tv Maria Bartiromos Wall Street FOX Business August 25, 2018 3:00am-3:31am EDT
him with it all along. thanks so much for watching "strange inheritance." and remember -- you can't take it with you. ♪ maria: happy weekend. welcome to the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. thanks for joining me. coming up in just a moment, form macy's chairman terry lundgren is my special guest. he will weigh in on the current retail backdrop. first, the fox business newsroom has the big headlines, everything from wall street to main street. reporter: a bull run for the ages on wall street. this week marked the longest bull market run in u.s. history. since the current run started on march 9, 2009, the s&p has
rallied over 300%. the dow followed the same path, starting under 7,000 and is now hovering close to 26,000. the big winner during this run has been the nasdaq. over the past nine years, the tech-driven composite has grown over 600%. all three indices continue their winning ways this week as the dow, nasdaq and s&p all finished in the green for the week. maria: at their annual retreat in jackson hole, jerome powell confirmed the central bank will raise rates again this year. powell says that he expects a slow but steady number of rate increases as the fed tries to control potential excess while at the same time promoting economic growth. turning to trade news, the trade war between the united states and china showed no end in sight as talks between the two superpowers stalled this week. this comes as tariffs on $16 billion worth of chinese goods kicked in this week, with china responding in kind. this means over $100 billion of goods between the two countries
are now subject to tariffs. back to you. maria: thank you so much. as you just mentioned, we are in the midst of the longest bull run in market history, since march 2009. both the dow and s&p 500 have quadrupled. while there is mounting evidence that the run can continue for several years, some people are worried that inflation and trade concerns could derail this historic run. joining me to talk more about markets and investing today, chief equity strategist bob dahl. great to see you. what a run. what do you think about this run? >> quadruple. incredible. it's been wonderful. maria: since march 2009. would you put money to work today in this market? >> i thought it was way overexposed on equities, maybe not, but the bull market is not over. earnings drive equities. earnings are pretty good and are going to stay pretty good. this noise about they will move from plus 25 to plus 20 and
therefore, we should shake in our boots, no. it was going from plus 25 to minus 2, different story. earnings are decelerating from amazing levels. corporate america, with a country as big and mature as this one, could be racking up 25% growth this far in the cycle is absolutely amazing. maria: is really is. that's the backdrop for investing today, 25% earnings growth in the first quarter, 20% earnings growth in the second quarter. what's driving this? >> about a third come from the tax bill. about a third from unbelievable revenue growth. that's the real story. maria: that's a demand. >> correct. a third from profit margin improvement and some financial engineering. maria: tell me where the sectors that you find most appealing are right now. where is the growth in this economy? >> technology, technology, technology, without question. health care has come on. not only the stocks but improvement there, some more
drug approvals. the consumer, oh, my goodness. more jobs, a little more wage growth. consumers have a big savings rate. the consumers are in really good shape and are spending some money, enjoying the cycle. that's part of what's driving the economy and therefore the market. maria: the tax plan, one thing it did was certainly give people more money in their pockets but the rollback in regulations is probably even more impactful given the fact it really unleashed animal fears in the business world. we have been waiting for capital expenditures to pick up. we got it. >> big-time. double digit thanks to that tax bill. look, the tax bill is creating increased confidence. corporate ceo confidence, all time high. they feel like, corporate ceos, they know the world in which they're operating. i agree with you, these rollback if regulations and the absence of new ones is -- has not gont enough credit. the tax bill's the focus of everybody and that's a positive but it's that raegulatory
framework that's really positive. maria: talk about investing today. longer term, i don't like short-term trades. i like to have a strategy and hold on to it for a couple of years. how do you do that? >> that's long term, a couple years. good companies with reasonable prices and improving fundamentals. pay attention to the cash flow. don't overpay on a valuation basis. invest in an area of the economy that's growing and if you can find a company that's gaining market share within that growing segment, you can put that to bed and probably rest easy. maria: do you believe that these policies or really, it's politics when you look at all the investigations going on and the headlines around president trump, do investors care about this? >> they do care. okay, let's go to the word impeachment. we have had in our lifetime nixon and clinton. in the nixon case, the market went down. in the clinton case, the market went up. why? because in the first case, the economy and earnings were stinko and in the second case, they
were good. earnings drive markets. this will pass. investors care because how much can we govern, what does it mean for the midterm election. it's an issue at the margin but it's not the long-term driver. maria: then there's the valuation question. where are we in terms of valuation? you just said technology is the growth story. you got to own tech. but are we talking about like some of these stocks trading at 100 times cash flow? >> i don't think you have to go for the high, high growth tech with those astronomical p.e.s. they worked well and i wouldn't be zero in them but i would focus on some more value tech. cisco, hewlett-packard, those kind of names that are giving us acceptable revenue growth where expectations are not high at all. maria: great insight from you. thank you so much. don't go anywhere. the former macy's ceo on deck next. stay with us. >> with the unemployment rate going down and consumer spending going up, is retail due for a renaissance? >> we are in a really good
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maria: welcome back. it's been a big month for some brick and mortar retailers. walmart had their best u.s. sales performance in a decade. macy's posted better than expected earnings a week and a half ago, hiking its annual profit forecast as well. some retailers have struggled to keep up with online platforms like amazon and while tax reform and employment growth has helped stimulate consumer spending, how retailers adjust to the digital economy could determine their survival. joining me to talk retail and the economy is terry lundgren, the former executive chairman and ceo of macy's. it is great to see you. >> great to see you. maria: thank you so much for joining us. we want to get your take on really what's going on. congratulations on an incredible run at macy's. i want to talk about that as well. how would you characterize where
we are now in terms of retail? >> we are in a really good place. there's been a lot of activity that's taken place, particularly over the last few years as retailers had to pivot once more to the changing consumer environment. right now, maria, consumption is strong. consumers are feeling good. they have money in their pocket. tax reform has been positive and all these changes that have taken place are starting to get some traction. you are seeing really strong results, not just from macy's, target, walmart, kohl's, nordstrom, broad spectrum of retailers doing well. i think that's a really good sign for fall. maria: it's a good sign for the consumer. we got the consumer back. you reimagined macy's a number of times. you basically changed the look of it. you made a lot of acquisitions. you were, from 2003 to 2017, the chairman and ceo of macy's. what a run. you have seen a lot. >> i wasn't executive chairman until february 1st. i was still in the saddle for a
long time. maria: you're amazing. it's been an incredible tenure. congratulations. tell us how you've changed, your leadership changed macy's over these years and what did get you to the fact where you say yes, people have been reimagining and changing and adapting to a new economy? >> you know, being in business as long as i have, being ceo of neiman marcus before that, so i have seen this, the changes that take place constantly. every four or five years, there's a major shakeup to the consumer and retailers must adjust and react. it's not a small pivot very often. it's often a very large one. we are used to this and you can never get comfortable. we had 10, 11, 12, 13, 2014, unbelievable, average growth of $1 billion a year at macy's and bloomingdale's and then had earnings ratio just kept going up and up and up. this is easy. the minute you think this is easy, forget it. the consumer changes and you have to pivot once again. i think all retailers face these
changes that occur largely by the consumer and you got to get in front of it. you can never rest. you have to always think what's next. how is the consumer going to act next. i think many of these companies that are doing well now didn't start changing their strategy last quarter. they have been doing this for months, for years, for even a decade in many cases. so you had to address the consumer in the store, the consumer online, and recognize she doesn't shop in one or the other. it's all connected to this omnichannel experience today. maria: which is what you did when you look at some of the discounts. the discounted macy's products in the warehouse or i don't know -- >> yeah, off-price. lot of people don't recognize that, particularly in 2016 and '17, a lot of the share shift, is it moving to amazon, sure, they did a great job. it's really not just that. it's certainly not just the online component. macy's is the fourth largest internet company in america.
they were very strong there, still are. but the off-price channel was starting to attract this millenial consumer who replaced the baby boomer who is no longer spending because they don't need apparel for work and the like, so millenial consumers like to treasure hunt and like this off-price and it wasn't as focused on brand. maria: they want a bargain. >> so macy's said hey, why don't we create our own off-price business. we did that, opened some free-standing stores and they were fine. maria: your stock has done so well, up more than 50% year to date. last year you had a big selloff, 60% in a day. what do you think happened there? the stock is still, seven is the p.e.? trading at seven times earnings? you don't see that with the rest of the market trading at 18. what do you think happened last week with that selloff? >> i think that individuals were saying hey, this has been a great run, let's take some chips off the table here and cash it out. so i think they can always buy back in on the dip which i'm
sure they've done. the stock has come back. they have already gained more than half of what they lost on that day in just a few days. just based on the fundamentals. earnings were very positive. people didn't quite get the shift and i talked jeff through that, that it didn't matter how often you said it, it's going to be hard to understand when you shift a big event, they had a friends and family event a year ago, this year was in quarter one, last year was in quarter two so obviously that's a big shift. it goes back to should we report, you know, in a semi-annual way or quarterly way. i think if macy's reported in a semi-annual basis, you would never have had this up and down because it would have been more gradual. maria: you like the idea of getting away from the short term. >> i never liked the short term and i never liked managing to a quarter. let it fall as it will. it does frankly influence short-term investors watching the stock on a daily basis or quarterly basis. maria: i want to get your take
on real estate out there. you have talked a lot about brick and mortar needs to get smaller. we will talk about that, plus i want your take on the federal reserve as well. this weekend the jackson hole meeting. stay with us. terry lundgren is with us. we'll be right back. >> back to school time for parents and kids. what does that mean for retailers? >> back to school is very positive. that's generally a good indication for holiday sales. xfinity mobile is a new wireless network
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back in line. maria: too much capacity? >> too much capacity. with real estate comes inventory so there's too much not just physical space, there's too much inventory in the system and that creates pricing issue over time. there's too much inventory. the only way to get rid of it is mark it down. that becomes an off-price issue. macy's took the position a couple years ago while i was there to reduce 20% of our stores. it's a hard decision because the stores are all cash flow positive. we got rid of all the bad stores a long time ago, over time, but this was a big decision. but we knew that just watching the curve that the stores were losing traction on sales, on foot traffic and over time, you're not going to be proud of those stores. if you're not proud of those stores, you won't be able to keep the selling team that's so vital and so important to the consumer in those stores. you know, we have to get in front of it and rationalize the real estate. we did that, made that decision, it was the right move. maria: let's talk demand.
you have the supply side of the story there. demand has been good. back to school, how do you characterize it? >> very good, so far from reports that i have seen, back to school is very positive. that's generally a good indication for holiday sales. it's not a guarantee and it's less of a factor today than it was ten years ago. but when it was much more of a direct correlation. but having said that, you definitely want to feel like you've got momentum going in back to school as you are buying for your holiday season. maria: does the back to school give you an indication of what we might see over the real important, even more important is the holidays, christmas? >> yes. it does. as i say, it's not as, you know, as clear of a line as it once was. it's definitely a positive. what you don't want is to show negative signs in back to school because that gets our buyers skittish about buying for the holiday season. i think what you are seeing here, you will see some optimism in the buying pattern for retailers for the fourth quarter. maria: you got a 4.1% gdp for
the last quarter. the atlanta fed comes out, says we are expecting 4.3% for the third quarter. two straight quarters of 4% growth possible. is this sustainable? >> i think so. maria: the way the consumer feels to you today, you think that's sustainable? >> yeah. consumers is the right word, right question, because 70% of gdp growth is driven by consumption. so we just need to make sure that this consumer is still feeling good three months from now, six months from now, nine months from now. pocketbook is good, unemployment remains very, very low. all of these indications of confidence that are there today need to remain -- maria: how sensitive you think the consumer will be of higher interest rates? we heard from powell on friday, they had the jackson hole meeting. we know the fed will probably raise rates in september. do you think that a steady sort of slow but steady move in rates
impacts, changes it for the consumer? >> first you have to begin with the base. we are at 2% interest rate. it's not like we are at 8% going to 9%. we are at 2% interest rate. we are at record lows. i think from the base where we begin, this is much less of an issue than it would be if we were at a higher base. i think the economy can handle the increases that the fed has in store, whatever they may be. i think they signaled two before 2018, who knows if that will be what they'll do but that's what they've signaled. i think if they're as modest as they have been, we went from 1.75 to 2.0 this last round, if they're as modest as that, the economy can clearly handle it. maria: one of the things that happened on your watch, under your tenure, is the entrance of amazon. >> yes. maria: that changed the industry. didn't it? tell me how you dealt with this new smaller entrant in the business, what you did to change
to get macy's as strong as you could. >> so the good news was for macy's, macy's began their macy's.com website in the late '90s. actually the mid '90s. we already had a platform to turn into an online business. by 1999 and 2000, when all of the dot-gone era -- maria: dot-gone. >> many companies these people have forgotten about that were riding high at 50 or 80 or 100 multiples, there was really no multiples because they weren't making any money. maria: counting clicks to the website. >> right. they got wiped out in '99, 2000, which was unfortunate for many but it was the right thing because you began to have to have a business model that could actually produce earnings for shareholders over time. so when that happened and everything sorted itself out in the online world, macy's was
already in position to stay with it. amazon obviously did some very, very good things. i think the brilliance of amazon is their non-retail business. their cloud services, their distribution, their logistics. they are doing unbelievable in all these places which frank pays for the retail business that is far less profitable for them than these other businesses. i think they are actually quite brilliant in this regard. maria: great to have you on. thank you so much for joining us this weekend. terry lundgren. what a career. don't go anywhere.
maria: welcome back. now a look at some big market events coming up in the week ahead that could impact your wallet. this, the final week of summer going into labor day. on monday we start the week with data from the dallas federal reserve manufacturing survey. we also get earnings on monday from aerospace company.
tuesday we hear from typical movers. consumer confidence is typically a market mover. we get the latest earnings from best buy, hewlett-packard and h & r block. some retailers yet to report. wednesday, real gdp numbers. the atlanta federal reserve expecting the next quarter to be 4.3%. that gdp number is important. focus on it. it could be a market mover. earnings from sales force as well on wednesday. on thursday, the weekly initial jobless claims are out, personal income as well as earnings from dollar general, campbell's and abercrombie. friday ending the week with the chicago purchasing managers index and consumer sentiment. coming up next week, hope you will join me. we have former reagan adviser david stockman my special guest. plus this weekend, join me on sunday morning for sunday morning futures on the fox news channel. house majority leader kevin mccarthy joining me as my special guest. we talk the midterm elections
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