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Ian Lingen with us now.
with BMO Capital Markets. 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 10-year yields in this year at 365, and I'm holding that call for now.
That's extraordinary to go to a 365. Right now, the 10-year yield, folks, if my eyes won't fail me, here's a 430, rather, 4.30. Ian, Justin Wolfer's of Michigan just out with the massive trade surplus of movies. If Mr. 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 dollar's 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 surging as much as 5% 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? 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 me focused on this week's auctions. We have the 10-year tomorrow and the 30-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 U.S. continues to be this global safe haven?
The 10-year 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 Treasuries. The solution, Ian Lingen, for a lot of governments is to extend duration, to initiate 30-year, 50-year, even farther out paper. Is that efficacious? I mean, who wins with 50-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 Treasury's borrowings, for example, for the time being is off the table. The only argument that that starts to make sense would be in a significant repricing to a lower rate environment where Besant would choose to lock in attractive financing. Ian Lingen, thank you so much. Greatly appreciate it. With BMO Capital Market this morning in this stunning call, he reaffirms
From a 10-year yield price up, yield down a 4.30 to a 3.65-ish yield. That's a brave call right now out there. Not that many people on board that. Ian, thank you so much. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay 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 1130. Now specialties, Alicia Levine with BNY 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.
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've all noted is the best nine days since 2004,
I think we're gonna do a little bit of backing and filling here. What we tell our clients is, if you have fresh capital, it's always good to dollar cost average in, meaning you allocate some percentage, I would say over three months, 1/3, 1/3, 1/3, so you don't,
you know, have all your assets 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 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, we're calling this the tariff tantrum. For the tariff tantrum, we think that 4835 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? It could. But I think that ultimately the conversation that we've had, every single economist has talked about stagflation.
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 20% 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 fixed or whether you measure by the drop down in 20 percent or whether you measure by rock bottom consumer and investor sentiment. And in a sense, the market did what it always does, which is, you know, it recovered when things bleakest and it looked the bleakest.
I love your bottom fishing here, the idea that when there's the catharsis there. Very quickly, Alicia, 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 Thursday and Friday after Liberation Day. So the 3rd and the 4th of April was, I mean, that drop was about 12% drop in the year.
I think we had it. Alicia, I want you to talk to people about MagSavvy. I got Apple with a bond offering this morning at Microsoft and other cloud types doing better than good. Was there a reaffirmation in April of ownership of the MagSavvy? 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 there was a talk of 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 earnings 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 30% concentration of the Magnificent Seven in the S&P is going to be, the 30% 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, you're buying companies with earnings. And I know there's been an aversion for international investors coming into US markets, but the US market has sold us
And particularly, let's call it individual investors, they're all in. 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 longs have to be discarded in favor of shorts. It's sort of a ripe opportunity for the pain trade to be the other way, which is up.
Alicia, thank you so much. Alicia Levine, BNY Wealth this morning. Greatly appreciate that. Trading as Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos, and more, all curated just for traders. Plus, guided learning paths with content designed to fit your unique interests.
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car play and android auto with the bloomberg business app or watch us live on youtube hugely anticipated with the joy of luxury road from madison down to fifth avenue the joy of costco adapting each day to the trade war dana telsey uh joins us uh 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 1st. Some kids aren't even out of school by June 1st, and yet they're going to start marketing and advertising on June 1st. 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, a 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 with 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 Rolodex like no one in the business back to your childhood and your affiliation with the good people at Bergdorf 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 a lot of the apparel retailers and the footwear companies. The footwear companies overall have some of the biggest exposure to China and to Asia. Give us a name. Steve Madden. You want to call Steve Madden? 58% of their sourcing comes from Asia. Every time I walk into Steve Madden, my wallet's lighter. Pick it up, Timmy.
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. When 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 are you watching what's happening with shipping? Port of Los Angeles, Port of Long Beach. We've heard analysts who track the ships that are coming in.
We're down 30, 60%. 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 retailers, 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 we continue to see inventories being up, but
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, SHOO, how cute. Lisa, you get that? They're symbol SHOO, SHOO. They're down 57% from the shocking success back 10 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 58% is coming down hopefully by the end of the year to 40% 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...
fashion forward women's brand that's based overseas look what it was just announced a half hour ago sketchers is being bought for 63 a share by 3g capital so you're seeing some combinations begin to happen even sketches taken interesting dana chelsea with its encyclopedic on retail we welcome all of you across the country on your morning commute on youtube good morning as well tim stenevik waiting for paul suny tim
Hey Dana, your top pick for apparel and footwear is Birkenstock. Why is that? Don't have sourcing in Asia. I knew you were going to say that as the answer. Germany and Portugal. Take a look at the pricing power that they have with the newness. They don't have a lot of stores. And from
from women's to men's to kids, you name it, the age group, there's appeal. Still, how big of a business is the U.S. for them? Because they're still importing, so that's going to be an issue. If it's not made in the U.S., President Trump's not happy. Right, but it's still a lower tariff than what you have from Asia. It's a continuing growing business for them, and it's becoming even bigger. Okay, Hailey Biber.
Is that how you say it? I heard it's Bieber. I heard it's Bieber. Okay. Haley showed up Haley Bieber in vintage Gucci at the Met Gala last year. The Met Gala. Are you going tonight? I'm not. Are you? No. I think the bow tie fits for you to go. No. I've been saying that all morning. We're going and she was on, she's just going all Fendi 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 stores right now. What a train wreck. 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 taking the place and where there's increases? Miu Miu from Prada. That's where all the increases are coming from and that's where you've seen spend. Have you seen a collapse ever like carrying Gucci? No.
You know, we've seen collapses before. You look at Burberry. Burberry 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 its own. Can they be reinvented under LVMH? Is Mr. Arnaud chomping at the bit to take out Gucci or something like that? I'm not hearing that.
I'm hearing Bernard Arnault is focused on the Louis Vuitton brand and the Christian Dior brand. Tiffany's now, I mean, come on. Tiffany's a struggle? Tiffany's has done a great job. The Louis Vuitton brand and the Christian Dior 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 pick for luxury right now? On the luxury side, I think tapestry.
I think Coach is continuing to take share from Michael Kors. 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 Vuittons, not the LVMHs. 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 a value retail, they have nearly 30 stores in the U.S., they're from the U.K., they reported their numbers last week and they said with the tariffs in the U.S. now, and their prices are below $10 for the most part, they said going forward and what it looks like if these tariffs at 145% really are the name of the game, your prices will be up 40 to 50%. That's significant for the low-income consumer. Steve Madden, Craters, 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 that Kiering 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 weaning on as a child at 57th and 5th Avenue.
Scarcity. Is scarcity still out there? Like at Target, is there scarcity? You have limited edition and collaborations that are scarcity. Look what Ulta just announced. For seven tours, they're going to be the beauty destination 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 at beyonce concert that's not sold out that's surprising is that an issue right i have 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 berkenstock i think with joe feldman he's talking about costco
- Okay, what's a, come on, this is, I know you listen every day. Lisa's got Costco on the brain. - Everyone does. - What is their process that others have to replicate? - Their private label is quality. Their assortment and pricing is competitive. They can solve for most 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, Chelsea, 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 Birkenstock of choice? Is it the Arizona? I don't have any Birkenstocks. There's a few floating around the house. I try to give them to the dogs to chew. I hear they're back. I don't.
I do the claws. Dana, Tulsi, goodbye. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay 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 1130. Joining us now, a huge value add for us always, Henrietta Trace with Veda Partners and your Washington. Henrietta, 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 flow. 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 deluge. You're just drinking from a fire hose. It's a lot for sure. The latest stuff that y'all were just talking about with Barbies 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 a trio of countries that combined make up less than 1% of our trade in 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 take 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, or the trade front rather, before we get to the tax front. If indeed what we hear is
this week or 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 in goods deficit. 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 trail.
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 Lutnick 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 95% of the goods coming in are tariffed at 0% 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 25% 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 $20, 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. Exactly.
Exemptions. Tariff exemptions. You've got to know that. Is she doing a GoFundMe there? Is that? Do you always, do you, you don't always, you know, look, we live in New York, so we're not driving. We're not driving much. Do you always need to get four new tires? Yes. That's the way it works. That's the way it works. That's the way it works. Henrietta's correct. You can't,
Okay. Continue. Henrietta, you've got a new note out. 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 president's term.
So 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 has actually done
And now that we're into the tariff war and there are tariffs on every nation at a minimum of 10 percent and a whole host of different product lines at usually 25 percent rates, is that those entities, those businesses, toy makers, 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 bailout. So one thing I would encourage folks to watch is the upcoming tax bill from Ways and Means. One of the biggest revenue raisers that they have in there at $70 billion is an elimination of the employer's
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.
Henry, I need you up in New York. I hope you have real ID for May 7th. Next time we have Henry Dutraise, we're going to talk about this real ID disaster that we're in. Henry Dutraise, Veda Partners.
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This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. Newspapers today. Lisa Mateo, what do you got? We do. OK, so we were talking about President Trump, right, wanting to impose that 100 percent tariffs on films produced overseas. So screen time. Lucas Shaw 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 to tax TV shows 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 U.S., but it's a little bit more expensive. So that's the whole point. You talk, Tom, about John Boynt 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 the note was great. Lucas put that out 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, it is. I mean, 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 a big deal for them. Paul says, Tim, Paul says streaming makes money. I still don't get it. If you're Netflix, it makes money. Yeah. Yeah. I just don't get it. I think the lawyers are going to be busy with this one.
They're a little busy right now. Lisa with that court case over the weekend too on the law firms. Lisa, what do 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 point out companies like JetBlue, T. Rowe Price.
They say jobs advertised on Indeed down 1% in the past two weeks. So they're showing how people are hiring less. But meanwhile, you had the report on Friday that was a surprisingly strong number. It was strong, but it wasn't. At the same time with revisions, it was down to like 119,000. And again, you know, we'll see that. I said this to Tim.
Six weeks ago, I said May 2nd is important, but June 7th or June 6th is the next jobs report. To me, that's way, way more important. Yeah, you've got to 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. Fed decides. Any labor market commentary, obviously, will be closely watched. Yeah, I think his goal is to get through it in that one piece. Give us one more, Lisa. All right, so we're talking about AI and how it 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 they're 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 $2 filing documents for claims for just over $65. 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 areas. Are they going to replace us? I don't think so. Impossible, Tom. There is no replacing you. There is no replacement. There is no. The personality. Thank you. Have you used any of this stuff, guys? Hardly. Have you? Yeah, chat GPT quite a bit. Do you? Weisenthal really did a survey of it. Like he'd lose like four, five, six of them.
And I've heard Gemini's getting a buzz with Google. But I haven't used, I mean, I use them on 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. This is the Bloomberg Surveillance Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts.
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