Emerging Markets Middle Class Good News: Galloway

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Oct. 14 (Bloomberg) -- NYU Stern School of Business Professor Scott Galloway discusses the rise of the middle class in BRIC nations with Deirdre Bolton on Bloomberg Television's "Money Moves". (Source: Bloomberg)

Have really been part of it.

It is not just bp?

Thank you, olivia.

We are on the markets in an 30 minutes.

For now "money moves" is next.

Welcome to "money moves," where we focus on alternative investments feel stop --. -- on alternative investments.

Today, breaking the impasse, we will tell you who will be at a key meeting at the white house in just under an hours time.

Plus, how secure is the dollar status as primary currency in the world?

And how hedge fund managers are positioning themselves ahead of the debt ceiling deadline.

President obama and vice president biden are meeting with congressional leaders.

Peter cook is with me now.

First, how much progress was made in the senate today?

We are about to find out.

I'm joined by republican senator bob corker of tennessee.

He's been in the middle of this budget battle, trying to find some areas for compromise.

He is here to give me an update on where things stand.

From your perspective, i know that senator reed and senator mcconnell have been meeting.

From your perspective, is there a compromise?

They are talking about the same topics.

The biggest issue now remaining is -- you know, republicans would like to see a short-term debt ceiling extension and a long-term cr, because we like to lock in those many reductions that are part of the budget control act.

Can you split the difference?

I think it is going to happen, i really do.

Mitch has shown outstanding leadership in the last three weeks on this issue.

I had a good conversation this morning with senator reid.

I know he understands the realities of where we are and we have been bringing in a lot of members to talk with him.

I sense that we may be on the verge of something good happening.

Is there going to be something to show the republicans efforts in all of this if we have some short-term reduction in the debt ceiling and a short-term increase in funding the government?

Anything on the health care law?

Anything with regard to the larger budget battle?

For me, for the last two months we have been focused on the wrong subject.

Usually, when you focus on continuing resolutions for the funding of government or debt ceilings, you are looking for reform to make our country more solvent.

Typically, that is around spending.

We have been on the wrong subject for a long time.

We have just gotten back on the right subject matter in the last 72 hours.

We have wasted a lot of time on the wrong topic.

To expect something really big to come out of this with three days left is probably not realistic.

But to set the framework up by virtue of when the next debt ceiling comes up and how the cr is going, the framework is forcing january of 2015. we can do this in a much wiser way by substituting, as everybody in our country knows, some mandatory reforms for some discretionary cuts.

It would be much better in the long run.

And if we can frame this in order to make that happen, we could still make up for lost time.

I have heard that senator reed is very optimistic that a deal can be reached.

What is the message that you think needs to be sent to international investors, who are watching this so closely and are worried about the real risk of default in the u.s.? will that be off the table by the end of the day?

I think we have made a lot of progress.

Ministers from around the world, many of whom i know and respect, are very concerned about our nation.

We are a nation that affects the rest of the world.

A strapping the ball will affect them in -- us dropping the ball will affect them in a big way.

I think we will get the management of expectations on the house side.

Let's face it, the thrust has been a totally different direction now for two months.

To manage expectations back to a place where you are focused on spending and debt, and to know that there is an lot -- not a lot of time is probably the bigger issue.

That will be the deal between mcconnell and senator reid.

Is it something that john boehner can read -- bring to the floor?

We are getting closer.

I know that senator mcconnell has been very focused on trying to bring something to the floor that he thinks the house can accept.

And that the senate will think is sufficient?

I do think the senate needs to -- whatever the senate comes up with needs to have broad bipartisan support.

You get the folks in the middle and you may lose the folks on the two ends.

I think we can send something over that captures that sentiment.

If we can do that, then we will have a chance of success.

What is your feeling on that now, 50-50? i don't want to mess up a batting average.

I do think we will get something out of the senate that is bipartisan.

I do not know yet how it will be received in the house.

As time goes on, and we are closer to the deadline, maybe people's expectations get to a place where we do something for our country and the finance ministers around the world and the people back home that are worried about their jobs.

I think we will rise to the occasion and deal with this issue yet.

Bob corker of tennessee.

Senators reid and mcconnell are talking and they are close to a deal.

We will have more this afternoon.

Peter, thanks.

Peter cook with republican senator bob corker from tennessee.

We will stay on the theme of the ticking clock.

As for the consequences, everyone will be on the hook.

Michael mckee is with me now with the real deal on options.

Some taken from treasury secretary jack lew's doomsday label.

-- playbook.

A reminder to everybody, the day that we run out of borrowing authority is approaching.

It is not necessarily the day that we default.

But starting that day, we have got to make some decisions.

One of the possibilities is prioritization.

That is what bill gross and the bond markets want, pay out first.

The problem is, most of the government would not be funded.

You can imagine the market reaction to that.

Everybody would get across-the- board cuts, but pay everyone less.

That also means social security recipients do not get full checks.

That when i fly.

Bondholders would also probably call a default there and you would still get the market collapse.

You could delay the payments until you have enough money to do it, but that will take a while and the bills will keep piling up.

It is not very sustainable.

And again you have a market collapse kind of pattern here.

We have talked about the 14th amendment.

The administration has ruled that out.

The markets might accept those as real, and they might not our in new debt auctions.

That could result in president obama being written -- impeached.

The last thing i'm told is to let it happen, not really default, but let it go past thursday into friday.

What ends up happening is that the markets crash and that scares people on capitol hill and they make a deal.

Before we actually get to the point where we cannot pay the bondholders and you do get to default.

Michael mckee joining me with a bit from the doomsday book.

When we come back, how our main trading partners see the standoff.

A hedge fund manager will join me.

An op-ed published this weekend is a strong indicator of what to expect ahead.

And a wide array of businesses that have transformed the subscription-based model.

And we will show you some economic winners and losers in an increasingly digitized world.

All of that coming your way on "money moves." ? the debt debate rages in d.c. and the status of the u.s. dollar as the world's premier currency is in question.

Jim records -- jim richards is with me.

He is the author of "the currency wars here go -- "the currency wars." you were telling me about an op- ed in the chinese government newspaper.

Nothing gets printed there that they are not in agreement with.

It basically calls for a de- americanization of the world.

What would you say about this?

It is a signed op-ed go up -- calling for de-americanization and basically saying that the global dollar has been abused by the united states.

The intentions are clear, china wants out of the dollar, but they do not have the capability.

This could be kind of a five- year project, which they are now pursuing in earnest.

Another great thing about your broke -- your book is that it was like wargames and set up all of the strategy and how it is much more about money than military might.

But to your point, the difference between china wanting the americanize world -- a de -americanize world and getting it, how are they going about?

There's about $3 trillion and half of that is in u.s. treasury securities.

They own about 11% of the united states.

They probably own more than they want to.

But they cannot dump it and they know that.

When you have treasuries in gold, you have a hedge.

If the treasury's payoff, inflation is not there and then you make money on the treasuries.

They have a hedged position.

They had a gold chart up for you.

It basically shows that the last time the gold was at a high was the last time we were fighting a bout of debt and that was august, 2011. right, the dollar index was at an all-time low in july, 2011. and then gold hit an all-time high in august, 2011. the dollar has been going down lately, but not quite to the july low.

Gold is a bit of a mystery, though.

It is down 30% from its highs.

They got bashed in april.

You've had a lot of big names be very publicly corrected on their stance.

You say, look, even though it is down 30% from the high, you cannot ignore how many funds china has purchased.

-- how many tons china has purchased.

They have purchased thousands of tons.

Over the last four years.

They are thinking ahead, which is very typical of the chinese.

What is baffling a lot of people is how the traded price is so low, but physical demand is huge.

Not only are banks buying it, but everyday citizens as well.

How do you explain that?

They cannot.

There are technical factors pushing the price below the intrinsic price.

Everybody is going to go buy it.

If bread is three dollars a loaf and the government mandate is two dollars per loaf, then they will not getting mandate.

You also have eluded him the past -- you also have alluded to in the past to the ser, the imf.

What they were weighing in about the status.

Lagarde knows that the scr is not quite ready.

They are not ready to roll it out yet.

She said if the dollar can hang in there -- please do not mess up the dollar because we are not ready.


You are essentially saying those two from the chinese point of view.

I was surprised to speak with so many chinese economists who said the you want should not the -- that the yuan should not be the reserve currency.

I have spoken to many who said they want it to be and chinese economists said, no, we are not ready.

There is a lot of infrastructure.

You need a bond market, a lot of maturities, futures, options, settlement, clearance.

There is a large into structure.

It will take at least 10 years to develop.

China wants to get rid of the double.

The dollar, but don't want the yuan.

-- china wants to get rid of the dollar, but they don't want the yuan.

The u.s. is blocking that.

This is a shoving match between china and the u.s. behind the scenes at the imf.

Would you buy gold or not in an environment?

The chinese bought several hundred tons in june.

I would do what the chinese do.

Jim rickard, hedge fund manager at tangent capital partners.

When we come back, an increasingly digital world and some brands you will recognize.

? as brands apple, estee lauder, and others are winners, jcpenney and sears are losers.

For more on why luxury is outperforming, we bring in a professor of marketing and and why a new -- at nyu stern school of business.

Is it fair to say that if you are running a luxury brand or catering to luxury customers you are fine and if you are serving the middle class your income -- in trouble?

Anyone who is banking or writing off of the backs of the market is going to have a tough time.

If you are like procter & gamble or another company that has exposure to the middle class in other nations like emerging markets, that is a gross story for his -- a growth story.

Many of these companies are doing great.

There's a market cap of $55 billion right now for lvmh.

In developed markets, who drives luxury?

Affluent people.

In other countries it is middle- class people.

The average luxury consumer in china makes $17,000 and spend $2000 on handbags.

The emerging market class loves luxury.

For any of these companies you can order whatever you want from your ipad, your smart phone, your pc.

I'm assuming technology plays a pretty big role.

Yes, but there is this myth that technology will level the playing field.

It has been terrible for the emerging markets and middle- class.

What estee lauder has shown in publicly released information is that a greater percentage of people convert to purchase when they act with an apt will stop -- when they act with an app.

Jobs are bifurcating to two places.

The middle-class is getting even alive.

When you hear focus group feedback, it seems like they want service.

They want human interaction.

But you are saying that as far as just measuring by sales, that is not true.

The reddest ambition of my life this last year is the tsa pre-check.

There is no touch luxury.

People want the product.

They do not want the overly friendly check in person.

They want a blue line path to the product and they want the other stuff out of the way.

Technology is giving them that.

The jobs that are building these middle-class households are going away.

Thank you very much for joining me.

Nyu stern school professor joining me there.

It is almost 26 minutes past the hour.

That means it is time to get you out to the newsroom.

Alix steel has everything you need to know about trade.

Here where the market stand, we have seen a huge rally take place.

The s&p up about five points.

President obama says he does see some kind of movement in the senate in terms of some kind of debt deal.

He is meeting with congressional leaders in just half an hours time.

Many traders were talking about buying the dip earlier today when we saw the s&p in the red when trade opened.

Two stocks i want to highlight for you, first, trip advisor, which is used by american express.

They are up after their write up.

And yelp is up, maintaining its overweight outlook on stocks.

The two bright spots in a market that has had a reverse direction and is climbing higher.

Energy and technology are the winners of the day.

We will be back with more "on the markets" in 30 minutes.


This text has been automatically generated. It may not be 100% accurate.


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