Surveillance: Dynamic Ownership With RTR's Hyman

yield curve. What's the signal that comes from that for you right now? Well, I think what we're seeing is that the expectations for growth in the US are of more moderate growth going forward, and the ten year yield is reflecting both those expectations of more moderate growth as well as more moderate inflation going forward. UM, and with the fell fedding out on a hold, we believe the Fed has actually reached its terminal paul see rate for

this cycle. UM, we don't really see much momentum upward for for yields going forward, So I think we're going to see this flatter curve for the foreseeable future. There's always that question of does that signal recession. I think there's a possibility that that signals a recession. We actually think there won't be a recession. But we're seeing more and more signals, including from policy makers, that the risks are really to to the downside, and everybody's talking about

those risks, which leads to recession bias. Okay, Normally people get more optimistic about inflation and growth when the FED is more dubbish, right because basically people say the FED is going to allow growth to accelerate, allow inflation to run hot. Right now, we are not seeing that based on the shape of the yield curve, based in the tepid response toward risk acids. Does that mean to you the FED is out of ammunition when it comes to

stimulating the economy during this round, during this credit cycle. Uh? And that that really, frankly, they cannot help prolong this cycle. I don't necessarily think that they're out of communition. Um. I think, by the way, that by not raising rates this year, they're actually providing somewhat of a greater growth puffer.

For we've calculated that the delta between them raising rates three times this year or not raising rates at all this year is about zero point five percentage points of GDP growth, so they're actually providing an ex anti buffer

in terms of growth. They have the most ammunition amongst all central banks around the world, having already raised rates and having started although they're going to taper that process, but have it started to reduce the size of their balance sheets, so they have a little bit more ammunition. But really that the game in town in the next recession, in the next downturn is not going to be central banks. It's going to be all on fiscal policy. And will

they have the capacity to do fiscal policy? In the noted States, I think we have the capacity. The capacity is not really an issue in the United States, especially when you have the dollar as your your main currency reserve. Globally, Are you basically supporting mm T here, I don't know that we support or or do not support m m T. I think it's always what is into m MT. But

I think we do have some fiscal space um. I think Blanchard's argument that interest rates being low is a great opportunity for us to increase government spending for productive reasons that I think is the main argument. I think what I think what he's saying is that the treasury market will behave like a developed market sovereign bond market in the next downturn, I yield will go lower if growth concerns roll off a cliff, I giving you the

capacity to do some kind of fiscal stimulus. There will be some people listening thinking, hang on a minute, this economy is still okay. A recession isn't immediately around the corner. So let's take stock of where we are in Europe. We've just had some ugly p m I data, the Eurosie manufacturing number coming in at forty seven point six for March. It's terrible. The estimate was fourting nine point five.

The previous read was forty nine point three. Is there any reason to believe this really, really dreadful soft patch in Europe over the last six months, called it nine months bleeds into the United States in the moment of a real Why yeah, I mean, I think external headwinds are important, and they are one of the concerns that

the FED has um. This environment where global growth has slowed from three percent to eighteen months ago to about two point six percent in our latest forecast, is something that the FED is quite concerned about but we have to remember that US fundamentals remain quite solid despite all this talk of a downturn an imminute recession. The U S economy still has solid fundamentals. The labor market is

the strongest we've ever seen. The economy is about to reach the longest expansion it's seen um in in in over seventy years. So we are in this very still positive market where we still have solid growth, momentum, elevated confidence. I think, yes, growth will slow, perhaps very rapidly, from three percent to two percent over the course of this year, but we shouldn't be necessarily talking about recession in this

type of environment. There is a big question. It is the inflation question, because people really don't understand why inflation hasn't picked up more given how long this recovery has been. Where do you see that and sort of the pressures of rising wages and corporate profitability and their ability to pass along costs. What are you expecting in terms of inflation? I think there there are a few questions in that

question to unbundle. First, is this relationship, this tradeoff between unemployment and wage growth, and we see that trade off still happening. The philis curve is still alive. We're still seeing wage growth accelerate as labor market slack diminishes. Um whether that is passed on to inflation is the big question, and I think we're seeing less of that passed through to inflation, in large part because of increasingly anchored inflation expectations.

