Retail Sales Numbers Are Just Wrong: Craig Johnson

government shutdown. But before you get all barished the way that many traders have, we have the economic advisor to President Trump, Larry Cudlow, saying this about the data. Take listen. First of all, you had ten days of government shutdown. I regard that as a temporary glitch, as you know. Uh. Secondly, shoppers were very late. According to the National Retail Federation, shoppers came in very late. I wouldn't be surprised if

January was revised up because of that. That was Larry Cudlow speaking to a gaggle of reporters in Washington, d C. Joining us here our Bloomberg Getta Active Broker Studios Coror Kadana Chief you as economist for Bloomberg Economics and joining us by phone. Craig Johnson, president of Customer Growth Partners, Carl, let's start with you. Was this data glitchy? I don't think there were glitches there in terms of a collection

of the data and whatnot. However, to the extent that we had a government shutdown, probably those government workers were kind of absentees in the later part of the holiday shopping season, so that could have had an impact. I don't really buy into what a weather story there because one of the most weather sensitive categories tends to be

motor vehicle sales. If there's two feet of snow in the dealership lot, you tend to not go for a test drive U. And actually that was the rare bright spot in this report, with the motor vehicle sales up one percent UH in the month h. The other factor there, obviously, is the equity market and financial market turmoil that we saw in you know, we we knew about in December, not fully, but that was definitely scaring people away or leading to some sense of, uh, you know, conservativism with

their back to spending habits. So in light of this report, we have trimmed our GDP forecast for Q four. Right, consumers are very important part of that forecast. So we've taken growth down from to nine to two and a quarter UH for the UH for that's a very substantial revision that shows how bad this report actually was. UH. Nonetheless, UH, you know, we're not changing our outlook for consumers over

the course of beware. I think there's some sticker shock as people are getting smaller than expected tax refunds as they're filing. But the labor market is on very sound footing. Personal income growth is strong. That means consumers will be back in the game, but maybe not until Q two. So Craig Johnson love to bring you on in this discussion.

What do you make of this retail number and does it change your view of the consumer and for growth in well Answering the second question, first, no, we don't. We don't think it UH significantly affects the outlook now on SO two. The reason for that is is gets to the first question, is that we think there are

clear anomalies in the data here. UM. Overall retail works in a world of year of year sales and total sales growth in December per the report, and this is excluding autos, gasoline, and restaurants normal exclusions, was up only

one point UM. But if you look at non store retail for December UM, of which is with online sales, it's up only three h That is the worst showing since the native of the Great Recession uh in in in two thousand eight Quality two eight uh And yet if you look at online year to d eight sales

through November, they were up two points ten ten. October and November, which is inclusive of the first half of holiday, online sales were up again using their data, was up thirteen point five And for the thought that suddenly this ran up down from thirteen point five percent pace in October November is only a three percent pace in December. Holds, are you basically saying that the numbers are inaccurate here? Yes? Okay,

so you don't believe the numbers. You think that they are wrong, absolutely, because this would imply a deceleration from October December of a of a growth rate of thirteen point five percent, only a three percent growth rate in December, which has never happened. UM and other other the other retail Amazon is almost half of all retail sales. Their Q four sales are up eighteen year of a year. Wayfarers is which is the second biggest pure play, uh,

and they'll be up almost this quarter. And so anybody who thinks the three percent growth rate for online in December is living in a dream world. And and we're certainly going to get some more earnings next week to confirm or rebut some of this data. But Carl, what gives you faith in this data enough to revise downward your GDP estimate for this year. Well, the retail sale are whether whether the data or right or not. And

there's definitely a valid case there that maybe there's some distortion. Uh. The retail sales data, nonetheless are plucked and put plugged into the GDP tabulation. So if there's a mistake in retail sales, that gets factored into the GDP numbers as well. So it's just really plugging in the actual arithmetic. What can happen here is you have sampling issues. So uh, some retailers may not be counted in the retail sales survey. I don't know if that's the case for Amazon or

what not. Usually Census doesn't disclose who they're pulling but you know, if you if you have a lot of retailers that were doing poorly at the end of the year, certainly there were lots of headlines about you know, sears and and companies of that nature that could be feeding some kind of distortion into the survey. So Craig, how about I mean, seriously, on the on the do you sense that if the data is correct or incorrect, that you're the consumers in a good position for Yeah, because

the airline consumer fundamental. The reason we're sanguine about the rest of the year is that whether retail sales or consumer spending in general, retail is the biggest segment of consumer consumers sixty percented economy is is that the fundamentals that drive retail sales is two biggest. The biggest fundamental is growth in disposable personal income, and right now that

depends that in turn is driven by two things. One growth and employment, particularly full time employment, which has been very robust, and secondly by growth in average wages, which are up three percent and change. Those two vectors combined to be a major driver, about a five percent driver retail sales, and that's why we're sticking with our forecast of about somewhere around five percent year of a year retail sales growth four two. Craig Johnson, thank you so

much for being with us. President of Customer Growth Partners, Cardona, chief US economist for Bloomberg Economics. Just want to bring you this headline just crossing US and China trade teams are so to be far apart on reform demands. Looking at the Dow, it is off its earlier highs on this news, uh, So we are going to keep an eye on that as the day progressive we list. It seems like you and I are spending more and more

time talking about gaming. Maybe that's just having met Cantraman come in and talk about the big gaming companies and their earnings. But one aspect of the gaming businesses e Sports, that just fascinates me. This is the business where people come to arenas and other public places to watch other people game. This is a real business. It is a growing business. This is a one billion dollar business four

million viewers, uh and growing. So to help us kind of dig deep into this business and the opportunities here, we have a couple of gentlemen on our eleven three year studios Ken d Q Bellis CEO of Black Ridge Acquisition Company that is a Nasdaq listed spack on a the symbol b r A C. And Frank frank Ing c year of our Game International and Kennon Frank, I guess your companies are are in the process emerging to form what will be the new company would be Allied

E Sports Entertainment. So Frank, maybe if you could just give us a sense of E sports. Why E sports? What are the opportunities that you guys see in this business? Uh. E sports has been around for a long time, but as the subset of gaming. But now it becomes an industry because in the past few years, streaming becomes extremely popular and that really support the growth of the sports, and and and and the essence, the core element is

the viewership. Viewership has grown to a very large number already. You know, last year we had about four million on the global basis viewers regularly on the sports and it's already bigger than many major sports. So um as as it develops right now, you know, we we see a lot of new business model that is emerging and we we really believe this is at the very big getting stage off the industry. You know, to monetize from the sports activities. So you two are coming together to form

Allied E Sports Entertainment. Ken dicobilis joining us here as well. In your firm, black Ridge Acquisition Company. Didn't it focus on oil? That was part of the initial focus. But I will tell you when you have a spack, you have a finite timeline that you have to get a deal done. So it's all about deal flow. And for us, we're very fortunate in that a gentleman named Lyle Berman took a company called World Poker Tour public in two thousand and four. He eventually sold that and then Frank's

company bought WPT three years ago. As Frank was looking at various ways to fund the sports initiative, he heard that Lyle had a spack, so he approached Lylan for those who don't know his special acquisition company, correct, So they approached us, and I can tell you the opportunity with this business blows away any we were looking at in the energy space. So it's all about sure hold a return for us, and we think this is the

right bet. Okay, So what is the business plan for your company and give us a sense of how that maybe mirrors what's going on in the sports business in general. I would say this this is unique. Okay, if you're looking to play the sports today, there's really two ways to do it. You are a video game publisher that makes the games itself, or a lot of the traditional sports franchise owners are buying teams that compete against each other. We're a game and team agnostic. The strategy is threefold.

You hold a live event like at our lux or arena in Las Vegas, produce content off of that, and then drive viewers from the content piece to an online platform. So it's the three pillar strategy that, by the way, has been deployed at the World Poker Tour for seventeen years. So that's the play here to monetize. So, Frank, talk to me about the arena type play because this is something I have not seen that much about me. We know that watching competitive gamers, that's a very popular thing

to do. People stream that. But you know what is the market like for in person events right now? Well, I think the market is growing very rapidly right now. A lot of the bigger sports events today they're being how that colosseum like you know, Candlestick Park for example. Um, you know, but we we're trying to create a new format,

a dedicated arena just for E sports. Basically, it's just like a studio or TV studio with live broadcast capabilities that can house a thousand people with those gas, your show looks great, and I'll focus instead of you know, doing more like a proper organized league or teams. Instead, we want to create shows entertainment for e sports that can be carried out on a frequent, regular basis, and as such, the commercial value that can be created will

be a lot bigger for our sponsors. So talk about where you are in or how how you view the model sponsorship advertisers, how critical is that to kind of what you guys are thinking about. Well, I would say this, the demographic in in the sports of the viewership is primary L thirty five and under. That's a highly coveted demographic. And the beauty of the ecosystem right now is they are all online. So E sports is an online business. The content that will be produced from the live events

that the arenas will be distributed primarily online. So the sponsors really covet that demographic and so they want to get behind this business. As well. So, Ken, how big do you think this? How how how do you sort of monetize this in terms of ticket sales? Do you do? Uh? Gear? I mean just the practical aspects of this. Yeah, the two really big opportunities with this business model is with the content to sell sponsorship or spell sell the content

to distribution networks. Okay number one. But thirdly, which really meets up with what Frank's background is, is an online subscription based service geared primarily towards gamers. That's what Frank has been doing his entire career. Yeah, thank you both so much for being here. Kenn D. Cabila's CEO of Black Ridge Acquisition Company, seem to be future CFO of allied E Sports Entertainment. Frank Young, chief executive of our Game Internet National future CEO of allied E Sports Entertainment.

Both of you here in our Interactive Broker studios. Thank you so much for being here with us. Well, the number of the day is one point two, as in a one point two percent decline in retail sales for the month of December just released this morning, certainly impacting the markets. To get us give us a sense of what this means for the consumer and for markets going forward. We bring in Peter Anderson. Peter is the founder of Anderson Capital Management. He joins us right here in our

bloom Bloomberg Interactive Broker studio. So, Peter, this number was clearly a surprise for the market. Uh does it change your view of the consumer and maybe how you're positioning your portfolio. The only thing it does is it really reinforces my opinion that last order was such a crazy quarter.

Nobody really had firm opinions as to what was happening, and as a result, I think what you're seeing is the consumer just recoiled back and said I'm out for the month of December, simply because nobody is giving me any pure advice. Nobody is telling me which way the markets are going. Everybody seems confused, and when I'm confused, I go back into my bunker. Are you confused right now? I've never been confused? So so, so what's your take? Well, I think that the market has, uh, it needs to

discount all the political policies that we're we're following. I mean, certainly it's very important about the tariffs, the wall breaksit, but let's just put it in perspective. You know that if you like US stocks, then I would suggest buying US stocks based on the fundamentals and not whether the tweet of the day by President Trump will actually change your mind. Paul, can you believe this? If you like

US stocks, you should buy US stocks. I have to wonder on a day like today, when you see Coca Cola shares plunging the most in two thousand and eight, if you like the U S economy and you think people will keep drinking stuff that doesn't just water, would you be a buyer of Coke shares? Well? I don't own Coke shares because it's not in my universe of

stocks that I own. I tend to own stocks are a little less followed, actually, because I think Coke is followed to death, and in terms of advantages of information, it's pretty tough because it's followed so much. But when you're looking at other stocks it might have missed their earnings that are not followed such as closely. Then I think those are buying opportunities if you do have the

confidence in your own analysis. So we've certainly seen a tremendous rate or level of volatility, certainly in December and even coming that snap back here we've seen this year to date. Do you use volatility as a buying opportunities that is that kind of how you're viewing it right now, or are using volatility as an excuse to step back? Well, know, volatility is probably the most frequently used word in our business, and I have to tell you I almost ignore the

total volatility. I just go ahead. I say to myself, if this is a stock that I like, and I've liked it for some time, and I still continue to like it. If a new client comes in, I don't even market time. I usually just jump right into the jump rope and don't wait for vall to pick up. So I might pick up the stock at a little bit more cheaply than I normally would, because it's a fool's errand to try to time that. So you'll hear a lot of people in my side talking about how

scary the volatility is. But I'm not afraid of that because I don't think it's a major driver. If you're in this market for the long run. Sure you might pick up some stocks, uh during the high periods of volatility, where you might get cheaper prices, but in the end, it averages out and you should focus on more technical things. All right, So if you are not afraid of making statements and making opinions, what do you like? What shares

do you like? Well? I like, uh, hold your breath now in video in video is reporting interesting talk about little stock exactly, but he doesn't pay attention to that's right. So let me just quickly talk to you about a video. You know, I grew up in the world of physics, so I feel like I understand uh humbly a little bit more than the street about in videos addressable market in the future, so certainly it will be lumpy around along the way. And it was of course last quarter

and maybe even this quarter because it's reporting aftermarket. But that is a tremendous stock that you can get at now a pe of less than twenty times, and if you remember, it was trading at a much higher evaluation as recently as six months ago. Anything else in tech? Does tech scary way? Or do you like? You like the growth and you can make the valuation call well, I love computer security. So for instance, Palo Alto Networks cyber Arc just reported recently. Uh, those two companies will

never their addressable market. Unlike Coca Cola for instance, there addressable market is growing undeniably and as we get more complicated and communications and technology and hacking, it's UH an arms race. So that will never end except with the advent of quantum computing, which is far far away in the future. So what about the breakdown between stocks and

bonds and how are you allocating right now? UH? In terms of asset allocation, I would say that it is well overdone in our industry to have people come in here and talk about a core satellite model which might use ten to fifteen asset classes, and some of the exposures are two to four per asset class. What does that get you It it gets you low conviction. I advocate having if you're coming into on cash, for instance,

so let's UH suspend capital gains issues. If you came in on cash, I would advocate as little as three to four asset classes. For completely diversified portfolio, I would I would do away with the lexicon of tactical allocation and strategic allocation. There would be a core UH SMPI et F very very cheap core e t F of fixed income, and then my twenty stock portfolio which would hopefully give you the alpha, and then you are done.

Your reports come out three line items basically. Yeah, so ten seconds here, have you shifted the allocation between stocks and bonds or kept it sort of like a sixty for type model for most people. I keep it at sixty forty and I really don't switch that, and sometimes I even let that run, believe it or not, as opposed to going back and tactically reallocating. Peter Anderson not

afraid to give some points of view. Really great having you, Peter Anderson, founder of Anderson Capital Management, joining us here in our Bloomberg Interactive Broker's studios. Right now, let's focus on airplanes, in particular those that have staircases leading from one deck to another. They are going out of style and off the market. Joining us now to discuss George Ferguson,

Senior Aerospace, Defense and Airlines analyst for Bloomberg Intelligence. George, So, air Bus is scrapping it's unprofitable a three eighty double ducker jet. Why? Yeah, So, I mean it just wasn't the demand for the airplane. And that's been as you said, you know, the same for all sort of four engineer planes lately. Um, I mean it's a real move to two smaller wide bodies, so airplanes with to two aisles in them. You know, smaller airplanes can be deployed to

more markets, different markets. You don't have to worry about, um them being being too large that when you drop them into a market you'll you'll hurt fair dramatically. The A three eight really was just it was too big to fly to most markets. It would just dilute fares and her profitability. And I could say, Paul, he says, you can drop it into a market and people get hurt, a very different image and what he's talking about. Have you ever seen one in land? It's amazing fly it

into Sarah. So I think that's just the challenge is too big for most markets. He fled in there, and you really dilute fairs and Emirates profitability has been it's deteriorated over the last bunch of years. There's a lot of competition out there, and they finally, I think, came to terms of the fact that it's just too big

an airplane to operate most places. So, George, how rare is it for you know, an airplane manufacturer to cancel a whole line of of its plane, argue it's marquee line of of a plane after such a short, short shelf life. It seems like they really misread the market here Airbus did. Yeah, you know, I think I think they did. You know, for Airbus, it's not as rare as it should be. The A three forty was another

four engine airplane that had a pretty short lifespan. So, um, they've got to sort of misses on the wide body front, I would say, in the last couple of decades. Um. And you know, I think you just have to stay close to customers. I feel like, um, I feel like some of their competitors that maybe been a little bit close to customers and understand demand a little bit better. You know, Boeing built the seven forty seven. It's what fifty years old now, right, They built it many many

many years ago. Um And and in those days, the hub and spoke was more of the way airlines went about trying to do their business, and now we're doing more point to point and I feel like Airbus sort of really missed that point to point trend. With the three Airbus shares up for nearly four and a half percent in Paris right now, I want to get your sons, George, of just the fact that more than three thousand jobs will get cut if this goes through. As this goes through,

do you have a sense of where those jobs are? Yeah, I mean the three is made into loose. Um. They put a lot of investment in too loose. So I imagine would share of jobs get hurt there? Uh you know the rolls Royce to make engines, g makes some engines. UM. See you see some some losses away from toloose some of the suppliers and um and maybe you know some of the other Airbus facilities that supply the airplane. But

I think the majority being to loose. I would note that Emirates placed orders for the three fifty and the three thirty, and air Bus is in the process of increasing production of the three twenty from fifty to sixty airplanes this year. That's increase per month. And so I think there are other opportunities and Airbus alluded to this, there are opportunities to find people places to move inside the air Bus uh um network, you know, as they wind down the three. So, George, is this a good

day for Boeing? Is a loss for Airbus, good for Boeing. Well, I mean, you know, look, I think, uh, you know, I think from from sort of the PR stamp, and it might be it might be good because you know, again, Boeing sort of built the seven or designed to build the seven eight seven at the same time Airbus was working the three eight, and the two airplanes were markedly different. One was about point to point travel and the other one was about hub and spoke. And I feel like

this is a win for point to point. But but the truth is, I mean, the three eight wasn't making much money. I don't know that it adds much like to the seven forty seven. I think the seven forty seven have got a freighter variant that helps carry it, and that's really what's sort of saving the day for the seven four seven. So it's a PR victory, but it's not huge. George Ferguson, senior Aerospace, Defense and Airlines

and analysts for Bloomberg Intelligence, Thank you so much. I gotta say, the kid in me is sad to see these go, Paul, because uh, you know, where's the romance and where's the romance? No, they're just cramming us more and more people into these single aisle you know, aisle planes, and yeah, we're the cocktail bars and the so on and so forth. Pan am. The nostalgia, the running up staircases that I never really experienced but I saw in television, and what I experience when I go and wonder if

I have to pay for my Coca Cola. Thank you for Coca Cola shares down. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa Abramoy. It's I'm on Twitter at Lisa abram woits one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio