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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,

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Speaker 1: SoundCloud and at Bloomberg dot com. Well, talking about fake

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Speaker 1: news is David Guarantee, CEO of g v A Research.

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Speaker 1: Thank you David so much for being here and sort

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Speaker 1: of helping us understand how big of a problem the

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Speaker 1: proliferation of some of this fake news is on a

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Speaker 1: global level. Certainly, Lisa, my pleasure and thank you pim um.

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Speaker 1: You know, in terms of looking at the current election cycle,

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Speaker 1: two thousand and sixteen, we didn't see the rise of

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Speaker 1: this sort of unverified content being put out onto the

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Speaker 1: social media, and if we went back to two thousand twelve,

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Speaker 1: we were in a situation here where social media was

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Speaker 1: really at a point where the size of their audience

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Speaker 1: was outstripping that of traditional news organizations. However, four years

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Speaker 1: further down the road, things obviously have massively changed, and

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Speaker 1: we're now in a situation where organizations such as the

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Speaker 1: Pew Center have said that of their survey respondents recently,

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Speaker 1: about forty percent of them are roving relying upon social

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Speaker 1: media as being their primary information source. However, social media

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Speaker 1: organizations bend over backwards to say we're not news organizations,

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Speaker 1: were technology companies. Well, the fact of the matter is

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Speaker 1: the size of their audience is now larger than traditional

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Speaker 1: news organizations. They are in effect news organization because their

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Speaker 1: audience treats them as such. However, given the fact that

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Speaker 1: they're now adults, they don't wish to take on the

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Speaker 1: responsibilities that would fall traditionally to a news organization, which

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Speaker 1: means they don't they would want not enjoy the protections

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Speaker 1: of the US Constitution as a news media outlet. And

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Speaker 1: they will also say that they would be subject to

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Speaker 1: libel laws. Well, was where I was going to go

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Speaker 1: with this, because we all recall the libel uh suit

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Speaker 1: that was filed against Vice. Was this That's what I

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Speaker 1: beg Gawker was a director of Facebook. Peter Teal, yes,

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Speaker 1: who funded that lawsuit, and its not the only lawsuit

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Speaker 1: that Pete that Teal and other billionaires have funded. So clearly,

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Speaker 1: if people are concerned about a free press, people are

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Speaker 1: concerned about having proper information, and if proper information is

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Speaker 1: what is necessary to have an informed electorate that can

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Speaker 1: make proper and appropriate choices in elections. Liberal democracy needs

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Speaker 1: an informed electorate. Misinformation cuts right at that route. I

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Speaker 1: want to play the devil's advocate because in your comments

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Speaker 1: you're basically saying that the facebooks and the twitters of

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Speaker 1: the world really ought to So the implication is that

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Speaker 1: they really ought to police what's getting distributed and understood

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Speaker 1: as truth. At the same time, isn't the onus on

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Speaker 1: the consumers of this, I mean, isn't it to sort

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Speaker 1: of seek out the verified information? And I mean, by

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Speaker 1: how do you how do you make sure that the

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Speaker 1: twitters and facebooks of the world aren't de facto censors

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Speaker 1: and becoming you know, uh and viewed frankly as as

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Speaker 1: the man or sort of be viewed as in bed

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Speaker 1: with a particular political party in going after you know,

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Speaker 1: another side. I mean, this sort of edges into a

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Speaker 1: pretty scary territory. Yes, we we are relying upon an

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Speaker 1: informed electorate to basically exercise their judgment, but at the

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Speaker 1: same time, we look at how social media sites have

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Speaker 1: developed their algorithms they're programming is developed in such a

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Speaker 1: way as to show people what it is that they

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Speaker 1: already like. The idea being if the dogs reading the

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Speaker 1: dog food, give them more dog food. And from that standpoint,

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Speaker 1: we've seen the creation of basically filter bubbles in terms

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Speaker 1: of people basically sharing information with their friends and they're

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Speaker 1: basically just given more of the same. They're not given

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Speaker 1: a contrasting point of view. There is nothing that as

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Speaker 1: individuals requires them to be fair and balanced in terms

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Speaker 1: of what media they consume. There is a concern here

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Speaker 1: which I think we have to look were the corporate

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Speaker 1: advertisers who have been looking at using social media as

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Speaker 1: a channel increasingly because that's where the audiences migrated. Were

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Speaker 1: the advertisers from the standpoint of concerns over their own

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Speaker 1: brand reputations, not wishing to have an ad served next

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Speaker 1: to a piece of news that is fake or false

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Speaker 1: or hateful or misleading. You know, there could be a

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Speaker 1: move here by advertisers essentially, Sarah say, yes, social media

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Speaker 1: maybe a lot of noise, but it's not something we

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Speaker 1: used to identify with. Why because we've spent you know,

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Speaker 1: billions of dollars building our reputations and We're not going

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Speaker 1: to see it sold away for something that basically gives

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Speaker 1: the way the truth or debases it. Didn't that already

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Speaker 1: happen with pripe Bart. Wasn't there an a distributor that

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Speaker 1: removed it's uh its services from bright part calling it

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Speaker 1: hate speech? It was last week there was there was

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Speaker 1: something like this. I mean it is there are There

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Speaker 1: is starting to be some pushback, but it'll be curious

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Speaker 1: to see whether it will be. I was actually in

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Speaker 1: a meeting recently with a fellow who was in charge

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Speaker 1: of WPP Group, very large global advertising agency amongst the largest,

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Speaker 1: and he was the one who is simply indicating that

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Speaker 1: this was a likely response to fake news coming off

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Speaker 1: of the selection, that he would basically go out and

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Speaker 1: council the global advertisers that they work with to say, look,

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Speaker 1: focus on reliable sources of media and information. You know,

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Speaker 1: from that standpoint, social media, like any other organization, has

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Speaker 1: to pay bills, and if they don't get any money

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Speaker 1: from advertisers, I think their tune will change. Well, let

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Speaker 1: me just give you the detail here. The bright Bart

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Speaker 1: example that you just offered a Lisa it was app

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Speaker 1: nexus and they deactivated bright Bart News after an audit

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Speaker 1: of the site's content determined that it violated the Advertising

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Speaker 1: Networks Code of Conduct banning hate speech and great hate speech.

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Speaker 1: But I didn't say fake speech. And one David, how

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Speaker 1: long have you been covering the technology industry more technology

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Speaker 1: sector of going back before the change the millennium? Okay,

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Speaker 1: so consequences responsibilities? Do technology companies have a great track

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Speaker 1: record when it comes to the social consequences and responsibilities?

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Speaker 1: Because if they want those press uh freedoms, then maybe

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Speaker 1: they're going to have to change the way that they charge.

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Speaker 1: This is very true. And if we go back and

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Speaker 1: look historically a technology companies, they tend to have a

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Speaker 1: shorter lifespan, if you will, than than other companies. But

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Speaker 1: one thing that people have noted more broadly is that

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Speaker 1: the lifespan of corporations has been contracting. But arguably one

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Speaker 1: would say technology companies lead in this regard. Typically there

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Speaker 1: has been a disposition on the part of managements whre

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Speaker 1: in early stage investors and technology companies essentially to build

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Speaker 1: them for sale, basically passed the buck on to somebody else,

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Speaker 1: the acquirer, to have the acquirer solve the problem. Some

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Speaker 1: of the concerns that they have been in the case

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Speaker 1: of social media companies, is being concerned about how fickle

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Speaker 1: the demographics of their audience was. Certainly we've seen early

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Speaker 1: age demographics going from say fifteen to twenty four have

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Speaker 1: been migrating away from Facebook, have been migrating more towards

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Speaker 1: things like Napchat. Obviously, we'll see how well that does

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Speaker 1: with its I p O. But nonetheless, the audience is fickle,

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Speaker 1: and from that standpoint, one would argue that there is

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Speaker 1: a hands off attitude in order to maintain an audience.

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Speaker 1: And so as a result, you know, this kind of disregard,

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Speaker 1: if you will, for the niceties that news organizations need

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Speaker 1: to follow have certainly led social media organizations Facebook at

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Speaker 1: al to wander far afield Um. Now I want to

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Speaker 1: turn our attention to the fate of Italian banks. We

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Speaker 1: have Jonathan Tyson is our senior banks analyst for Bloomberg Intelligence,

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Speaker 1: joining us from London. Jonathan, there is a referendum scheduled

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Speaker 1: for December the fourth. What does the referendum in Italy

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Speaker 1: mean not only for the government but for the future

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Speaker 1: of Italian banking. That's good, good morning. I think the

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Speaker 1: referendum per se was clearly Mario Renzi um the prime minister,

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Speaker 1: the prime minister looking to consolidate his position or have

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Speaker 1: an exit strategy. And in terms of what it means

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Speaker 1: for the sort of wider economy and the banks, um,

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Speaker 1: if it's a no vote and Renzy does walk, then

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Speaker 1: quite clearly all of the things the Italian banks, mostly

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Speaker 1: via UNI Credit and Monty Pachy, where most of the

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Speaker 1: people are looking at the moment they're trying to do,

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Speaker 1: they get set back. Confidence dwindles. We've already seen, for example,

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Speaker 1: a five billion euro fifty year bond that was issued

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Speaker 1: very recently by itaally that's now trading at eighty five

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Speaker 1: cents in the euro. So it's fallen in a very

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Speaker 1: few weeks. When they issued it, I think it was

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Speaker 1: like two point eight three percent or something around there.

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Speaker 1: And you wonder, who would you know lend their money

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Speaker 1: for fifty years. Well, so, I mean we we've seen

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Speaker 1: hundred year bonds in Europe. Certainly, sometimes you do look

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Speaker 1: at it and think, two people believe that the Eurozone

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Speaker 1: crisis has gone away, and if anything, as very little

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Speaker 1: is achieved, we're getting further right um politically across Europe

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Speaker 1: and there are so many questions unresolved, with so little

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Speaker 1: action and resolution in the banks. Um, it's very hard

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Speaker 1: to see this not dragging into two thousands and seventeen

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Speaker 1: and beyond. Well, okay, so the Italian banks have been

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Speaker 1: in trouble for a while that there is are a

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Speaker 1: number of them that are looking for some kind of

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Speaker 1: solution that may, if possible, include some kind of government bailout. Again,

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Speaker 1: that's not necessarily possible under some of the recent rules

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Speaker 1: that have been implemented. But can you walk us through

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Speaker 1: the direct mechanism by which the banks will suffer in

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Speaker 1: a no vote for the referendum? In other words, walk

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Speaker 1: us through kind of Is this a matter of yields

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Speaker 1: on an Italian government bonds, blowing out any of their holdings,

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Speaker 1: losing a lot of value, borrowing costs for them, you know, ballooning.

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Speaker 1: Is that sort of the mechanism by which this will

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Speaker 1: lead to trouble for them? No? Not really, I mean

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Speaker 1: that is that's amcillary, that's part of it. Because the

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Speaker 1: Italian banks owned several hundred billion of government bonds, So

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Speaker 1: clearly yields blowing out means that the unrealized gains in

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Speaker 1: those bonds are disappearing, and Italian banks include that in

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Speaker 1: regulatary solvency, so it's unhelpful. But that's not the problem.

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Speaker 1: The problem is that the banks have got several hundred

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Speaker 1: billions of non performing loans. They've got two hundred plus

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Speaker 1: billion of the very worst sort of loans, and Monty Pasky,

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Speaker 1: which is the poster child for everything that's bad and

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Speaker 1: needs addressing in Italy, they are trying to raise up

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Speaker 1: to five billion and are flowed tens of billions of

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Speaker 1: non performing loans. And we need proof that there is

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Speaker 1: actually a secondary market for the sale of non performing loans,

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Speaker 1: because it's not just Monti Paski. Uni Credit is the

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Speaker 1: largest bank in Italy by assets. They've got tens of billions,

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Speaker 1: multiples of what Monty Pasky has. So if we lose confidence,

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Speaker 1: if the market takes a step back and doesn't understand

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Speaker 1: the direction politically and regulatorily of Italy into two thousands

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Speaker 1: and seventeen, it's very hard to see how Monty Patsky

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Speaker 1: and then Newny Credit, which has, by the way, a

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Speaker 1: strategy day one December where they're going to try and

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Speaker 1: articulate how many billions of new capital they need and

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Speaker 1: how they're going to get it if we get the

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Speaker 1: no vote, and there is significant fallout even from here

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Speaker 1: because things have already moved. The problem remains, how on

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Speaker 1: earth does Italy address it's bad loans, Jonathan the the

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Speaker 1: introduction of a sort of a bad loan bank. Hasn't

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Speaker 1: that been considered? And have US institutions such as Goldman

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Speaker 1: Sachs and JP Morgan. They have indicated that something might

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Speaker 1: change if indeed that referendum gets the no vote. As

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Speaker 1: you describe, well, the problem is that you can't have

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Speaker 1: state aid, and because Italy has been very very slow

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Speaker 1: in applying bailin enforcing its banks to take its medicine

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Speaker 1: um the the bailing rule effectively kicked in for Italy

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Speaker 1: at the beginning of two thousand and sixteen. One of

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Speaker 1: the problems they face is that, unlike many other markets,

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Speaker 1: a lot of the bond or the debt funding that

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Speaker 1: the banks have is actually held by retail bond holders.

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Speaker 1: So the last thing really that you want for the

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Speaker 1: Italian bank system is to have a bail in from here,

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Speaker 1: because suddenly you've got a lot of retail investors and

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Speaker 1: retail deposit holders who will lose significance amount of money.

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Speaker 1: At that point you've got a proper liquidity crisis for

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Speaker 1: the bank system as well. So unfortunately that the bail

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Speaker 1: in should Montypasky struggle to raise its five billion and

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Speaker 1: if it doesn't manage to use the securitization guarantee from

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Speaker 1: the government to offload its nonforming leans, I think bailing

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Speaker 1: is what people begin to think. At that point, you're

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Speaker 1: a retail bond holder and some of the other small

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Speaker 1: Italian banks, what do you do with your money and

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Speaker 1: what happens to liquidity? And as we all know from

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Speaker 1: two thousand and eight, when you get a significant liquidity problem,

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Speaker 1: it becomes a capital problem very quickly. When we're already

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Speaker 1: concerned about the solvancy of the Italian banks, Jonathan real

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Speaker 1: quick Is any of this price into the market currently

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Speaker 1: that a no vote will be the presiding one? Oh? Absolutely?

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Speaker 1: I think the mark is well aware, um that this

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Speaker 1: will be the case. And the fact is that you've

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Speaker 1: got France at the moment, you've got what happens with Brexit.

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Speaker 1: So is it priced inadequately? I don't know, But as

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Speaker 1: we just said, um, you've got a five billion, fifty

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Speaker 1: year bond away and it's four and fift cent and

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Speaker 1: two to three weeks. The market is clearly very aware

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Speaker 1: of this, It just doesn't understand what the real number

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Speaker 1: needs to be. Lisa A. Bronwitz. Something else happening today

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Speaker 1: taking place in Dallas, A T and T is said

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Speaker 1: to reveal its new online video service. Of course, A

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Speaker 1: T and T the owner of the video streaming service

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Speaker 1: direct Tv. Now it's the country's time pay TV producer,

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Speaker 1: and we know that they also want to get into

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Speaker 1: the content business. We don't know exactly whether A T.

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Speaker 1: T will receive a regulatory approval for their pending Uh

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Speaker 1: they're pending acquisition, um is it? Uh? This is a

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Speaker 1: good introduction though, for our next guest, because A T.

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Speaker 1: T has been behind this this venture. Couldn't go as

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Speaker 1: the co founder and the general manager of Crunchy Roll.

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Speaker 1: And by the way, it makes me hungry, though, well okay,

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Speaker 1: couldn't you. You've got one, You've got one follower there

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Speaker 1: already already because of the name. Tell us what is

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Speaker 1: what is crunchy role and then maybe just explain the

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Speaker 1: relationship between you and A T and T because they're

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Speaker 1: they're part owner. Sure, thank you for having me. Crunchy

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Speaker 1: Role is a anime streaming service. We bring the latest

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Speaker 1: shows out of Japan and we stream it to eight

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Speaker 1: different languages, including English, Spanish, French, Portuguese, Italian, German, Arabic

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Speaker 1: into a hundred sixty different countries. We have millions of

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Speaker 1: viewers and a lot of paid subscribers. Our relationship with

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Speaker 1: A T and T. They are an investor along with

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Speaker 1: the Trending Group into Outer Media, which is a digital

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Speaker 1: media venture UH company, and that is a majority investor

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Speaker 1: into crunchy roll. Um. I want to talk a little

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Speaker 1: bit about the demand for viewing anime or sort of

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Speaker 1: a Japanese form of hand drawn or computer animation. How

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Speaker 1: much has it sort of gained in popularity away from Japan.

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Speaker 1: I mean, I know that it has been popular for

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Speaker 1: years in certain um, in certain circles, but you know,

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Speaker 1: is it proliferating more? Absolutely? We think this is just

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Speaker 1: the early innings and there's a lot more demand and

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Speaker 1: a lot more popularity to be had. What we've seen

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Speaker 1: is that there's a lot of misconception about what is

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Speaker 1: anime and generally animation. Anime is a medium for a

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Speaker 1: using storytelling, just like live action is a medium and

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Speaker 1: within that medium there's a lot of diversity. There's a

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Speaker 1: lot of different genres within that medium, including romance, horror,

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Speaker 1: sci fi, comedy, action, drama, you name it, and there's

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Speaker 1: just so much rich storytelling, amazing characters. I think that's

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Speaker 1: what draws audience into it as has been very much

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Speaker 1: under the radar for a lot of years, but I

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Speaker 1: think that's because it's mostly the fans who are into

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Speaker 1: it were really in the know, And what we're really

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Speaker 1: seeing now is that the fan base has grown and

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Speaker 1: there are the millennials today and they're uh figuring out

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Speaker 1: new ways to access this content, to engage with its content,

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Speaker 1: and making it even more popular. Can you explain the

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Speaker 1: financial background for Crunchy Role in the context of advertisements,

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Speaker 1: but also in the context of you can have your

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Speaker 1: own YouTube television channel now and I believe that you

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Speaker 1: can watch a lot of these types of programs in

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Speaker 1: another format. How does crunch your role figure into this?

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Speaker 1: How do you make money? Absolutely? So, we're still really

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Speaker 1: early innings into digital media and we're still learning a lot.

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Speaker 1: But I think one thing that we've learned and that's

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Speaker 1: been valuated across other different businesses in this space is

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Speaker 1: that it takes a lot of capital to be able

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Speaker 1: to make investments to create premium truly premium content, and

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Speaker 1: premium content is what gets people to really engage and

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Speaker 1: to get ultimately people to pay and subscribe to your

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Speaker 1: content because you've got general discussion boards and forms about

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Speaker 1: each individual character and episode. That's right. So the difference

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Speaker 1: here is that comparing UH for example, us to other services,

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Speaker 1: there are a lot of services that are in the

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Speaker 1: digital space that are basically something for everyone. What we're

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Speaker 1: trying to be is we're trying to be everything for

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Speaker 1: some people, the most passionate fans. And what we've seen

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Speaker 1: is that with really passionate fans, for them, it's not

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Speaker 1: just let's watch a video and and let's watch a

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Speaker 1: show and let's come back later. Once they engage with

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Speaker 1: the show, they're absolutely engaging with everything else. They're going

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Speaker 1: going to the community, they're they're engaging in forums, they're

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Speaker 1: transacting by buying merchandise and figures around the shows they're watching.

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Speaker 1: They're going to physical conventions. They're just doing a lot

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Speaker 1: more things and and creating a lot more engagement and

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Speaker 1: hopefully a lot more opportunities for monetization. How big is

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Speaker 1: the online market for viewing anime right now? We have

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Speaker 1: many millions of viewers over the US as well as

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Speaker 1: the rest of the world. We think that there's still

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Speaker 1: a lot more potential. Ultimately, we think that anime is

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Speaker 1: one of the ways that millennial audiences really want to

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Speaker 1: engage with digital content, and they really embrace it, and

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Speaker 1: and they really can relate to a lot of characters,

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Speaker 1: a lot of the stories are being told, and they

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Speaker 1: think it's a lot of fun. You know. I want

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Speaker 1: to bring up something we talked about earlier in the program.

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Speaker 1: We were talking about social media of sites um and

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Speaker 1: whether they ought to be getting involved in some of

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Speaker 1: the conversations and preventing speech that might be their hate speech,

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Speaker 1: or you know, if there's something that veers into some

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Speaker 1: kind of inappropriate territory. I mean, do you guys have

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Speaker 1: some kind of approach to that. I think that's an

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Speaker 1: amazing and very relevant topic. So with animation, what we

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Speaker 1: do is we we take everything that's on air on

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Speaker 1: TV and we rebroadcasted and we self title it into

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Speaker 1: multiple languages. But what we have seen is that animation

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Speaker 1: is amazingly diverse, and there's a lot of storytelling around empowerment,

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Speaker 1: around growing up, around a lot of these themes that

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Speaker 1: are anti boling around Uh, really, how do you develop

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Speaker 1: yourself and find your own perspective as a as an individual?

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Speaker 1: And how do you do that with friends? So we

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Speaker 1: think that the content is amazingly empowering and not just

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Speaker 1: towards one demographic or one audience. It captures an entire

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Speaker 1: sp a froum of perspective in in terms of not

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Speaker 1: just male, but female, various other gender or sexual orientations,

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Speaker 1: all of those things. So it's it's an amazing diverse

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Speaker 1: medium for storytelling and empowerment. Couldn't you graduated from UC

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Speaker 1: Berkeley with honors? You've got a Bachelor of Science and

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Speaker 1: Electrical engineering computer science, also be an applied mathematics. Does

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Speaker 1: anyone question like, you're working with cartoons? Does that? How

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Speaker 1: does that go down? So I had this, Uh, I

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Speaker 1: had this debatement with myself many many years ago. I think,

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Speaker 1: you know, the path was either academia or go into

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Speaker 1: working with animation. And I think the great thing about

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Speaker 1: animation is we're able to bring through crunch real amazing

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Speaker 1: story telling that touches people touches many millions of people

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Speaker 1: in meaningful ways, and I think that's ultimately very impacting

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Speaker 1: and very very rewarding for me personally as well as

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Speaker 1: to be able to reach so many people and and

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Speaker 1: we would impact so many lives. Kuno, co founder and

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Speaker 1: general manager of Crunchy Role, coming to us from San

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Speaker 1: Francisco talking about UH, the movement of anime to the

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Speaker 1: United States. This is Bloomberg. Wait, Wait is that a

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Speaker 1: black sweater? No? Do I want to get that microwave?

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Speaker 1: Wait we have to be on the radio. Oh, yes,

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Speaker 1: that's right. I'll stop shopic. But one person who may

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Speaker 1: go back to shop in. Christian mcgoon, CEO of Amplify

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Speaker 1: Investments and manager of the Amplify Online Retail et F,

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Speaker 1: is here in the studio to talk about what we

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Speaker 1: know so far about how well UH stores did on

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Speaker 1: Black Friday. Of course, as we just heard from Greg

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Speaker 1: Jared in the Bloomberg news room, it's unclear whether we

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Speaker 1: have a better sense from maybe Cyber Monday than we

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Speaker 1: do from Black Friday. But Christian, thank you so much

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Speaker 1: for being with us. I want to start out with

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Speaker 1: how much do we really know already about Black Friday,

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Speaker 1: there was that UH National Federation of National Retail Federation

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Speaker 1: that came out saying the average spending per person was

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Speaker 1: down slightly dollars per person from more than two last year.

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Speaker 1: How accurate is this? Yeah, I think it's fairly accurate.

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Speaker 1: Big data is now emerging in the retail scene. It's

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Speaker 1: less about opinions and it's more about gathering all these

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Speaker 1: streams of data into quick analytics, and I think that's correct.

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Speaker 1: I think consumers haven't spent as much so far this year.

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Speaker 1: I think it's probably due to the fact that these

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Speaker 1: UH deals have been extended before Black Friday and even

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Speaker 1: after Cyber Monday, so I think there's less urgency to

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Speaker 1: go out and make your purchase on that single day

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Speaker 1: or wait for for for Cyber Monday today, and that's

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Speaker 1: impacting I think some of the swiftness of the sales,

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Speaker 1: but I think they're still going to be there, and

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Speaker 1: it's clear the big winner here is online retail versus

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Speaker 1: brick and mortar. Christian, I wonder if you could just

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Speaker 1: tell us a little bit of your background, going back

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Speaker 1: to claim More and the exchange traded fund industry, and

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Speaker 1: then the creation and the manager of this new amplify

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Speaker 1: online Retail et F symbol I buy. Yeah. So I've

401
00:23:19,119 --> 00:23:21,639
Speaker 1: been involved in the et F industry since the early

402
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Speaker 1: two thousands and done about sixtiesome funds in the United States,

403
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Speaker 1: and uh, this particular fund, the online Retail et F,

404
00:23:28,440 --> 00:23:30,679
Speaker 1: I buy. It's kind of it's coming out day, so

405
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Speaker 1: to speak. It's the first time it's been out during

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Speaker 1: the holiday shopping season, and you know, it's a way

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Speaker 1: to actually take advantage of not only the seasonal trend,

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Speaker 1: but it's really kind of a change in the whole

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Speaker 1: retail and environment. Uh, the amount of sales in online

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Speaker 1: retail is growing at about a annualized pace versus brick

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Speaker 1: and mortar, and that's a trend many investors don't have

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Speaker 1: exposure to into the in the traditional brick and mortar

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Speaker 1: exchange traded funds out there. So I buy offers that

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Speaker 1: focused exposure and to as like it's a holiday so

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Speaker 1: to speak, Well because I was sorry, but just because

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Speaker 1: I was looking at the the companies that are in

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Speaker 1: the the e t F D I buy, Okay, etc.

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Speaker 1: It's like a major position pet met Express one eight

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Speaker 1: hundred flowers Overstock Neutral Systems hs N. What is the

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Speaker 1: rationale for why some companies go in and why some don't. Yeah,

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Speaker 1: so there's a hard and fast rule. A company has

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Speaker 1: to have seventy percent of their revenue coming from online

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Speaker 1: retail sales. So if you don't meet that seventy percent threshold,

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Speaker 1: you're not in the e t F. So Best Buy

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Speaker 1: had a bright spot with online sales. Walmart and their

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Speaker 1: acquisition of Jet got dot dot dot com has had

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Speaker 1: a bright spot and online sales, but it's not seventy

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Speaker 1: of their revenue. The ETF really wants to have companies

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Speaker 1: that are exposed the majority of their revenue to that

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Speaker 1: online trend. Uh. So, yeah, I believe it or not.

431
00:24:48,200 --> 00:24:51,280
Speaker 1: PIM Amazon is not even in the top ten holdings here.

432
00:24:51,440 --> 00:24:53,439
Speaker 1: But when you look at these companies like Etsy or

433
00:24:53,480 --> 00:24:56,320
Speaker 1: pet Meds or eight hundred Flowers, Uh, they've had some

434
00:24:56,400 --> 00:24:59,120
Speaker 1: unbelievable performance. A lot of it has been fueled, we believe,

435
00:24:59,160 --> 00:25:03,320
Speaker 1: because they're available online and that segment is just growing markedly.

436
00:25:03,680 --> 00:25:07,560
Speaker 1: How concerned are you about their share falling markedly when

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00:25:07,680 --> 00:25:11,320
Speaker 1: the biggest retailers figure out how to better sort of

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00:25:11,640 --> 00:25:14,760
Speaker 1: uh negotiate their their transactions online. Yeah, it's clear that

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00:25:14,800 --> 00:25:16,760
Speaker 1: you know Walmart, for example, is you know, doing some

440
00:25:16,760 --> 00:25:19,879
Speaker 1: strategic acquisitions. I think, um where the e t F

441
00:25:19,920 --> 00:25:22,520
Speaker 1: could benefit is some of the merger and acquisition potential.

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00:25:22,600 --> 00:25:25,320
Speaker 1: So some of these UH companies will get taken out

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00:25:25,359 --> 00:25:27,639
Speaker 1: by these broad based retailers that are brick and mortar

444
00:25:27,640 --> 00:25:29,959
Speaker 1: because they have to. I think these companies will benefit

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00:25:29,960 --> 00:25:32,320
Speaker 1: because of the consolidation that's going to happen in the

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00:25:32,359 --> 00:25:35,720
Speaker 1: physical space, whether that's in terms of employees or or

447
00:25:35,760 --> 00:25:38,280
Speaker 1: square footage. But I think these companies not only should

448
00:25:38,280 --> 00:25:40,840
Speaker 1: benefit kind of this growth. We're only doing eight percent

449
00:25:40,920 --> 00:25:44,080
Speaker 1: of all sales online right now. Estimates are that goes

450
00:25:44,160 --> 00:25:47,800
Speaker 1: to ft by thirty so we're seeing a global trend

451
00:25:47,840 --> 00:25:50,080
Speaker 1: that's much more than one single day, and I think

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00:25:50,080 --> 00:25:52,119
Speaker 1: this et F and the company should stand to benefit.

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00:25:52,320 --> 00:25:53,919
Speaker 1: I want to thank you very much for coming in

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00:25:53,960 --> 00:25:56,240
Speaker 1: and giving us a look under the hood of I

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00:25:56,440 --> 00:26:00,000
Speaker 1: Buy the new Amplify Online Retail e t F. Chris

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00:26:00,040 --> 00:26:10,000
Speaker 1: Jim Magoon is the chief executive of Amplify Investments. Thanks

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00:26:10,000 --> 00:26:12,760
Speaker 1: for listening to the Bloomberg pen L podcast. You can

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00:26:12,800 --> 00:26:17,240
Speaker 1: subscribe and listen to interviews at iTunes, SoundCloud, or whatever

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00:26:17,520 --> 00:26:21,040
Speaker 1: podcast platform you prefer. I'm pim Fox. I'm out there

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00:26:21,040 --> 00:26:24,080
Speaker 1: on Twitter at pim Fox. I'm out there on Twitter

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00:26:24,200 --> 00:26:27,159
Speaker 1: at Lisa Abramo. It's one before the podcast. You can

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00:26:27,200 --> 00:26:29,680
Speaker 1: always catch us worldwide on Bloomberg Radio