Eric Wiegand, Senior Portfolio Manageron markets and investing

Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. As we talk about potential tariffs and trade skirmishes, it's important to take a look at the industries that are being affected, and joining US now has pretty intimate looked at this with respect to the apparel and footwear industries. Rick Helfenvine he joins US now. He's president chief executive of the American Apparel and Footwear Association and he joins us here

in our eleven three oh studios. And just to give people a sense of what the A A F A is, UH is sort of the voice of the industry that includes everyone from Levi to Ralph Lauren and Gap to Target in Washington wearing clothes. If you're wearing clothes right, this is this is the person who is representing your clothes in Washington. Rix. I want to start with you know what you're hearing from your members with respect to the tariff talk and the trade tensions. Have any of

their business has already been affected? All of our businesses have been affected, and our members are talking to us, I have to say, more than they've ever talked to us before. A lot of it is trying to figure out exactly what's going on in Washington, what's the policy? What do they want to do? What is Washington trying to do to their business? They're having enough trouble just running their own businesses. Do they really want to have added burdens? Do they want to change their global supply?

Change weld? It's like this is important. I mean, how much has the trade tension actually reduced from their bottom line so far? I think that the reduction in bottom line is is uh fast forward. It's coming. People are aware of it. Prices will go up, sales will go down, margins will be more difficult to attain. We don't understand why the administration is pushing so hard to take a business that is it's still in recovery mode for the whole his whole host of reasons, and trying to add

burden to it. They're not really helping us Rick, I just want to give you the opportunity to share a little bit of your background, because, uh, this speaks to your experience at USA textile mills, also working for an overseas Hong Kong manufacturer of of apparel. Just give people a little bit of your background so they understand that you're coming to this not from a political point of view, but you're coming to this from a real business perspective. Absolutely.

I mean, I grew up in the textile industry. My father was in the textile industry. I worked for a wonderful company out of Cleveland, Ohio called Campus Water and Sportswear, which was owned by inter COO. They taught me everything. I was down in the mills. I was dying, finishing, weaving, you name it. I was involved in it from the ground floor. Later, we also had nineteen US UM manufacturing facilities,

so I know how to manufacture product in the US. However, later on the industry morphed and more of it went overseas. That happened pretty much in the nineties. So I got involved with a company who was based in Hong Kong. We manufactured overseas and I got to see all aspects of the industry, which now as it relates to trade, I personally feel the pain. I understand what our members are going through, and it is it is hurtful, we believe it or not. In our industry, Um, we were

six percent of all imports. Keep in mindent of for well, apparel is imported, so we're six percent of all the US's imports. But we pay of all the duties collected consequently, Uh, any additional burden to that, We've learned to live with that burden. But any additional burden is downright painful. Well, just to play Devil's advocate here, I mean you talk about the shift in the nineties where the manufacturing what overseas? I mean President Trump is kind of responding to that.

Perhaps you know, a decade or so too late, but I'm wondering, you know, what would happen if those jobs did come back to the US and manufacturing could return. Well, we always ask the question because we also represent all the domestic manufacturers, which is quite frankly, about three percent of the market and growing and growing, but still only three percent of the market. Look, when you're making apparel, there are two aspects of it. One is the raw material,

fabric raw material is capital intensive, not labor intensive. Assembling a garment as labor intensive, takes a lot of people, and that's why a lot of this has morphed overseas. We can't really get enough people to assemble garments, and we can't compete on a global scale, which is what America is about now, trading and competing on a global scale. One thing I'm wondering, you know, you speak to a lot of people in Washington, d C. Is there unanimated

unanimity in anything that you hear when you talk to Congressman. Yeah, there's unanimity because people are really questioning why, in a sense, we're misusing these tariffs that you hear about. They're misdirected. They are directives of the White House. They are powers that the White House can use without consulting Congress, and Congress, by the Constitution, is in charge of trade. I'm starting to think that maybe the FDA should get involved because

the White House. Think about this. The White House is recommending metas in the form of tariffs for a disease that it can't cure. Think about that these tariffs won't cure our problems. They were wrong and they've been proven wrong before. The whole history of tariffs is very interesting. First time we heard about smooth holy precipitated the Great Depression um President Bush tried it in two thousand two lines steal with tariff, Remember that one lasted one year,

was supposed to be three years. And then President Obama tried it with tires. It was a disaster, absolute disaster. Tariffs don't work. They're hidden tax on the American consumer. Thank you very much for being with us. Rick Health and Bind is the president and the chief executive of the American Apparel and Footwear Association talking about tariffs, and we look forward to having you on the program in

the future. Much appreciated. Warren Buffett, the chief executive of Berkshire Hathaway, and Jamie Diamond, the chief executive of JP Morgan Chase, are looking for some radical changes to the way public companies disclose financial information. They have said that quarterly financial guidance encourages short term thinking and that it stifles growth and limits innovation in the economy. Here to tell us more about this proposed change is Andrew Stoultman,

securities fraud attorney at Stoutman Law Offices. Andrew, thank you for being with us. What's your first reaction to these comments by both the Jamie Diamond and Warren Buffett. Maybe I'm a little biased, but to me, it kind of sounds like the worst idea since the Kardashian credit card. I mean, it's just a bad idea. It's kind of an existential question. I mean, what information our investors entitled to, and under the federal securities laws, they are all predicated

on full and complete disclosure. And if we go from releasing this information four times a year to maybe only two times or even one time a year, I just don't see how that's good for investors, and especially the retail investors, because large investors will still be able to get access to this information, but smaller investors won't. So I just think it's a prior a priority issue. Are

we placing corporate interests ahead of the interests of small investors? Well, Andrew, just to push back a little bit, I mean, the argument here is that these sort of short termism, or the concept that the chief executives of these companies have to play to their just the most immediate quarter and giving the best guidance possible that they don't take some of the extra money that they have invested back in

their business, build more plans, take more risks. I mean not only that, but you could argue, and this is something else that Warren Buffett and James and Diamond were arguing, which is that this requirement to continually forecast earnings is one reason why there are many are companies that have gone public, which also isn't necessarily in the best interest of retail investors. How do you respond to those issues, Well,

I think that's on companies. I mean, if companies are spending an inordinate amount of time making certain that quarterly earnings are met instead of a year or two years or five years out, that's on them. I mean, there's no obligation to to basically meet those quarterly numbers. And yes, you can argue that volatility will be increased to the extent companies have to release this information quarterly. But there are plenty of companies out there, including Warren Buffett, that

basically remind investors, don't look at our quarterly information. We are on a year to year or five or ten year track. And I feel like the you know, the pressures it's self inflicted on CEOs to meet those quarterly numbers. I just I don't get it. Well, you know, Andrew, I wanted to follow up with the last point that I was making, which is that many fewer companies have been going public, and then part it is because of

these requirements to continually forecast data. And people are arguing that this is also really bad for retail investors because they have a fewer, smaller pool of companies to invest in. What do you say to that. I think there are a whole bunch of reasons why there are less companies listed.

I don't think that the you know, the pressure of releasing quarterly earnings or quarterly revenue or that guidance is the sort of thing that would cause UH companies to say, you know what, we're going to remain private, We're not going to go public. I just, you know, I don't buy it. And look, if companies are that concerned about having to release information that I, you know, I've argued they have a finuciary duty to release and provide guidance on,

maybe they shouldn't be public companies. Alright, I'm just wonder if we could just tease apart this idea that releasing information that is pertinent to public shareholders is one thing. But then that three month ninety days cycle of having to meet estimates that are put together based on the limited information that you are legally allowed to offer the

analyst community. Do you not see that there's a difference. No, I mean okay, So all right, No, all right, So let me ask you then, Have you worked for a public or a public company? No? I haven't. Okay, So if someone came to you and said, working for a publicly traded company is very different than working for a privately held company, would you accept that? Well, yes, I would accept that it is radically different. But once you

take public, public money, you have fiduciary duties to those investors. No. No, I understand that, But I mean, but but but it doesn't seem like people do because people are taking a position that, g it's such a it's such a pain for us to release information to the shareholders who have placed their money with our company, and we all fiduciary duties to those investors, and if it's burdensome, if it's too difficult, then they probably shouldn't be publicly traded companies.

I guess i'd ask you this question in September two thousand and eight, do you want to know whether Merrill Lynch and Morgan Stanley's revenues are dramatically declining or increasing or staying or basically staying neutral. I mean, that's important information for you to decide whether you want to keep your money or invest your money in these companies. Yeah, Um, and Andrew, I'm wondering. No one thing that struck me.

And some of the stories that were written about this, uh many noted that the number of companies that actually do give forecasts earning earnings per share forecasts has fallen over the past eight years to less than a third from about thirty six in two thousand and ten. Have you seen the companies that release less guidance get treated

better than the other companies are worse by investors? That's a that's a really hard question, and I don't you know, I don't know the answer to it, and I'm afraid to kind of go out on a limb and and and give an opinion on that. But so I'm just not comfortable going out on that branch because I haven't studied that quite as intensely as I would need to in order to make an opinion on it. Okay, let's just to go back to this idea of quarterly information.

The idea of being not being that they would uh decrease the amount of information that they would offer the shareholding public, but this idea of offering guidance, and then that guidance, as you well know, gets used by Wall Street analysts in order to estimate what will or won't happen. And I'm sure you're well aware of what happens on those earnings days when the company meets estimates, when it uh doesn't meet estimates? Do you believe that that increase

east volatility is good for their business? Well, I guess I would flip it and say the opposite of that is, what if you're only uh disclosing numbers uh twice a year or even once a year, disclosed them every quarter? Great? Great disclosed, right, And that's what we're arguing that these

numbers should have to be disclosed every single quarter. And the fact that Jamie Diamond and and and Warren Buffett don't want to do it isn't a valid reason when you're weighing the impact that that would have, especially on small retail investors. Look, I personally think it's kind of ironic that Warren Buffett is advocating for this position, given

he's the biggest shareholder in Wells Fargo. And if I'm contemplating investing or staying invested in Wells Fargo, I want to know what sort of impact have all of these scandals had on earnings and revenues for the company. And if I'm not getting that in a timely fashioned four times a year, I that kind of creates a vacuum of information now, Andrew, Unfortunately we have to leave it there, but thank you so much. A really good discussion and hashing in a lot of the issues. Andrew Stoultman is

securities for an attorney at Stoultman Law Offices. The credibility of central banks in emerging markets? Is it on the line? Well, here to tell us more is Damian sass Our Bloomberg Intelligence is fixed income strategist. All right, Damien, emerging markets. There's a currency issue Turkey, Argentina, Brazil. Need I go on? Uh? Is there going to be a moment where the central banks of countries such as those realize that they're pushing

against the string? Yeah? No, I mean we are. We are in the midst of a crisis of confidence here PIM and so what what we were just talking about. What's interesting is inflation is actually stable or declining in most emerging markets. Yet you know, it's it's I mean, markets are rushing to price in considerable um rate hikes in each of these markets, you know, over the next

three months. You know, we have a lot of central bank meetings coming on the heels of the FED next week, and Brazil, Mexico, the Philippines, I mean, most of these markets are are now pricing in additional tightening. Just you know, it's it's it's pretty unbelievable just how quickly things have changed, and only the last month. Well, um, first of all, I mean it's it's hard to sort of speak about emerging markets as and monolith because there is some, uh,

some spots where there is considerable inflation. I mean Turkey, for example, being a poster child for that. But I have to wonder whether this is all a byproduct of the FEDS tightening and the fact that you're not seeing the acceleration in stimulus from the e c B and the b o J that you had in the past. You're still seeing same of that's just not the acceleration. So they can't offset the fact that the FED has started to shrink its balance sheet and that it is

raising rates. Well, it's a relative value game, right, I mean you carry so well in the short end of the U S. Treasury curve. Now, I mean money markets, right, I mean it's an asset class all of a sudden, all over again. Right, that's what everybody's talking about, and so E M has to compete with that. And you know, there are easier ways, I guess, to make money than investing in emerging markets with all of the currency volatility to your point, and that's going on right now. Now.

It used to be that if you had an emergent, let's say you were a country that was export driven, maybe commodity export driven, right, it was perfectly fine for you to have your currency devalue against the US dollar because that made you much more competitive. Cheaper exports, you take over markets. But now you've got trade barriers going up around the world. Yeah yeah, now, I mean we we we were just talking about that the other day. So you know what's interesting is most people, you know,

ascribe all the pain to China. Right, the China has BA basically, um, you know Chinese imports, right, or you know the trade depths at the U S has with China and how that kind of filters through into Mexico and a lot of their you know, the U S

has other trade partners, etcetera. But what's really interesting here is with these trade barriers coming up, and even you know President Trump's kind of closet proposal to slap withcent tax on auto imports, I mean this, I mean, think about what that would do to Germany and to the

CE three, poland hungry check. I mean, people aren't really talking about this, but you know, I mean those economies would I mean, it would just be it would be devastating, right, And you know, we look at so we were looking at basically which emerging market countries are most at risk given their bilateral trade and balances and the two that kind of pop up if indeed China needs to concede to to to US demands or South Korea and Brazil. Right, Brazil is a huge exporter of soy and and and

soybeans and all that kind of stuff. Yet the US is the leading producer of that globally. So where do you think, you know, the twenty five billion dollars you know that China's proposing to to kind of give to the US is going to come from right and South Korea's machine it's it's chips, it's semi conducting semiconductor chips.

So you can definitely see China begin to may begin to kind of substitute away from you know, from from dealing with those two countries and maybe you know, uh, you know, spend a little bit more money in terms of importing from the US in those two areas. Are we seeing contagion? I mean, contagions a dirty word, but yes, this is exactly what we're seeing right now. I mean

we're seeing you know, we're seeing things spread. And I think it's more a fact of the liquid currencies, you know, the rand now and uh and the Mexican paste, which are basically being used as a hedge for a lot of macro players here to kind of all set their

emerging market currency risks. So so yeah, I mean what you're seeing is contagion only because people are in search of a liquid hedge through which the kind of to play what's going on now in a m The reason why I ask is because you're not seeing massive flows out of the broad based indexed emerging markets debt funds. So if this is contagion, I just in wondering. You know, also when you talk to people, they say, these are idiosyncratic stories and they point to, uh, problems in the

underlying economies. But you know, is there a degree at which you could always find issues and sort of a tribute the moves to them. But really what we're seeing is just macro plays that are that are playing out. Well yeah, I mean, okay, so contagions there. I mean, there are two ways of defining it. Right. There's you know, financial market contagion, which is what we're seeing here, which

is merely you know, price action. Right, You're not really seeing it affect the real economies yet to your point, you know, you're not seeing you know, real economies, real growth declining, you know, um, real inflation picking up in

a lot of these economies. Um, you know. But but but I think you're definitely seeing financial market contagion, and that is a function of the fact that, hey, people are rushing to protect their interests in a lot of these markets, and they're just aren't a lot of liquid mechanisms out there, uh, to do it. So people are kind of going to the rand, they're going to the rail, they're going to you know, they're going to the Lira

for example. I mean just to basically try and you know, offset some of the weakness and um and so that from that perspective, that's the type of contagion that we're seeing. Do we need to also go visit places like Miami? I mean talk about capital moving just look at home prices, yeah,

look at where look at where the money comes from. Yeah, no, I mean there's a lot of I mean there's there's a lot of I mean what we look at, I guess in e m IS is remittances and repatriation of assets, and a lot of that data, unfortunately is in real time. It's hard to kind of get your arms around it. But um, there are a lot of us um um let's call it, you know, us vested interests in emerging markets that are based in places like Florida and so yeah,

I know it's your point. You know, you see a lot of Latin American kind of expats, you know, who are who who might very well be looking at at at at putting money to work there hopefully in the NATI distant future. Davian Sassaur, thank you so much for being with us. It's always enlightening to speak with you. Damian Sasaur is a fixed income strategist for Bloomberg Intelligence, focusing on emerging markets. He's great follow his research reports.

They're insightful and deep. You know him. A constant theme is as we watch these headlines roll out about some of the trade tensions, how much should investors care? And I think it's an important question and I'm glad that we have Eric Weakend here with us to answer it. Eric weigand a senior portfolio manager at US Bank Private Wealth Management overseeing about a hundred and fifty four billion dollars,

who joins us here in our eleven three oh studios. Eric, you talk with a lot of wealthy individuals, business owners. What's the main question they ask you? And what do you tell them? You know, it's particularly regarding the you know, the trade issues. Those individuals that are business owners are are genuinely uh sensitive about the you know, the notion that trade is not currently fair. Uh. They may be troubled and have a lot of anxiety about how uh

uh you know. The discussion continues to you know, evolve, particularly regarding you know, isolating what have been our major trading partners and being somewhat antagonistic to to our allies. But I think there's almost a complacency in some of their concerns that that this is merely a negotiating tactic, that the rhetoric, you know, doesn't necessarily represent reality. They're

waiting for greater clarity to really formalize their opinions. Eric, what role does UH inflation play in the conversation right now with clients about what to do with their money? You know, it's it's you know, that is certainly one of the key focal points for us, as it is has been for everyone. Everyone's looking for the you know, the emergence of inflation. We've continued to see a very

favorable labor backdrop wages. While we did see wages last Friday increase UH perhaps a little bit ahead of expectations, you know, the persistence of inflation just hasn't been present. You know, we get a little bit of growth and then we'd see a little bit of retreat even you know, looking at the data points that we've had this week, whether it's Delta airlines coming out talking about pricing pressures

because of the fuel increase. Even you know, uh, it was reported today that you know, uh Smuckers was having difficulties seeing significant increase in their logistics and transportation costs. We're seeing some some feed through. It's just the persistence

that's necessary. To your point, Pim. One of the things that they're uh, you know that they're finally uh, you know, embracing if you will, is you know that there's an alternative as a result of you know, more normalization on monetary policy, that front end of the yield curve is is finally providing a return at a lower risk point, and and that's giving them a little bit of comfort

at a moderating some of their positioning. So I want to bring in the emerging market sell off that we've been watching, and I'm wondering how you're viewing that and whether you're advising any of your clients to either withdraw from some of these uh developing nations or to take advantage of the sell off to capture extra yield. You know, it's a great question. We had spent the last two years, uh much more of a U with a risk on

posture across our asset allocation models for our clients. UM. And then early this in the first quarter of this year, we thought the narrative was was changing, so we began to to moderate that position, taking off some of that really long equity exposure which was inclusive of international. Uh. And while we still saw a favorable backdrop domestically, that international was a little bit more problematic. What were you buying instead, you know, uh, in a couple of different areas.

Number one, as I mentioned earlier, finding some attractiveness on the front end of the of the curve, So going from being more materially underweight fixed income to narrowing you know that underweight, but also looking at things that were you know, less correlated uh, you know, with with equities, So exploring even things like insurance linked securities, uh, that that don't have those same types of correlations you mentioned. Uh,

the sort of change in short term money rates. Are you finding that more people are interested in that than they are in stocks? Uh? Not so much as yet. UH. And I think part of that is because we've you know, for all the uh, you know, the focus on volatility that we've seen, you know, in the equity market on a year today basis, we've still moved laterally, so you know, for the most part, our clients are still seeing uh, you know, appreciation in their portfolio, so it hasn't had

that type of a bite. They do understand, as you know, we've we've been very proactive at discussing with them that our expectations for returns this year are much more moderate than what we had seen over you know, certainly two thousand seventeen. Can you help me understand why you think the narrative is changing, why you expect to see more moderate returns if after we just saw earnings they were really good. Yeah, it's it's absolutely a great point. And

there's two things that I really want to talk about. Their. Number one from a narrative standpoint, Uh, you know, we really had the best of world's last year. Very low inflation, very accommodative monetary policy. You had strong not only earnings growth, but strong revenue growth. You had that in an environment where there was just language or rhetoric around trade. You weren't seeing any repercussions there. And importantly, there was synchronized

global growth. We've seen you know, some of the economic day of more recently has shown some moderation to that that growth it's not necessarily as strong or as broad. So that's that's causing us, uh, you know, to increase our our concerned. We are you know, from a monetary accommodation standpoint, we're seeing that being withdrawn or the prospect of it emerging. So we think that that's that's changed. And uh, you know, importantly as we look at those

earnings growth. You know, I think that the quintessential example of this was Caterpillars earnings. Uh, you know, the stock was up during the you know, during the conference call, and in the course of one sentence you know, suggesting it's hard to imagine things getting any better. You know, the stock you know, immediately reversed. You know, it's pricing. So we agree, you know, looking at the first quarter being you know, seeing revenue growth over eight percent, seeing

earnings growth, you know, approaching that's fantastic. But the market is a forward indicator and looking at at that it is difficult to imagine that that that pace is likely to be sustained. So we do believe that earnings will drive stock prices, but we also believe, because of that changing narrative, will see the valuations of the multiples that

investors are willing to provide. Uh, you know, narrowing just briefly, h muni bonds, Any interest on behalf of the clients and investing in muni bonds now, you know very much. So particularly from a you know, from a geographic perspective, a lot of our clients live in some very high

tax states. So whether that be New York, New Jersey, Connecticut, Massachusetts, Illinois, or California, you know, these are areas where high income earners, you know, particularly with the reduction and the ability uh or the reduction and the ability to duct state and local taxes, you know, has made that clearly an interesting opportunity.

Thanks very much for being with us interesting topics. Eric Wagan is the senior portfolio manager for US Bank Private Wealth Management, helping to manage more than a hundred and fifty billion dollars of customer assets. And thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's

one before the podcast. You can always catch us worldwide on Bloomberg Radio