Luxury during wartime

Katie Martin (0:06)

Pushkin.

That Rob Armstrong has a tough life. A few weeks ago, he and I chatted on this very pod as he hobnobbed with energy traders on the shores of Lake Geneva. Today, listeners, I must inform you that he's on the shores of the Adriatic in Italy, talking about the business of luxury. Yes, people, it's another hardship assignment for the big guy. Why is this a thing? You may be asking, don't we have important things to worry about in the world? Today on the show, why you do actually need to think about $5,000 handbags while the world is burning. This is Unhedged, the Markets and Finance podcast. Shush.

From the Financial Times, I'm Pushkin. I'm Katie Martin, a markets columnist trapped in the gray basement of the FT in rainy London. Joining me from very fancy Puglia, Italy, is Mr. Robert Armstrong, putting in the hard yards with the high fashion set. Rob, you know, set the scene for me here. Are you like surrounded by Anna Winters and Derek Zulanders and air kissing and...

Robert Armstrong (1:18)

Oh, it's incredible. And I feel slightly like the ogre in the land of the elves. You know, I consider myself a good dresser and a reasonably well-groomed man. But I'm here mixing with people who really dress well and are really well put together. And I'm kind of like the gross American.

Katie Martin (1:37)

Yes, they're called Europeans. Because this is...

This is the FT's Business of Luxury Summit, right? It's like a fixture for us.

Robert Armstrong (1:48)

Yeah, it's a fixture. It's an important conference for us. And, you know, to your point about the world being on fire, and we're here talking about how to sell handbags, you know, whatever you feel about these products, whether those be handbags or luxury hotels or fancy wine, it's a very important industry, especially for Europe.

Katie Martin (2:09)

But, you know, meanwhile, while you're thinking about $850 t-shirts, the world is kind of on fire, right? The bond market is having a horrible time. We've been talking about that a bit on the pod recently. Rob, you and I were talking to Dara, our new colleague on the newsletter about this the other day, and it is a pretty kind of harem, harem move higher in yields and borrowing costs. And in fact, it's so harem, harem and exciting that Dara misspoke and said the Bank of England rate is 4.25%.

It's only in fact 3.75%. But such is the level of lunacy going on in bond markets at the moment that people are getting ahead of themselves.

Robert Armstrong (2:47)

So are we going to fire Dara, do you think, for this making a mistake on his first podcast? Off his head, I say, I think he gets off light if we just fire him.

Katie Martin (2:56)

Poor Dara.

Robert Armstrong (2:58)

I just said that because I hope his mother is listening. I wanted to give her a little scare.

Katie Martin (3:03)

Just as I was coming here to record this, I walked past a TV screen in the newsroom, and it was a BBC TV screen, and it was saying, bonds fall on inflation fears. And I thought, uh-oh, like the totally mainstream media is on this now. That is not a good sign.

Robert Armstrong (3:20)

Yeah, it's breaking through to the normals. And another person who has noticed that the bond market is in a tiny bit of trouble, is Mr. Stock Market, which on Friday looked at 30-year yields rising and inflation expectations rising and oil prices ticking up. And it took a bit of a fall. And very importantly, the heroes of the stock market recently, meaning American AI-associated tech stocks, took it pretty hard. So that is why I had to run to southern Italy to sit by the pool and discuss how to sell a champagne to millionaires, which is how any normal person would respond to this kind of situation.

And I will say, let me say, in all seriousness, however trivial you might think selling baubles to the wealthy is, this is a very important industry for Europe at its peak, which was maybe three years ago. And I'll talk about why it peaked there and why it's fallen off a bit since. This was an industry, you know, widely, including, you know, fine dining, champagne, hotels, clothes, so forth. You know, it's a 1.5 trillion industry that is led by Europe. And there just aren't that many industries that big where Europe is the undisputed champion. And this is one of them.

Katie Martin (4:40)

Yeah. So, you know, like the US is big tech. US does big tech incredibly well. You can talk about whether it's a good idea that the rest of the world has just absorbed US technology and absorbed this, you know, hegemonic power without question. That's a whole other thing.