The tradeoff between the two has essentially had over the last twenty years compared to the twenty years prior to that, So we're not seeing much passed through. And actually our view is that inflation is really not going to break to the upside in any significant way. And that's I think a big reason why the FED is reconsidering its strategic framework and thinking about catch up models, average inflation,

price level targeting. Those are all things that the FED is considering right now, Greg, Greg, to catch you out with the really interesting moment. To catch you out with you as well, Greg Dak they're the Oxford Economics chief US economists. I want to get you up to speed

on the Brexit news. Two reason. May the Prime Minister of the UK planning to hold a third vote on her Brexit deal next week after the European Union essentially put off the threat of the UK crashing out of the block next Friday by giving the British another week or two to figure out what exactly to do. Do you essentially telling the Prime Minister that if you can't get a Brexit deal ratified next week, she'll have until April twelve to decide whether to leave without an agreement

or request a much longer extension. On the phone, I'm really pleased to say taking the time out of it. What I'm sure is a busy morning to speak to us. Is Anthony Phillipson, the British Consul General for the United States, and to be always great to get your thoughts on this situation. So talk to me about what your message is today to anyone who's essentially dealing with the U United Kingdom, whether it's from a trade perspective, from a

business perspective, what's your message for them today? Well, thank you very much, Jonathan, it's always great to be on your show. Um. I think the key message that came out of yesterday is the Prime Ministers and the government's commitment to delivering on the result of the referendum and doing so in an orderly way that provides both the future perspective and future relationship with the EU and the

time for people to prepare. We are obviously very conscious that people, you know, we're very close to the twenty ninth of March as as you say, next Friday, um and the agreement with the EU last night in Brussels provides for either a technical extension if Parliament agrees the withdrawal agreement next week, or as you say, there is then a new sort of milestone of the twelfth of April, by which time we either need to come forward with

an alternative plan, including the crucial question of whether to run and candidates in European elections in May, and the Prime Minister has made clear that she thinks that would be the wrong thing to do, given that the British people voted almost three years ago to leave the EU. So I think the key messages that we're still determined to deliver on the result of the referenced and to do so in a smooth and orderly way, and to give business time to prepare as necessary. And so will

Parliament hold a third vote next week? Is that clear to you whether that will actually happen. So the Prime Minister will be talking to colleagues today. I'm sure she said in her statement in Brussels last night that she was committed to bringing this back to the Commons next week. I think, you know, it's it's a fast moving issue. I think we need to wait and see exactly how she plans to do that. What gives you confidence that a third vote will actually get some consensus given some

of the turmoil that we've seen in Parliament. I think the key point the Prime Minister keeps making is that Parliament needs to agree what it wants to do. It has had a series of votes that have obviously been very significant in terms of expressing the will of the House on various issues. But at the minute, the important thing is to pass this agreement or to decide to

do something else. So the key debate I think next week will focus on that, the agreement that the Prime Minister has done with the eu UM and that's her primary that's her primary focus for now. If they don't agree that, then that the Commons we need to agree something else. We can't just keep letting it slip down the road. And so can you guarantee the trade community that the one be a hard breaxit um? No I

don't think I can. If I can, to be very honest, I can certainly guarantee that the Prime Minister's determination is not to to to carry out this process in a

way that creates needless uncertainty. And that's why the focus is still on the withdrawal agreement, the implementation period that's built into that, that gives a period of transition and continuity, or within a context of agreeing a new future relationship with the EU that allows us to continue a close economic relationship with them at the same time as developing our our trade policy with the rest of the world.

That remains her her view about the best way forward and the best way to deliver on the referendum result. It must be a tough job to speak with with trade partners and try to massage the situation at a time of great and certainty. How do you do it? I think we focus on two things. One is trying to explain to them what is happening and what the

implications are. We also do try to keep our eyes on a slightly broader perspective about the continuing opportunities of an economic partnership with the UK, the continuing investment opportunities that the UK economy offers in a whole host of sectors. And obviously I continue to feel there is no more important partnership than we have with North America and with

the with the U S and Canada. We do try, as to say and keep our eyes focused on that forward agenda with for example, in a couple of weeks here in New York, we're doing a big event around that we call designing our Future. That is trying to build the partnerships with the business community, of the academic community, building on our industrial strategy, but also a lot of

what's going on here. So we try to offer assurance an explanation where we can at the same time as talking about future opportunity and something always great to get your insight. I know this morning will be incredibly busy for you, so we appreciate your time here on Bloomberg Radio and Anthony Phillips and there the British Consul General for the United States. We have a unicorn in studio right now, a unicorn who also happens to be eight

months pregnant with her second child. We're talking with Rent the Runaway co founder and chief executive officer. Jennifer Hyman joining us here in our bloom Bloomberg Interactive Broker studios. I want to just first start by congratulating you because you did just reach this one billion dollar valuation. Staff is making you a unicorn. Congratulations, Thank you. We are so proud and it's been a huge amount of teamwork

over the last ten years to get us here. So can you give us a sense of where the biggest businesses that you do and how you've expanded, in other words, which locations around the world that really are driving the growth here. Well, our business is primarily well, our business is based in the United States right now, the majority of our revenue comes from a subscription to fashion called Rent the Runway Unlimited that women are using to get

dressed in their daily lives. In fact, they're using it a hundred twenty days of the year as a substitution for the closet that's in their bedroom. So they're renting all forms of apparel from us, everything from a pair of pants, jeans, coats, blouses, dresses, vacation where, maternity where literally everything that you can think of on rotation. How long do they usually borrow each item of clothing for? So you pay a monthly fee and receive four items

and you can swap them at your leisure, at your discretions. So, um, the customer is really in control. It's this new form of dynamic ownership where she's able to decide how long she actually needs each item for. Can you talk about the value proposition from your perspective, right, because the fixed costs have to do with cleaning. Uh, what happens if somebody does a little too much wear and tear on something or there's a stain or something like that, right

in acquiring the clothes. Well, let's actually talk about the value proposition first to the customer, because the customer in America right now, on average is spending thirty three d dollars a year on apparel and five to seven hundred dollars a year on dry cleaning, whether they care about fashion or not. You are down four thousand dollars a year. And that doesn't actually vary that much based on household income.

So even at lower household incomes, this is still this fixed six spence that people have because they work and they need to show up at work looking professional. So now for a hundred sixty dollars a month, so less than fifty of what you would have spent on fashion for the year. You're getting unlimited choice of millions of items. You're getting forty thousand dollars worth of value in terms of the cost of the product that you're getting free

dry cleaning. You're saving time and it's much more sustainable, so you don't have that waste of the of your closet that's not regularly used. From our standpoint um in terms of how we optimize our own costs and profitability, we have known that this company is primarily about logistics and technology from the very beginning, so we vertically integrated

the company ten years ago. We've built out proprietary reverse logistics technology, including the largest dry cleaning operation in the world, so we are real experts and how to restore clothing to perfect condition and utilize it multiple times throughout its life. So when you're raising money, which you just did. You just had a fresh capital raise million dollars from investors collored by Franklin, Templeton and Bane Capital. UH. Other investors

have included tro Price, Hamilton Lane Advisors. What are their main concerns at a time in investing in retail in

in an era of Amazon and a steeply competitive environment. Yeah, I think the investors set thinks more um towards the sharing economy as it relates to around the runway camps, and they think about retail where if it's really interesting, look at millennials and Generation Z, dynamic ownership has already overtaken our lives when it comes to our digital our digital footprint, music, entertainment, books, everything that we want is in the cloud, and Rent the Runway is providing those

same options for the physical world. You know, our goal is to become the Amazon Prime of rental and make it fiscally irresponsible for anyone to not have a subscription to Rent the Runway. What kind of bargaining power do you have when it comes to purchasing the clothes. So, of course the company is growing rapidly, so the amount that we purchased from designers has gone up UM a lot every year, and that gives us increased purchasing power.

But I think what's more exciting to the designer brands that we work with is the data that we're providing them and the millions of new customers that we're able to introduce to their brands for the very first time.

Remember that for these designers, their primary distribution channels in the past have been via department stores, and those department stores are catering to a woman who is above the age of fifty, whereas most of the rent the runway customers rent the runway customers are below the age of fifty in fact, our media ages. So we're introducing thirty years worth of women to these brands for the first time and developing that brand affinity early in their lives.

What kind of data is helpful in determining this mean? Is it basically what kinds of clothes? Uh, somebody has liked in the past. You know, that's data that almost everyone can get, Like you can look at cell through rate, you can look at preferences online and figure out what people like. But what was missing from the retail industry is what happens after someone purchases the product. What happens Do they actually wear it? How often do they wear it, do they like how it looks on them? How often?

What quality is that item in and how many times can it be used over its lifetime before it falls apart. So we have this precious source of data that we call our post order data of what happens once it is at home in a customers closet, because a lot of brands have um high cell through rates, very low loyalty rates, and they have no idea why the customer is not coming back to them, and we're able to solve that for them and let them know. Is it because of the item quality, is it because of fit?

Is it because you know it just went out of style, etcetera. So you know, if somebody basically, uh for all inends of purposes, buy something and stick it on the shelf of the tag to a lot it not, don't never wear it again versus in order to receive the next items in our unlimited subscription, you have to tell us about the items you just wore, so real quick. I'm just wondering, where do you see the biggest expansion opportunities

going forward. I think that we've just scratched the surface of women putting their closets in the cloud in the United States. You know, we really think the total addressable market here is every woman we've already seen in the subscribers. We have incredible diversity both in household income geography. Our subscribers already comprised seventy six percent of all zip codes

across the US. We have um of our subscribers have household incomes below sixty five dollars a year of household incomes above two dollars a year, so very diverse group of people. We really want to proliferate this behavior of dynamic ownership because we think that the customer gets a lot more value, saves time, feels incredible every day, and it is far more sustainable. Jennifer Hyman, thank you so much for joining us here in congratulations on reaching a

unicorn status. And you're impending a delivery, Jennifer than Jennifer Rent the Runway, chief executive officer and co founder. Really interesting to think about these sharing economy. Uh. Putting your closet in the cloud certainly would be much more space efficient in a place like New York City. Uh. The news out of Washington continues unabated, as it has been for some time, and at this time on Fridays of every week, we have our friend Margaret Brennan help us

break it down. Margaret Brennan, of course, as a host of CBS has faced the nation, which you can see every Sunday on CBS and on Bloomber. Uh, Margaret, thank you so much for joining us. I just wanted to start off by giving us a sense of where you think the Mueller investigation is. We've been waiting for the report for uh seems like several weeks. Now, can you give us the latest? Well, you know, every Friday, I

think all reporters across the country hold their breath and wait. Uh. We don't necessarily have any um indication it will be this Friday, but we do know that the Special Counsel's Office has been shrinking. A number of the investigators who have been on staff are slowly leaving as their portions of this probe wrap up, So that indicates they are getting closer to the end. But as to the official day that the report will be finalized and quietly transmitted

to the Department of Justice, we are just waiting to see. Um. Of course, the bigger question then is what happened next. It will be up to the Attorney General to make a decision to act on the Mueller report if there's anything in it that warrants action, um, and it will also be up to him in many ways to decide what becomes public. The President just yesterday, UM, said that he does think proportions of it should be public, which is a reversal from his prior position, which is that

it would be a call for the Attorney General. Margaret I am interested in how the economic backdrop fits into the ongoing political drama, in particular the US China trade discussions, because President Trump has come out recently and cast a little bit of cold water on expectations that a deal will go through easily ahead of the meeting with Jimpeng. Can you give us a sense of what you're looking for there? Well, we know us negotiators it was very

deliberately leaked. UM are headed to big Ing in the following days. That includes the Secretary of the Treasury and the U s trade negotiator, Robert Lightheizer. So there is um a desire for the Trump administration to continue to hold up hopes that they get to the point that there is a deal broker between the US and China in the near term. The President continues speaking as if

it is very much within grasps. But of course what we hear details about are the things that have to do with trade of goods, like buying more soybeans, doing things that will have certainly political residents for supporters as the president, who have been hurt directly by tariffs from

the farmers in the heartland of this country. We're hearing a lot less detail about the things that we're at the heart of this dispute in terms of the really tough reforms that the administration says China has to undertake, in terms of its business practices, in terms of how it handles private investment. We just don't know if they are there yet at what the Trump administration says are their goals out of this, But I would expect in the coming weeks to continue to hear some um talking

up of the possibility, the practicality. We just don't have a lot of visibility into. So, Margaret, we're getting closer and closer to the Democratic field of potential presidential candidates continues to grow. Uh, as anybody you know, I guess let's start with Joe Biden. Where do you think he is? I know there's been some concern about fundraising. Um, do you think he is really going to go all in here? Well, you know everyone has been waiting for him to make

it official. As one Democratic fundraisers said to me, it's like waiting for kudo but uh one. But this particular Democrat does know, um, as do other Democratic sources who have been speaking to CBS News, that the Vice president is very much getting ready to pull the trigger, doing some work in terms of alerting fundraisers that he's getting into the game. UM. You know, one of the concerns among some Democrats has been the big money donors have

been way eating. Some felt burned after sixteen that they went all in on the candidate and obviously didn't get the return on that investment, so to speak, that they had hoped for UH and that at this point a lot of fundraising her smaller dollar, more activist types who are donating to campaigns, and some of that's reflected in what you're hearing with a more progressive sort of policy line from Democrats responding to what they're hearing from UH

or activists and those donating early on. The big money is kind of waiting to see who pulls out in a really crowded field. And if the vice president jumps in, he's already got the name recognition, so he doesn't need to take a lot of time, um to to do that slow build across the country. He goes in as someone who's run at least twice before for president and as a vice president, has been in the Senate for so long people know who he is. So, Margaret, who

are your guests this weekend? Well, we are still working on the lineup, but at this point, UM, we have two big points of discussion. One is with Hakim Jeffrey is one of the time Democrats in the House, part of leadership there, who has been very frustrated and vocal

in recent days. But the White House isn't turning over documents that they've requested regarding a number of different lines of inquiry, including this latest UM a revelation from House oversight that Jared Kushner, of the President's son in law, was using private communication text, email messaging app What's App for official government business? Sound familiar? That was the Hillary Clinton criticism launched by President Trump during the twenties sixteen campaign.

Will also have on the show retired Marine General UM John Allen, who ran the campaign against ices previously, and he'll talk to us about what was actually accomplished on the battle battlefield in Syria and rock. Margaret Brennan, thank you so much for joining us. We look forward to that you can cure Margaret Brennan this weekend on Bloomberg Radio.

Listen to Face the Nation Sunday at two pm in New York, Washington, D C. And now Bloomberg one six one Boston, Newberry Part That's Face the Nation this Sunday at two on Bloomberg Radio. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio