P&L: Trump Tends to Aim High, Then Fall Back

at Peter Koi CEO. Y all right, Mr ki Uh, tell us a little bit about the economy and the challenges that a Trump administration faces. Well, Donald Trump is uh is a regieved changer. He's he's not your average new president coming into office. He's got incredibly ambitious goals. He wants to really change things a lot, and he has vanquished his political opponents. But can he as easily vanquish his economic challenges? And that's the question I have.

I mean, well, yeah, specifically, I mean, he's vowed to cut taxes, but he's also planning to increase spending quite substantially. And the question that I have is, I mean aren't there going to be some Republicans who don't want to see the deficit expanded dramatically? And how is this going

to work? Exactly? So, the compare of nonprofits in Washington, the Committee for Responsible Federal Budget and the Urbans Brookings Tax Policy Center did a joint report looking at Trump's sort of the handcuffs on him, the economic handcuffs, and saying that if you look at Trump's plan, as you said, he wants to cut tracks is dramatically, but he wants to preserve the big cost centers of the federal budget, which your Social Security and Medicare, and he must keep

defense spending on track or raise it. He said, the new spending over the next decade will be ten times larger than the new revenue. And as you say, there's a political constraint there in the economic constraint. The political constraint is people in his own party might not want to go along with that. The economic constraint is that the bond market vigilantes might not want to go along with it. So we focus a lot on politics because it's been an election, but I think we need to

look at finance and economics as well. I want to look at the bond yield the tenure, Peter, because I know you were interested in that as well. Right, two point eight percent right now for the tenure. What does that that sell off in the bond market tell you, Well, you can need to look at the level and you can look at the change. The level is still pretty moderate. We're not talking about a high bond yield historically, it's the change that matters. And it shot up the day

after the election. Yield shot up. The yield shot up noticeably. No one wanted to own these ten years, right, and so again you know, the Federal Reserve has been sort of wanting to see inflation higher, and you know what we're probably seeing here is higher inflation expectations being embedded in the bond yield. So it's not a terrible thing. It could be that people are betting that the tax cuts will be stimulative towards the economy and raise inflation

a little bit. It could be an infrastructure spending which would also be stimulative. So, uh, what we're seeing is the bond market seeing, hey, this is a new game. You know, one thing that you quoted from Donald Trump's book, The Art of the Deal, is him saying I never get too attached to one deal or one approach. I mean, how much do we actually know about what he wants to do? Um And is it matter more who he's

listening to with respect to getting economic advice? Yeah, I think that he aside from making America great again, which he's definitely committed to, I think a lot of the details are ones that he'll play it by ear he'll see what he can get through. Another quote from the Art of the Deal is that he he tends to aim high and then fight and then fall back. That's the typical uh people some people do in real estate, right, They asked for a lot, and they don't always get

what they want. So when he asked for this enormous tax cut, he may fully intend to pull back and accept a smaller tax cut. The dollar and the U. S. Treasuries opposite directions is the greatest correlation since December. What do you make of the fact that you've got this major difference between people wanting to own the dollar and people wanting to own US treasuries? Well, think about it. Higher yields actually attract money into the the U. S. A that's I think that might be what's going on

in the currency. Well, there's also the flip side of that, which is the depreciation of some currencies that might be of nations that might be negatively effect to dry a newly h new new trade deals from the US. So you've got a Mexican pay so moving quite a bit, and you've got to you know, Europe with its own issues. There's a lot of dynamic action behind there, and there are a lot of people who are stepping back entirely at this point in trying to wait and see how

that takes out. Peter koy Uh, us economy editor at Bloomberg, thank you so much for being with us. It's really fascinating to see the negotiations going forward and how this will work um when you actually have to get to the bottom line. One other place that is seeing some big money and potentially even bigger money is the marijuana industry. I want to bring in Rickford, CEO and executive chairman of Pure Agro, which is a company that applies goods

to help with the growth of marijuana plans. This was a big This was a big election for you, wasn't it. It sure was. I want to clarify we're kind of a picks and shovels play for what we're calling the rush. So just like the Gold Rush, picks and Shovels were the companies that made it, we feel we're picks and shovels. We we just supply the equipment, nutrients, and typical farming products. So, um,

let's let's go over what happened on Tuesday. California voters uh and those in Massachusetts, Nevada, and Florida North Dakota all past some measures, whether it was medical marijuana or also recreational marijuana, making it legal. How concerned are you that this could get reversed with an anti drug Republican administration.

I think the Republicans have had a conservative platform on states rights, and I think as long as they stick to that platform and let the states do what they want, which has historically been their platform, I think we're in a good position. Now. You have been credited with creating the first, uh, well the first in the country custom platinum certified home when it comes to energy efficiency. Yeah.

My my background is environmental construction, so I built the first Lead platinum home and helped the Lead rating system in their progress into the residential market. All right. And the reason I bring that up is because I'm curious if you can give us an estimate for how much energy And as you said, picks and shovels, it's not just picks and shovels. It's all of the farming equipment, but it's the energy also that it is taking off

the grid. If you, uh, let's say, just set aside the legal issues of the marijuana industry, what kind of energy consumption is are we talking about? You know, it's hard to put a dollar amount or a percentage because I don't have the data from the growers, but I'll tell you it's a big line item for them. And actually the marijuana industry is what's fueling the R and D for these lighting manufacturers and such to bring down

the cost of it. And as we see in Colorado, the price of cannabis has been dropping due to the recreational that's forcing these guys to look at their P and l's and actually pull up. Are there specific companies

or technologies that you can point to that are being developed. Yeah, there's a lot of technology, and I think we're seeing in L e D. L E D really hasn't been able to break into the cannabis market yet, but what I see on the horizon, I think it will be so one thing that pure predicts is that the legal marijuana industry will grow to be a fifty billion dollar industry. By what has to happen for that to happen? Right now?

You askedimate that is about a six billion dollars. Yeah, I really think that we're seeing it happen with what you just said about these votes. I mean, Florida going medical is just huge. That once again, that's a Florida passing the bill legalizing medical marijuana exactly, and then California going recreational. So California, by a couple of estimates, represents either sixty two or eighty two percent of the totals

country country's cannabis markets. So when you look at it like that, just California alone could throw a big chunk of the number you just quoted. Yeah, I love him. I love that every industry has their uh lingo and that this is going medical or going or going recreational. I love it the different expressions that come up. Um, how about going just to run down some of the initiatives, right,

because Massachusetts approved voted for recreational marijuana. Also extending a legal marijuana that makes it a coast to coast situation, doesn't it? It It sure does. So there are still those that oppose this or that are sort of trying to get court orders to halt some of the bills from getting implemented or for allowing people to exercise their new rights. Um, basically before there's a social study to look at whether this does have a bad effect on social fabric. Um,

How concerned are you about that kind of activity? Well, since you know, my company owns the largest player in Colorado, and Colorado was really the social experiment. So what we're seeing with Colorado is that they love the tax revenue. There is no other consumption of other drugs, that gateway drugs sort of mentality. I think that's been put to rest. And um, I feel that Colorado, since they've already done it,

we'll see the same thing happened in California. We'll see public opinion be very high after the recreational passes real quick. Which state do you think is next to legalize marijuana? Wow? Um, I'd like to see New York. Is that where you're from? I'm bi coastal Ah, thank you so much for being with us, Rick Bird a fascinating time for the marijuana industry. Rickbird, CEO and executive chairman chairman of Pure Agro. On the marijuana business, thank you grow to be fifty billion dollars

in the next ten years. Definitely a big industry, Definitely something to watch, and I know anecdotally speaking too many traders out there, that it is something that they're watching as a potential profit boon and something to to bet on. So it'll be interesting to see how they do that with the picks and Shovel's type of play or not. This is Bloomer all right, Let's solve the issue of retail sales with an expert our own Punam Goyle, senior

US retail analyst for Bloomberg Intelligence. Put them, where do you want to start? You want to start with Macy's and Coals and then I know we get Nordstrom's after the close today. Yeah, sure, we can start with Macy's. I guess that's the largest department store, so let's start there. I think you know, overall in the department store channel, you're seeing the stocks rise the last I checked high single digits, and that strength is coming from the sales

warrant that bad. I mean, that's really it. They were still but they weren't that bad, so I think the optimism really comes from their coals. Was a big surprise. Um, they actually beat by ten cents UM, which is a big number. Sales they missed a little. The beat was entirely on better expense management. So very good numbers out of colds. On Macy's, the numbers were weaker, but the guidance was better. Um. They expect same stert sales to be less negative UM for the year, which is good

for the fourth quarter. So what's behind the less negative outlook, which is, by the way, so encouraging. I mean, it makes it makes me just want to run out and buy something. Uh, what's behind it? It's all about inventory. It's all about inventory management. Retailers have been really in the spiral of you know, too much inventory, have to discount um reduce the sales. And at the end of the second quarter they were lean on inventory. They maintained

that inventory discipline. They're continuing to pull back orders from wholesale and that's helping their margins and it's allowing them to discount less. So that's really the magic behind why things are less bad. Traffic is still down, so that that continues to be the case. Do you think that this is worth it? I mean, I'm looking at Macy's shares and they're up eight percent. Well, I just I'm just, you know, like I got to hear, I mean put I was saying, well, here, they're basically less bad. Let

me let me add to this. Let me let me add to this. This is the seventh consecutive quarter in which sales and profits have both declined. Correct, Um, Macy's made I love this zero point two cents for every dollar it took in in revenue, adding to the math. But I assume you're right, right, Okay, but you can't do that for very long, can you? No? You know,

