WEBVTT - Bond Selloff Forces Funds to Reassess Strategy: FTN's Vogel 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.040 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. It 0:00:33.120 --> 0:00:38.000 feels like something has shifted pretty significantly in the US 0:00:38.120 --> 0:00:40.640 treasury market. Here to talk about that with us is 0:00:40.720 --> 0:00:46.800 Jim Vogel, an interestrate strategist at FTN Financial based in Memphis, Tennessee. Jim, 0:00:46.800 --> 0:00:50.000 thank you so much for joining us. You've absolutely nailed 0:00:50.000 --> 0:00:53.000 this market again and again. So right now we are 0:00:53.040 --> 0:00:56.880 looking at ten year treasury yields that are two point 0:00:57.040 --> 0:01:03.480 eight five creeping up from the highs of last week. Um, 0:01:03.560 --> 0:01:05.160 how much more do we have to go? Here? We're 0:01:05.160 --> 0:01:08.440 looking at the highest ten year treasury yields since January 0:01:08.480 --> 0:01:13.839 two tho. We've compressed about into three weeks what many 0:01:13.880 --> 0:01:16.400 people thought the market would do in terms of um 0:01:16.640 --> 0:01:20.920 increasing rates by say the third quarter. So where we 0:01:21.000 --> 0:01:24.000 continue to go, it's it's easy to see that the 0:01:24.080 --> 0:01:26.679 ten year could head towards to nine or so before 0:01:26.720 --> 0:01:30.360 it begins to even catch a breath. We see um 0:01:30.560 --> 0:01:33.160 really about the next two to three weeks people redoing 0:01:33.160 --> 0:01:36.280 their strategies and thinking through where do they want to 0:01:36.360 --> 0:01:39.720 be buying tens and thirties in particular, So, Jim, why 0:01:39.720 --> 0:01:43.399 are people going to be reassessing their strategies strategies? Now? 0:01:43.520 --> 0:01:47.280 What changed? There's so many things changed about the yield curve. 0:01:47.840 --> 0:01:50.480 It had been flattening very hard. The thirty year was 0:01:50.520 --> 0:01:53.840 a star last year and you returned nine in a 0:01:53.880 --> 0:01:57.280 thirty year government. Now everything is turning in the opposite 0:01:57.320 --> 0:02:01.240 direction without any bond aim to come in at these 0:02:01.240 --> 0:02:04.960 new higher levels. Yet, So in that kind of perspective, 0:02:05.320 --> 0:02:08.040 you've got to sit back and look at your strategy 0:02:08.080 --> 0:02:11.360 not only in treasuries but also in corporates. Well, Jim, 0:02:11.600 --> 0:02:14.919 what would just suggest given what you know about people's positioning, 0:02:14.960 --> 0:02:16.760 And I'm just curious if you can also add in 0:02:16.840 --> 0:02:22.760 the supply and demand of treasuries absolutely right now, in particular, 0:02:22.800 --> 0:02:25.639 what the seven year part of the curve has been 0:02:25.760 --> 0:02:28.799 hurt because they've just been trading almost one for one 0:02:28.880 --> 0:02:32.800 with tens, but nobody really trades the seven years a 0:02:32.840 --> 0:02:37.200 hot item. It just follows so for in particular retail 0:02:37.240 --> 0:02:40.920 investors intermediate bond funds, if they want to take advantage 0:02:40.919 --> 0:02:44.079 of this move, that's a great place to try. In 0:02:44.160 --> 0:02:48.760 terms of supply and demand, we've got the next three 0:02:48.760 --> 0:02:51.559 months is going to see are going to see progressively 0:02:51.680 --> 0:02:55.239 hired treasury supply and then the treasury where we ass 0:02:55.280 --> 0:02:59.359 asked probably with at least one more um significant increase 0:02:59.760 --> 0:03:04.160 when they announced the May refunding in three months. So, Jim, 0:03:04.320 --> 0:03:08.280 you said that people should reassess their strategies, not only 0:03:08.320 --> 0:03:12.400 for US government pown markets, but also for corporates. Uh, 0:03:12.440 --> 0:03:14.920 if you look at spreads, the extra yield that investors 0:03:14.960 --> 0:03:17.360 earn over the benchmark rate, you could see that it 0:03:17.400 --> 0:03:20.880 really has not increased for investment grade corporate bonds, but 0:03:20.960 --> 0:03:24.240 it has increased for high yield bonds. Do you think 0:03:24.280 --> 0:03:27.400 that that actually makes sense and that you should expect 0:03:27.560 --> 0:03:30.519 the sell off to continue there with both the spreads 0:03:30.760 --> 0:03:35.120 rising in tandem with rising benchmark rates. So far, the 0:03:35.160 --> 0:03:37.760 sell off and high yield is taking back a lot 0:03:37.800 --> 0:03:41.080 of the profits that were generated just last month. So 0:03:41.120 --> 0:03:43.480 we won't know until we get a little bit higher. 0:03:43.520 --> 0:03:46.240 In terms of the high yield spreads before we know 0:03:46.320 --> 0:03:50.640 whether that's a trend or just a bounce. Sorry, beg 0:03:50.640 --> 0:03:53.600 your pardon? Go ahead? No please, no, no, go ahead? 0:03:53.600 --> 0:03:58.440 Finished your thought? I've now lost the question. I beg 0:03:59.200 --> 0:04:02.040 go ahead, It's save me. Well, no, Jim, you know, 0:04:02.040 --> 0:04:06.080 I'm just thinking, what is sort of the threshold yield 0:04:06.160 --> 0:04:10.240 for ten year treasuries that you would recommend people start buying. 0:04:11.320 --> 0:04:14.360 There isn't one yet, and and that's exactly what we've 0:04:14.440 --> 0:04:17.560 learned the last couple of weeks. Until you begin to 0:04:17.560 --> 0:04:22.239 see any sign that people are not have stopped moving 0:04:22.320 --> 0:04:26.000 and racing ahead in terms of their inflation expectations, there 0:04:26.120 --> 0:04:30.760 is no place to necessarily immediately stepping in by the tenure. Instead, 0:04:31.279 --> 0:04:35.039 we have it's much easier to see fair value relative 0:04:35.120 --> 0:04:37.560 to what the said might do and say the five 0:04:37.640 --> 0:04:40.599 year or the three year. So we've got to wait 0:04:40.680 --> 0:04:44.560 for We've got to wait a week two weeks just 0:04:44.720 --> 0:04:47.640 before people really can start doing that strategy on tens 0:04:47.680 --> 0:04:50.240 and thirties. All right, So if people really can't do 0:04:50.320 --> 0:04:53.479 that strategy yet and they aren't necessarily going to come 0:04:53.480 --> 0:04:56.679 in and buy, what does that mean for equity markets? 0:04:56.760 --> 0:05:00.360 Because we've seen a whole host of analyzes them out 0:05:00.680 --> 0:05:04.280 over the weekend talking about just what the rise in 0:05:04.320 --> 0:05:07.320 treasury yields means for stock markets, right because a lot 0:05:07.360 --> 0:05:09.080 of people were talking about the FED model, A lot 0:05:09.080 --> 0:05:12.640 of people were talking about how, uh, the dividend yields 0:05:12.760 --> 0:05:16.119 were paying more at one point than you could get 0:05:16.160 --> 0:05:21.080 on benchmark treasuries. So if that equation changes, are you 0:05:21.120 --> 0:05:24.240 really going to see selling continue in the U S 0:05:24.240 --> 0:05:26.840 stock indices despite the fact that earnings have actually come 0:05:26.839 --> 0:05:31.800 in pretty pretty good. It depends. If the equity market 0:05:32.080 --> 0:05:37.240 slows down in terms of volatility um you will not 0:05:37.360 --> 0:05:40.040 see people really you will not see the bond market 0:05:40.040 --> 0:05:42.839 herd stocks. So as soon as we can pause in 0:05:42.920 --> 0:05:46.239 stocks and people can catch their breath there as well, Uh, 0:05:46.440 --> 0:05:52.320 the stock market remains largely unrelated to rates for the moment. 0:05:52.720 --> 0:05:56.760 Think about last year, UM income grew four point one percent, 0:05:56.880 --> 0:06:00.440 spending grew four point seven That was cond evidence in 0:06:00.480 --> 0:06:03.680 all sorts of different things, including the stock market, that 0:06:03.839 --> 0:06:06.680 confidence is not going to leak out that quickly in 0:06:06.800 --> 0:06:10.599 terms of the drivers of the economy until stocks really 0:06:10.640 --> 0:06:13.880 begin to disappoint for perhaps several weeks in a row. 0:06:14.839 --> 0:06:18.000 Jim at the three percent level at least for the tenure. 0:06:18.040 --> 0:06:20.760 We're now at two point eight five. At that point, 0:06:20.839 --> 0:06:23.360 aren't you going to see big demand from pension funds, 0:06:23.480 --> 0:06:25.880 life companies, other firms. I mean, because don't they have 0:06:25.960 --> 0:06:30.080 to immunize themselves against liabilities. Uh? They do, But I 0:06:30.120 --> 0:06:33.279 don't think there's necessarily one particular level where they will 0:06:33.320 --> 0:06:37.640 begin to come in with enough strength to overcome the 0:06:37.680 --> 0:06:40.719 selling At some points. Last week, you know, particularly right 0:06:40.800 --> 0:06:45.679 after don farm payroll reports on Friday, the selling volume 0:06:45.800 --> 0:06:48.480 was two times the busiest that we've seen over the 0:06:48.520 --> 0:06:51.279 past couple of years when we had a surprising payroll number. 0:06:51.680 --> 0:06:55.000 So there's one group of people that are selling bonds 0:06:55.000 --> 0:06:58.919 extraordinarily fast. The buyers that will be coming in or 0:06:59.040 --> 0:07:02.279 want to pick up um bonds at a higher interest rate, 0:07:02.480 --> 0:07:04.760 they're going to move much more slowly. I want to 0:07:04.800 --> 0:07:06.840 thank you very much for joining us. Jim Vogel is 0:07:06.920 --> 0:07:11.480 interest rate strategist of FT and Financial. They're based in Memphis. 0:07:24.760 --> 0:07:28.000 What if money fell from the heavens, what would be 0:07:28.040 --> 0:07:30.960 the effect on growth and inflation? Well, here to help 0:07:31.040 --> 0:07:33.200 us answer this question is Joel Stern. He is the 0:07:33.280 --> 0:07:37.240 chairman and the chief executive of Stern Value Management, and 0:07:37.280 --> 0:07:39.760 he joins us here in our eleven three oh studios, 0:07:39.800 --> 0:07:42.560 Joel Stern, thank you very much for being here. So, indeed, 0:07:42.600 --> 0:07:46.400 if money were to drop from the sky, what would 0:07:46.480 --> 0:07:51.160 happen to growth and inflation? People would in the initial 0:07:52.080 --> 0:07:58.520 expectation strong profits, strong growth. It looks like paradise. But 0:07:59.120 --> 0:08:02.040 I have to admit to you, Pam. My teacher Milton 0:08:02.120 --> 0:08:05.280 Friedman asked us that question on the first day of class. 0:08:06.000 --> 0:08:10.200 He said, if money reigned down from the heavens, what 0:08:10.240 --> 0:08:13.560 would happen? And of course he got the right answer, 0:08:14.120 --> 0:08:18.720 the rest of us did not, because he said companies 0:08:18.760 --> 0:08:22.320 would compete against each other with this additional moneys and 0:08:22.360 --> 0:08:26.120 they would lower prices to the consumer in order to 0:08:26.160 --> 0:08:29.480 try to gain market share. And I believe that's going 0:08:29.520 --> 0:08:32.080 to happen here too. Don't get me wrong. The size 0:08:32.080 --> 0:08:34.680 of it is so huge, there's enough to go around 0:08:34.679 --> 0:08:38.040 for everybody. Uh So my answer to you is that 0:08:38.360 --> 0:08:40.800 I don't think we would have inflation from it. I 0:08:40.840 --> 0:08:42.720 think what we would do is we would have lower 0:08:42.760 --> 0:08:46.280 prices to the consumer. So can you connect this, Joel, 0:08:46.520 --> 0:08:50.319 to markets, to to to sort of how you invest. 0:08:50.520 --> 0:08:53.599 Because I was struck by a statistic that of S 0:08:53.640 --> 0:08:56.000 and P five hundred companies that have reported so far, 0:08:56.480 --> 0:09:01.920 eighty percent have beaten Wall Street expectations for revenues, which 0:09:02.120 --> 0:09:05.760 is the biggest beat going back in data to at 0:09:05.800 --> 0:09:09.880 least two thousand and eight. So is that already baked in? 0:09:11.280 --> 0:09:15.160 For sure? The price today is the present value of tomorrow. 0:09:15.679 --> 0:09:19.120 What's actually happened. What's interesting about the the the economy 0:09:19.200 --> 0:09:22.760 right now is the economy is poised to grow at 0:09:22.840 --> 0:09:25.559 at least three. I believe it's going to be a 0:09:25.600 --> 0:09:27.560 lot higher than that. I think it will be close 0:09:27.600 --> 0:09:30.600 to four. And when people say, oh that we don't 0:09:30.600 --> 0:09:32.959 have enough people coming into the workforce, remember they talk 0:09:33.000 --> 0:09:36.959 about productivity and population growth. Do me a favor. Relax 0:09:37.000 --> 0:09:39.840 would your place? You'll be really fine? What's what's the 0:09:39.880 --> 0:09:44.600 answer to this? So many people left the workforce during 0:09:44.600 --> 0:09:49.520 the last ten, twelve, fifteen years. Right now, the participation 0:09:49.640 --> 0:09:54.120 rate is only around six. Think about it. I believe 0:09:54.160 --> 0:09:57.080 it's going to move up over and that will be 0:09:57.120 --> 0:10:00.760 the equivalent of immigrants coming into the country and journing 0:10:00.800 --> 0:10:04.560 the workforce. So what I'm hearing from you is dampened 0:10:04.600 --> 0:10:08.400 inflation expectations. Frankly, because even with all this money you're 0:10:08.400 --> 0:10:11.200 going to have more competition on both sides, both with 0:10:11.320 --> 0:10:13.920 employees coming into the workforce as well as companies that 0:10:13.960 --> 0:10:17.240 are competing with each other. This does not our scream 0:10:17.280 --> 0:10:22.800 of of runaway inflation out. It occurred to me that 0:10:22.880 --> 0:10:25.400 maybe when you said all of this, I should have said, 0:10:26.040 --> 0:10:28.400 very nice, Lisa, I think we should go on to 0:10:28.480 --> 0:10:30.880 the next topic. But we cannot do it. And what's 0:10:30.920 --> 0:10:34.600 the reason. The reason is that the gold price is 0:10:34.600 --> 0:10:39.280 still sitting at thirty four dollars or thereabouts as interest 0:10:39.360 --> 0:10:42.960 rates rise. If the interest rates that are rising are 0:10:43.000 --> 0:10:47.160 because of higher real rates, not inflation, that's good for 0:10:47.200 --> 0:10:49.520 the economy because that's a signal to the rest of 0:10:49.559 --> 0:10:52.920 the world. Hey, come onto the United States. High rates 0:10:52.920 --> 0:10:55.480 of return are available here. That's what you would expect 0:10:55.480 --> 0:10:58.200 to have happened. But you see, what's happened is that 0:10:58.240 --> 0:11:01.800 with the rates rising, by this time, the gold price 0:11:01.800 --> 0:11:04.679 should be down around twelve fifty. How do I know 0:11:05.280 --> 0:11:09.520 it happened before? When Trump won, interest rates rose dramatically, 0:11:09.880 --> 0:11:13.000 and I had the pleasure of talking to him, not 0:11:13.080 --> 0:11:15.680 to you, unfortunately at that time. But he asked me 0:11:15.760 --> 0:11:18.000 this question, and I said, I got news. Take a 0:11:18.000 --> 0:11:20.360 look at what's happening to the gold price? As the 0:11:20.440 --> 0:11:23.800 rates went up, the gold price went down. That meant 0:11:24.120 --> 0:11:27.720 inflation was tame. We wouldn't have to worry. But if 0:11:28.040 --> 0:11:31.240 interest rates rise and the gold price does not fall, 0:11:31.920 --> 0:11:35.079 it must mean that there is some inflation in there 0:11:35.360 --> 0:11:37.360 that we're going to see at the end of this year. 0:11:38.559 --> 0:11:40.400 Can we just assume for a moment that there is 0:11:40.440 --> 0:11:42.920 going to be an acceleration and inflation just kind of 0:11:43.000 --> 0:11:45.760 to be the devil's advocation? But what is a good investment? 0:11:45.880 --> 0:11:48.720 Is it gold? Yes, it would be it would be 0:11:48.800 --> 0:11:50.680 gold would be a good investment. But real estate is 0:11:50.720 --> 0:11:55.240 always a good investment unless it has already reflected all 0:11:55.280 --> 0:11:57.480 of this and so it's already in the price. But 0:11:57.600 --> 0:12:01.760 I believe that real estate it is just a fantastic 0:12:01.800 --> 0:12:04.400 investment if you think the inflation rate is coming back. 0:12:05.200 --> 0:12:07.320 I'm surprised to hear that, given the fact that Janet 0:12:07.360 --> 0:12:10.680 Yellen over the weekends pinpointed commercial real estate values in 0:12:10.720 --> 0:12:15.439 particular as being a particularly frogthy or hetty invaluation. It's 0:12:15.440 --> 0:12:18.040 a good thing she's going back to academia. Huh, you 0:12:18.080 --> 0:12:21.520 can pontificate a little bit. She is a lovely, lovely 0:12:21.800 --> 0:12:26.840 human being. Her position, though, on how markets work, is 0:12:26.880 --> 0:12:29.920 not the same as my own. I am a true 0:12:29.960 --> 0:12:34.680 blue Chicago boy. I'm a I was bred by Milton 0:12:34.760 --> 0:12:38.120 Friedman and Merton Miller, and I believe that markets actually 0:12:38.160 --> 0:12:41.400 do work. What we have to do is develop models 0:12:41.440 --> 0:12:44.480 that replicate what the markets are doing so we can 0:12:44.480 --> 0:12:47.800 see it clearly before it actually happens, instead of waiting 0:12:47.840 --> 0:12:49.920 for it to happen and then everybody else is telling 0:12:50.120 --> 0:12:53.880 the same story. Talk if you can about regulations and 0:12:54.040 --> 0:12:59.040 how regulations or the lack of regulations can spur economic growth. 0:12:59.480 --> 0:13:02.400 I spoke of people in the current administration before they 0:13:02.400 --> 0:13:05.840 were the current administration, way back two years ago, this 0:13:05.920 --> 0:13:08.760 coming July. I was teaching in Brazil at that time, 0:13:09.080 --> 0:13:11.480 and I had questions coming in from people who now 0:13:11.520 --> 0:13:15.560 have very authoritative positions in the administration, and I said, 0:13:15.559 --> 0:13:19.360 you gotta do three things. Just three. Number one, slash 0:13:19.440 --> 0:13:23.760 the regulations. Why because regulations not only lower the rate 0:13:23.760 --> 0:13:27.760 of return on investment, they increase the risk of investment. 0:13:28.080 --> 0:13:31.720 Because today's regulation becomes tame compared to what they'll do 0:13:31.760 --> 0:13:34.840 to us tomorrow. In other words, when when when Hillary 0:13:34.840 --> 0:13:37.920 Clinton was running, she said, you think the regulations under 0:13:37.920 --> 0:13:40.320 the Obama administrations. Only wait to like, get in there. 0:13:40.440 --> 0:13:43.600 I'm gonna really wet Okay, set number two, slash the 0:13:43.600 --> 0:13:47.600 marginal tax rate. Our trait twenty six major trading partners 0:13:48.200 --> 0:13:52.080 had an average tax rate of only two when hours 0:13:52.160 --> 0:13:54.600 was in the high thirties. If you include city and state, 0:13:55.440 --> 0:13:57.920 you can compete that way. By the way, I have 0:13:58.040 --> 0:14:01.559 three firms that I'm involved, okay, and one of our 0:14:01.600 --> 0:14:04.719 firms is headquartered in Singapore. The tax right there is 0:14:04.760 --> 0:14:07.640 around what should I do bring the money back to 0:14:07.640 --> 0:14:10.480 the United States and get hit a second time? So 0:14:10.920 --> 0:14:13.120 real quick, I want to get your take on Wells Fargo, 0:14:13.200 --> 0:14:16.880 because we have this feeling that regulation is moving in 0:14:16.920 --> 0:14:18.840 the opposite direction. Then what the Fed seems to have 0:14:18.880 --> 0:14:20.400 done with Wells Fargo. Do you think that this is 0:14:20.400 --> 0:14:22.400 sort of the opening salvo or sort of the I 0:14:22.440 --> 0:14:26.160 am so disgusted. I don't know what to say to you, Lisa. Look, 0:14:26.240 --> 0:14:29.840 when people do things that are what shall we call 0:14:29.920 --> 0:14:35.920 them fraudulent, they should be banished from the industry. Remember 0:14:35.920 --> 0:14:40.200 when Michael Milken was told his infraction was minor. These 0:14:40.200 --> 0:14:43.440 people created things that didn't exist, and they seem to 0:14:43.440 --> 0:14:45.360 have gotten away with it. I was. The thing that 0:14:45.400 --> 0:14:47.840 I was unhappy about with Janet Yellen is that she 0:14:47.840 --> 0:14:50.040 should have acted on this as soon as he found 0:14:50.080 --> 0:14:53.520 it out, as soon as they verified it, and using 0:14:53.560 --> 0:14:58.040 my vocabulary, they should have been speked. All right, Jill 0:14:58.080 --> 0:15:02.280 Stern from your words, from your lips to perhaps the 0:15:02.360 --> 0:15:06.440 new fed chairs ears Joelster, chairman and chief executive officer 0:15:06.520 --> 0:15:10.160 of Stern Value Management. Always a pleasure speaking with you. Uh, 0:15:10.200 --> 0:15:27.480 this is Bloomberg market Time is money, especially if you 0:15:27.600 --> 0:15:30.640 have airtime during the Super Bowl. And here to talk 0:15:30.720 --> 0:15:33.240 to us a little bit about the advertisements that you 0:15:33.280 --> 0:15:36.800 saw last night during the fifty second Super Bowl is 0:15:36.880 --> 0:15:40.520 John Swallen, chief Research officer of Cantor Media, which is 0:15:40.560 --> 0:15:43.600 based in New York. John, I want to start with 0:15:43.640 --> 0:15:48.320 the price tag for thirty seconds more than five million dollars? 0:15:48.320 --> 0:15:52.240 Was how much companies paid for that time? Is it 0:15:52.440 --> 0:15:57.960 worth it for many companies? It is yes, UM companies 0:15:57.960 --> 0:16:01.200 are not just paying for the prety seconds of at time, 0:16:01.240 --> 0:16:03.680 They're actually rolled up in that in the value of 0:16:03.680 --> 0:16:06.880 that five million dollar investment. UM is are some other 0:16:06.960 --> 0:16:10.320 things that I think brands considering that helped justify UM 0:16:10.360 --> 0:16:13.000 for what I'm sorry, just give us some some figures 0:16:13.000 --> 0:16:15.000 if you can just in terms of the actual total 0:16:15.040 --> 0:16:18.440 amount that's been spent. Sure, UM, So the total we 0:16:18.480 --> 0:16:20.400 asked me that the total amount of money spent on 0:16:20.440 --> 0:16:23.960 the game last night was approximately four fifteen million dollars 0:16:24.000 --> 0:16:26.560 for the commercials that aired between kickoff and the final whistle, 0:16:27.160 --> 0:16:29.640 which would make it the second highest Super Bowl of 0:16:29.680 --> 0:16:34.240 all time after two thousand and seventeen. Is that considered 0:16:34.240 --> 0:16:39.240 to be a win for NBC? UM, Yes, it is. UM. 0:16:39.280 --> 0:16:41.480 It's a win every year for whichever network gets to 0:16:41.640 --> 0:16:44.680 carry the game. UM. And NBC also was able to 0:16:44.760 --> 0:16:48.200 use that as a platform to promote their upcoming Olympics telecasts, 0:16:48.600 --> 0:16:51.160 which will also be a financial windfall for them, So 0:16:51.200 --> 0:16:55.680 they had a nice synergistic effect there. John one thing 0:16:55.680 --> 0:16:57.480 that I noticed. I was looking over some of the 0:16:57.640 --> 0:17:01.320 notes that you put out just sort of some conclusions 0:17:01.440 --> 0:17:05.040 from the Super Bowl and the advertisements, and there was 0:17:05.080 --> 0:17:08.560 a pretty notable drop off in the number of companies 0:17:08.600 --> 0:17:12.200 that were advertising during the Super Bowl for the first time. UH. 0:17:12.240 --> 0:17:16.480 The percent of first time parent companies dropped just eleven 0:17:16.480 --> 0:17:20.320 percent this year from last year. What happened why so 0:17:20.359 --> 0:17:24.440 many fewer entrants to this field? UM? I think parlates 0:17:24.480 --> 0:17:27.160 the price tag UM five million dollars for a thirty 0:17:27.160 --> 0:17:30.400 second spot, plus the additional costs for creating a commercial, 0:17:30.840 --> 0:17:33.760 promoting it on social media and so forth, is a 0:17:33.800 --> 0:17:36.360 big hit for many of the small companies that make 0:17:36.440 --> 0:17:39.560 up those first time advertisers. UM. So I think this 0:17:39.640 --> 0:17:41.880 year there was perhaps a little bit more price sensitivity. 0:17:42.320 --> 0:17:45.000 UM that can you know that that can happen. It's 0:17:45.040 --> 0:17:48.159 a it's a big investment for small companies. Who do 0:17:48.160 --> 0:17:54.760 you think was the most successful at their advertising? UM? 0:17:54.800 --> 0:17:57.720 I think everybody has a different metric. UM. If you 0:17:57.760 --> 0:17:59.840 take a look at the consumer popularity polls, I'm sure 0:17:59.880 --> 0:18:03.040 that the Amazon Alexa ad and the NFL AD with 0:18:03.280 --> 0:18:06.399 Eli Manny and O'Dell Beckham doing their version of dirty Dancing, 0:18:07.840 --> 0:18:09.600 I'm sure those will end up on the you know 0:18:09.640 --> 0:18:13.160 its probably the top two in terms of consumer popularity. 0:18:13.320 --> 0:18:17.920 But in terms of long term payout UM and brand effectiveness. UM. 0:18:17.960 --> 0:18:21.440 I actually think that a brand like UM tied um 0:18:21.560 --> 0:18:25.240 had a very interesting media strategy running one commercial in 0:18:25.320 --> 0:18:28.320 each of the four quarters, and they weren't obvious commercials 0:18:28.359 --> 0:18:30.200 when they started out to heay this is a commercial 0:18:30.200 --> 0:18:31.680 for Tide, it wasn't until sort of the end of 0:18:31.680 --> 0:18:35.000 the commercial that it all came together and tied together. UM. 0:18:35.359 --> 0:18:39.399 I think that was a very effective strategy for PNG. John. 0:18:39.760 --> 0:18:41.840 There was a lot of talk leading up to this 0:18:41.960 --> 0:18:48.159 Super Bowl about the politicization of football and how viewership 0:18:48.200 --> 0:18:51.879 had actually gone down as people view the sport is 0:18:52.040 --> 0:18:57.960 becoming increasingly political. Do we have any preliminary assessments of 0:18:58.000 --> 0:19:02.480 what viewership was like last night or whether some advertisers 0:19:02.480 --> 0:19:07.200 shied away from, uh, perhaps participating this time around because 0:19:07.200 --> 0:19:10.959 of all that drama. Um, the viewership figures won't be 0:19:11.119 --> 0:19:14.639 enough until won't be out until later today. UM. So 0:19:15.200 --> 0:19:17.400 I can't tell you how many people watch the game. 0:19:17.720 --> 0:19:20.080 In terms of the advertisers and their approach. UM, there 0:19:20.119 --> 0:19:24.000 certainly was less advertising of a political or social issue 0:19:24.080 --> 0:19:27.159 nature this year as compared to last year. UM. And 0:19:27.160 --> 0:19:29.959 I think that reflects the fact that in our increasingly 0:19:30.000 --> 0:19:33.919 polarized environment, UM, taking any kind of of a stand 0:19:33.960 --> 0:19:36.280 pro or con and any sort of an issue, UM, 0:19:36.320 --> 0:19:38.640 it's just a landline that marketers don't want to get 0:19:38.680 --> 0:19:41.720 involved with, particularly on a stage as public as the 0:19:41.840 --> 0:19:45.200 as the Super Bowl, and so the big corporate ads, 0:19:45.320 --> 0:19:47.600 the you know, the the as it weren't plugging brands 0:19:47.640 --> 0:19:50.880 per se um like the bud Wiser at promoting their 0:19:50.880 --> 0:19:55.000 water relief efforts, were taking things of a more humanitarian approach, UM, 0:19:55.080 --> 0:19:58.280 kind of a safe issue that nobody can object to. UM. 0:19:58.280 --> 0:20:01.600 So I think that was the strategic to this year. John, 0:20:01.680 --> 0:20:04.479 I have to wonder whether you're seeing an increasing number 0:20:04.760 --> 0:20:09.280 of ads direct viewers to their websites to watch longer 0:20:09.359 --> 0:20:12.280 saga as I saw that. It was certainly a part 0:20:12.400 --> 0:20:16.800 of some of the strategies, but is that an increasing one. Um, 0:20:16.840 --> 0:20:19.080 It's not increasing only because it's been a very common 0:20:19.080 --> 0:20:22.440 tactic for you know, for the last ten years or so. UM. 0:20:22.520 --> 0:20:27.080 You know, many companies are putting their commercials out online 0:20:27.560 --> 0:20:29.720 uh up to a week in advance of the Super Bowl, 0:20:30.080 --> 0:20:33.520 promoting them through YouTube, promoting them through social media, UM, 0:20:33.560 --> 0:20:35.320 and leaving them there after the game so people can 0:20:35.359 --> 0:20:37.560 go back and watch them the second time. UM. So 0:20:37.600 --> 0:20:41.119 the social media wrap around UM is very well integrated 0:20:41.119 --> 0:20:45.399 into brand strategy for Super Bowl advertising. Thank you very 0:20:45.440 --> 0:20:47.800 much for joining us. John Swallen is the chief research 0:20:47.840 --> 0:20:51.359 officer for Kantar Media. He joins us from New York, 0:20:51.400 --> 0:21:07.760 giving us his perspective on Super Bowl Advertising. Well, a 0:21:07.760 --> 0:21:11.399 lot has changed in the retail world since nine and 0:21:11.440 --> 0:21:14.240 here to tell us more. As Lindsay Rupper, specialty retail 0:21:14.320 --> 0:21:18.000 reporter for Bloomberg News. Lindsay can be followed on Twitter 0:21:18.160 --> 0:21:22.320 at l c Rupp and you can listen to her podcast, 0:21:22.640 --> 0:21:26.359 Lindsay's Material World Podcast. It is at Bloomberg dot com 0:21:26.400 --> 0:21:32.080 Slash podcast Material Slash rather Underscore World. All right, Lindsay, 0:21:32.119 --> 0:21:34.320 thanks for being being here. Um, I just want to 0:21:34.320 --> 0:21:36.800 start off with a little news about Bontage stores because 0:21:36.840 --> 0:21:39.800 I was looking today bankruptcy doesn't look like anyone's gonna 0:21:39.840 --> 0:21:42.800 come and really throw them a lifeline. And they if 0:21:42.840 --> 0:21:46.160 you go to their website up to seventy percent off, 0:21:46.680 --> 0:21:48.920 what happens when they get to a cent off? Does 0:21:48.920 --> 0:21:51.920 that mean they start to sell things? You know? I 0:21:51.960 --> 0:21:53.359 don't know what it's going to take for them to 0:21:53.400 --> 0:21:56.720 sell things. The problem is for all these retailers, they're 0:21:56.960 --> 0:22:00.159 just too many stores, and people have more options than 0:22:00.240 --> 0:22:02.560 ever for places to shop. And so if it's not 0:22:02.600 --> 0:22:04.760 a great experience, or it's not on trend, or it's 0:22:04.760 --> 0:22:07.280 not the right product, you have other options. You're not 0:22:07.359 --> 0:22:10.800 loyal anymore. So, Lindsay, you wrote a piece, and I 0:22:10.800 --> 0:22:14.760 found it fascinating about how this sort of death of 0:22:14.840 --> 0:22:19.800 retail has been a long time coming. Can you explain, Yeah, absolutely, so. 0:22:20.240 --> 0:22:24.440 Apparel retail specifically is plagued by a myriad of issues, 0:22:24.480 --> 0:22:26.119 and it's you know, it's really easy to say, oh, 0:22:26.119 --> 0:22:30.479 it's Amazon, Amazon's killing these apparel retailers and companies like Bontan, 0:22:30.600 --> 0:22:33.640 but it really is so much more than that. You know, it's, Uh, 0:22:33.680 --> 0:22:36.760 it's that these apparel retailers got really slow in terms 0:22:36.840 --> 0:22:38.360 of it takes a long time for them to get 0:22:38.359 --> 0:22:40.199 product to market, and then you've got H and M 0:22:40.200 --> 0:22:42.919 and Zara who can get on trend styles to you 0:22:43.000 --> 0:22:46.359 in weeks. Or uh, it's the fact that people have 0:22:46.480 --> 0:22:49.080 more options of places to shop. Or it's the fact 0:22:49.119 --> 0:22:52.680 that prices have been driven down by discounters and by 0:22:52.720 --> 0:22:55.320 fast fashion companies, and so you don't want to pay 0:22:55.440 --> 0:22:57.760 full price for a white T shirt because you can 0:22:57.800 --> 0:23:01.600 get it almost anywhere for less. Um it's it's just 0:23:01.680 --> 0:23:04.480 so many different factors that are really hurting the apparel 0:23:04.520 --> 0:23:07.439 industry and they've been really slow to transform. And I 0:23:07.440 --> 0:23:09.480 think we're starting to see and will continue to see 0:23:09.560 --> 0:23:12.040 the fallout from that. Well, Lindsay. You mentioned that there 0:23:12.080 --> 0:23:14.240 are a variety of things that are contributing to this. 0:23:14.440 --> 0:23:17.520 No one needs to buy a separate wardrobe for their 0:23:17.520 --> 0:23:21.840 workplace anymore. You also mentioned that things such as neckties 0:23:21.960 --> 0:23:25.600 seemed to be disappearing from at least the most heavily 0:23:25.640 --> 0:23:30.760 purchased of items, as well as the introduction of sort 0:23:30.760 --> 0:23:34.280 of new trend setters who are not celebrities. They're all 0:23:34.320 --> 0:23:38.040 over social media, right, I mean, the societal and cultural 0:23:38.080 --> 0:23:41.439 shifts in the way that we think about fashion, uh, 0:23:41.640 --> 0:23:44.080 is a huge problem for the apparel industry. So it 0:23:44.200 --> 0:23:46.879 used to be that you'd spend money on your wardrobe 0:23:46.920 --> 0:23:49.280 because you know, the fashion industry was telling you these 0:23:49.280 --> 0:23:51.720