The Diamond Market And Economy In 2022

tested up for the COVID passing with colors. I would say she's the CEO of Signet Jewelers based in Accord, Ohio. It's a publicly traded company. S i G is a ticker about a four billion dollar market. Cappin. Jenna, thanks so much for joining us here. Talk to us about the jewelry business in the world of a global pandemic. Tell us what the last couple of years have been like for your business. The sixth sign it is I read that Signal is the world's largest retailer of diamond jewelry.

Is that true? Yes, that's right. So we operate under a number of retail banners that many customers no k sales. Jared Banter by piercing Pagoda. We have an online purely digital play retailer, James Allen dot com. Just recently in the last year purchased Diamonds Direct and Rocks Box, which is the number one jewelry rental and subscription business in the US. So we are number one in the US

both in bricks and mortar and e commerce. We're also the number one jeweler in Canada with People's Jewelers and in the UK with Ernest Jones and H. Samuel. So I'm just looking at your fundamentals here on the Bloomberg. It's great with any stock you can take GF go and see your revenue. Uh and um, EPs, you guys aren't doing great business obviously, up fifty percent year over year in terms of revenue growth EPs at a near

record high. UM. Why Why is that? This is really the culmination of several years of transformation that the company has been under and I'm very proud of our team for embracing those strategies and for the passion that they have. We we have been working to drive out all costs that customers don't see or care about, and we've invested, We've invested that in creating a much stronger digital presence.

What we know about shoppers as they came through COVID is that they're much more interested in searching and browsing online before they go to a retail store. In fact, in our business, now nine of our highest value customers, so people who spend more than five dollars with us, interact with us both online and in stores. So this this is growth. I mean, if you look across different segments and I know you have a ton of new kind of high tech businesses springing up, is online sales

your your biggest growth business. It's definitely the biggest new interaction point for our customers. Still about eighty percent of stores and jewels of sales in jewelry happen in store, so people aren't buying as much online, but they're definitely getting informed on line. We have features now like virtual try on online, virtual jewelry consulting, asynchronous chat where you can chat with someone one day and come back to the same chat a week later. So we've really invested

in digital tools to make the shopping experience easy. So talk to us about the pandemic that two years did you shut down stores and how did you manage that. I'm guessing it's a regional situation in different parts of the country doing different types of policies. So we we took a very proactive stance on that to keep our team members safe. UM we closed our stores almost exactly

two years ago on March twenty three. That was a scary thing to do for a retailer that was very brick and mortar focused, but we had already been transforming our digital operations the Christmas before. UM. Everyone of our sales associates had been working with iPads in the store, so within forty eight hours we turned those on in their living rooms and they were still able to serve

of our customers. Our digital business really exploded during that time period and we were ready to lean into that pivot. And and I would say, if anything, it accelerated our transformation. That's you know that amazed me talking to different luxury retailers about how customers did make the pivot to digital. Like, if I'm gonna lay down a big chunk of money for something, whether it's a diamond or an automobile or a fur coat, I want to see it, touch it,

feel it. But that wasn't necessarily the case. Do you buy a lot of fur coats? I do not. Well, you know you have to. You have to think about what matters most in each category, and in jewelry, the two key things that customers are looking for before they make an expensive purchase our consultation or advice and visualization. You want to see what it looks like. But think about trying to look at a diamond in a store

using a loop. It's not very easy. I mean, you pull it back and forth in front of your eye. You can't see the diamond that Well, we came up with a technology where we take hundreds of photos of a diamond, blow it up forty times in HD You can actually see that the you know, a diamond much better now digitally than you can't even in the store. Yeah, I'm sure that's that's the case. What about the current

war in Ukraine? How and the sanctions on Russia? How difficult is that as a diamond retailer When I'm I've read that Russia maybe the world's largest supplier of raw diamonds. So thankfully we don't have any operations on the ground in Russia or Ukraine, but we did act very quickly

on this um. Signet has been a leader in responsible and ethical sourcing of jewelry now for more than a decade, where founders of the Responsible Jewelry Council, members of the World Diamond Council, and we actually go above and beyond that and have our own Signet Responsible Sourcing protocol. So customers for many years have been able to count on everything in a Signet store being pristinely sourced. And we're agile.

We have a group of changing vendors. We've gone to them, We've said we don't want any diamonds sourced after this conflict that came from Russia in our jewelry. We've stopped our own direct interaction and so customers can feel very good about buying jewelry at Signet. All right, Jenna, thank you so much for coming, and we really appreciate you

coming into our studios here today. Jennet Drosos, CEO of Signet Jewelers again public and traded company s i G. They're based in Akron, Ohio, but Jenna joins us here in New York and we appreciate that. All Right, Supreme Court nomination, got another one coming. That means we're gonna have some holly contested I guess some hearings, if you will. June Grasso, host of Bloomberg Law and Bloomberg Opinion, joins

us here in our Bloomberg Interactive Brooker Studio. All right, So Katanji Brown Jackson, June, what can you tell us about Katanji Brown Jackson? Well, she is currently uh appellate court on the d C Circuit Court of Appeals, which is sort of known as the second highest court in the and it's the feeder court for the Supreme Court. And um, she was a district court judge for ten years. She just had a hearing last year to get onto

the d C Circuit Court of a judge. She has a background as a public defender, which is something that's so unusual on the court. The last person who defended criminals who sat on the court was um was it

was decades ago. So what what? Um? What we're saying seeing is that she might be attacked because of her defense of you know people, and that's one of the attacks that they lodged when she was at her I just remember, I just remember the Cavanaugh hearing being so ugly, so ugly, and so many images that are seriously, people's you know, literally television images. How do you think this

one's gonna go? Well, if you remember the Amy Coney Barrett hearings, which were after the caval hearings were not that ugly. Probably you remember that because you remember Kavanaugh because it stood out, and we remember Clarence Thomas. There are some hearings that really and out, and a lot of times you don't remember what what the the nominee said. You worry you remember what the attack on the nominee was. It's all about the questions in these kinds of hearings.

It's all about the senators getting their questions in it. So you'll find a lot of the Republican senators who have presidential ambitions, like Josh Holly Ted Cruz are going to be on the attack most likely in these hearings. Even though I mean her record is I would say, I mean it's it's difficult to assail her on certain points. For example, the hot button issues like abortion, religious rights.

She hasn't written about that. She's been on the court for only a few months, so she hasn't written about that, and her as a district court judge, you don't write about those things. So they're not gonna be able to get her on that. So they found other things too, assail her on whoa like what? Like what? That's a

good question. That's a good question. Let me with that without we don't want to get political about it, obviously, Um but if you when you were at Harvard Law or wherever you studied, I'm sure you had to take the other side occasionally, right, So put yourself in the shoes of a white male Republican. I wonder which one of the few that around the Judiciary Committee, all of them except for one, there's one. There's one female Republican. I will tell you, because we know what they're going

to attack on. Basically, they're going, what would you do if you were advising the Republican Party? How do you get rid of kenjy kb J? Can't do it. They can't get rid of her unless the Democrats, who have held together, by the way, all fifty Democrats on all of Biden's nominees. Unless one of them suddenly says Joe Manchin kristin cinema, Oh, I'm not going to support her. They really can't get her. And the thing is that so the attacks are going to be. Mitch McConnell has

already signaled this. She's soft on crime. She was a public a federal public defender, so she's soft on crime. And also Josh Holly came out with something a week ago that has not been raised in the three times she's been before the Judiciary Committee and including the one time that she was there when he was questioning her, and that's that she's soft on child pornographers. That her sentencing. Now, this is a good area for Republicans because who doesn't

hate child pornographers? You know, it's just certainly the Republicans do right, and the Democrats do y'all do right. It's and also it doesn't involve and it's about sentencing, and it doesn't involve the sensitive area of racist, racist sentencing, you know where that's been alleged. So she in point of fact, she's um, I think about nine defendants and she has sentenced to to below two to the minimum and I think seven to the a little below the minimum.

Why wouldn't you just throw away the key because it's it's child pornography. For child pornography, this is your your what you have stuff on your computer? Right? You could go to prison for decade. The laws are really out of date, and in those cases, some of them, the federal prosecutors recommended below the minimum. The sentencing laws are

out of date. And this all the judges, about six judges sentenced below the maximum on those kinds of crimes because it's you know, you have to compare them to you know, murder, two different arson. What's the timing on this whole process. They expect that before the Senate goes away on its Easter break that the process will be done, and maybe they'll be a vote before then. They're hoping that they will be a vote before them. And from your perspective, what do you think the odds are of

her getting confirmed here? I think the odds are. I'm gonna say, just to leave, just to leave a so Matt will tell me later on. But that doesn't do anything really for the direction now. And that's why that's why this is not going to be you know, one of those like Kavanaugh that meant something, Amy Coney, Barrett, that meant something. But this is just replacing one liberal with another liberal in a court that has a sixth

person conservative majority. All right, all right, Juan, thank you so much for joining us here in our studio June Grasso, host of Bloomberg Law and Bloomberg Opinion, giving us the latest on the Supreme Court process. Hopefully, Uh, get the Katanji Brown Jackson. I guess if you're a member of Congress, I'd like to get this done by easter. Well, we've been spending a lot of time recently talking about the rates market, the yield curve. We're at or near inversion

in various portions of the yield curve. What does that mean? Let's bring in r J. Gallow, Senior portfolio manager for Federated Hermes. R J. When you see certain parts of the U S yield curve at or near inversion, does that meaningfully raised the recession risk in your mind? Good morning? I think it reflects the fact that we have a shock going on, sort of a series of them, the most notable being the Russian invasion of Ukraine in the area economic impacts in terms of the West response to

that invasion. Uh. That's a clear aggregate supply shock, broad based, exogenous, if you will, coming from the geopolitical realm. UM, and that historically increases the risk of recession. UM. Add to that that the Feds in tightening mode. UH, and historically that also suggests increased risk of recession. Oftentimes, when the FED has to pivot aggressively to fight inflation, the result

is a recession eventually ensues. So we're facing both of those factors, the geopolitical shock and in the sense one pivot from transitory too inflation is a problem. It makes sense that the Yolk curb is flattening given both of those you put those two together, it's clear that the recession risk is rising in the market's mind. However, I don't think the Yolk curb inverting is causal. I don't

think that ever causes recessions. I understand that people you know, borrow short, land long, and can slow down uh the financial mechanism that you see in financial intermediation. But I think that the flattening of the curve is more people's expectations that recession risk has risen. It's not a causal relationship in my mind. I mean, some people have been saying lately the yield curve may have caused COVID nineteen. We saw it invert right before the pandemic. That was

a joke to those who didn't get it. I'm looking at Paul's face, thinking he didn't get that correlation. He didn't get that. No, I mean obviously that that was our most recent recession, right, And UH, if you believe in the predictive qualities of an inverted yield curve, you've got to give it a lot of credit for that. Um. No one could could have seen that coming. Nonetheless, we have very high inflation and there is concerns of a

growth slow down. UM. Even if we don't go into a recession, it looks like we could almost grind to a halt here. Are you worried about stagflation? UM? I think about six to twelve months ago, the words stagflation sort of made my skin crawls. You know, it seems inappropriate for the context that the time. I now think

it's a word we should be using. Uh. It's very clear that the exogenous shock arising from the conflict, UH is the kind of thing that results in broad based inflation, which was already bad before the Russian troops invaded Ukraine. It's also the kind of thing that produces demand destruction ultimately slows down economic activities. So I do think stagpulation

is an appropriate word probably more so for Europe. Maybe I'm being extreme, but I think when you actually have recession outcomes and inflation together, uh, stagflation is the right word to use now here in the United States. I think it's a stagflationary shock. Uh. We may be able to skirt a recession. The risks clearly risen, as evidenced by the yokurve um, but it's not baked in the cake.

I mean, we have a lot of strong economic momentum here in both the labor market, balance sheets are strong, both for households and businesses. Uh, there's a good chance that the United States can sort of power through this um. That said, global markets are global in nature, and the response that you're seeing in terms of the Yoeld curve

I think reflects the rising risks that are there. R J. We got the oil on the move higher again today w T I coot up over five about dollars a barrel, just kind of, you know, reiterating in people's minds the inflationary pressures that are out there in this economy. How do you think about inflation, whether it's you know, the duration of this inflationary cycle we're in or the severity I'm struck by the fact that the markets still have

pretty high confidence. If you look at the the slope or the yield curve of of the U S TIPS break evens, UH, it's very downward sloping. It has been inverted for some time, meaning that near term expectations for inflation are much higher than long term expectations. So, for example, UM I LB on your Bloomberg, the break even of two and three years is are each well north of

four percent. Four seventy eight for two year break evens, you know, astronomically high by by recent standards in recent decades. When you go out to the ten year, it's down to two high in the history of tips, but that's still a sharp disinflation between the shorter break even and the longer break even. You go all the way out

to the third year, it's a two. So I think that the Fed has given the market what it needs in the sense that the market needs to believe that the Federal Reserve believes inflation fighting is still a huge part of their mandate, and in fact they are now

focusing primarily on that side of their dual mandate. If the Fed we're not to have done that, I think we'd be facing a much more difficult bond market right now than we already have UM in the sense that nominal yields will be rising more rapidly, that these inflation break even is probably wouldn't be nearly as inverted, and losses would be more stark than they already are. And it's been a pretty rough year for bonds. When you

think about the UH. The the Treasury Aggregate Index, for example, is on a year today basis, the Bloomberg Agreed Index, I should say, UH is now down five two percent, and the Treasury Index itself, that component is down four six So the inflation process, I think people believe if that's doing what it needs to do, and inflation should diminish as we move forward. If it doesn't happen, If that doesn't happen, the bond market sell off will will

actually become more difficult, it will become more protractive. All right, r J, thanks so much for joining us. Once again. I always appreciate getting your perspective there are Gallo, senior portfolio manager for Federated Hermes UH. Looking about stagflation is something that is a term that's coming into our j's vocabulary recently, and he's a wolverine, and he's a Michigan wolverine. Actually was looking. I think he might have gone to the University of Michigan for a four year period in

which Michigan won every single game. Is that right against the Ohio State University. This is the Big Take, the best of Boomberg's in depth original reporting from around the globe. This is a really fast moving story that caused a lot of outrage among investors. This is so fascinating. Market shutdown in a way it's never done before. That's gonna have consequences for years to come. The Big Take on Bloomberg Radio. All Right, Matt, I've told you before I

take New Jersey Transit. Are we doing a sounder? I just talk right over there. Oh well, no worries, Okay, I gotta get this story. Did the sounder dud? We? Okay? All right? But you know, so I take New Jersey Transit in every day during the week man, and I would say the trains now are maybe fifty full, but on the weekends, just backed everybody's coming in and see games and go to bars and restaurants and stuff. But people ain't coming back to work in size, and that's

a problem for New York City. I think Alicia Diaz, she's a writer for Bloomberg's Hop Live team, She's got the big take story of the day again, Alicia, thanks so much for joining us on our Bloomberg and Arctic Broker studio. What you find came to work today? She came to work today absolutely, which is probably more than you can say for a lot of her supervisors. Um, So we kind of looked at this as two groups. There's there's the tourist group. You know, we we're not

having as many international visitors. And then also we're not having those, like you mentioned, the people who are commuting into the office. And so it seems like as a result, a lot of those restaurants, the coffee shops, the places around Midtown and fied I are kind of just struggling to keep their doors open. And that what the kids

call the financial district. That's right, my daughter trying to explain that to me as like kids, I've been working down on Wall Street for thirty five years, just just tuned into that as well. The kids who sit around all right, so what has to happen here is it are the tourist coming back, because I was in Midtown a couple of weeks ago and I thought I felt a much more European international tourist. Play are we seeing

any of that. It seems like it's slowly coming back, especially with um you know, Oh Macron being subdued, but it looks like more international tourist at least the level it was before the pandemics still aren't returning, and that could be to travel restrictions. Are still nervous about getting COVID or spreading covid um, and international tourists had to spend the most money, and so that's why a lot

of the sectors relying on the most. So the problem, I mean, I can imagine here where we're sitting in Midtown, the problem must be that no one's coming back to the office because all of the big box stores, for example, that are downstairs in this building or across the street are empty still. I mean they haven't been um filled

back up again. I don't understand what the problem is in the Bronx because here in New York seven seven point six percent unemployments, some of the worst of any major sitting in the country, But the Bronx is eleven percent And it's not exactly a Wall Street hub up there, right, So what's the problem. That's a great question. And it seems like, um, this is also um, disproportionately impacting um

a lot of black workers as well. UM. And that could be because um, you know, they're more so in the service industry and they're more doing face to face jobs like being in healthcare or that kind of thing, and so um, that rate is almost double for for other workers. And so UM, there could be some ties to that. I get so workers and the Bronx basically would well, they'd live in the Bronx, they'd come down

and work and fini die. But since no one's going to Wall Street, they can't get those jobs back, which is why their unemployment is higher. That's a very real possibility. So what are we hearing about how we're going to repurpose some of these commercial real estate buildings in like Midtown Manhattan for example. Ive hear some people saying, well, maybe'll convert them into apartments. That might address maybe some of the crazy craziness that we have here in the

in the residential rental market. What are you hearing? Yeah, so we're hearing a mix of things. Definitely that residential aspect where this could be more affordable housing. Some are saying it's going to be more likely um, like luxury apartment buildings and so, um, does that really address the

problem is another question. Um. I've also heard that this kind of opens the door in terms of just recreating town and maybe adding more cultural hobs or or more biotech incubators and that type of thing, and really rethinking this, um, like corporate centers doing that howny thing is gonna do that? Is it the city administered the Mayor's office, is it the I guess that may have been Office of Economic

Deployment or something in the city. Is it the city that's really gonna do that or is it gonna be maybe a public private partnership. Um. They've been talks at least with the mayor's new plan of doing a public private partnership and so I think that's a very real possibility as well. Um. And they've just talked about like inklings and ideas, but it doesn't seem like anything is super concrete. Just yeah, UM, so interested to see what

kind of comes out of those plans and ideas. Is there a connection with the crime level It seems kind of silly to worry about crime if you're a kid who grew up in their seventies, right, because there was real crime back then relative to this. But this is much worse than the kind of Giuliani Bloomberg Eras you know, we see also a huge amount of homelessness, drug use, um, theft. Is that is that a problem that's causing some of this unemployment or is the unemployment problem that's causing that.

That's a great question, and I I think that there is some aspect that we looked at in terms of people leaving Manhattan. Um, it doesn't seem to be a mass accidus by any means, but it seems like that could be people starting to trickle out of the city, whether it's due to high rent or or crime. And um that being such a center of the economic hub for the entire city, UM could have a big impact. All Right, Alicia, thank you so much for joining us here.

Alicia didya. She's a reporter for a Bloomberg's Top Live team, joining us here on a Bloomberg Interactive a broker studio. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller. On False Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio m