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Trump Tariff Threat, Retail Earnings · Bloomberg Intelligence

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Speaker 3: Sure our typic story. The geopolitical story of the day
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Speaker 3: is tarris President like Trump looking at post tariffs on
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Speaker 3: a lot of our leading partnershare. Brendamurray joins his Bloomberg
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Speaker 3: Global Trade editor. Hey Brendan, you're the expert on trade.
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Speaker 3: What do you make of this story here about TIFFs?
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Speaker 4: Well, for those of us who covered Trump's first term,
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Speaker 4: this was a bit of a flashback to a time
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Speaker 4: when you might get a message from your boss at
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Speaker 4: eight o'clock a night saying he's done it again. And
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Speaker 4: sure enough, the incoming president tweeted some tariff threats last
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Speaker 4: night to the three biggest US trading partners, China, Canada,
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Speaker 4: and Mexico. The ones that stood out were the cand
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Speaker 4: for the twenty five percent tariffs on mechs, everything from
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Speaker 4: Mexico and everything from Canada, which would essentially throw the
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Speaker 4: US economy into a tailspin blow up NAFTA and its successor, USMCA.
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Speaker 5: So that's what I didn't understand is Trump negotiated the
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Speaker 5: USMCA in twenty twenty when signed it with Mexico and Canada,
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Speaker 5: So why would he blow up his own agreement.
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Speaker 4: Yeah, you know, that's a good question, because these threats
1:32
Speaker 4: aren't intended necessarily to be promises that eventually get fulfilled.
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Speaker 4: They are threats, they are bluffs, and you know they're
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Speaker 4: meant to drive the other party to the negotiating table.
1:46
Speaker 4: So he will have plenty of advice. If this goes
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Speaker 4: to you know, January twentieth, then he's still threatening this,
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Speaker 4: He'll have a lot of advisors around him saying, you know,
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Speaker 4: you're going to destroy the US audio industry if you
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Speaker 4: do this. So you know, there's there's a lot of
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Speaker 4: time between now and the inauguration day. You know, maybe
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Speaker 4: there's some negotiation that can come out of it. That
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Speaker 4: you know that he's already gotten a call from Justin
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Speaker 4: Trudeau in Canada. The Mexican leader said said just a
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Speaker 4: few minutes ago that Mexico will respond with his own threats,
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Speaker 4: and she said, you know, the main exporters from Mexico
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Speaker 4: to the US are General Motors Stillantis and Ford Motor Company.
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Speaker 4: So you know there's the big you know, the big
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Speaker 4: auto companies there. So so we'll see what happens. But
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Speaker 4: you know, markets had a reaction, but it's nothing too
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Speaker 4: too drastic. Yep twelve eighteen hours afterwards.
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Speaker 3: Hi, Brendan, thank you so much. We appreciate it. Brenda Murray.
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Speaker 3: He's Global trade editor for Bloomberg News, joining us from
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Speaker 3: London via zoom So. I think some of the reporting
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Speaker 3: I've seen today alex is potentially using tariffs as a
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Speaker 3: bargaining chip for other issues down the line.
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Speaker 5: Literally, it's a dajav of twenty sixteen exactly right.
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3:19
Speaker 6: Headed back to the market here.
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Speaker 5: It is earning's craziness, particularly when it comes to retail.
3:24
Speaker 5: We got tons of news out here. Mary Ross, Gilbert
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Speaker 5: Bloomberg Intelligence and your equity analyst is joining us in
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Speaker 5: some of those retail earnings.
3:31
Speaker 6: Can we talk about Ross stores.
3:33
Speaker 7: For excuse me? Coles?
3:34
Speaker 6: Coles, right, Coles? What happened here? With Coles?
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Speaker 5: I get the weather situation, but I mean, is it
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Speaker 5: a real thing or is this the excuse of the weather?
3:44
Speaker 4: No?
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Speaker 8: So with Coles, it wasn't a weather thing at all.
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Speaker 8: It was an execution issue. So the company reported COMP
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Speaker 8: sales down nine point three percent. What that means is
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Speaker 8: that their core business, the core apparel categories, they were
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Speaker 8: in the double digits because so four beauty sales on
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Speaker 8: a comp basis were up nine percent. So what happened
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Speaker 8: in the quarter? What was the miss? It was on
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Speaker 8: the private label side. So as the company was bringing
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Speaker 8: in some new categories, including two hundred toys r US
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Speaker 8: shops in the quarter that they opened. Plus they have
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Speaker 8: some home decors impulse items that they've brought in, and
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Speaker 8: in so doing, they drew back on their private label
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Speaker 8: and then also petites and that really cost them dearly
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Speaker 8: in the quarter. Since then they haven't made improvements and
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Speaker 8: they saw toward the end of the quarter a five
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Speaker 8: hundred basis points improvement in the comp sales decline. But
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Speaker 8: this basically led to them naming a new CEO. They
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Speaker 8: have brought in Ashley Buchanan as CEO. He's with Michael
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Speaker 8: Stores and he's known for improving the profitability and turning
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Speaker 8: that business around. He also has had stints at Walmart
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Speaker 8: as the chief merchant of US e commerce and also
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Speaker 8: the CEO of that e comm business in Walmart, So
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Speaker 8: he really brings a lot to the party.
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Speaker 3: Wow, there's a lot of moving parts there at Cohl's
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Speaker 3: And as you mentioned, you know what the big issue
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Speaker 3: is execution. What did the company say, If anything, it's
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Speaker 3: about their core underlying demand out there. I mean, what
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Speaker 3: do they did? You give it any read on the consumer?
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Speaker 8: Yeah, I mean the reason why they missed on the
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Speaker 8: private label is because those are more open price point
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Speaker 8: items and that their core consumer is sort of that
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Speaker 8: lower to low middle income consumer. So they're earning under
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Speaker 8: fifty thousand, under seventy five thousand, and well they will
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Speaker 8: draw on some higher end consumers. The core consumer is
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Speaker 8: really they have less discretionary income in this environment, and
5:55
Speaker 8: then there's so many other choices out there with off
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Speaker 8: price mass merchants. We had great numbers that came out
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Speaker 8: of Walmart, and they're apparel category doing well, so I
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Speaker 8: think that's where they've had the miss. But they've really
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Speaker 8: stepped up engagement with their core consumer and they're seeing
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Speaker 8: that that's really, you know, helping the sales.
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Speaker 5: There is this just a matter of say Walmart. I
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Speaker 5: mean TJX is a little bit different. But let's just
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Speaker 5: say Walmart doing really well with over one hundred thousand
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Speaker 5: and under one hundred thousand.
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Speaker 6: They're a one stop shop. Is it really a Walmart story.
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Speaker 8: No, it's not really a Walmart story. It's really it's
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Speaker 8: a Cohle's execution story. That's really what happened. What about Abercrommie, Ah,
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Speaker 8: here's a different story. Abercrombie and Fitch hits it out
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Speaker 8: of the ballpark it again with comp sales up sixteen percent. Hollister,
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Speaker 8: which is their gen Z brand, was up twenty one percent.
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Speaker 8: Analysts were expecting eleven percent. This company did not say
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Speaker 8: weather was an issue for them. They said that they
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Speaker 8: always believe that they need have balanced categories so that
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Speaker 8: weather isn't a factor.
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Speaker 7: And of course it is a global.
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Speaker 8: Business and they were doing well across all markets, including China,
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Speaker 8: so they were also up in China as well. So
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Speaker 8: Abercrombie has a very different story, just superb execution. They
7:16
Speaker 8: have all the categories that their customers want. They introduced
7:20
Speaker 8: Your Personal Best YPB, which is kind of like a
7:23
Speaker 8: Lululemon alternative for their customer at more amenable price points,
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Speaker 8: and it's second full year of that business and it's
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Speaker 8: continuing to grow. So they're giving their consumers what they
7:35
Speaker 8: want and it's showing up in the results. So quite
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Speaker 8: a different story with Abercrombie.
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Speaker 3: So the stock's off five percent, but I see that
7:43
Speaker 3: the stock was up sixty six percent year to date.
7:45
Speaker 3: So is just a little profit taking today for Abercrombie.
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Speaker 8: Investors, Yeah, probably a little breather. I think they're going
7:53
Speaker 8: to continue to execute going forward. And then when you
7:55
Speaker 8: think of the big headlines right now with tariffs with
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Speaker 8: abercrombiere teriff exposure for imports coming from China into the
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Speaker 8: US is only like five to six percent of sales,
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Speaker 8: and they could also dial that back further if necessary.
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Speaker 5: Well when it comes to an overall macro takeaway. So
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Speaker 5: that's the unquestioned right, we don't know what the tariff
8:17
Speaker 5: situation is going to be. What is our Macro read
8:20
Speaker 5: on the retail names that you cover, because as you
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Speaker 5: made it clear, like the cols is execution, So can
8:25
Speaker 5: we really take something away.
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Speaker 6: What's your broader take here?
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Speaker 8: Well, based on most of the companies that have reported
8:33
Speaker 8: so far, weather has definitely had an impact. So for example,
8:37
Speaker 8: we also had Burlington Stores, which is in the off
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Speaker 8: price space and it's one of the fastest growing because
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Speaker 8: it's so small and they're opening up about one hundred
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Speaker 8: stores every year, and their comp sales rose just one percent.
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Speaker 8: Analysts were expecting two point two percent, but they said, look,
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Speaker 8: winter weather categories make up about fifteen percent of our
8:58
Speaker 8: sales in the third quarter, so if you strip it out,
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Speaker 8: our comp sales were really up four percent. So they
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Speaker 8: are saying, hey, we were prepared for the weather, and
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Speaker 8: we didn't get it until really until we moved into November.
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Speaker 8: So I think most of the companies that have reported,
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Speaker 8: including TJX, which had great numbers, but they also missed
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Speaker 8: a little on the comp sales and it was due
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Speaker 8: to weather. So that's been the underlying, I think factor,
9:26
Speaker 8: and I think we'll probably hear it coming out of
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Speaker 8: Nordstrom when they report after the clothes today too, but
9:32
Speaker 8: we do think that Nordstrom could beat estimates, but we'll
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Speaker 8: see when they report later.
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Speaker 3: Mary, when all is said and done here this holiday season,
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Speaker 3: how do you think it's going to turn out from
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Speaker 3: a top line number.
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Speaker 8: I'm very optimistic. I think the consumer has proven to
9:47
Speaker 8: be very resilient and if you have highly desirable apparel,
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Speaker 8: you're going to get the sales. And clothing is a
9:55
Speaker 8: big category for the holidays, so it's the second largest,
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Speaker 8: you know, second to let's say, electronics, So I think
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Speaker 8: it's going to perform well. If you look at a
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Speaker 8: lot of the holiday dressing that's out there, it's pretty exciting.
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Speaker 8: We now have cool weather that is set in in
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Speaker 8: most parts of the country. That's good news. That's going
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Speaker 8: to draw sales. And that's actually based on our consumer
10:19
Speaker 8: survey that we conducted recently. The number one driver second
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Speaker 8: to discounts is weather. The change in weather. The change
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Speaker 8: in weather does cause consumers to go out and spend
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Speaker 8: money on new clothes.
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Speaker 5: So, like, we make fun of it, but it's real,
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Speaker 5: I guess. I mean, I never see the weather thing
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Speaker 5: on earnings release. I'm like, uh huh, so sure, all right,
10:39
Speaker 5: thanks a lot. We really appreciate Mary Ross Gilbert joining
10:41
Speaker 5: us from a Boomberg Intelligence.
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Speaker 3: Peter Chair Joints, US head of Macro Strategy Academy Securities. Hey, Peter,
11:03
Speaker 3: you and your team you woke up Wednesday, November sixth,
11:06
Speaker 3: the morning after the election and when it became a
11:09
Speaker 3: parent that president like Trump was going to be the
11:12
Speaker 3: next president and that we would have a Republican control
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Speaker 3: of Congress. To what extent if any, did that alter
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Speaker 3: the way you guys think about investments going forward?
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Speaker 9: You know, I think for us there's two things about
11:23
Speaker 9: it right One, what's it going to do on the
11:25
Speaker 9: geopolitical landscape? What's it going to do on the domestic landscape?
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Speaker 9: And what will that do then for our investments? And
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Speaker 9: I think really it takes us to really being all
11:33
Speaker 9: in on commodities. We think commodities, whether it's rare, earth's,
11:36
Speaker 9: critical minerals, oil, are going to be supported by this government.
11:40
Speaker 9: I think you're going to see some activity in the chips.
11:42
Speaker 9: I think you're going to see kind of a national
11:44
Speaker 9: security type level thing where one we impose some tariffs,
11:47
Speaker 9: maybe strategically, but also we actually provide some supplements and
11:52
Speaker 9: some boost to the companies that we need to do
11:54
Speaker 9: things domestically. And I think one of the big things
11:57
Speaker 9: that's going to change is not in my backyard. We're
12:00
Speaker 9: going to review a lot of the rules that have
12:02
Speaker 9: been in place over the last ten to fifteen years
12:04
Speaker 9: that were done when there was a luxury that the
12:05
Speaker 9: US was the sole superpower that are going to be
12:08
Speaker 9: rethought a little bit in terms of, hey, China's and
12:10
Speaker 9: economic superpower. They're fighting with us. What are we going
12:13
Speaker 9: to do about it?
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Speaker 5: Well, Peter was interesting though when you mentioned commodities, is
12:17
Speaker 5: that the result of all this can also be a
12:20
Speaker 5: stronger dollar, which could be negative for commodities.
12:22
Speaker 6: How do you square those two things?
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Speaker 9: So, in fact, I think you're right. I don't think
12:27
Speaker 9: commodities themselves are going to do particularly well, but the
12:30
Speaker 9: commodity related companies will do very well. Right, They're going
12:33
Speaker 9: to be allowed to produce more, They're going to be
12:34
Speaker 9: allowed to make profits. So I think you want to
12:36
Speaker 9: continue to play in those stocks. I look at XL,
12:38
Speaker 9: for example, on the energy space that has continued to
12:41
Speaker 9: do well, even while oil itself hasn't done well. So
12:43
Speaker 9: this is much more a play in the companies themselves
12:45
Speaker 9: because they're going to be able to produce more. And
12:47
Speaker 9: I think anyone who does services should do very well.
12:50
Speaker 9: So I think that's the play. It's not in the
12:52
Speaker 9: commodities itself, It's in the commodity related stocks.
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Speaker 3: Peter Reed overnight we had a bunch of tariff discussion
13:01
Speaker 3: coming from the President and elect. How do you think
13:04
Speaker 3: about tariffs and does that impact maybe sectors you look
13:08
Speaker 3: at around the world.
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Speaker 9: So right now, I'm not overly concerned about tariffs. I
13:13
Speaker 9: think Wall Street coming into the election just took every
13:16
Speaker 9: worse thing you know than you know. Trump on the
13:19
Speaker 9: campaign trails set about tariffs and came up with these
13:21
Speaker 9: kind of ridiculous assumptions. How I see it as he
13:23
Speaker 9: is trying to negotiate this, and I think one change
13:26
Speaker 9: we have to remember is Trump is going to say
13:28
Speaker 9: this right up until the last minute. Right he can't say, hey,
13:31
Speaker 9: don't worry about this, I'm just faking to get them
13:33
Speaker 9: to the table, because that would lose all the power.
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Speaker 9: He does have the benefit that he actually did put
13:37
Speaker 9: tariffs on in twenty eighteen, which at the time a
13:40
Speaker 9: lot of econdoms said were awful. We said, we're just
13:43
Speaker 9: we weren't starting a trade war. We were only fighting
13:45
Speaker 9: back for the first time. None of those economists complained
13:48
Speaker 9: in twenty twenty two, when there's twenty twenty when Biden
13:50
Speaker 9: left those tariffs on. So I think this is more
13:52
Speaker 9: negotiating employee. We'll bring China to the table, We'll bring Canada,
13:55
Speaker 9: mex to the table. I think with China it's pretty
13:58
Speaker 9: easy negotiations right now. I think think there will be
14:01
Speaker 9: we can't give in on anything on high tech. We
14:03
Speaker 9: can give in on things like food, and we will
14:05
Speaker 9: try and work with them, and China is probably going
14:07
Speaker 9: to have to absorb some of the costs of whatever
14:09
Speaker 9: get implemented. Is there economies not so well, I would
14:12
Speaker 9: say discussions around the world. It's Mexico that just seems
14:15
Speaker 9: we should be thinking more about tariffs and more about
14:17
Speaker 9: how do we really work with Mexico to create a
14:20
Speaker 9: robust environment or an industrial manufacturing base that we can utilize.
14:24
Speaker 5: Right Yes, exactly ex staring that that base won't be
14:28
Speaker 5: really going away. How does this all then translate to
14:31
Speaker 5: the bond market, right, Because in terms of narrative storytelling,
14:34
Speaker 5: the story was, ooh, Scot percent, we like him, that's
14:37
Speaker 5: going to be good for treasury, that we want to
14:39
Speaker 5: buy treasuries a lot, and yields go down. Then today, oops,
14:42
Speaker 5: we have tariffs. Maybe that is distressing. We're going to
14:45
Speaker 5: sell a little bit in the belly. That's the narrative.
14:48
Speaker 5: What's the correct narrative?
14:50
Speaker 9: So I think at four fifty it was pretty obvious
14:52
Speaker 9: even four to forty five you should be buying treasuries.
14:54
Speaker 9: I think we get down to ten four, ten, four fifteen,
14:57
Speaker 9: partly because I think people got ahead of themselves on deficits,
15:00
Speaker 9: they got ahead of themselves on terrorists, and some of
15:03
Speaker 9: that's getting walked back. But I also look very closely
15:05
Speaker 9: at positioning. You have spec short interest is very high
15:07
Speaker 9: in treasuries. You have a lot of the CTAs are
15:09
Speaker 9: allegedly pretty short treasuries. You'd even seen kind of retail
15:13
Speaker 9: coming out of some of the long and duration. So
15:15
Speaker 9: I think people kind of got whipsawd are badly positioned.
15:17
Speaker 9: So I think you get to four to ten, maybe
15:19
Speaker 9: four fifteen, that range on tens, and then you want
15:22
Speaker 9: to start shorting again because the story won't be rosy
15:24
Speaker 9: next year. But people price them way too much, way
15:27
Speaker 9: too early.
15:28
Speaker 6: Credit risk.
15:29
Speaker 3: How much credit risk, if any, do you want to take?
15:30
Speaker 3: Because I note that the best performance in fixed income
15:33
Speaker 3: has been US high yield and US leverage A loans.
15:36
Speaker 9: Yeah, I think you continue to take credit risk. And
15:39
Speaker 9: I've looked at it from two standpoints. One is, at
15:41
Speaker 9: the high quality end, I think more and more people
15:44
Speaker 9: are overweight, you know, short dated corporates versus t bows. Right,
15:46
Speaker 9: you still don't know what's going to happen with debt
15:48
Speaker 9: ceiling things like that. And then at the long end,
15:50
Speaker 9: you have this really neat competition, right, you have all
15:52
Speaker 9: this private credit pushing in. And then I think you
15:55
Speaker 9: saw a lot of banks pull back on their lending
15:56
Speaker 9: after Silicon Valley Bank. So what they've had to do
15:59
Speaker 9: is now catch up, so they're lending. So you have
16:01
Speaker 9: a lot of support for this, and you know, I'd
16:03
Speaker 9: be more worried about the leverage loan than the high
16:05
Speaker 9: yield bond market. I think you know one thing I
16:07
Speaker 9: really get frustrated. I see a lot of charts ten, fifteen,
16:09
Speaker 9: twenty year charts on high yield. It's so not the
16:13
Speaker 9: right thing to look at. The high yield market used
16:14
Speaker 9: to be very small, issuers companies that you didn't know.
16:17
Speaker 9: Almost every issue in the highield market now is big.
16:20
Speaker 9: They have public equity. It's hard to get surprised, so
16:22
Speaker 9: I think that makes sense. Leverage loans, I think are
16:25
Speaker 9: a little bit you know, where you have more one
16:27
Speaker 9: off trades. So I would be probably moving out of
16:30
Speaker 9: leverage loans focused on, you know, the high yield. I think,
16:33
Speaker 9: you know, some of the business development corporations could be interesting,
16:36
Speaker 9: but I'm very comfortable credit here right now.
16:38
Speaker 6: Still, Peter's so great to catch up with you.
16:41
Speaker 5: I mean, it's like any question you ask if you
16:43
Speaker 5: have an opinion and answer, and they're usually right. All right,
16:45
Speaker 5: Peter Cheer ahead of Macro Strategy at Academy Security.
16:47
Speaker 6: Thank you so much. Really appreciate that.
16:51
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17:09
Speaker 5: Let's pust some biotech here. So you have amgine sinking
17:12
Speaker 5: after its weight loss drug. Maybe wasn't as good as expected,
17:17
Speaker 5: I mean, though it's still delivered some solid results. You
17:19
Speaker 5: also have a Novo Nordisk and Eli Lilly rising potentially
17:22
Speaker 5: the Biden administration proposing that Medicare and Medicaid covered the
17:25
Speaker 5: obesity drugs.
17:26
Speaker 6: So who do we go to?
17:27
Speaker 5: We go to Sam sam Fazelli, Bloomberg Intelligence director of
17:29
Speaker 5: Research for Global Industries and a senior pharmaceutical analyst. Hey, Sam,
17:34
Speaker 5: how real is this Biden proposal?
17:36
Speaker 6: Do you think?
17:38
Speaker 10: Well, Alex, the thirty five billion dollar number was floated
17:42
Speaker 10: a little while ago. As to the cost of this
17:45
Speaker 10: to the system over nine years, it's not exactly a
17:49
Speaker 10: large number, right. If you could genuinely get a significant
17:53
Speaker 10: number of people at the sort of ages that they
17:56
Speaker 10: are in the Medicare program, reduced their risk of invascular disease,
18:00
Speaker 10: reduce the risk of sleep happena, the kidney disease, which
18:04
Speaker 10: is what these drugs do, I think that's a win.
18:07
Speaker 10: So I think this is a really good possibility for
18:09
Speaker 10: it to happen. Obviously, President Biden wants it to happen.
18:13
Speaker 10: The question really is whether the next administration is going
18:16
Speaker 10: to try and reverse it or would there be appetite
18:18
Speaker 10: to continue with it.
18:20
Speaker 3: All right, we're speaking weight loss drugs. What happened to
18:23
Speaker 3: am jen? It's rare that I see these guys swinging
18:26
Speaker 3: miss here.
18:29
Speaker 10: Well, so, Paul, I think there was. We've seen this
18:34
Speaker 10: movie place over and over again. Companies say we've got
18:38
Speaker 10: a great obesity drug, and let's be honest. You know,
18:41
Speaker 10: twenty percent weight loss isn't bad and side effect profile okay,
18:46
Speaker 10: maybe a little bit worse, but this was a dose
18:48
Speaker 10: escalation trial, et cetera, et cetera. The problem is everybody
18:52
Speaker 10: gets that sort of level of efficacy. How are you
18:55
Speaker 10: going to compete against the might of No One nor
18:58
Speaker 10: Disk and Lily when they come to market where they've
19:01
Speaker 10: got all those indications just talked about sleep apnea, cardivascular
19:06
Speaker 10: risk reduction, kidney osteoarthritis, and they've been on the market
19:12
Speaker 10: for X number of years and over noticed with the
19:15
Speaker 10: diabetes indication included over and well over a decade. So
19:19
Speaker 10: how do you compete? You need better data than that
19:21
Speaker 10: and somebody might say, okay, well it's a once a
19:25
Speaker 10: month drug. Well really once a month versus once every
19:29
Speaker 10: week with the pen that you don't even notice you using.
19:32
Speaker 10: I think that's what a lot of people would say.
19:34
Speaker 10: So that's where the issue is. They needed to really
19:37
Speaker 10: hit a home run and they ran a there and
19:41
Speaker 10: also run instead.
19:44
Speaker 5: So do you think they're gonna so what's going to
19:45
Speaker 5: take for them to not do an also round.
19:49
Speaker 10: I'm pretty sure they're going to continue to do the trials.
19:52
Speaker 10: Maybe they'll find that they can extend to every quarter
19:56
Speaker 10: instead of every month. Then that becomes a little bit
19:58
Speaker 10: more interesting potentially. But at the end of the day,
20:01
Speaker 10: a lot of these drugs we still we saw it
20:03
Speaker 10: with rash, we saw it to a degree with AstraZeneca.
20:06
Speaker 10: They come up with the excitement, how we've got a
20:08
Speaker 10: new drug. Although at least Rushi and Asentica have some
20:11
Speaker 10: oral versions. I think these guys maybe are also looking
20:14
Speaker 10: at a rural versions. Uh and the news comes there
20:19
Speaker 10: go oh okay, so what does it take. It needs
20:22
Speaker 10: to be significantly.
20:23
Speaker 3: Different, So about the oral version taking via pill just
20:27
Speaker 3: asking for a friend, by by the way, what are
20:29
Speaker 3: you guys gonna come up with that because I just
20:31
Speaker 3: consider you're a big pharma.
20:33
Speaker 10: Yeah I am, I am, I am big farmer.
20:36
Speaker 4: Look at me.
20:38
Speaker 10: No, no, look Oral, I think it will come. There
20:41
Speaker 10: are drugs in development and they're going to go through
20:44
Speaker 10: it and they'll come again. What are they useful for?
20:48
Speaker 10: Because nobody seems to bat annihilid to take an injection
20:51
Speaker 10: once a week. Again, as I said, these needles are
20:54
Speaker 10: very fine. So most people say they don't even feel
20:56
Speaker 10: it going in. Not everybody. Some people don't like a
20:59
Speaker 10: needle injection.
21:01
Speaker 3: I'm the one that applies the injection and it's fun.
21:06
Speaker 7: I enjoy it.
21:06
Speaker 6: It's yeah.
21:09
Speaker 3: We do it every Saturday. I got to get an
21:11
Speaker 3: adult beverage, a cocktail. We gather and we do the injection.
21:15
Speaker 10: It's kind of this is a group activities, Yes it is.
21:19
Speaker 6: It is all right, Sam beg group.
21:20
Speaker 3: But yeah, thank you so much. Sam Fazzelli, he's a
21:23
Speaker 3: director of research for Global Industries. I'm not sure what
21:26
Speaker 3: that is, but I know he's a senior pharmaceuticals analyst
21:29
Speaker 3: for Bloomberg Intelligence. He's one of the best in the
21:32
Speaker 3: city of London. Widely highly regarded in London and in
21:36
Speaker 3: the US.
21:38
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
21:42
Speaker 2: weekdays at ten am Eastern on applecar Play and Android
21:45
Speaker 2: Auto with the Bloomberg Business. You can also listen live
21:48
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21:52
Speaker 2: Say Alexa, playing Bloomberg eleven.
21:54
Speaker 5: Thirty Alex Steel alongside Polsmoeni Bloomberg Intelligence Radio. We're broadcasting
21:59
Speaker 5: to live from Interactive Brooker Studio right here in Midtown Manhattan.
22:03
Speaker 5: So we hit a record high yesterday on the SMP,
22:05
Speaker 5: didn't close it a record high. We had another record
22:07
Speaker 5: high today on the SMP. And Deutsche Bank comes out
22:09
Speaker 5: with its SMB forecast for next year at the high
22:12
Speaker 5: end seven thousand. It is one of the most bullish
22:15
Speaker 5: forecasts over on Wall Street. Let's talk to Anna Rapper,
22:18
Speaker 5: now a CIO at Sibiz Investment Advisory Services, and are
22:21
Speaker 5: you also going to be like, hey, sixty six hundred
22:24
Speaker 5: next year seven thousand, How bullish are you?
22:27
Speaker 1: Well? I don't know if I would do that at
22:29
Speaker 1: twenty two x forward pe multiples. You know, I think
22:34
Speaker 1: a lot of what's happening in the markets right now
22:37
Speaker 1: is just euphoria for one reason or another. There's promise
22:42
Speaker 1: of tax cuts. There's this idea that tax you know,
22:46
Speaker 1: the tax cuts from twenty seventeen are going to be extended,
22:50
Speaker 1: especially because if we have a red wave, there's promise
22:53
Speaker 1: of deregulation. There are no details right now, so it's
22:57
Speaker 1: sort of running on fumes. But one we have the
23:00
Speaker 1: details in twenty twenty five, we're expecting there to be
23:03
Speaker 1: a lot of volatility as the markets start to price
23:06
Speaker 1: in those details. So sitting here at twenty two x
23:10
Speaker 1: PE multiple, I'm not necessarily thinking that it's going to
23:13
Speaker 1: be a road straight up.
23:15
Speaker 3: So the day after the election, on a did you
23:17
Speaker 3: and your team make any material changes to your outlook,
23:21
Speaker 3: your asset allocation? How did you guys try to process that?
23:27
Speaker 1: You know, in terms of asset allocation, we did have
23:30
Speaker 1: a little bit of an overweight and small cap because
23:34
Speaker 1: we believe that if mister Trump had won that the
23:38
Speaker 1: upside would be greater than the downside if he hadn't won.
23:41
Speaker 1: So that worked out for us. It's still working out
23:43
Speaker 1: for us. But in terms of outlook, you know, you
23:47
Speaker 1: have to sort of ask how much again, how much
23:50
Speaker 1: of this euphoric outlook is actually going to take place?
23:55
Speaker 1: And we don't know if there's going to be an
23:57
Speaker 1: actual fundamental change to the US economy in the boots
24:01
Speaker 1: on the ground kind of fashion that it would actually
24:05
Speaker 1: make us think differently about the labor market or think
24:08
Speaker 1: differently about prices, because one person in the White House
24:12
Speaker 1: can't change that. So we're still a little bit skeptical
24:16
Speaker 1: about a lot of this enthusiasm. But I guess only
24:18
Speaker 1: time will tell.
24:19
Speaker 5: So this was a total reducs from twenty sixteen. Right
24:22
Speaker 5: like you get a tweet, you get an instantaneous stock
24:26
Speaker 5: move or an individual stock move, and then you'd have
24:28
Speaker 5: the weight. Maybe this won't be the end goal, maybe
24:31
Speaker 5: something will change and then sort of a pairing back
24:33
Speaker 5: of the market reaction.
24:35
Speaker 6: How do you avoid that this time.
24:37
Speaker 5: In that are there places you can go where you
24:39
Speaker 5: don't have to worry about the tweets?
24:42
Speaker 1: I'm not sure. I'm not sure if we can finde
24:45
Speaker 1: I mean, if twenty sixteen to twenty twenty taught us
24:47
Speaker 1: anything that these tweets or I guess it's truth, social
24:51
Speaker 1: or whatever platform it is, it's gonna come now. I
24:54
Speaker 1: think the people that mister Trump has surrounded himself with
24:58
Speaker 1: will make a difference as we saw yesterday. There's a
25:01
Speaker 1: lot of confidence in Scott Besant, and I think some
25:05
Speaker 1: of the news that came out on the new tariff
25:08
Speaker 1: threats that will also probably involve not just the Treasury,
25:12
Speaker 1: but the Commerce Department as well, because the negotiating factor
25:16
Speaker 1: here isn't economic. The negotiating factor here is drugs and immigration,
25:21
Speaker 1: and it will impact certain industries more than others. So
25:24
Speaker 1: I think there's going to be hopefully a group effort
25:27
Speaker 1: in looking at some of these you know, so called
25:29
Speaker 1: you know, tweet based policies, and it will continue to
25:33
Speaker 1: be measured, and that is that is definitely a hope.
25:37
Speaker 3: Fixed income space, Anna, how do you think about this?
25:39
Speaker 3: Do you stick with the two year treasury at four
25:41
Speaker 3: and a quarter or do you go out there and
25:42
Speaker 3: try to take some credit risk here?
25:45
Speaker 1: Yeah, you know, we've all we've had credit positions both
25:49
Speaker 1: on the investment grade side as well as high yeel side.
25:52
Speaker 1: Their sizing is different. We favor investment grade because I
25:56
Speaker 1: think that the credit spreads are narrow and that does
25:59
Speaker 1: worry us a little litle bit, and we have taken
26:01
Speaker 1: some chips off the table, but we do think that
26:04
Speaker 1: as long as the economic growth seems to be in
26:08
Speaker 1: place that it's going to be fine, And in terms
26:12
Speaker 1: of clipping coupons, we can continue to clip them. In
26:15
Speaker 1: the high yield space, we are a little bit cautious
26:18
Speaker 1: because there tends to be an equity beta component to
26:21
Speaker 1: the price movement when things do go wrong. But in
26:24
Speaker 1: the meantime we can still continue to clip coupons. So
26:28
Speaker 1: right now for us in fixed income space, it is
26:30
Speaker 1: really a clipping of the coupon environment.
26:33
Speaker 5: Yeah, and then just kind of watching and waiting and
26:35
Speaker 5: seeing when that trade will reverse. I want to get
26:38
Speaker 5: your tech on small caps. So record high yesterday, MidCap,
26:41
Speaker 5: same deal. Now the rustle is down one percent. Clearly
26:44
Speaker 5: is a terriff overhang here. What do you do with
26:46
Speaker 5: those really economically sensitive parts of the market. I mean,
26:49
Speaker 5: materials and industrials are one of the worst performers in
26:51
Speaker 5: the S and P.
26:53
Speaker 1: Yeah, so small caps. I think the ride up, I
26:56
Speaker 1: mean we were enjoying it right now, but we're also
26:58
Speaker 1: internally talking about, Okay, what do we do with this
27:01
Speaker 1: overweight position because the headwind for small caps isn't gone
27:07
Speaker 1: because mister Trump got elected. I mean, maybe there may
27:09
Speaker 1: be some deregulation that would be helpful. But remember what's
27:13
Speaker 1: happening in the treasury market is that yields are heading up.
27:16
Speaker 1: I mean we're seeing that today with the whole trade
27:19
Speaker 1: talk or tariff talk. That's not going to be helpful
27:23
Speaker 1: for small caps. And certainly tariffs as we see today
27:26
Speaker 1: aren't going to be helpful for small caps. So I
27:28
Speaker 1: think there needs to be we can have exposure to it,
27:31
Speaker 1: but there needs to be an intelligent discussion about what
27:34
Speaker 1: the right sizing is.
27:36
Speaker 3: Thank you so much for joining us, Anna Rathbund. She's
27:39
Speaker 3: a chief investment officer for ceba's Investment Advisory Services based
27:43
Speaker 3: out there in Ohio in the Cincinnati area.
27:47
Speaker 2: There you're listening to the Bloomberg Intelligence Podcast. Catch us
27:52
Speaker 2: live weekdays at ten am Eastern on Apple card Play
27:55
Speaker 2: and Android Auto with the Bloomberg Business app. You can
27:58
Speaker 2: also listen live on AM on Alexa from our flagship
28:01
Speaker 2: New York station, Just Say Alexa playing Bloomberg eleven.
28:05
Speaker 3: Thirty Alex Steele and Paul Sweeney. We are live here
28:09
Speaker 3: in our Bloomberg Interactive Brokers studio in New York City.
28:11
Speaker 3: Were streaming live on YouTube, so head over to YouTube
28:14
Speaker 3: dot com search Bloomberg Podcast that's where you will find us. Well,
28:17
Speaker 3: the retail earnings, they are coming in fast and furious.
28:21
Speaker 3: Right now, We're going to take a look at a
28:22
Speaker 3: couple of them, best Buy and Dick's Sporting Goods. Best
28:25
Speaker 3: Buy a little bit weaker stock trading down about six percent.
28:28
Speaker 3: Dick Sporting Goods, however, they strong back to school stocks,
28:32
Speaker 3: trading a little bit higher here today. Stucks a forty
28:34
Speaker 3: seven percent Dick Sporting Goods year today. That's a big
28:37
Speaker 3: move for a retailer. Lindsay Dutch joins US consumer hardline
28:40
Speaker 3: senior analysts for Bloomberg Intelligence. She is safely aisconsed in
28:44
Speaker 3: our Princeton University campus down there, down at Princeton. Lindsey,
28:48
Speaker 3: thanks so much for joining us here. Let's start with
28:50
Speaker 3: Dick Sporting Goods. They called out strong back to school sales.
28:54
Speaker 3: That's that's a good sign.
28:57
Speaker 11: Yes, thanks for having me. I think Dix had a
28:59
Speaker 11: strong quarter, you know again, stronger than expected, sort of
29:03
Speaker 11: continuing the trend that we've seen earlier this year. You know,
29:07
Speaker 11: they have you know, the items that kids these days
29:11
Speaker 11: want in footwear, athletic apparel and their exclusive sort of
29:16
Speaker 11: vertical brands are also doing very very well, and that
29:19
Speaker 11: really supported that back to school and it gives a
29:22
Speaker 11: lot of optimism when we think about holiday and the
29:24
Speaker 11: fourth quarter coming out.
29:25
Speaker 5: So I realized that best Buy and dis are different stores,
29:28
Speaker 5: but the way you describe Dick Sporting Goods, it feels
29:31
Speaker 5: like it should have been the same for best Buy
29:33
Speaker 5: right back to school. They do have some exclusive items,
29:36
Speaker 5: et cetera.
29:36
Speaker 6: Why not.
29:38
Speaker 11: Yeah, So I think that's a great question, Alex. I think,
29:41
Speaker 11: you know, when we think back three months ago, best
29:44
Speaker 11: Buy had a great quarter and it was on back
29:48
Speaker 11: to school for them, back to school is a little bit.
29:50
Speaker 7: More college bias.
29:51
Speaker 11: It does hit a little bit earlier in the year,
29:54
Speaker 11: then Dix might benefit from. And the demand for laptops
29:59
Speaker 11: was very strong in the second quarter, and you know
30:03
Speaker 11: best By raise their guidance, there was strong optimism that
30:05
Speaker 11: we were going to get.
30:06
Speaker 7: Back to growth mode.
30:08
Speaker 11: I still think, you know, there's a possibility for a
30:10
Speaker 11: strong holiday for best Buy laptops did They were up
30:14
Speaker 11: comp sales seven percent in the third quarter, but that
30:18
Speaker 11: was overridden by weakness and some of the other categories appliances,
30:24
Speaker 11: home theater being key ones. It sounds like they're really
30:28
Speaker 11: leaning into promotions for the fourth quarter and really looking
30:33
Speaker 11: to get aggressive with promotion, especially for their premium product
30:37
Speaker 11: and things that are exclusive to best Buy, to really
30:41
Speaker 11: draw that shopper in.
30:43
Speaker 3: How's it when you talk to your retailer companies that
30:45
Speaker 3: you covered, lindsay, what are they saying about just this
30:49
Speaker 3: whole holiday season when all is said and done, How
30:50
Speaker 3: is it gonna We're gonna have growth this year? So
30:53
Speaker 3: better than last year? How are they shaking out?
30:55
Speaker 2: Really?
30:56
Speaker 7: Yeah? So growth looks pretty weak.
30:58
Speaker 11: I also think it's divergent and sort of like last year.
31:02
Speaker 11: So there's some categories that are just in a better position.
31:06
Speaker 11: You know, beauty would be one of those sports where
31:09
Speaker 11: you know, where Dix is playing. Is also one of
31:11
Speaker 11: those where just demand generally is a little bit stronger.
31:15
Speaker 11: And then we have other categories that are still on
31:17
Speaker 11: the weaker side, home appliances, and some of that still
31:22
Speaker 11: you know, obviously affects best Buy, It also affects companies
31:24
Speaker 11: like william Sonoma RH.
31:27
Speaker 7: We also have a bifurcation.
31:29
Speaker 11: I think in the consumer, you know, a higher in
31:31
Speaker 11: consumer still seems to be holding up pretty well. Dix
31:35
Speaker 11: is another benefactor there, you know, their customer base is
31:39
Speaker 11: on the higher income side, whereas best Buy is probably
31:42
Speaker 11: a little bit more like the average of the overall country.
31:46
Speaker 11: So I think, you know, the deal days that these
31:49
Speaker 11: companies are rolling out, you know, they each have their
31:52
Speaker 11: own strategies on how they want to manage that. But
31:56
Speaker 11: as I said, best Buy is going to get very
31:58
Speaker 11: aggressive with those deals. Consumer high or low income is
32:02
Speaker 11: very value focused, and we may have seen a pause,
32:06
Speaker 11: you know, people holding back waiting for those deals in
32:09
Speaker 11: the third quarter results.
32:11
Speaker 5: Yeah, it's like you're describing me exactly.
32:14
Speaker 3: Hey, Lindsey, how about from an industry perspective, when I
32:17
Speaker 3: if I ever find myself going into store, which I
32:20
Speaker 3: hope that doesn't happen, Am I going to find the
32:22
Speaker 3: stuff I'm looking for?
32:23
Speaker 6: Like?
32:23
Speaker 3: Has everybody got the inventory they need?
32:26
Speaker 9: Here?
32:26
Speaker 3: I don't hear too many, you know, supply chain stories anymore.
32:31
Speaker 11: Yeah, So supply chain, the supply chain woes of COVID
32:35
Speaker 11: have sort of gone away, you know. I think, you know,
32:38
Speaker 11: retailers maybe a little over a year ago were probably
32:41
Speaker 11: over inventoried. I think inventory is in a healthier position
32:45
Speaker 11: this year, you know, for the retailer themselves, but also
32:47
Speaker 11: for the shopper and I think that the retailers are
32:51
Speaker 11: working really hard to make that in store experience a
32:54
Speaker 11: positive one for those that go in store. But there's
32:57
Speaker 11: also a lot of focus online, so that mine shopper,
33:00
Speaker 11: you know, best Buy is doing doorbusters.
33:03
Speaker 7: Again this year, but it's it's for that in.
33:05
Speaker 11: Store shopper, but also if you are a member and
33:07
Speaker 11: have the app, you could also take advantage of that.
33:11
Speaker 11: So they're really looking to you know, capitalize on that experience.
33:16
Speaker 6: What about tariffs?
33:17
Speaker 5: So if we do get tariffs on China and Mexico
33:21
Speaker 5: and Canada, like we heard on True Social yesterday, what
33:25
Speaker 5: was the impact?
33:25
Speaker 6: How do they manage it?
33:27
Speaker 11: Yes, so best Buy they have talked about, you know,
33:32
Speaker 11: as a big picture, as a percent of cogs, about
33:36
Speaker 11: sixty percent of their inventory, you know, is manufactured in China.
33:42
Speaker 11: That's about the same as where it was in eighteen
33:44
Speaker 11: and nineteen. For the products that they they have direct
33:49
Speaker 11: control over, the exposure is low and they've sort of
33:52
Speaker 11: managed that down and they discussed on the call this
33:56
Speaker 11: morning that you know, the burden of that cost is
33:59
Speaker 11: really going to be shit between the manufacturer or supplier,
34:02
Speaker 11: the retailer, and the possibly the consumer if it comes
34:08
Speaker 11: to that.
34:08
Speaker 7: Dick's exposure is pretty low. When I look across my coverage.
34:13
Speaker 11: You know, elf Beauty stands out. They have eighty percent
34:16
Speaker 11: of their supply chain is manufactured in China.
34:19
Speaker 7: Very highly exposed.
34:21
Speaker 11: A company like that is looking to lean on price
34:24
Speaker 11: increases to sort of manage that type of cost.
34:27
Speaker 3: So terifs are inflationary, is that all I'm hearing?
34:29
Speaker 5: That's weird. I didn't know that. No one talked about
34:32
Speaker 5: that before. But again, like what we actually wind up seeing,
34:36
Speaker 5: et cetera, is that when it wint up being different. Lindsay,
34:38
Speaker 5: thanks a lot, Lindsa Dutch Bloomberg Intelligence Consumer Hardlines as
34:41
Speaker 5: senior analyst, joining us on best Buy in Dickporting Goods.
34:44
Speaker 5: All I heard was that best By sales are coming,
34:47
Speaker 5: But then I have to go there.
34:48
Speaker 6: I don't want to do that.
34:50
Speaker 8: Yeah, well, maybe a member or something along those lines.
34:52
Speaker 4: Right.
34:53
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