I think that's the problem for retail though. Right in general, we're in this position where consumers are not going to stores, and if they are, they're choosing one and how and where they shop. They're shopping more online. So these retailers, by nature have to evolve. And Macy's today said something about that they hired m Brookfield Brookfield Asset Management because that they got a big base of real estate, right, I mean, they got that Union Square store in San Francisco,

for example, two and fifty million dollars. Yeah, but you know, Hall Square is still on the table, and that's what everyone's dying for. So I think they're taking baby steps on their real estate. Eight. But when the Herald Square deal strikes, what it is, um, you know, what do you think that's going to look like? Can you give us some idea of the shape? So I think it's going to be the last one that they do, because

it is the largest and the most complex. This is for the New York City flaship, for the New York City Harald Square, the you know, the iconic Macy store. Um. It's valued at four billion dollars from Starboard. That's what it was valued at in January. So that's the big deal. And when that happens, who knows, But I think it'll be the last. They're kind of just scratching the surface pleasing investors by making these baby sales. Um. But that's

what everyone's waiting for for Macy's. I'm looking at Nordstrom shares at Nordstrom Reports after the bell today and they're up about almost the exact same amount is macy shares More than eight percent UM. Why I mean, I think everyone's just expecting less negative news, but probably more positive from Nordstrom. So Nordstrom wasn't really supposed to follow the weakness that we had expected originally from Macy's and Coals

because had an anniversary sales shift. So if you recall their anniversary sale that they have every year, a week of that moved from the second quarter into the third quarter, and that was supposed to help nord Storms results. We expected to help nord Storms results. But just by seeing UM better numbers out of Macy's and Cold, I think the market in general is more positive on the department

stores could have. Could the better better than expected numbers have anything to do with a stronger economy than many UH analysts were expecting, You know, I don't think there's much that has changed and the economy. If you look at the third quarter, macy cited very good back to school and so did Colds, so I think that's encouraging. But things ZiT soften in September and then we're kind

of flatish in October. So I'd say less to do the economy, more to do with maybe tourism for Macy's, UM they had a hundred two hundred and fifty basis point impact from tourism and most of the last eighteen months, and now tourism sales are just in line with their comps. So that's helping Macy's too. J C. Penny, they will be reporting of results tomorrow and the stock is up more than eight and a half percent today. What's the j C. Penny turnaround story looking like it's you know,

it's on its way to a turnaround. It's proven it um. We expect no different tomorrow results where it's going to be better than Macy's and Coals And now it just reinforces if they didn't do that bad, they probably did even better. Appliances focused on home, private label Sephora. I mean, those are all positives for the company. The company probably will not or will take a long time to go back to seventeen billion dollars in sales. It's right now

at under thirteen billion UM. But it's growing and its stores look better. It's digital platform is improving. They're making all the right steps to differentiate. Marvin Allison is really pulling this one out. He is. He's doing a good job. He's differentiating the department store. Well, you know, you talked just general about the online presence. I mean, how much you learning given Coals and UH and Macy's earnings today, how much have you learned about the progress they've made

on that front. I think they've all made a lot of progress. But online still isn't the bulk of their sales. Does it need to be? It probably will have to be at some point as a closed store. So you know, we've been calling that stores need to close. Macy's announced a hundred for next year, but a hundred out of seven hundred some odd store macy stores is still too

many stores. There's about four hundred to six hundred a b malls, the malls that you want to be in, and UM, do they need to be in more than that? That's the question. So will online grow to be more than just ten percent of retail sales? Absolutely, At some specialty apparel retailers anywhere from UM department stores I think are still scratching in the low double digits. So there is more opportunity there. Buy online, pickup in store has

great attachment rates. That's helping them. That's a plus for them when they compete against Amazon. That doesn't have those locations, but we should see fewer stories down the line, if not few or at least smaller stores. Smaller store for Macy's indeed. And we're also going to be getting Walmart results next a week actually from today right Walmart, this stock is up so far this year. Thanks for listening

to the Bloomberg pien L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio