Latest / Bloomberg Intelligence / Too Much Worry About Emerging Markets: Van Eck's Fine

Transcript

Too Much Worry About Emerging Markets: Van Eck's Fine · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you.
0:05
Speaker 1: Along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. There is a push pull dynamic
0:24
Speaker 1: when it comes to emerging markets. On the one hand,
0:27
Speaker 1: you have an increasingly doubbish federal reserve potentially weaker dollar.
0:31
Speaker 1: On the flip side, you have trade wards that arguably
0:34
Speaker 1: may end up slowing certain economies, particularly those tied to
0:37
Speaker 1: China more than developed markets. Here to sort of pass
0:40
Speaker 1: through where the opportunities are here. As Eric Fine, portfolio
0:43
Speaker 1: manager focus on a marketing emerging markets fixed income at
0:47
Speaker 1: van Eck Global, he joins us here in our Bloomberg
0:49
Speaker 1: Interactive Broker studios. So where are we in terms of
0:53
Speaker 1: this dynamic? Is the sort of bull case for EM
0:56
Speaker 1: stronger right now or or the bear case? Um well,
1:00
Speaker 1: I as a you know twenty five plus your EM
1:03
Speaker 1: person um for twenty five years, I've been asked what
1:05
Speaker 1: do I think about emerging market sponds, and for years
1:08
Speaker 1: I've said I don't know, and I feel more and
1:10
Speaker 1: more comfortable. I think it depends country by country. However,
1:13
Speaker 1: that wasn't your question. Your question was broadly speaking, and
1:15
Speaker 1: so my answer would be if quote unquote emerging markets
1:18
Speaker 1: to you means um um a lot of exposure uh
1:23
Speaker 1: to names like Mexico or Turkey, um, or it means
1:28
Speaker 1: significant exposure to quote unquote E m f X, then
1:32
Speaker 1: then UM, I would be more cautious. Um. Right now
1:34
Speaker 1: the countries we are concerned about happen to be big
1:37
Speaker 1: ones UM, Mexico in particular, Turkey, ongoing, Russia is tricky
1:41
Speaker 1: because it's the fundamentals are fine. It's more about sanctions
1:43
Speaker 1: risk um. Um So, Uh I think you could. I
1:47
Speaker 1: think you could make a mixed case um and uh
1:50
Speaker 1: so I would say, but I would I would say
1:52
Speaker 1: the biggest concerns we have are that, uh, countries like
1:55
Speaker 1: Turkey there's too much trapped exposure. Essentially, countries like Mexico
1:59
Speaker 1: there's too much comfort with its ratings and we think
2:02
Speaker 1: it's a d rating story. Claberg is mixed. Um. You're
2:06
Speaker 1: saying that Mexico, you think it's going to default, No
2:08
Speaker 1: D rating, D rating, D rating, Oh no, no, no no
2:12
Speaker 1: default D rating. Um. I I would say that there's
2:16
Speaker 1: there's a non trivial chance in a country like Turkey
2:19
Speaker 1: that's in the midst of a bounce payments crisis right now. Um,
2:22
Speaker 1: but no Mexico's D rating. So if you if you're
2:25
Speaker 1: going to be very very married to the existing um
2:29
Speaker 1: amount of debt that's out there essentially um, then um um.
2:32
Speaker 1: Then I'd be cautious, and I'd be biased towards dollars,
2:35
Speaker 1: towards dollar denominated debt, because the more profound thing that's
2:39
Speaker 1: happened is that the FED has gotten activated. That seems
2:41
Speaker 1: to me the big wheel turning um and uh. And
2:44
Speaker 1: it gets to what you think happens. Let's say, let's
2:47
Speaker 1: say that the Fed's reaction is discounting um a slowdown
2:50
Speaker 1: in the economy. Well, most people with my experience that
2:53
Speaker 1: believe in the so called dollar smile, which is um
2:57
Speaker 1: um in in uh in extreme good time times, in
3:00
Speaker 1: extreme bad times, the dollar can do. It does really
3:03
Speaker 1: well and uh and and in a recession you've had
3:07
Speaker 1: through all this dollar dead issuece essentially a big shorten
3:09
Speaker 1: the dollar, we're going to a recession. The traditional behavior
3:12
Speaker 1: is what we've seen, let's say, out of Turkey, when
3:14
Speaker 1: they when they're worried about access to finance or a nowntern,
3:16
Speaker 1: they buy dollars right and then if the policy reaction
3:19
Speaker 1: is bad, they the authorities uh step in and try
3:23
Speaker 1: to muck around with that. So, Eric, is there an
3:25
Speaker 1: argument to me to be made that investors should avoid
3:29
Speaker 1: or underweight emerging markets broadly until the China situation is resolved.
3:34
Speaker 1: There's just too much uh, you know, tape risk. Absolutely not.
3:39
Speaker 1: That's my one of my strongest is in general, people
3:42
Speaker 1: are way too worried about emerging markets. UM as you
3:45
Speaker 1: get paid. Let's just look at corporum corporates. You get
3:48
Speaker 1: paid a higher spread for the same rating as a
3:50
Speaker 1: US corporate, and that e M corporate has to work
3:53
Speaker 1: harder to get that same ratings. You're basically you're in
3:56
Speaker 1: a sense getting that lower leverage lower you know, not
3:59
Speaker 1: that even those of those sorts of variables um uh,
4:02
Speaker 1: typical US pension funds have about three allocated to e
4:05
Speaker 1: M debt. If you look at the boring old efficient
4:07
Speaker 1: frontier and I'm not a fan of looking backwards. But
4:09
Speaker 1: the last fourteen years, and you look at the different
4:12
Speaker 1: elements of fixed income you're supposed to have depending on
4:14
Speaker 1: your risk tolerance of your bonds in e M debt,
4:19
Speaker 1: and we're living in a post quee era where the
4:21
Speaker 1: storytelling works with it. What are we talking about these days,
4:24
Speaker 1: last ten fifteen years, sustainable level of debt, independent central banking,
4:29
Speaker 1: getting paid for political risk. Those are all three. Those
4:32
Speaker 1: are three things that EM has an answer for us.
4:34
Speaker 1: So broadly speaking, I think this is e MS continues
4:37
Speaker 1: to quit itself. My my concern is that as we
4:39
Speaker 1: go through a trickier period, the names that are vulnerable
4:43
Speaker 1: happen to be names that are household names, big names
4:47
Speaker 1: in our portfolio. You know what we do is we
4:48
Speaker 1: avoid them. Um. But one of the big phenomena, the
4:52
Speaker 1: other phenomen has happened in the last ten years, is
4:54
Speaker 1: that there has been increasing exposure to names because they're
4:58
Speaker 1: part of an index, not because investors are choosing to
5:02
Speaker 1: to to invest. And so I worry about Oh, I
5:04
Speaker 1: don't like it, therefore I'm underweight behavior as opposed to
5:07
Speaker 1: I don't like it and I don't own it behavior. Well,
5:10
Speaker 1: so I'm wondering where do you find value. You said
5:14
Speaker 1: dollars nominated bonds. Of which nations I'd say, some great
5:18
Speaker 1: UH names out there are Brazil, UM and Ukraine. Brazil
5:22
Speaker 1: is a big name, so that's why I mentioned it's
5:24
Speaker 1: a big important one. UM Brazil has essentially one core problem.
5:28
Speaker 1: It's fiscal in particular pension reform. Other than that, it's
5:32
Speaker 1: an okay shape. Reserves are high well, certainly relative to imports. Um.
5:36
Speaker 1: The economy is coming out of one of the deepest
5:38
Speaker 1: recessions about a hundred years. They're going through number of
5:41
Speaker 1: implementing a number of structural reforms. If and the central
5:44
Speaker 1: bank is independent, inflation and inflation expectations are low and anchored.
5:48
Speaker 1: If the economy grows, there's plenty of capacity, so you
5:50
Speaker 1: won't see it past through the inflation immediately or you know,
5:53
Speaker 1: and of structural reform. So so I think that's a
5:55
Speaker 1: very very positive story, assuming they get pension reform through,
5:58
Speaker 1: which is you know, a daily weekly soap opera. But
6:01
Speaker 1: that is one of the great stories there. I think
6:02
Speaker 1: pet Bra is a is a good way to um
6:05
Speaker 1: UM get exposure. By the point of good corpus. I'd
6:07
Speaker 1: also say Ukraine north of six over spreads. UM was
6:11
Speaker 1: on an IMF program. It's likely re inter and IMF
6:13
Speaker 1: program very popular. UM It's does have some issues, mainly
6:16
Speaker 1: short term debt liabilities, but most of them are to
6:19
Speaker 1: the US and can be handled through sponsorship from you
6:23
Speaker 1: or or association with the I'm of Eric Fine, thank
6:25
Speaker 1: you so much toward a force through emerging markets investing.
6:29
Speaker 1: I guess the takeaways don't be scared away from emerging
6:32
Speaker 1: markets given the trade tensions. Eric Fine, portfolio manager for
6:35
Speaker 1: Emerging Markets Fixed Income Strategy at ben Global, joining us
6:39
Speaker 1: UH in our Bloomberg Interactive Broker Studio. Let us turn
6:56
Speaker 1: our sights to the one and only Mark Bennioff, who
6:59
Speaker 1: has been a force unto himself when it has come
7:02
Speaker 1: to consolidation. Salesforce dot Com now buying Tableau, a software
7:07
Speaker 1: company h for a fifteen point three billion dollars in
7:10
Speaker 1: an all stock deal. Sales Salesforce shares are down today
7:14
Speaker 1: more than four percent. Tableau shares, however, UH surging more
7:18
Speaker 1: than thirty percent. Luckily, we have Una Grana Software and
7:21
Speaker 1: I T Services analyst for Bloomberg Intelligence here with us
7:24
Speaker 1: in our Interactive Broker Studios to help us understand why
7:27
Speaker 1: markets are perceiving this as a good deal currently for
7:31
Speaker 1: for Tableau and perhaps not so much for Salesforce. Well,
7:36
Speaker 1: it's all stock deal, so you would expect Salesforce to
7:39
Speaker 1: go down a little bit. But you know, frankly, Salesforce
7:42
Speaker 1: has done such a good job about a quieting companies
7:44
Speaker 1: over the past few years, adding it to the portfolio
7:47
Speaker 1: of already present companies it has. They bought a company
7:50
Speaker 1: called mules Soft last year, and this particular deal actually,
7:53
Speaker 1: you know, really complements the business of those guys, all right,
7:56
Speaker 1: So why is Salesforce doing this deal? This is really
8:00
Speaker 1: a big trade for them. Why are they doing this deal?
8:02
Speaker 1: So one of the biggest themes in enterprise software today
8:04
Speaker 1: is and you know, artificial intelligence, getting more analytics out
8:07
Speaker 1: of your existing customer base, getting more insights. So for that,
8:11
Speaker 1: you really need to you know, pull out data that
8:14
Speaker 1: you have internally on your you know systems as well
8:17
Speaker 1: as married to social media other kind of data systems.
8:21
Speaker 1: But then at the end of the day, after you
8:23
Speaker 1: gain insights of it, you need to visualize those particularly
8:25
Speaker 1: in dashboards and beautiful graphs. And this is what tableou
8:28
Speaker 1: does better than anybody else out there, can you just
8:30
Speaker 1: zoom out a little bit and just give us a
8:33
Speaker 1: sense of how much this deal is just yet confirmation
8:36
Speaker 1: of Mark benning off strategy and frankly his his sort
8:40
Speaker 1: of instinct and trusting his internal instinct to just go
8:43
Speaker 1: with the deal when he sees it and moving quickly.
8:46
Speaker 1: Moves very quickly, definitely, And you know we have seen
8:48
Speaker 1: over the years, whether it was demand where um or
8:51
Speaker 1: Force dot com, which is part of their platform as
8:54
Speaker 1: a service at that time. I mean, all of these
8:56
Speaker 1: things eventually adds very well to their exist in core
9:00
Speaker 1: customer base, which is, you know, the people who buy
9:02
Speaker 1: their sales cloud or their customer service cloud. All of
9:05
Speaker 1: this you know, ties very well into that. So it
9:07
Speaker 1: is you know, as you said, it is something that
9:09
Speaker 1: market backing off just better than you know, almost everybody
9:11
Speaker 1: out there at this point. Boy, I'm looking at the
9:14
Speaker 1: Salesforce stock price chart five years on the Bloomberg terminal here.
9:18
Speaker 1: That is a good story. I mean, wow, so he
9:20
Speaker 1: and the market clear, He's obviously earned the markets support, um,
9:25
Speaker 1: but the stock is down today. You know, I think
9:27
Speaker 1: this is gonna be deluded to earnings initially, I mean,
9:30
Speaker 1: did he overpay here potentially, it's so it is expensive.
9:33
Speaker 1: Sixteen times sales is probably one of the largest. I mean,
9:35
Speaker 1: I would say higher valuations that we have come across.
9:38
Speaker 1: But again he's paying with stock, so that you take
9:40
Speaker 1: that into account as well. It's not cash um And
9:43
Speaker 1: you know, I think SIP bought a company called Qualtricks
9:45
Speaker 1: just a few months ago. They actually paid more than this.
9:48
Speaker 1: So current valuation in software is so high that if
9:52
Speaker 1: you really need to get some deal done, you need
9:54
Speaker 1: to take out you know, cash on at a much
9:56
Speaker 1: higher multiple. So right now, who does this hurt them most?
10:00
Speaker 1: In terms of Salesforce dot com competitors, They are trying
10:03
Speaker 1: to be as aggressive so that Microsoft doesn't you know,
10:06
Speaker 1: really become bigger in this space. So that's one second.
10:10
Speaker 1: I think Article needs to step up their game a
10:12
Speaker 1: little bit because their stock has not done as well
10:14
Speaker 1: as Salesforce has over the last three to five years,
10:17
Speaker 1: and they may not have that mouth currency to use
10:19
Speaker 1: their stock to buy that. So they you know, they've
10:21
Speaker 1: been buying back stock aggressively. They really need to think
10:23
Speaker 1: back and say, do I need to get more cloud
10:26
Speaker 1: deals to to to grow over the next few years
10:28
Speaker 1: or not? Alright, So my favorite question when we talk
10:31
Speaker 1: about deals, is this going to set off more deal
10:34
Speaker 1: flows so my banker friends can get paid. It has
10:37
Speaker 1: been for a while software deals has been so hot.
10:39
Speaker 1: That's just I mean, I I won't be surprised over
10:43
Speaker 1: the next few months if you see more deals in
10:45
Speaker 1: those space. So what what So in a software space
10:49
Speaker 1: is this? Is it all about the cloud here? I mean,
10:51
Speaker 1: I guess we saw Google just uh last week with
10:54
Speaker 1: two an a half billion dollar acquisition. Is is cloud
10:57
Speaker 1: still the area where these tech companies are uh, you know,
11:01
Speaker 1: investing money, making deals, putting capital to work. Cloud is
11:04
Speaker 1: one Customer insights is another one. So Google, you know,
11:07
Speaker 1: buying look at It is the same exact thing as
11:09
Speaker 1: as Salesforce buying Tableau in terms of visualization of that data.
11:12
Speaker 1: So you are trying to figure out a lot of
11:15
Speaker 1: these enterprises, legacy enterprises, companies like Pepsi, Coca Cola, they
11:18
Speaker 1: have so much of data on their own systems they
11:22
Speaker 1: really need to extract it, get value out of it,
11:25
Speaker 1: and then go back to that same customer and sell
11:26
Speaker 1: more products to them. And that's where a lot of
11:29
Speaker 1: these things are coming through. Is you know, your ability
11:32
Speaker 1: to extract that data, clean it up in just then
11:35
Speaker 1: analyze it and then finally show social you know, dashboards
11:39
Speaker 1: along with it. Anaag ran I, thank you so much.
11:41
Speaker 1: Anaa Ran as a senior analysts for software and I
11:44
Speaker 1: T Services for Bloomberg Intelligence here in our Bloomberg and
11:47
Speaker 1: Reactor Broker studio. Well trade tensions appear to be abating
12:07
Speaker 1: somewhat today on news of the Mexico deal. Of course,
12:10
Speaker 1: China is still to be determined, but looking at the
12:12
Speaker 1: action today, market certainly liking the reduced attentions with Mexico.
12:17
Speaker 1: To get a sense of where to go next, we
12:19
Speaker 1: welcome Brad McMillan. Brad is chief Investment Officer of Commonwealth
12:23
Speaker 1: Financial Network, about a hundred sixty one billion dollars under management.
12:27
Speaker 1: He joins us on the phone from Waltham, mess Uh, Brad,
12:30
Speaker 1: thanks so much for joining us. Do you think that
12:34
Speaker 1: this storm is passing financial markets as we speak? I do, Paul,
12:39
Speaker 1: and I'll tell you why. There's been a tremendous amount
12:42
Speaker 1: of bad news. There have been some real shock Certainly
12:44
Speaker 1: the Mexico tariff adjudgment you know, certainly qualifies as a shock.
12:48
Speaker 1: But nonetheless markets have been resilient and they bounced back strongly.
12:52
Speaker 1: I think there's a lot of strength there. Okay, So
12:56
Speaker 1: at this point, given the fact that we didn't see
12:58
Speaker 1: that much of a pullback, at this fact of not
13:00
Speaker 1: getting a China US trade deal, where are the opportunities.
13:04
Speaker 1: I think the opportunities are in growth sectors. I would
13:07
Speaker 1: probably stay away from internationally exposed equities. You know, certainly
13:12
Speaker 1: there's still risk there when you look at the United States,
13:15
Speaker 1: there's a lot of fear about consumers spending, There's a
13:18
Speaker 1: lot of fear about how fast the economy is going
13:20
Speaker 1: to grow. In fact, we're seeing wage growth holding steady
13:24
Speaker 1: at over three percent. We're seeing job growth despite the
13:27
Speaker 1: last despite the disappointing number the other day, you know,
13:30
Speaker 1: hold at strong levels, and we're seeing confidence high. I
13:33
Speaker 1: think the consumer has been oversold, so Brad. One of
13:36
Speaker 1: the areas that has u tends to lead the market
13:38
Speaker 1: both up and down, as we saw in the fourth quarter,
13:41
Speaker 1: is big tech. And I think maybe what's changed a
13:44
Speaker 1: little bit in the analysis is and the big technology
13:47
Speaker 1: stocks that have driven the market has been maybe there's
13:50
Speaker 1: a new regulatory risk fact that it needs to be
13:53
Speaker 1: waited for these names as US regulators start taking a
13:56
Speaker 1: look at big tech. How do you factor that in.
13:59
Speaker 1: I think right now the assumption has been that growth
14:01
Speaker 1: is infinite, no one will ever touch them. But remember
14:04
Speaker 1: tech has weathered this before. We went through a phase
14:07
Speaker 1: where there was no taxes on the internet and if
14:10
Speaker 1: we impose taxes, it was going to destroy everything, and
14:12
Speaker 1: of course it didn't. Tech has a wonderful ability to
14:15
Speaker 1: kind of negotiate around government restrictions. Microsoft another good example.
14:20
Speaker 1: It was going to be broken up, it was going
14:22
Speaker 1: to be taken down. Now it's worth over a trillion dollars.
14:25
Speaker 1: Companies can respond to these things. I think it's a
14:28
Speaker 1: real concern, but you have to factor in company's ability
14:31
Speaker 1: to stay ahead of the regulators, which thus far they've
14:34
Speaker 1: got a good record. So Brett, I'm struck by the
14:36
Speaker 1: optimistic tone that you're taking in this idea that growth
14:40
Speaker 1: stocks of more room to run the consumer has been
14:42
Speaker 1: over sold, impairing that with the idea that traders are
14:46
Speaker 1: currently pricing in two and a half rate cuts by
14:49
Speaker 1: the end of this year, basically indicating a slowing in
14:52
Speaker 1: the economy and a capitulation by the Federal Reserve that
14:55
Speaker 1: their policies are just too tight at this point. How
14:57
Speaker 1: do you reconcile these two sort of fact features of
15:01
Speaker 1: the market right now. Well, first of all, they call
15:04
Speaker 1: me or here at the office, So I'm not a
15:06
Speaker 1: natural optimist, okay, but when you look at what's going on,
15:10
Speaker 1: when you look at we've never had a recession with
15:12
Speaker 1: job growth as strong as it is, We've never had
15:14
Speaker 1: a recession with consumer confidence where it is puto business
15:18
Speaker 1: confidence and even the yolkerb Yes, it's recently inverted, but
15:22
Speaker 1: typically that gives us at least twelve months, so we've
15:24
Speaker 1: got at least a couple of quarters ahead of us.
15:27
Speaker 1: And I think right now all of the bad news
15:29
Speaker 1: is kind of pushed expectations down undoing. Yes, there's a
15:32
Speaker 1: storm coming, but I don't think it's showing up any
15:34
Speaker 1: time soon. But I think the FED actually gets that
15:38
Speaker 1: they're being cautious, they're being responsible, but I don't see
15:41
Speaker 1: anybody pushing the panic button just yet. So but I think, um,
15:45
Speaker 1: if we if I were just to summarize kind of
15:47
Speaker 1: the guests that we've heard that people on this show
15:49
Speaker 1: over the last several weeks, in terms of gauging a
15:52
Speaker 1: recession call, it seems to be the most people are
15:55
Speaker 1: thinking about something in timing mid is that something that
16:00
Speaker 1: is consistent with your thinking. I think that's the best bet.
16:04
Speaker 1: Right now, we've seen the EO curve invert. If that
16:06
Speaker 1: takes us out twelve months, that would be right in
16:09
Speaker 1: the middle of the sweet spot. If we see consumer
16:11
Speaker 1: confidence decay, that would also put us in the same spot.
16:14
Speaker 1: And there are other things that say that's the place.
16:17
Speaker 1: So the real question is not are we going to
16:19
Speaker 1: have a recession? We are at some point, but will
16:21
Speaker 1: it be in And I think that's reasonable. Okay, So
16:24
Speaker 1: we're speaking with Brad McMillan, chief investment officer at Commonwealth
16:27
Speaker 1: Financial Network overseeing a hundred and sixty one billion dollars.
16:31
Speaker 1: You talk with a lot of advisors, Brad, a lot
16:34
Speaker 1: of investors, and I'm just wondering, you know, if you
16:38
Speaker 1: tell them this, what happens If they say to you, okay,
16:41
Speaker 1: there might be a couple quarters left. When do I
16:43
Speaker 1: get out ahead of a recession? Sort of when is
16:46
Speaker 1: the sort of escape hatch open. Well. One of the
16:49
Speaker 1: good ways to look at it is, and I actually
16:52
Speaker 1: wrote a book about this, is it can make sense
16:54
Speaker 1: to de risk when the market moves into moves below
16:57
Speaker 1: it's two day moving average that historically is indicated a
17:01
Speaker 1: time to worry, and in fact, right now we were
17:04
Speaker 1: just below the two day moving average. So you could
17:07
Speaker 1: argue you should be worried. But when you look at
17:09
Speaker 1: the other fundamentals, we don't see sustained pullbacks without a recession.
17:13
Speaker 1: So I'm going to look at a recession. I'm going
17:15
Speaker 1: to see where consumer confidence is. I'm going to be
17:18
Speaker 1: mostly looking at a recession. So, Brad, one of the
17:21
Speaker 1: things you know that's been powering obviously powers the US
17:24
Speaker 1: economy and is um is the consumer, and we've seen
17:27
Speaker 1: generally a very strong consumer. We did have that surprisingly
17:32
Speaker 1: weak jobs data on Friday. What is your view of
17:35
Speaker 1: the consumer. I think the consumer still feels good. I
17:39
Speaker 1: think the what's interesting when you look at that weak
17:41
Speaker 1: jobs report. First of all, we've had week jobs reports
17:44
Speaker 1: before and they've rebounded. We seem to be in nineteen
17:48
Speaker 1: at a lower level of growth given that we've had
17:50
Speaker 1: two week reports, but it's still a healthy level on average.
17:54
Speaker 1: Second of all, you've seen wage growth hold up. There
17:57
Speaker 1: was some talk about how wage growth pulled back, but
17:59
Speaker 1: in fact, for the average working person, the production workers.
18:03
Speaker 1: Wage growth is held up much better. So for most people,
18:06
Speaker 1: they're spending ability is being enhanced because they're making more money.
18:10
Speaker 1: There's more people working, and in fact, with lower interest rates,
18:14
Speaker 1: they're going to be more able to buy things like
18:16
Speaker 1: cars and houses. That can only be helpful. So in
18:20
Speaker 1: the meantime, we do have this trade battle that seems
18:22
Speaker 1: to be reaching in the background. The U. S And
18:25
Speaker 1: China seemed to be hardening their lines depending on the day,
18:28
Speaker 1: and I'm just wondering how you factor this into your assessment. Well,
18:32
Speaker 1: there are two things going on here. First is a
18:34
Speaker 1: direct damage and even there, when you look at it,
18:36
Speaker 1: it's about thirty billion dollars right now in a twenty
18:39
Speaker 1: trillion dollar economy. It's meaningful, but it's certainly not going
18:43
Speaker 1: to break the bank. The indirect effects are going to
18:46
Speaker 1: be the most meaningful, and there you're starting to see
18:48
Speaker 1: reduced confidence. It will start to see more impact on
18:51
Speaker 1: consumers pocketbooks over the next couple of months if tariffs
18:56
Speaker 1: go up. So it's a headwind, but it's a headwind
18:59
Speaker 1: that's only gonna raw I slowly, and it's it's not
19:02
Speaker 1: going to be an earthquake. It's going to be a slow,
19:05
Speaker 1: slow slope to slow the economy down a little bit. So, bro,
19:08
Speaker 1: let's take if we get a bad headline, I mean
19:11
Speaker 1: a bad headline out of China, because I think the
19:12
Speaker 1: expectations are, oh, some deal will get done. But if
19:15
Speaker 1: we get some bad news out of China, what do
19:17
Speaker 1: you think the risk of the you the market is.
19:21
Speaker 1: I honestly don't think China drives much of the market.
19:24
Speaker 1: When you get Chinese headlines, you go back and you
19:27
Speaker 1: compare the you compare how the US market does. We're
19:31
Speaker 1: still a very closed economy relatively speaking, only about an
19:36
Speaker 1: eighth of our economy is exposed outside the US. Now
19:39
Speaker 1: there's more exposure to earnings, corporate earnings, but at the
19:43
Speaker 1: same time, much of that damage has already been done
19:46
Speaker 1: and you've seen diminishing effects as we get more and
19:49
Speaker 1: more headlines. So right now, I think the market's expectations
19:52
Speaker 1: are pretty well. I think there's more chance to beat
19:54
Speaker 1: it than underwhelment. Just real quick indexes or stock selection.
19:58
Speaker 1: What's your preference right now? Right now, I think it's
20:02
Speaker 1: still that indexes, you have individual stocks. Um, there's certainly
20:08
Speaker 1: some opportunities out there, but for the average investor, of
20:11
Speaker 1: the index remains the way to go. Brad mcbellan, chief
20:13
Speaker 1: investment officer at coming to WET the Financial Network overseeing
20:17
Speaker 1: a hundred and sixty one billion dollars. Well, I've been
20:33
Speaker 1: told that this Sunday is Father's Day, So in case
20:37
Speaker 1: anyone out there is thinking about a gift, UM, I
20:40
Speaker 1: have enough. Um, I don't know, socks, ties, I've I
20:44
Speaker 1: think I've got all that kind of stuff. So what
20:47
Speaker 1: do you want? I'm just saying, well, I'll tell you
20:48
Speaker 1: what I think our next guest, I'll have some cool ideas.
20:51
Speaker 1: Joseph Aboud, chief creative director for Men's Warehouse. He joins
20:55
Speaker 1: us in our Bloomberg eleven three oh studios. Joseph, thanks
20:58
Speaker 1: so much for joining us. It's really great to have
20:59
Speaker 1: you year. So, first of all, we were just talking
21:02
Speaker 1: off air. You know the question I had is our
21:05
Speaker 1: millennials are younger generations? Are they dressing up? Yeah, that's
21:09
Speaker 1: the most encouraging news. As we were just talking about
21:12
Speaker 1: to see the young guy getting dressed up again. Maybe
21:14
Speaker 1: his dad lived through that casual experience and so now
21:18
Speaker 1: he's finding his own space and he's doing custom suits
21:21
Speaker 1: and it's a very big part of our business. So
21:24
Speaker 1: the suit isn't dead, it's just morphed. They're wearing it differently.
21:27
Speaker 1: Maybe the trousers a little shorter, the silhouettes are a
21:30
Speaker 1: little leaner, but guys are getting dressed. So that's that's
21:33
Speaker 1: really terrific. So what's the age group? Because I remember
21:37
Speaker 1: back in the say six months ago, when we were
21:39
Speaker 1: talking about yoga, were coming back and wondering how jim
21:42
Speaker 1: ware was going to sort of infiltrate the male species.
21:45
Speaker 1: And I'm just wondering, you know, is that is that over?
21:47
Speaker 1: Because lul Lemon seems to be doing just fine. Well,
21:49
Speaker 1: they're doing great. I think that's a lifestyle thing, but
21:52
Speaker 1: I think that's just one piece of a guy's wardrobe.
21:55
Speaker 1: Every guy is going to find a moment when he
21:57
Speaker 1: needs to get dressed up. Younger or more staff published.
22:00
Speaker 1: And so that young guy is graduating college and looking
22:03
Speaker 1: to set himself for his future, is looking I need
22:06
Speaker 1: two or three suits for a wedding, a funeral, a
22:08
Speaker 1: job interview. So it's just that they're doing it their
22:11
Speaker 1: own way. And it's very difficult to buy suits online.
22:15
Speaker 1: You really need to go in and touch, feel and
22:17
Speaker 1: get fitted. So having a retail locations is crucial to
22:22
Speaker 1: get the guy to understand how it suits. And everybody
22:25
Speaker 1: type is different, let's be sure about that. So just
22:28
Speaker 1: it is Father's Day. So what what would you suggest
22:30
Speaker 1: would be like a really good, thoughtful, cool, fun gift. Yeah,
22:34
Speaker 1: I mean they're all different. Well here's the thing. What
22:38
Speaker 1: a great and we found this that guys are getting
22:41
Speaker 1: custom suits as gifts the experience. It's not actually purchased,
22:45
Speaker 1: but it's a great gift. But if you want something
22:47
Speaker 1: more affordable, linen is a great fabric for spring summer.
22:51
Speaker 1: So the linen shirt is always a great piece of
22:53
Speaker 1: white linen shirt. It's fresh. Anything that's more personal to
22:57
Speaker 1: the dad. Maybe some dads are more dressed up. Some
22:59
Speaker 1: day ads are a little more casual. So it really
23:01
Speaker 1: depends on the direction you want to take. Where in
23:05
Speaker 1: the United States that you're actually seeing younger people dressing
23:08
Speaker 1: up more. Yeah, I think if you look at the cities,
23:10
Speaker 1: I mean obviously just looking at the building that we're
23:12
Speaker 1: in today, seeing all the young guys. There are a
23:14
Speaker 1: lot of guys in shirts and trousers, but there are
23:17
Speaker 1: a lot of guys and jackets and trousers. Some will tie,
23:20
Speaker 1: some without But we find that throughout, including that the
23:23
Speaker 1: dashing man next to me, of course, and it's great
23:26
Speaker 1: dressed in a short and tie. But you know, there
23:28
Speaker 1: is something wonderful. But when a guy gets dressed, he
23:31
Speaker 1: feels different. I always say, a guy feels like James Bond.
23:34
Speaker 1: You know, you put on a great suit or a
23:35
Speaker 1: great texedough there's something really special about that. It's now
23:39
Speaker 1: guys are wearing suits because they want to, not because
23:42
Speaker 1: they have to. And that's the distinction. It's not a
23:44
Speaker 1: uniform anymore. Joseph. I think one of the great things
23:47
Speaker 1: about your brand and your company over the years that
23:50
Speaker 1: just a good Brandon line of clothing is it's actually
23:52
Speaker 1: manufactured here in the United States. Can you tell us
23:54
Speaker 1: about that? Yeah, yeah, no, that's I think of all
23:57
Speaker 1: of the things, of all my accomplishments are factory in
24:00
Speaker 1: New Bedford, Massachusetts. We have eight hundred people there and
24:03
Speaker 1: we produce about three hundred thousand high quality tailored garments
24:07
Speaker 1: a year using Zenia fabric, lor Piano Fabric, all the
24:11
Speaker 1: high end Italian fabric. So uh and it's grown. The
24:14
Speaker 1: first season I launched in we made two thousand suits
24:18
Speaker 1: there and now we're up to about three hundred and
24:21
Speaker 1: forty thousand units, so it's it's it's a great place.
24:25
Speaker 1: I think most people don't know that. But it's not
24:28
Speaker 1: just about being made in America's being made well in America.
24:30
Speaker 1: That's important. So you're part of tailored brands, and I
24:33
Speaker 1: know that they did just appoint a new chief executive
24:36
Speaker 1: officer within the past few months, Janish Lothi, and his
24:39
Speaker 1: background is more in the casual wear, and I'm wondering
24:42
Speaker 1: how that sort of meshed with your understanding of kind
24:46
Speaker 1: of the future. How is that kind of going forward? Well,
24:48
Speaker 1: I think Denish is Uh is highly intelligent, energized CEO.
24:54
Speaker 1: We love having him. I think he's learned about what
24:57
Speaker 1: we do in tailoring. He can fit a suit now,
24:59
Speaker 1: so he really immerses himself in the experience. And when
25:03
Speaker 1: we talk about casual and dressing, I think there's a
25:06
Speaker 1: myth to some degree. As a woman, you probably know
25:09
Speaker 1: that women have one wardrobe. Men have two wardrobes. They
25:13
Speaker 1: haven't learned to integrate their wardrobes, and so when we
25:17
Speaker 1: talk about casual, you can put a casual piece in
25:20
Speaker 1: with a suit. So we're trying to teach men about
25:22
Speaker 1: lifestyle dressing, and that does include suits, dressy clothing, but
25:26
Speaker 1: it also includes sports wear. So I don't think there's
25:29
Speaker 1: a one way or another to dress. I think it
25:31
Speaker 1: should be all available to man, such as you mentioned earlier,
25:35
Speaker 1: online shopping and how that's you know, there's challenges. They
25:37
Speaker 1: are certainly in fine clothing. You talked about the importance
25:41
Speaker 1: of actually touching and feeling it. Uh. You guys have
25:43
Speaker 1: a new story you opened recently right your for your collection. Yes,
25:47
Speaker 1: it's our it's our flagship store or black label collection
25:50
Speaker 1: on forty ninth and Madison. And what I really wanted
25:53
Speaker 1: to do is bring back the experience of the great
25:55
Speaker 1: specialty store, great product, one of a kind pieces, service,
26:00
Speaker 1: style and information. And that's always been my goal is
26:03
Speaker 1: to be able to help men because so often you
26:06
Speaker 1: walk into a store, you can't get the proper help,
26:08
Speaker 1: you can't get the right fit. So service is a
26:11
Speaker 1: huge part of the experience for guys. I love that.
26:14
Speaker 1: When it comes to the experience for women, people talk
26:16
Speaker 1: about manicures and and uh and getting your hair done
26:19
Speaker 1: in bloods. But with with respect to a male store,
26:22
Speaker 1: it's just simply the service. Is there anything else any
26:25
Speaker 1: other high touch elements of being served in a store. Yeah,
26:29
Speaker 1: you know, the the whole experience for guys. You know,
26:31
Speaker 1: lifestyle for guys. We talk about the barbershop, we talk
26:34
Speaker 1: about the bar those things that are important but really
26:38
Speaker 1: for guys. And it's interesting how men shop. They're there,
26:41
Speaker 1: they're laser focused. They want to know about the fabric,
26:44
Speaker 1: they want to know about the fit, and it's so
26:46
Speaker 1: important to give them that information. You know, here's a
26:48
Speaker 1: fabric that is from Italy or from the UK. And
26:52
Speaker 1: also what you want to do is make sure that
26:54
Speaker 1: you can tell them about the experience and having them
26:56
Speaker 1: enjoy it. Make it a process for the guy and
26:58
Speaker 1: his wife or girlfriend or mom whatever. Jessepha Food, thank
27:01
Speaker 1: you so much for being with us. Thank you guys
27:03
Speaker 1: for having me again. Jesseph's food designer and chief creative
27:06
Speaker 1: director of Men's Warehouse. Thanks for listening to the Bloomberg
27:11
Speaker 1: P and L podcast. You can subscribe and listen to
27:13
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
27:16
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm
27:19
Speaker 1: Lisa Abram Woyds. I'm on Twitter at Lisa Abram wits
27:22
Speaker 1: one before the podcast. You can always catch us worldwide.
27:25
Speaker 1: I'm Bloomberg Radio.