Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. We're kind of getting
Speaker 1: through the meat of the tech earnings, um and you
Speaker 1: know the stocks. I used to follow the big social
Speaker 1: media companies and Google's and facebooks in the world, so
Speaker 1: I always continue to keep an interest in that Pinterest.
Speaker 1: What was the biggest deal By the way, what was
Speaker 1: the biggest deal you did as an investment banker? A
Speaker 1: well buying time warner? We represented a well Okay, so
Speaker 1: that's the same wheelhouse. And I always think about the
Speaker 1: radio I did all the radio. Those were fun. Those
Speaker 1: were fun. That's why I love being in the radio business.
Speaker 1: But I look at Pinterest. I'm not a user, um,
Speaker 1: but it's a thing. I get it. They put up
Speaker 1: some good numbers, stock up twelve percent, but I look
Speaker 1: it around the digital advertising space and I saw some
Speaker 1: serious hiccups here. So I want to get a sense
Speaker 1: of what's going on out there. So fortunately we have
Speaker 1: Mark Douglas live in our Bloomberg Interactive Broker studio, not
Speaker 1: phoning it in like a certain interest rate analyst time.
Speaker 1: I know, Marcus the CEO and Mountain um Mark. We've
Speaker 1: had Google, We've had Facebook. I'm not going to use
Speaker 1: the medicine. This is a meta free yes, so but
Speaker 1: you know, but I see snap, I see Pinterest. Is
Speaker 1: these is the I guess secular growth of digital advertising
Speaker 1: because that story kind of playing out or do we
Speaker 1: still have room to grow? Um, it's not playing out.
Speaker 1: I think the way to think about it. And this
Speaker 1: goes for your personal finances. This goes for investing. Is
Speaker 1: everything that's closest to the consumer. The consumer making a
Speaker 1: purchase is going to do very well in tough times,
Speaker 1: and everything furthest Away is going to struggle. So like
Speaker 1: in in digital advertising, Roku is furthest Away brand ads,
Speaker 1: you know, not really at the point of purchase. Google
Speaker 1: is close, Pinterest is actually very close to the radio
Speaker 1: radio is closed. And so it goes also for other
Speaker 1: categories streaming television. You know that that the first three
Speaker 1: streaming services you like, you're gonna keep paying. If you're
Speaker 1: number five on that list, as a consumer, you're gonna
Speaker 1: be like, I'm cutting something right, and so you're gonna
Speaker 1: cut that off. It goes for everything, and so digital
Speaker 1: advertising is fine. You just have to focus on the
Speaker 1: companies that are closest to the point of purchase and
Speaker 1: what are you seeing in terms of the clients that
Speaker 1: you work with, what are they doing to increase their
Speaker 1: reach to the consumer at closer Yes, so they're generally
Speaker 1: reevaluating where they're spending, and then the things that are
Speaker 1: doing well for them, they actually increasing spend. So those
Speaker 1: are those categories we all know, paid search, paid social, um,
Speaker 1: the and then those things again there furthest away they're
Speaker 1: they're taking spend away from that and be us they
Speaker 1: just literally can't afford it, or at least can't afford
Speaker 1: the risk if the economy struggles a bit more. Right,
Speaker 1: So that's a that's a cyclical issue. It sounds to
Speaker 1: me the secular story of just growth and digital advertising.
Speaker 1: Are those days kind of behind us here? Or do
Speaker 1: we Because I've got Google, I've got Facebook, and I
Speaker 1: guess I've got Amazon as my big three digital advertisers,
Speaker 1: can they combined continue to drive this market on Yeah,
Speaker 1: I mean, well Google and Meta uh we agree with
Speaker 1: a gun call of Facebook already fell off that chair.
Speaker 1: And we also don't say alphabet, so you know, alright,
Speaker 1: I'm on that train. Um no pun intended as in
Speaker 1: New York. But no, they they obviously just have incredible scales.
Speaker 1: So at that scale, at ten percent growth, those are
Speaker 1: still really really big growth numbers. Amazon is on fire
Speaker 1: in terms of their business, both the advertising business and
Speaker 1: AWS which essentially almost funding that a retail business at
Speaker 1: least from a profitability perspective, and so I think those
Speaker 1: are good. But the you know, the the area men
Speaker 1: streaming television continuing to grow obviously fake um Netflix, I
Speaker 1: should say obviously Netflix is you know, they have like
Speaker 1: consumer market share in the US and it's just kind
Speaker 1: of hard to grow from that. But I think the
Speaker 1: overall streaming market, this transition from old school linear television
Speaker 1: cable to streaming, that's not slowing down, that's continuing. How
Speaker 1: many how many of streamers do you think will be
Speaker 1: I don't know left standing at the end of this.
Speaker 1: I mean, is it is it three, is it five?
Speaker 1: Is it the fifty we had on cable TV or well,
Speaker 1: there's a consolidation going on right now. When you look
Speaker 1: at the television industry, the biggest companies are like half
Speaker 1: the market. So I'm talking like Disney, which people forget
Speaker 1: also owns ABC on ESPN on like, has all these properties.
Speaker 1: And then you look at Discovering Networks and they have
Speaker 1: merged with Time Warner I believe, right, And so the
Speaker 1: the your have a consolidation underway. It's just kind of
Speaker 1: happening under a bit below the surface because people are
Speaker 1: not paying attention to it. So I think you're gonna
Speaker 1: wind up with just a relatively small number very large players,
Speaker 1: you know, kind of focused on that market, but in
Speaker 1: a new way because consumers are watching TV. On the subway,
Speaker 1: they're watching it and back at taxis they obviously still
Speaker 1: watching it at home everywhere with the sound up. By
Speaker 1: the way, but by the way, um, okay, you can
Speaker 1: be honest with me. Here as we watch Nancy Pelosi
Speaker 1: get off of her plane, Greg Jarrett says, it looks
Speaker 1: like a seven two A I'm a pilot, by the way,
Speaker 1: Oh yeah, I'll try to call that way. I would
Speaker 1: agree with the seven seven from from the shot. I'm
Speaker 1: thing right now as we watch that, and I'm not
Speaker 1: really necessarily I don't have anything to say about this
Speaker 1: because we already saw her land. It looks like she's safe,
Speaker 1: everything's cool, and the markets have breathed a side of relief.
Speaker 1: But does news? Howse news doing? In terms of television? Obviously,
Speaker 1: streaming news is kind of a silly thing because you
Speaker 1: want it right away, live, right But I don't. For example,
Speaker 1: I don't even have cable TV at all at my
Speaker 1: house television. I mean, I watched Bloomberg on the Apple TV,
Speaker 1: but I don't watch other kinds of news. Are peeple,
Speaker 1: do people watch CNN, MSNBC, Fox, Bloomberg? Are they? Are
Speaker 1: they paying for that? Are we? Are we losing money
Speaker 1: as a loss leader for for Mike over there? Ye? Also,
Speaker 1: I think most people are watching the news via their
Speaker 1: um Instagram account and their TikTok accounts. Scary, that's really scary.
Speaker 1: So I think that's most people's number one news source.
Speaker 1: You know. Obviously I think you're trying to give me
Speaker 1: in trouble here. No, no, But you make a good point,
Speaker 1: you know. I remember I was talking to a barista
Speaker 1: a couple of months ago and she hadn't gotten her vaccine.
Speaker 1: I asked her why and she said, because she saw
Speaker 1: on the news that it can paralyze you get the vaccine.
Speaker 1: I said, what news were you watching? She said, oh,
Speaker 1: I saw it on TikTok. That was her news, the
Speaker 1: vaccine paralyzed. Yeah. By the way, that isn't true, right,
Speaker 1: but but but yeah, I mean obviously CNN has is
Speaker 1: struggling right now. I think Fox knows who their audience is,
Speaker 1: and they have a very engaged audience and and also
Speaker 1: an audience the weird news is part. Yeah. I I
Speaker 1: actually owned some land in Kentucky, so I know the
Speaker 1: middle of America, and all they want to know about
Speaker 1: is Hunter Biden and see like California man fights off
Speaker 1: store roberts Um twenty four hours of Fox coverage. Well,
Speaker 1: news is also entertainment these days, so let's leave it
Speaker 1: all right back to entertainment. Then. I have noticed lately
Speaker 1: Amazon Prime is knocking it out of the park. I mean,
Speaker 1: they had the terminal List, which is hard for me
Speaker 1: to try and watch Chris Pratt in a serious role.
Speaker 1: But anyway, they had Jack Reacher that was killer. They
Speaker 1: had outer range, which I love with I think Josh Brolin. Um,
Speaker 1: they're just they're just taking it over. Yeah, so they're
Speaker 1: they're obviously. You know the interesting thing, I actually talked
Speaker 1: to someone at Amazon, very senior executive. Their biggest issue
Speaker 1: with Prime is a lot of the people at Prime
Speaker 1: subscriptions don't realize and includes television, includes video and so
Speaker 1: they so first they have to they need their Handmad's Tail.
Speaker 1: They need that show that everyone wants to watch, and
Speaker 1: they're investing heavily in getting that. And then they have
Speaker 1: to remind everyone that, hey, by the way, you have
Speaker 1: access to this as part of getting your packages delivered
Speaker 1: same day. So they're they're really in it. Um. I
Speaker 1: my company used to be based in l A since
Speaker 1: the pandemic were fully remote right now, and when we're
Speaker 1: in l A. Amazon built a huge movie studio in
Speaker 1: Culver City, and I mean a million square feet of
Speaker 1: space to produce shows, to to manage all that. So
Speaker 1: they're they're heavily investing along with all the other big
Speaker 1: They don't have the Adam Project though, no they don't.
Speaker 1: Ryan Ryan Reynolds continues, did you get a cameo in that? Um?
Speaker 1: I have have no cameos in Ryan's movie I haven't
Speaker 1: I have a cameo in his actual life right now,
Speaker 1: just for the listeners, h Mark and Mountain. Ryan Reynolds
Speaker 1: is their chief creative officer. So is that the right title. Yeah,
Speaker 1: it's been an incredible partnership. Mark, you mentioned your folks
Speaker 1: are remote. Is that permanent? How's that working? I mean
Speaker 1: you look around here. Mike has like this phenomenal office
Speaker 1: for us. Nobody's here. Yeah. So we we at the
Speaker 1: relatively early in the pandemic. We decided when everyone scattered,
Speaker 1: including me, I went to I left l A and
Speaker 1: actually went all over the I went tot Loo, Mexico
Speaker 1: and spent nine months there. Had it very nice. I
Speaker 1: thought you gonna say back to the Bronx, but it
Speaker 1: pretty cool. France is good too, and so we just
Speaker 1: decided we're going fully remote. We decided in May of um,
Speaker 1: maybe June, we're going fully remote, and um we do
Speaker 1: four off sites a year to bring the team together.
Speaker 1: It's been fantastic. That's good stuff. Interesting. Every everybody's adapting.
Speaker 1: Everybody has adapted is adapting. Mark Douglas, President CEO of Mountain,
Speaker 1: joining us live in our Bloomberg Interactive Broker studio that
Speaker 1: is very cool. We appreciate them taking the effort to
Speaker 1: come in here. Right now, let's check in with James
Speaker 1: McCann's deputy chief economists Aberdeen Standard Investments. James, thanks so
Speaker 1: much for joining us here. Boy, tremendous amounts of news flow.
Speaker 1: We've got central bankers making statements all over the place
Speaker 1: raising interest rate, We've got earnings, we've got g DP prints,
Speaker 1: we've got geopolitical issues obviously in Europe. Uh and today
Speaker 1: there a lot of focus on Taiwan. When you step
Speaker 1: back and think about where the US economy is going,
Speaker 1: I wonder how you kind of put all those pieces together.
Speaker 1: How do you think about the US economy and maybe
Speaker 1: even you know, the global economy really over the next
Speaker 1: six or twelve months. Yeah, I mean, you're absolutely right.
Speaker 1: It's just a huge amount to unpack here. I think
Speaker 1: what's very clear from the U S data is that
Speaker 1: we're going into a very pronounced soft patch. I think
Speaker 1: the fact that we've had a huge energy price drive
Speaker 1: and commodity price drate and price shock has had a
Speaker 1: larger effect of many had expected on on consumer sentiments,
Speaker 1: on consumer spending, etcetera. So you know, definitely we see
Speaker 1: in strong signs in the data of a soft spot,
Speaker 1: of a soft patch. We're not convinced this as a recession.
Speaker 1: I know, last week after the two quarters of negative
Speaker 1: growth has been a lot of speculation and concern that
Speaker 1: we're already in recession. We're not convinced that we yet,
Speaker 1: but look, the risks are definitely increasing. And then when
Speaker 1: we look on a longer term horizon, we do think
Speaker 1: as the Fed titans policy, as financial conditions have already
Speaker 1: adjusted very very significantly, stressing markets has increased that we
Speaker 1: think the outlook as we go forward is for a
Speaker 1: further deterior ration in growth. And what we know, as
Speaker 1: I said, we don't think crim recession at the moment.
Speaker 1: We do think prospects over that sort of twelve month
Speaker 1: horizon are pretty dim. So we have a lot of
Speaker 1: concerns about where the U. S. Economy is going, and
Speaker 1: we know when where the U. S. Economy glows, that
Speaker 1: the global economy tends to follow. I mean, it's pretty
Speaker 1: hard to obviously um the technical definition normally are the
Speaker 1: rule of thumb is to quarters of contraction. But if
Speaker 1: you look at this economy with three and a half
Speaker 1: percent unemployment, and you know six or seven percent nominal growth, Um,
Speaker 1: it's difficult to see it, or more it's difficult to
Speaker 1: see it as a recession. Now. On the other hand,
Speaker 1: we had an interesting note by his old ten poser
Speaker 1: opposed are Overnight Um and our colleague are a Jersey
Speaker 1: from Bloomberg Intelligence also has said that this is a
Speaker 1: FED that wants to fight inflation and is sort of determined,
Speaker 1: um to turn this inflation around at the risk of
Speaker 1: pushing the economy into a recession or as posed our
Speaker 1: even the depression. Do you think we're gonna go to
Speaker 1: five percent? Do you think we're gonna go to six
Speaker 1: percent as the outliers are saying, or um, do you
Speaker 1: believe the market that the Fed is going to get
Speaker 1: to three and a half or four and then turn
Speaker 1: tail and run back down? By that team means sorry
Speaker 1: un employment rates, No, No, I mean the terminal rate
Speaker 1: the FED right now at the top range at two fifty, right,
Speaker 1: And even if they do seventy five again, that's only
Speaker 1: three and a quarter. And and if you look at futures,
Speaker 1: the market thinks they're gonna go to four maybe a
Speaker 1: little more, and then come back down already next year.
Speaker 1: But does that mean we're gonna already have met our
Speaker 1: two percent inflation goal by next year or are they
Speaker 1: going to go early? What do you think, um the
Speaker 1: time it's going to be? I told them, I think
Speaker 1: that the difficulty for the Fed at the moment is
Speaker 1: it's seeing signs of weakness in the growth, but it's
Speaker 1: just not comfortable and I don't think will be comfortable
Speaker 1: for a while in pivoting. And that's because it's just
Speaker 1: going to take a while to an inflation under control
Speaker 1: even if growth slow, as the economy looks just enormously
Speaker 1: in balanced stills. So I think today's jolt states were
Speaker 1: really interesting. They showed openings fell pretty significantly, but they're
Speaker 1: still from a historical style and just extraordinarily high. And
Speaker 1: it just tells me the seat has more work to
Speaker 1: do in taking some of the heat tells of this economy.
Speaker 1: So we certainly think the set has a ways to
Speaker 1: go in terms of its tightening. But we probably agree
Speaker 1: that the you know, the terminal rate looks most likely
Speaker 1: to be around we're not a half per cent, so
Speaker 1: there are still a fat dunk of tightening to come.
Speaker 1: It's not impossible that the FED has to go to
Speaker 1: go higher certainly if that inflation proves you know, more
Speaker 1: difficult to to to to do you think with that
Speaker 1: kind of terminal rate they could get down to two.
Speaker 1: We were at nine point one. I know they don't
Speaker 1: go by headline cp I, but uh, what's core PC
Speaker 1: right now? Like five? Um? Can they get back to
Speaker 1: two with a terminal rate of only four? Yeah? Sorry,
Speaker 1: the connection is a little bit poor here, but I
Speaker 1: think they can. I think they can definitely create and
Speaker 1: I think they can do so potentially quite quickly. I
Speaker 1: think that has to happen sort of late next year
Speaker 1: into twenty four potentially. But really what you need to
Speaker 1: see as an inflation for when it falls, it could
Speaker 1: for quite quite quickly. You know. Certainly the energy price
Speaker 1: dynamic I think is already going to be disinflation ry
Speaker 1: through the summer, and it growth sloans could provide further
Speaker 1: disinflation reimpetus. I think global goods prices could moderate quite
Speaker 1: quite rapidly given weakening demand and improving supply chain conditions.
Speaker 1: So it's not impossible that some aspects of their inflation
Speaker 1: picture improved quite quite rapidly. I think what they really
Speaker 1: need to see is that course services inflation moderate, and
Speaker 1: for that they need to see labor market sees and
Speaker 1: wages start to come down, and then I think they'll
Speaker 1: be more confident that the run rate, perhaps not the
Speaker 1: year on year rate, but the run rate of monthly
Speaker 1: inflation is coming in more in line with where their
Speaker 1: inflation target is. And actually, I don't think they're going
Speaker 1: to put the economy into a depression to achieve that,
Speaker 1: because I don't think inflation would be that stubborn, you know,
Speaker 1: but certainly we think that, you know, consecutively a period
Speaker 1: of very weak growth of recession will be enough to
Speaker 1: sort of shake that inflation geanie back into the bottle
Speaker 1: maybe as as a way of putting it, and that
Speaker 1: will allow them to cut as we sort of move
Speaker 1: into late twenty three and twenty twenty four. But that's
Speaker 1: a we have to get the tightening in first. I
Speaker 1: guess James about the consumer, the consumer is kind of
Speaker 1: hanging in there pretty well, and Matt mentioned the relatively strong,
Speaker 1: very strong employment position, but there are some concerns about
Speaker 1: savings rates coming down, credit card rate balance is going up.
Speaker 1: How do you view the consumer? Look, I think the
Speaker 1: consumer in aggregilities is in really good shape when we
Speaker 1: look at the balance. So if we think about debts
Speaker 1: the ratio of the to income, then that's a multi
Speaker 1: year lows. We know there's a lot of accruede saving.
Speaker 1: Even if the flow of saving, the monthly thing that
Speaker 1: they're doing sort of back to pre crisis normals, they've
Speaker 1: built up a big stock pile of saving. I guess
Speaker 1: the key question for the consumer is, you know, what
Speaker 1: do they do with that? Well? Are they happy to
Speaker 1: keep on spending it, especially as the economic outlook starts
Speaker 1: to starts to darken, especially as the labor market starts
Speaker 1: to weaken, do they switch to perhaps some more precautionary stance.
Speaker 1: I think that's what we're already seeing signs of of
Speaker 1: coming out, is that consumers, at first we're looking to
Speaker 1: spend through this inflation of the impulse. Now they seem
Speaker 1: a little bit less convinced. So, you know, I don't
Speaker 1: think the consumers in terrible shape, but I do think
Speaker 1: they'll become increasingly cautious about how they spend their money.
Speaker 1: I think that's going to be felt most acutely endurable
Speaker 1: good sector, just because they've spent so much in that
Speaker 1: in that part of the economy over the last two years.
Speaker 1: Maybe services still has a bit of insulations. People are
Speaker 1: getting back to normal to you're going back to their
Speaker 1: lives pre pre pandemic spending on holidays and and anything else,
Speaker 1: et cetera. But yeah, I do think they look to Edinburgh. Yeah, exactly,
Speaker 1: it's my next holiday, all right, James, what do they
Speaker 1: do that log throwing thing? When do they do that
Speaker 1: big Scottish Thailand Highland Games? That would that's later this
Speaker 1: year is so you should definitely get to tell. Tell well,
Speaker 1: hopefully it cools down. Tell Luke Hickmore. I'm on my way,
Speaker 1: all right, James mcinn, Deputy Chief Economist, Aberdeen Standard Investments,
Speaker 1: Thanks so much for joining. Alright, all eyes on Taiwan today,
Speaker 1: Uh speaker Ploss playing did land moments ago in Taiwan.
Speaker 1: Now there's a red headline across the Bloomberg terminal China
Speaker 1: to carry out military drills encircling Taiwan. So here we go.
Speaker 1: Let's get the latest on all things Taiwan and from
Speaker 1: the speaker. Emily Wilkins, Washington reporter with Bloomberg Government, joins
Speaker 1: us here. So Emily, here we go. The speakers in
Speaker 1: Taiwan what is the expectation in Washington, hopeful or not
Speaker 1: about how this will play out? I mean, I think
Speaker 1: the expectation in Washington. Number one, this is an absolutely
Speaker 1: historic day. It is a historic trip. This is um
Speaker 1: the first time in a quarter of a century that
Speaker 1: one of the top lawmakers in America that the third
Speaker 1: in line from the presidency is in Taiwan. We saw
Speaker 1: that Taiwan even projected um onto a building near the
Speaker 1: airfield a message welcoming Speaker Pelosi and and saying that
Speaker 1: the Taiwan and that that Taiwan loves the US. And
Speaker 1: so it is a huge trip for those reasons. But
Speaker 1: when you look at exactly what is going to be
Speaker 1: accomplished here, Pelosi already put out a statement saying that
Speaker 1: you know that this is not change how the US
Speaker 1: sees Taiwan. It does not change US and Taiwan relationships.
Speaker 1: The US is sticking with the status quo. But she
Speaker 1: also notes that at this point that the US Taiwan
Speaker 1: relationship is more important today than ever as the world
Speaker 1: faces a choice between autocracy and democracy. Those were words
Speaker 1: that the Speaker are released in a statement shortly after
Speaker 1: she landed. So she's seen a larger historical context here.
Speaker 1: I think after Russia invaded Ukraine, a lot of folks
Speaker 1: started asking could we see similar with China and Taiwan.
Speaker 1: And so even though this trip does not involved a
Speaker 1: policy shift, it is sort of a signal about where
Speaker 1: the US sees Taiwan and the allegiance that that both
Speaker 1: have with each other. Eamily, you spend a lot of
Speaker 1: time um in the halls of Congress. Is this something
Speaker 1: that you know, one of those rare issues that has
Speaker 1: support on both sides of the aisle? It does? It
Speaker 1: really does. I mean, we saw Senate Minority Leader Mitch McConnell, certainly,
Speaker 1: someone who's never been afraid to criticize Pelosi in the past,
Speaker 1: basically encouraging her to go on this trip, saying that
Speaker 1: if she didn't, she would be handing China a win.
Speaker 1: We heard very similar rhetoric from the House Republican Leader
Speaker 1: Kevin McCarthy. You've heard the same from em Pelosi's own party. Certainly,
Speaker 1: there have been security concerns that we I've heard from
Speaker 1: the Department of Defense, from the Pentagon. There's a recognition
Speaker 1: that this is a sensitive time within the relationship between
Speaker 1: Washington and Beijing. At the same point, I can't think
Speaker 1: of a single House member who has really come out
Speaker 1: and said we don't want Speaker Pelosi to be going
Speaker 1: on this trip at this time. Certainly there this is
Speaker 1: going to have to be a trip where the Speaker
Speaker 1: needs to be cautious. She needs to be careful in
Speaker 1: what words she uses in the actions that she has.
Speaker 1: At the same point, though this is not Pelosi's first rodeo.
Speaker 1: I mean, she went to Taneman Square and and protested
Speaker 1: um the killings there the previous two years, and so
Speaker 1: she understands the region, she understands the aspect, she understands
Speaker 1: the dynamics, and certainly she's been in a position of
Speaker 1: power long enough to to really understand what would and
Speaker 1: would not be considered uh in line with the current
Speaker 1: status quo. Emily, Matt and I are looking at the
Speaker 1: live go when we see a view here appears to
Speaker 1: be of a hotel in Taiwan. Looks like the press
Speaker 1: corps maybe assembling here. Do we know or what do
Speaker 1: we know of Speaker Pelosi's schedule for tomorrow in in
Speaker 1: terms of events, in terms of press availability, that type
Speaker 1: of thing, So we haven't gotten a ton of details
Speaker 1: about this trip. I mean the Speaker's office. I don't
Speaker 1: think they ever even confirmed that she was actually going
Speaker 1: to Taiwan until the plane touched down. In this statement
Speaker 1: came out, we didn't know that she has planning on
Speaker 1: meeting with officials within Taiwan, within the legislature, with Taiwan's president. UM.
Speaker 1: That those are all things on the agenda. Remember too,
Speaker 1: this is a part of a larger trip. She was
Speaker 1: in Singapore, she is still planning on going to Japan
Speaker 1: and to South Korea. UM. And so it will definitely
Speaker 1: be a very closely watched trip for Speaker Pelosi. UM.
Speaker 1: But in the in the same at the same time, UM,
Speaker 1: I think there are there's a sense that the most
Speaker 1: historic thing that she's done is today simply landing here,
Speaker 1: stepping off the plane and becoming the first Speaker in
Speaker 1: twenty five years to do So. What kind of legislation
Speaker 1: is um circulating in Washington and support of Taiwan because
Speaker 1: we used to have a mutual defense treaty until we
Speaker 1: basically quit out of it in ninety nine, Is there
Speaker 1: anything like that on the books? So at this point
Speaker 1: that hasn't been a giant focus. UM. The things that
Speaker 1: you've seen Washington be really consumed with right now. Are
Speaker 1: mostly domestic things that that reconciliation package that uh kind
Speaker 1: of rose out of the dust the other week, UH
Speaker 1: stuff for veterans are are very much on lawmakers minds
Speaker 1: at this point. But you have seen really that bipartisan
Speaker 1: willingness in Congress to pass legislation UM that would sort
Speaker 1: of you know, slap China on the risk for human
Speaker 1: rights abuses, UM, that would kind of continue to establish
Speaker 1: US dominance in the markets over China. You recently saw
Speaker 1: lawmakers take up that fifty two billion dollar deal in
Speaker 1: semiconductors with the idea that more of them now need
Speaker 1: to be made in the US so that the US
Speaker 1: does not rely as much on China and partly Taiwan,
Speaker 1: should China make some sort of move to change the
Speaker 1: status quo there. And you know, these are the things
Speaker 1: that I think lawmakers are are more focused on at
Speaker 1: this time. Emily, great stuff, Thank you very much for
Speaker 1: your reporting. Really appreciate getting the update there. Emily Wilkins,
Speaker 1: congressional reporter for Bloomberg Government based in Washington, d C.
Speaker 1: Giving us the latest, UH. Speaker Pelosi in Taiwan or
Speaker 1: playing landed just moments ago. Kind you want to bring
Speaker 1: you this interview with Uber CEO Dara kosh Roshah. He
Speaker 1: talking about the company's recent earnings with Bloomberg's Guy Johnson
Speaker 1: and Emily Chang. Certainly some very good numbers coming out
Speaker 1: of there. Let's bring you that interview right now with
Speaker 1: the CEO of Uber, Dara. Thank you so much for
Speaker 1: joining us. A happy day, I know, when the stock
Speaker 1: is that much in the green, you hit a record
Speaker 1: on Booking's revenue more than doubled. Dig into some of
Speaker 1: the trends here. What was so different about this quarter
Speaker 1: than the last few quarters when it came to supply
Speaker 1: and demand. Well, to some extent, it's a continuation of
Speaker 1: the last few quarters, but we're really hitting a scale
Speaker 1: point here, Like you said, twenty nine billion dollars in
Speaker 1: growth bookings of thirty six percent on a year on
Speaker 1: year basis. Uh as it relates on a constant currency
Speaker 1: basis are ebada three hundred sixty two million, well above
Speaker 1: our guidance range, and the guidance that we gave forward
Speaker 1: was well above street estimates, etcetera. So an indication of
Speaker 1: anticipated strength coming. And then a really important factor for
Speaker 1: US is we're a free cash flow positive three two
Speaker 1: million dollars in free cash flow, which is a big
Speaker 1: positive factor in our being self sustaining and a profitable
Speaker 1: going forward. And when we look at the environment, the
Speaker 1: marketplace is more balanced. The number of new drivers that
Speaker 1: we're adding in the US is up over seventy on
Speaker 1: a year. On your basis surges down e t A
Speaker 1: s or down. Uh So the business is really hitting
Speaker 1: on all cylinders and it's reflected in the stock price,
Speaker 1: which is great. Dara, thank you. We're looking at live
Speaker 1: pictures from Taipei where how speaker Nancy Pelosi's motorcade has
Speaker 1: just arrived at a Taiwan hotel. We're gonna keep monitoring,
Speaker 1: of course, her big visit to Taiwan. I do want
Speaker 1: to ask you a little bit about the broader environment, Dara.
Speaker 1: I still hear people say Uber is expensive, and we're
Speaker 1: seeing Uber benefiting from this. When you look at your
Speaker 1: earnings and the bottom line, how do you think about
Speaker 1: this dynamic longer term? Do you worry at all about
Speaker 1: alienating customers when they're already getting squeezed, Given that this
Speaker 1: is the worst inflationary environment in Uber's history, yeah, I
Speaker 1: think inflation is hitting all of us, whether it's grocery
Speaker 1: prices or fuel prices. And remember, uh, fuel is a
Speaker 1: big component of our driver costs, so that affects Uber
Speaker 1: prices as well, and you do see it in a result.
Speaker 1: While trips were up, which is really really healthy growth growth,
Speaker 1: bookings were up fast than that, which indicates some inflationary
Speaker 1: effect on our results. I think the good news for
Speaker 1: us is that surge levels are actually coming down, E
Speaker 1: t A s are coming down, so as the marketplace
Speaker 1: becomes more balanced, we actually see strength in terms of
Speaker 1: trip growth going forward. And we're hoping if we do
Speaker 1: our jobs and so far, so good onboarding more and
Speaker 1: word drivers that prices on Uber will ease going forward.
Speaker 1: At the same time drivers will make really strong earnings
Speaker 1: as well. At the same time, we've heard so many
Speaker 1: dire warnings about the economy. Jamie Diamond has said he's
Speaker 1: preparing for an economic hurricane. I just spoke to Apple
Speaker 1: CEO Tim Cook, who said, you know, he plans to
Speaker 1: be deliberate in Apple spending. You said in the past
Speaker 1: that you think Uber is recession resistant. Do you still
Speaker 1: believe that if we continue to see these down downward trends,
Speaker 1: and what is uber strategy to navigate continuing downward trends. Well,
Speaker 1: I think you're certainly seeing in earn results, which is uh,
Speaker 1: There's been a bunch of earnings results out there, and
Speaker 1: sometimes they've been less than great. I think Uber's earnings
Speaker 1: have been terrific in every way, top line growth, profitability
Speaker 1: growth as well. Um at the same time, we are
Speaker 1: being disciplined in terms of how we grow going forward.
Speaker 1: This is why our margins are improving so much on
Speaker 1: a year on your basis, free cash flow is now
Speaker 1: positive as well. Because of the scale that we have
Speaker 1: because we're in multiple businesses, both in mobility and delivery.
Speaker 1: I think we have a kind of business that can
Speaker 1: perform in all weather. But at the same time, we
Speaker 1: are being disciplined in terms of costs to make sure
Speaker 1: that as the environment, if it gets tougher, we are prepared.
Speaker 1: The other factor that I point out to is that
Speaker 1: you have seen, you know, during the pandemic, huge amount
Speaker 1: of spend went into retail and out of services. Now
Speaker 1: we're seeing the reversal of that money coming out of
Speaker 1: retail and into services. And Uber is an ultimate service
Speaker 1: company and we're benefiting from that, so you can expect
Speaker 1: us to perform better than the overall environment, certainly this year.
Speaker 1: When we look at next year, we have to be
Speaker 1: careful because those comps can go against us, which is
Speaker 1: why we are bringing real cost discipline into the business,
Speaker 1: growing top line and the bottom line. So tell me
Speaker 1: a little bit more about what you mean by discipline.
Speaker 1: Does that could that impact hiring? You know, any plans
Speaker 1: for layoffs or cutbacks on staff as we're seeing at
Speaker 1: other tech companies. I think the good news for us
Speaker 1: is with top line growth of thirty certainly no plans
Speaker 1: for layoffs, but we are being more disciplined in terms
Speaker 1: of headcoun growth. So we're adding headcount to key areas
Speaker 1: Let's say Uber for business salespeople that part of our
Speaker 1: business is growing very very quickly, or advertising business, which
Speaker 1: is a very very high margin business and growing as well.
Speaker 1: So we're adding heads selectively to parts of the portfolio
Speaker 1: that are growing in really strong and power a ways.
Speaker 1: Otherwise words scale already, we are going to leverage costs,
Speaker 1: both variable costs and fixed costs going forward, and I
Speaker 1: think this environment that is demanding more discipline, it's the
Speaker 1: perfect environment for Luber competitively. Dary, Good morning, it's Guy
Speaker 1: Um picking up on that point. How much of current
Speaker 1: spend do you think is discretionary? You know, we do
Speaker 1: have a fair amount of discretionary spend in terms of
Speaker 1: marketing spend or incentive spend. We continue to have drivers
Speaker 1: sign on bonuses or guarantees as as earnings are elevated, UH,
Speaker 1: to make sure that drivers feel safe on boarding onto
Speaker 1: the platform and then see their earnings the great earnings
Speaker 1: for themselves. So there's certainly some discretionary spend and you're
Speaker 1: seeing that in terms of the margin efficiency of the company.
Speaker 1: Are gross profit margins, for example, are up your on
Speaker 1: year and we are our fixed costs are growing at
Speaker 1: much slower rates than that thirty six percent gross bookings
Speaker 1: growth rates. We are speaking with Uber CEO Darrik Costra
Speaker 1: Shah He I'm joined by Bluemberg's Emily Chang on Bluemberg
Speaker 1: Television and Radio. Dar Are you talked a moment ago
Speaker 1: about growth markets. Let's talk about markets where maybe you
Speaker 1: are not seeing that growth. Where are you reevaluating right now?
Speaker 1: There's been some conversations, certainly I've heard talking about the
Speaker 1: idea that maybe you could withdraw from India. Oh, those
Speaker 1: conversations are entirely false. We've said it a bunch of
Speaker 1: times and I'll say it again. Our India business in
Speaker 1: terms of mobility is at performing at excellent excellent rates.
Speaker 1: Were very happy with that business. We did exit uh
Speaker 1: India delivery business. We didn't think we could be a
Speaker 1: top one or two player and there are certain markets
Speaker 1: Brazil for example, and delivery where we decided to get out. Essentially,
Speaker 1: if we don't think we have a chance to get
Speaker 1: to number one within a reasonable cost, UH, we will
Speaker 1: look to be disciplined in terms of our portfolio. But
Speaker 1: when you look at her portfolio, both mobility and delivery
Speaker 1: both are growing at healthy rates. Were either number one
Speaker 1: or number two in the markets that we compete in
Speaker 1: and we're very very confident going forward. And to be clear,
Speaker 1: we are staying in mobility in India. We love the market.
Speaker 1: So Dar, are you confirming there that you're selling your
Speaker 1: steak in to motto? I mean we've heard that a
Speaker 1: big shareholder is selling. This is the big food delivery
Speaker 1: company in India, and there are reports that Uber is
Speaker 1: selling at steak. Yeah, no comment on those reports. One
Speaker 1: or the other. Okay, UM, so let's talk about the
Speaker 1: markets to guys point about where Uber might not be
Speaker 1: growing as much. You mentioned on the call that West
Speaker 1: coast markets are taking a little bit longer to come back,
Speaker 1: and I'm I'm thinking about San Francisco and how it's
Speaker 1: been a struggle to get workers back to the office.
Speaker 1: How are you thinking about this and Uber's, for example,
Speaker 1: Uber's own flexible work policies. Do you see the flexibility
Speaker 1: that you're giving workers holding up into next year for example?
Speaker 1: Does it does feel like the tail of two coasts?
Speaker 1: You know, when we look at the East coast New York, Miami,
Speaker 1: even UH cities Atlanta, Austin, Dallas. Our business is coming back,
Speaker 1: is roaring back, uh at this point, and we feel
Speaker 1: great about that business. Now. The San Francisco markets, Los Angeles, Seattle,
Speaker 1: they're certainly coming back. But when you look at the
Speaker 1: absolute levels versus pre pandemic levels, UH, it's a very
Speaker 1: very different story. UM. And you know, we'll keep pushing
Speaker 1: and we will do our part to make sure that
Speaker 1: we've got ample supply in those markets. UH. And the
Speaker 1: service works very well as it relates to Uber. UH.
Speaker 1: You know, we believe in two things. One is we
Speaker 1: want people to get out and getting out means going
Speaker 1: back to the office as well. And at the same time,
Speaker 1: we believe in flexibility, so we are going with a
Speaker 1: hybrid model. We're encouraging employees who don't want to be
Speaker 1: remote only to come in fifty percent of the time.
Speaker 1: And I will tell you, when you get together with
Speaker 1: your workmates, especially in a world and an area where
Speaker 1: you're working as hard as you are, as it relates
Speaker 1: to Uber, especially as you care so much about your impact,
Speaker 1: getting together in person is a great jolt of energy.
Speaker 1: I very much believe in it. But ultimately we want
Speaker 1: we want the best of both worlds. It's gonna get
Speaker 1: more competitive out there. Um, you've got Amazon interesting in
Speaker 1: grub Hub. What do you think that means for you? Well,
Speaker 1: we're very confident of our delivery business group twelve percent
Speaker 1: on a year on year basis constant currency, and our
Speaker 1: share in the US has been very, very consistent. The
Speaker 1: focus for us is to drive profitability of our delivery business.
Speaker 1: So we had a record quarter in terms of profitability
Speaker 1: nine million in iba DA and we expect that profitability
Speaker 1: to increase going forward. In terms of Amazon and grub Hub,
Speaker 1: we've seen zero material effect on us. We work with
Speaker 1: Amazon for example in Japan, uh, and because of our
Speaker 1: global scope and scale, we have a lot of chances
Speaker 1: to work with different players. Amazon is a great company,
Speaker 1: and we'll work We'll look to work with them. However,
Speaker 1: we can now if there was an area of weakness. Uh.
Speaker 1: You could say in the report, I'm looking at delivery.
Speaker 1: Delivery bookings mixed, missed expectations by about a billion, and
Speaker 1: you're forecasting it will be flat for the current quarter.
Speaker 1: Given just how big a part of the business this
Speaker 1: has become post pandemic, do you think a slowdown in
Speaker 1: delivery could potentially drag down the rest? Well, I think
Speaker 1: that the slowdown that we're seeing in delivery is is
Speaker 1: really a measure of the comps right last year, the
Speaker 1: delivery business of growing unbelievably quickly. If you look at
Speaker 1: delivery growth in the U S Uber eat crew year
Speaker 1: on year, our overall US delivery business crew year on year, uh,
Speaker 1: the growth rate there we're seeing internationally is affected by
Speaker 1: comps the year before, and if you compare delivery to
Speaker 1: two years ago, both of the US and international or
Speaker 1: growing an annual rate of forty plus percent, which is
Speaker 1: super super healthy. So we're big believers in delivery. The
Speaker 1: focus this year is really to draw profitability. We are
Speaker 1: at scale where the number one or number two player
Speaker 1: and the vast majority of markets that we compete in,
Speaker 1: and it's time for delivery to get profitable and we
Speaker 1: are going to lead in that aspect. Wrap it up
Speaker 1: that guys, stokes up fifteen point full percent. Pretty good
Speaker 1: day at the office. That are great to catch up.
Speaker 1: Thank you very much. Indeed, lebe dark here of course,
Speaker 1: Blue Bugs Emily Chang, This is Blue Bug. Thanks for
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
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Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
Speaker 1: Miller seventy three and on Fall Sweeney I'm on Twitter
Speaker 1: at pt sweeney. Before the podcast. You can always catch
Speaker 1: us worldwide at Bloomberg Radio