. So if you recall
Speaker 1: their anniversary sale that they have every year, a week
Speaker 1: of that moved from the second quarter into the third quarter,
Speaker 1: and that was supposed to help nord Storms results. We
Speaker 1: expected to help nord Storms results. But just by seeing
Speaker 1: UM better numbers out of Macy's and Cold, I think
Speaker 1: the market in general is more positive on the department
Speaker 1: stores could have. Could the better better than expected numbers
Speaker 1: have anything to do with a stronger economy than many
Speaker 1: UH analysts were expecting, You know, I don't think there's
Speaker 1: much that has changed and the economy. If you look
Speaker 1: at the third quarter, macy cited very good back to
Speaker 1: school and so did Colds, so I think that's encouraging.
Speaker 1: But things ZiT soften in September and then we're kind
Speaker 1: of flatish in October. So I'd say less to do
Speaker 1: the economy, more to do with maybe tourism for Macy's,
Speaker 1: UM they had a hundred two hundred and fifty basis
Speaker 1: point impact from tourism and most of the last eighteen months,
Speaker 1: and now tourism sales are just in line with their comps.
Speaker 1: So that's helping Macy's too. J C. Penny, they will
Speaker 1: be reporting of results tomorrow and the stock is up
Speaker 1: more than eight and a half percent today. What's the
Speaker 1: j C. Penny turnaround story looking like it's you know,
Speaker 1: it's on its way to a turnaround. It's proven it um.
Speaker 1: We expect no different tomorrow results where it's going to
Speaker 1: be better than Macy's and Coals And now it just
Speaker 1: reinforces if they didn't do that bad, they probably did
Speaker 1: even better. Appliances focused on home, private label Sephora. I mean,
Speaker 1: those are all positives for the company. The company probably
Speaker 1: will not or will take a long time to go
Speaker 1: back to seventeen billion dollars in sales. It's right now
Speaker 1: at under thirteen billion UM. But it's growing and its
Speaker 1: stores look better. It's digital platform is improving. They're making
Speaker 1: all the right steps to differentiate. Marvin Allison is really
Speaker 1: pulling this one out. He is. He's doing a good job.
Speaker 1: He's differentiating the department store. Well, you know, you talked
Speaker 1: just general about the online presence. I mean, how much
Speaker 1: you learning given Coals and UH and Macy's earnings today,
Speaker 1: how much have you learned about the progress they've made
Speaker 1: on that front. I think they've all made a lot
Speaker 1: of progress. But online still isn't the bulk of their sales.
Speaker 1: Does it need to be? It probably will have to
Speaker 1: be at some point as a closed store. So you know,
Speaker 1: we've been calling that stores need to close. Macy's announced
Speaker 1: a hundred for next year, but a hundred out of
Speaker 1: seven hundred some odd store macy stores is still too
Speaker 1: many stores. There's about four hundred to six hundred a
Speaker 1: b malls, the malls that you want to be in,
Speaker 1: and UM, do they need to be in more than that?
Speaker 1: That's the question. So will online grow to be more
Speaker 1: than just ten percent of retail sales? Absolutely, At some
Speaker 1: specialty apparel retailers anywhere from UM department stores I think
Speaker 1: are still scratching in the low double digits. So there
Speaker 1: is more opportunity there. Buy online, pickup in store has
Speaker 1: great attachment rates. That's helping them. That's a plus for
Speaker 1: them when they compete against Amazon. That doesn't have those locations,
Speaker 1: but we should see fewer stories down the line, if
Speaker 1: not few or at least smaller stores. Smaller store for
Speaker 1: Macy's indeed. And we're also going to be getting Walmart
Speaker 1: results next a week actually from today right Walmart, this
Speaker 1: stock is up so far this year. Thanks for listening
Speaker 1: to the Bloomberg pien L podcast. You can subscribe and
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Speaker 1: you prefer. I'm pim Fox. I'm out there on Twitter
Speaker 1: at pim Fox. I'm out there on Twitter at Lisa Abramo.
Speaker 1: It's one before the podcast. You can always catch us
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