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Lingen with US Now with BMO Capital Marcus Ian on full faith and Credit. You have had a vector of lower interest rates, price up, yield down. Have you been tripped by tariffs?
I do think tariffs complicate the calculus for lower rates. But I do think that the Fed is ultimately going to start the process of normalization again, but not until we've got greater clarity on what the trade war really means. And I do think tenure yields in this year at three sixty five, and I'm holding that call for now.
That's extraordinary to go to a three sixty five right now, the ten year yield, Folks, if my eyes won't fail me, here's a four thirty rather four point three zero. I justin Wolfer's of Michigan, just out with the massive trade surplus of movies. If mister Trump goes after services, that's more instability.
Are you able to make an.
Intelligent forecast out three hours or three months.
Well implicitly, because the president keeps changing the rules or changing the trade dynamics, it's very difficult to estimate what this all means for core PCE and therefore the FED and the trajectory of the economy. I think the one clear takeaway is that there has been a concern raised about the dollars status as a reserve currency and whether treasuries are still flight to quality assets. And the recent price action suggests that those two still hold for the
time being. But that's going to be the major question for the next several months.
Ian Tom has been drawing our attention to what's happening with Taiwan's dollar serving as much as five percent today. How do you look at what's happening in other countries with their currencies with regard to the dollar, but also to the treasury market here in the US. It does it send you a signal.
So there are two aspects of that. First is what's going on with the dollar is almost by design for a president who is attempting to make US exports more attractive by cheapening them on the global stage. As that relates to the treasury market. That also makes treasuries comparatively cheaper than they might have otherwise been, but only if the dollar remains the go to currency, and that's what
has been focused on this week's auctions. We have the ten year tomorrow and the thirty year on Thursday.
So demand there, What do you anticipate and is it going to send you a signal about this whole idea of whether or not the US continues to be this global safe haven.
The tenure will be the most important auction of the week. We're expecting reasonably solid demand across all the major bidding groups, but the market will be focused on the indirect awards. They tend to use that as a proxy for overseas demand, and that will define how the market reacts and whether or not we find ourselves back in a narrative where we're worried about the collective buyer strike on US treasures.
The solution andling in for a lot of governments is to extenderation to initiate thirty year, fifty year even farther out paper. Is that efficacious? I mean, who wins with fifty year paper? Well?
I don't think that it's been particularly successful at least not historically, and so the idea of pushing out the average maturity of treasuries borrowing, for example, for the time being, is off the table. The only argument that that starts to make sense would be in a significant reprice into a lower rate environment, where Bessett would choose to lock in attractive financing.
Inanling and thank you so much, greatly appreciate with being my capital market this morning. In the stunning call, he reaffirms from a ten year yield price up yield down a four point three zero to a three point six five ish yield. That's a brave call right now out. They're not that many people on board that ian. Thank you so much.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty Now.
Specialties, Alicia Levigne would be and ymelth Wealth to get us through the market opening and beyond. Alicia, I want you to talk to people whose heads are spinning and they're in cash, how do they deploy into the markets?
Well, thanks for having me today. You know, we also like to look at markers about when to deploy. We try to tell our clients you can't ever time the market, but after that nine days, which as you know you've all noted, is the best nine days since two thousand and four, I think we're going to do a little
bit of backing and filling here. What we tell our clients is, you know, if you're fresh capital, it's always good to dust dollar cost average in, meaning you allocate some percentage I would say over three months, you know, one third, one third, one third, So you don't, you know, have all your assets that are that are coming in all at the same time. Because markets move around, they're two way. It just seems like a better risk adjusted way to getting into markets here, and so that's what
that's what we would that's what we would advise. I think with the last four weeks has reiterated to market participants who have been in these markets for decades or to new ones, is that markets can recover a lot more quickly than the real economy, and at times bottom on really horrible news, even as the headlines are swirling around us, and I think it was just another reminder of that the last four weeks really really amazing.
How the market ended April.
Yeah, it is.
It's like I was saying earlier, if you went to sleep at the beginning of April and you woke up kind of nothing actually happened, and it masked really the volatility that we saw. You said bottomed. So my question to you was that the bottom at least for this cycle.
So for the tariff tantrum, are we're calling this the tariff tantrum? For the tariff tantrum, we think that forty eight to thirty five is likely the bottom, but with a huge caveat. And the caveat is, you know, is there a credit crisis coming that reverberates throughout the economy and then could it be undercut? But I think that ultimately the conversation that we've had, every single economist has talked about sagflation. A US recession has become the base
case scenario. We've heard about empty container ships from China, We've heard about empty shelves in the US. Christmas is gone, Halloween is gone. These are some pretty nasty headlines and I don't want to make light of it, because I actually do think the US is going to slow down and hit an air pocket in the next few months. But I think the market already priced it in when it dropped almost twenty percent in about a week. And what we know when the market drops to that extent,
it tends to have positive forward returns. And whether you measure by the elevated fix or whether you measure by the drop down in twenty percent, or whether you measure by rock bottom consumer and investor sentiment. And in a sense, the market did what it always done, which is, you know, it recovered when things look the bleakst and it looked the bleakest.
I love your bottom fishing here the idea that when there's the catharsis there very quickly or Alesia, we've got to get to the market opening.
But have you witnessed Catharsis yet? I haven't seen it.
So I think we had Catharsis. You know that that Thursday and Friday after after Liberation Day, so that the third and the fourth of April was I mean that dropped was about twelve drop in the I think we had it.
A Lesha. I want you to talk to people about meg seven. I got Apple with a bond offering this morning at Microsoft and other cloud types doing better than good. Was there a reinformation in April of ownership of the mag seven.
So look, the conversation we've had for the last few months is that American exceptionalism is over, that the rest of the world is a better place to invest, that Europe is going to far outperform the US this year, and by the way, it might, but over a cycle we have to discuss. And I think, you know, there was a talk of you know, international investors fleeing US markets, whether it was the dollar, or the bond market or
the US equity market. Now there's some truth in that, but I think what we saw from earning season was what made US markets so compelling. Are the triple beats, right, triple beats beat on the top line, beat on the margins, and therefore beat on the bottom line. I find it hard to find companies in the rest of the world that can deliver this kind of outcome quarter after quarter.
Now there will be a day where this doesn't happen, and the thirty percent concentration of the Magnificent seven in the SMP is going to be the thirty percent concentration is going to be a problem, but it's not today. And I think it's just a reminder that you know, you're not buying a political situation situation, you're buying companies
with earnings. And I know there's been an aversion for international investors coming into US market, but the US and market has sold US and particularly let's call it individual investors. They're all in Nope, they didn't sell and they were buying more. And I think it's a great example when you shed risk, when you shed length, when you know longs have to be discarded in favor of shorts, it's sort of a right opportunity for the pain trade to be the other way.
Right, which is Alicia, Thank you so much, Alicia Levine be and win wealth this morning greatly. I appreciate that.
You're listening to the Bloomberg Surveillance Podcast. Catch US live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch US Live on YouTube.
Hugely anticipated with the Joy of Luxury Road from Madison down to the Avenue of the Joy of Costco adapting each day to the trade war. Dana Telsey joins us this morning with a Telsey Advisory group. Will there be empty shelves?
It certainly feels like it. Consumers, well, the retailers. First of all, thank you for having me. The retailers need to place their orders within the next few weeks for holiday. We're hearing retailers starting to market and advertise back to school. They're going to start on June first. Some kids aren't even out of school by June first, and yet they're going to start marketing and advertising on June first. That's because they want to have the goods available for the parents.
And overall, when you think about this, we have companies that whether it's low end or high end, price increases. There's a third to third a third of what you can do to combat this. You can diversify your sourcing, but that takes time. It doesn't just happen overnight. You share the cost of the manufacturers, and I think that's something that's being negotiated almost on a daily basis, depending on what the tariff may look like. And at the end of the day, you raise prices to the consumer.
You have a roll of dex like no one in the business back to your childhood and your affiliation with the good people at BERGDRF. Goodman. Which company do you want to call right now to find out the pulse of the Trump trade war?
I mean overall, I want to hear about all a lot of the apparel retails and the footwear companies. The footwear companies overall have some the biggest exposure to China and to Asia. Steve Madden, you want to call Steve Madden fifty eight percent of their sourcing.
Steve Madden, My walls lighter, pick it up.
You mentioned empty shelves, and I think a lot of people over the past couple of weeks have been sort of sounding the alarm here about empty shelves and higher prices. Yet we haven't seen that yet will we see it?
So you're exactly right. Basically, it's week by week that we're watching things. You heard all the retail real estate landlords report last week resilient consumer, good traffic. When would you see it? Probably sometime during the summertime.
That's too soon. I think a lot of people would say, how close there are you watching? What's happening with shipping? Port of Los Angeles, Port of Long Beach, we heard, We've heard analysts who track the ships that are coming in.
We're hearing around thirty sixty percent.
Yeah, when you're down one third, two thirds, that's a very big deal. When does the consumer start to see that?
So overall, everything we've heard is retail is inventory levels. They were up at the end of the fourth quarter. First quarter is still first going to be reported. You have a big day this Thursday coming up. Then we'll go from there. I think you'll continue to see inventories being up. But when you're going to see empty shelves, it's going to take a little while, is it. Some empty items in midsummer could look like that?
Okay, Steve Madden shoe sho How cute, Lisa, you get that there's symbols shoe Shooh. They're down fifty seven percent from the shocking success back ten years of Steve Madden. What is Steve Madden actually doing in May?
Overall? In May, and we're going to hear exactly what they're saying, because they're going to report their earnings this week. I think they have more newness in their product. I think we're going to hear that fifty eight percent is coming down hopefully by the end of the year to forty percent of sourcing coming from China or even a
little bit less than that. And look what they just announced a couple months ago they bought Kurt Geiger, which is a more more fashion forward women's brand that's based overseas. Look what it was just announced a half hour ago. Sketchers is being bought for sixty three dollars a share by three G Capital. So you're seeing some combinations begin to happen, even.
Sketches taking it interesting. Dan Chelsea with its encyclopedic and retail we all come all here across the country on your morning commute on YouTube. Good morning as well, Tim Stenovik in for Paul Suni.
Tim, Hey, Dana, your top pick for apparelin footwear is Perkinstock.
Why is that don't have sourcing in Asia? You were going to say that as the end Germany and Portugal take a look at the pricing power that they have with the newness. They don't have a lot lot of stores and from women's to men's to kids, you name it, the age group, there's appeal.
Still the how big of a business is the US for them? Because they're still importing so that's going to be an issue if it's not made in the US. President Trump's not happy, right, But it's still a.
Lower tariff than what yeah from Asia. It's a continuing growing business for them, and it's becoming even bigger.
Okay, Hailey Biber, Hailey Bieber is Hailey Bieber Biber.
I heard it's Bieber. I heard it's Bieber.
Okay, Hailey showed up. Hailey Bieber invintaged Guccie at the met Gala last year.
Are you going today?
I'm not a you.
No, I think the most fits for you to go no more.
I said, we're going, and she was, She's just going to offendy for the Pope, the new Pope. But but the met Gala is definitive. Can Gucci begin to salvage their brand at the Met Gala?
Very hard. I think you could more likely see life at Gap at the Met Gala rather than Gucci, given what you have in the storage right now.
Discuss within all your heritage here, Discuss the collapse of what everybody had to have five years ago.
Compared to five years ago when Gucci was the biggest thing was mixed match patterns and prints. That was all the rage at Gucci. Now it is who is Gucci? Is it relevant anymore? Where's the newness? Who's taken the place? And where there's increases Memeu from Prada, that's where all the increases are coming from. And that's where you've seen, you've.
Been, we've seen a collapse ever like carrying Gucci.
You know we've seen collapses before. You look at Burbery, Burbery went way by the wayside, Look at Ferragamo which still hasn't come back, and there's a lot of work to be done. So we've seen things. And one of the things with luxury brands, you have iconic items that have heritage and authenticity. It's easier to reinvent than create on a tee?
Can they be.
Reinvented under lvmh is mister Arnauld chopped?
It's a bit to take out Gucci or something.
I'm not hearing that I'm hearing Bernard Arnault is focused on La Loouis Vauton brand and the Christian.
Now, I mean, come on, Tiffany's a struggle.
Tiffany's has done a great job. The Louis Vauton brand and the Christian Dura brand are what the works are in progress. Look at all the designer changes that you've had at LVMH. A designer needs to get the feel of the brand and then introduce the newness.
So who's your top pic for luxury right now?
On the luxury side, I think Tapestry. I think Coach is continuing to take share from Michael Cores and they'll report this Thursday, Okay.
So we'll get more details then. I'm thinking about this in the context of the I don't know, bigger stuff that we see each and every day. So not the Louis Vauton's not the LVMH's what we see at the grocery store, the expensive eggs that Tom Keene is still talking about, right, how are you seeing those prices moderate come down or not come down?
So Primark Primark, which is the value retail, they have nearly thirty stores in the US. They're from the UK. They reported their numbers last week and they said, with the tariffs in the US now and their prices are below ten dollars for the most part. They said, going forward, and what it looks like if these tariffs at one hundred and forty five percent really are the name of the game, your prices will be up forty to fifty percent. That's significant for the low income consumer.
Steve Madden creators you brought up, Thank you so much, Dana Telsey. TJX, which you and I can agree, are the best execution out there. What's the pixie dust at TJX? The curing and Steve Madden and Costco Egg department have to learn.
Keep in mind TJX is very different from the others. The others are brand designers and creators that have their own branded product. TJX has an assortment of branded product for the most part, but they make their own Also, they're buying a lot of it for discounts or less than what the full price is. That's what's so exciting about tj It's a treasure hunt.
Talk about what you were readingow as a child at fifty seventh and fifth Avenue. Scarcity. Scarcity is still out there like a target, is there? Scarcity?
You have limited edition and collaborations that are scarcity. Look what Alto just announced for seven tours. They're going to be the beauty destination for Beyonce for Beyonce's Cowboy Carter Tour. That's interesting. That's what scarcity is doing in order to drive newness and innovation at mass price levels.
I've seen some pictures of concerts not fully attended. Can you believe I'm saying that a Beyonce concert that's not sold out that's surprising?
Is that an issue?
Right?
I've not heard that's an issue. It's just starting now for them. It's seven concerts that they'll be involved with.
One more question, Dana, single best buy right now.
Single best buy right now. I like Birkenstock. I think with Joe Feldman, he's talking about Costco's.
Okay, what's it come on? This is I know you listen every day at Lisa's got Costco on the brain. Everyone process that others have to replicate.
Their private label is quality, their assortment and pricing is competitive. They can they can solve a vost business and also offer for home, and their prices and the service levels, the in stock levels are differentiated versus everyone else. They've got quality and value.
Dana TELCEA, thank you so much, Chelsea Advisory Group. The spirit of New York City. I really can't say enough about the vibrancy, even in these troubling times.
What's your birkinstock of choices at the Arizona.
At the Boston Birkenstocks. There's a few floating around the house. I try to give them to the dogs to chew. I hear that I don't. I don't. I do the clause Dana Telsea, goodbye.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg eleven thirty joining.
It's now a huge value at first always Henrietta Treys the Veda Partners and you're Washington, Henriette. I look at my phone from a distance at home, It'll be three feet away, seven feet away. I don't want to pick it up and look at the news flows. So I look at the Hill just as an example of a Washington internet site that's putting out all the gossip and it's just a cacophony of stories. Is that the way you feel about Washington right now?
It's a constant day louge. You're just drinking from a fire hose. It's a lot, for sure. The latest stuff that y'all are just talking about with Barbie's is just the least of it.
It's all over the place and all over the map.
If it's all over the map, if I use the word the negotiation or deals, do you see any evidence there are negotiations or deals or is it just all blather?
Yeah, So this is a great point. And really the question I have is are you talking about trade deals? Are you talking about the tax deals? Because they are both incredibly fraught, very far from conclusion, and much less than the White House is presenting them as.
So.
On the trade front, I'm expecting the earliest we get deals in the next couple of weeks to be with the trio of countries that combined make up less than one percent of our trade and goods deficit, the Dominican Republic, Peru and Colombia.
That's not going to move the needle.
That's not going to bring shipping in from China or Vietnam or any other Asian nations, which.
Is really what we need.
And then on the tax front, we are facing the real crunch time and the House is about to walk the plank on one and a half trillion dollars worth of spending cuts on things that are extremely popular like medicaid, food subsidies for the poor, and the corporate tax rate and individual tax rates that.
Ultimately the Senate will not tick up and will not vote on.
So it's really going to be a question of what issue, what trade deals, what negotiations on the tax front are you watching?
Well, let's start with the tax front before we get to the trade front, rather before we get to the tax front. If indeed what we hear this in the coming weeks are deals that only represent such a small portion of the trade that we do. Can we still look to the details of those deals to understand what those bigger trade deals could potentially look like. Will it be meaningful, will.
It move Well, so far it's really just around these countries making good on the trade and goods deficits. So what that means is LNG exports, soy exports, and other agricultural commodities. But it doesn't get to any of the core issues that presumably President Trump really had a problem with on the campaign trails sufficiently or substantially enough to launch trade wars with every single nation on Earth.
They're just not moving in that direction.
And if they do those trade deals will take years months to negotiate, just like they did in his first term, So any kind of deal of magnitude is months away. South Korea is the one that I think Howard Lutnik is referencing when he says a deal could be reached soon, referencing last week.
They don't even have an administration, they don't have a president.
So negotiating and reaching a deal with South Korea, which by the way, we already have a free trade agreement with and ninety five percent of the goods coming in are tireff at zero percent rates is not going to move the needle. And then I think compounding all these issues is the very real reality that now we have twenty five percent tariffs on automobiles and parts. I don't know about you, but I got to go and get
a new engine and four tires. I might not need twenty dollars, but last time I checked, I do require four tires on my car. So that's going to all be more expensive when I go on Wednesday to get that done.
Exemptions, tariff exemptions, You've got to know that sort of go fund me there is you always do you you don't always you know, Look we're not driving.
We're not driving much.
Do you always need to get four new tires?
Yes, that's the way, Well, that's the way it works. That's a weird little man, is correct.
You can't Okay, continue, Henrietta, you've got a new note oubt It says it's beginning to look a lot like COVID. In the context of these tariff exemptions industries you mentioned toy importers, retailers, big box retailers. How are you looking at the interest groups in Washington? What's been happening, who's had the president's ear?
So interest groups are fanned out across the hill trying to talk to any member that they can, when really they need to get into the White House. And this has been a pervasive problem for House and Senate members.
All year as they've been preparing for the presidents.
So they go members and constituents will go to their local representative or their senator if they're able to get a meeting, and then that senator has no recourse. There are not sufficient staffers at USTR or Commerce or Treasury, let alone an exclusions process.
So what that is actually done?
And now that we're into the tariff for and there are tariffs on every nation at a minimum of ten percent and a whole host of different product lines at.
Usually twenty five percent rates.
Is that those entities, those businesses, toymakers, footwear retailers, shippers, truckers, retailers, they are now moving away from asking for an exclusion because it's too late for that to now a bail out. So one thing I would encourage folks to watch is the upcoming tax build from Ways and Means. One of the biggest revenue raisers that they have in there at seventy billion dollars is an elimination of the employee retention
tax credit. Y'all remember that from COVID when everybody was firing everybody, and we started paying businesses to keep people on their payroll to stop the damage as we saw a vaccine. Now Here, the employee retention tax credit is slated for complete removal and pulling it.
Out of the system if it's maintained. That's your first indication of a bailout.
Henrietta, I need you up in New York. I hope you have real ID for May seventh.
Next time we have entered a trace and we're going to talk about this real ID disaster. We're in Henrietta trace Veda Partners.
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Today, Lisa Manteo, what do you go? We do?
Okay, So we've been talking about President trumpright wanting to impose that one hundred percent tariffs on films produced overseas. So screen Time Lukashaw has a really good look into how it's going to impact Hollywood.
So he has a few things.
He says, there's few details. That's one of the issues. It's not clear if the president wants to tax movies that are shot overseas finished in the US, because that's a whole different story, or if he plans a tax. TV show has made overseas for international audiences but available in the US, and that's huge for Netflix companies like Netflix. So he says a lot of producers and executives they just want to shoot more in the US, but it's a little bit more expensive.
So that's the whole point.
You talk Tom about John Boyd going to mar A Lago and talking about different federal incentives. But he goes into how the entertainment industry still exports three times as much as it imports, so Hollywood is really making a lot of money exporting its product all over the world. So he kind of breaks it down in that way.
I thought that note was great. Lucas put it out late late last night with this uproar, and like you say, it's a surplus business. This is like the least of our headaches, and yet that's what we're worried about. Yeah, and I get autos is a headache.
I get that, but movies at the end of the day really isn't.
Yeah, and you have streaming like Netflix or Disney Amazon. They produce shows for global audiences dozens of markets, so it's it's a big deal for falsesimalss.
Streaming makes money. I still don't get it.
If your Netflix it makes money. Yeah, Yeah, I just don't get I think the lawyers are going to be busy with this one.
They're a little busy right now. Yes, So leaves with that court case over the weekend too.
On the law firms least, So what are you got next?
So this is an interesting one from the Wall Street Journal talking about how corporate America is leaving more jobs unfulfilled. They're not laying off of workers, but the trade war has them just pausing hiring. So they're saying it's this new approach you hire less or not at all. So they can point out companies like Jet Blue, t rowe Price. They say jobs advertise on indeed down one person in the past two weeks, so they're showing how people are
hiring lit. But me, while you had the report on Friday that was a surprisingly strong number.
It was strong, but it was at the same time with revisions. It was done for like one hundred and nineteen thousand and again. You know, we'll see that.
I said this tim six weeks ago.
I said may seconds important, but June seventh or June sixth is the next jobs report. To me, it has way way more important.
Yeah, you got also wonder how the Fed is looking at things this week. Set to start their meeting tomorrow. We'll hear from Jay Powell on Wednesday. Any labor market commentary obviously will be closely watched.
I think his goals to get through it in that one piece.
Give us one more least, all right, So we're talking about AI and how could replace certain jobs. This was an interesting one from the Financial Times. It says an AI law firm in Europe could be replacing some real life lawyers. So it's a company called Garfield AI. They recently got approval. They were founded by this former London litigator quantum physicist. And what they do is there mainly for small claims courts, but they do it for people
on the cheap. So they create like a quote polite chaser letter for just over two dollars, filing documents for claims for just over sixty five dollars and this is all AI. The founder says he will review things to make sure that everything is complete and is in check. But it just points at this different trend of how AI can step into different sectors like law, finance, different area they going to replace us.
I don't think so.
It impossible, Tom, There is no replacement.
There is no replace, There is no the personality.
Thank you, have you used any of this stuff? Guys? How do you give you? Yeah? Take quite a bit. Wisenthal really did a survey of it, like he lose like four or five, six of them. And I've heard Jenini is getting a buzz YEP with Google YEP, but I haven't used I mean, I use them in the search, and I've said I'm stumbling into it.
It's finally you can finally ask questions and get answers like what search? What online search was supposed to be?
Okay for the newspapers today, Lisa Mateo, thank you so much.
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