WEBVTT - U.S Earnings, State of EVs and Hotels 0:00:00.600 --> 0:00:07.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.560 --> 0:00:14.400 This is Bloomberg Intelligence with Alex Steinhl and Paul'sweenye. 0:00:14.520 --> 0:00:17.720 The real app performance has been in US corporate high yield. 0:00:17.880 --> 0:00:19.040 Are the companies lean enough? 0:00:19.040 --> 0:00:20.240 Have they trimmed all the fats? 0:00:20.320 --> 0:00:23.880 The semiconductor business is a really cyclical business. 0:00:23.600 --> 0:00:27.200 Breaking market headlines and corporate news from across the globe. 0:00:27.240 --> 0:00:29.880 Do investors like the M and A that we've seen? 0:00:30.080 --> 0:00:31.000 These are two. 0:00:31.040 --> 0:00:33.159 Big time blue chip companies. 0:00:33.320 --> 0:00:36.920 The window between the peak and cut changing super fast. 0:00:37.080 --> 0:00:41.680 Bloomberg Intelligence with Alex Steinhall and Paul'sweenye on Bloomberg Radio. 0:00:43.159 --> 0:00:45.680 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:45.720 --> 0:00:48.000 business stories impacting Wall Street and the global markets. 0:00:48.040 --> 0:00:49.640 Each and every week we're going to provide you in 0:00:49.720 --> 0:00:51.720 that research and data on some of the two thousand 0:00:51.760 --> 0:00:55.000 companies and one hundred and thirty industries our analysts cover worldwide. 0:00:55.120 --> 0:00:57.520 Today will look at why Capital Ones bid for Discover 0:00:57.680 --> 0:01:00.040 will likely face a rigorous anti trust review by the 0:01:00.120 --> 0:01:01.040 US Justice Department. 0:01:01.120 --> 0:01:04.520 Plus we'll discuss how shrinking advertising on traditional TV channels 0:01:04.560 --> 0:01:06.600 is impacting sales at Paramount Global. 0:01:06.840 --> 0:01:09.360 But first we dive into the retail space. This week, 0:01:09.400 --> 0:01:12.000 Macy's said it plans to close almost a third of 0:01:12.000 --> 0:01:15.399 its US locations. And this comes despite Macy's reporting fourth 0:01:15.480 --> 0:01:18.440 quarter revenue and earnings that exceeded low analyst expectations. 0:01:18.440 --> 0:01:20.720 All right, for more, we're joined now by Mary ross Gilbert, 0:01:20.760 --> 0:01:24.039 senior equity analyst who covers retail for Bloomberg Intelligence. And 0:01:24.080 --> 0:01:26.520 we first asked Mary about her take on Macy's most 0:01:26.520 --> 0:01:27.160 recent quarter. 0:01:27.440 --> 0:01:30.240 The focus really wasn't on how they did in the 0:01:30.280 --> 0:01:34.160 fourth quarter. It's really their new plan that was the 0:01:34.200 --> 0:01:37.720 big focus. The new plan and their guidance for the year. 0:01:38.120 --> 0:01:41.399 So their guidance came in softer than consensus, and I 0:01:41.400 --> 0:01:44.480 guess it's just no surprise just thinking about how department 0:01:44.560 --> 0:01:47.319 stores are under pressure, and we've seen it across the 0:01:47.319 --> 0:01:51.040 board with you know, again, Dillard's showed some weakness. We're 0:01:51.040 --> 0:01:54.520 seeing it with Macy's in their outlook. But Macy's has 0:01:54.520 --> 0:01:59.840 a plan to address the department store model in shuddering 0:02:00.000 --> 0:02:02.880 one hundred and fifty underperforming stores, and then they're going 0:02:02.960 --> 0:02:05.400 to invest in the three hundred and fifty remaining and 0:02:05.400 --> 0:02:07.160 those are going to be primarily an A and A 0:02:07.320 --> 0:02:11.360 plus plus plus malls and what they're going to do 0:02:11.480 --> 0:02:15.320 is increase the service levels. Beauty has been something they've 0:02:15.320 --> 0:02:18.840 been investing in almost every year and expanding the floor 0:02:18.880 --> 0:02:22.160 space dedicated to beauty. You'll see that they have expanded 0:02:22.160 --> 0:02:24.160 the space and who knows, they could expand it again 0:02:24.200 --> 0:02:26.360 this year. We've been seeing it for the last five 0:02:26.440 --> 0:02:29.920 years that that space has been expanded. So there's a 0:02:29.960 --> 0:02:33.280 lot of details in what Macy's is doing. It's something 0:02:33.320 --> 0:02:35.800 they need to do. They really need to up their game, 0:02:35.880 --> 0:02:39.840 and that's exactly how they started their presentation, and that 0:02:40.160 --> 0:02:43.840 includes really making the assortments a lot better than they 0:02:43.880 --> 0:02:46.840 are because if you look at the inline store performance 0:02:46.880 --> 0:02:50.440 at malls, the ones that are executing, such as the Abercrombies, 0:02:50.480 --> 0:02:52.840 the Urban Outfitters, they're outperforming. 0:02:53.720 --> 0:02:55.880 So Mary I was kind of surprised to see this 0:02:56.120 --> 0:02:58.320 number of stores one p fifty because I kind of 0:02:58.360 --> 0:03:03.360 thought that this decade plus long shrinkage of department store 0:03:03.360 --> 0:03:06.480 footprints across the country by a lot of different companies, 0:03:06.919 --> 0:03:09.040 that was more or less kind of we're done that, 0:03:09.280 --> 0:03:11.280 or we're at near the finish line. So to see 0:03:11.320 --> 0:03:14.519 another big round of closings that kind of surprised me. 0:03:14.560 --> 0:03:16.000 Did it surprise the market at all, or is this 0:03:16.040 --> 0:03:18.200 something that analyst and investors have been asking for. 0:03:18.480 --> 0:03:21.840 What Macie's had said is, we don't need to close 0:03:21.880 --> 0:03:25.079 stores except for the usual stores that you close every year, 0:03:25.120 --> 0:03:28.280 which is maybe less than ten per year. But the 0:03:28.360 --> 0:03:32.160 reason that they've decided to close them is because these 0:03:32.160 --> 0:03:34.880 stores were underperforming, but they were still profitable on a 0:03:34.920 --> 0:03:37.760 four wall basis, so historically that their thought was, well, 0:03:37.800 --> 0:03:41.160 if it's still profitable and we're still generating cash, we'll 0:03:41.240 --> 0:03:41.880 keep it open. 0:03:42.280 --> 0:03:43.880 And this time what they. 0:03:43.760 --> 0:03:48.440 Did is they took a more holistic approach and said, Okay, 0:03:48.480 --> 0:03:51.200 even though it's four wall profitable, we could do a 0:03:51.240 --> 0:03:54.160 lot better with the funds that we could generate closing 0:03:54.200 --> 0:03:57.080 these stores, selling the real estate and redeploying it back 0:03:57.120 --> 0:03:59.680 into the existing store base. And for all the initiatives 0:03:59.680 --> 0:04:02.120 that they have going forward, it makes a lot of 0:04:02.160 --> 0:04:06.360 sense because we really need to rethink the department store model. 0:04:06.400 --> 0:04:07.480 It has to evolve. 0:04:08.040 --> 0:04:08.360 Mary. 0:04:08.760 --> 0:04:13.040 Does this do enough to get activist investors off Macy's back? 0:04:14.600 --> 0:04:15.840 That is a good question. 0:04:16.200 --> 0:04:16.880 I think it may. 0:04:17.120 --> 0:04:19.560 I think board has made it very clear that they 0:04:19.560 --> 0:04:23.479 are supporting this plan. Could they enhance the board with 0:04:23.760 --> 0:04:27.080 additional directors. That could be a possibility, so learn more 0:04:27.120 --> 0:04:30.480 about that in the coming months. But I think that 0:04:30.560 --> 0:04:33.720 this plan is it's been decided that this is the 0:04:34.240 --> 0:04:37.279 move forward. And when you think about what's happening with 0:04:37.360 --> 0:04:40.960 the activists, it usually involves the real estate, and what 0:04:41.000 --> 0:04:45.240 we have seen in past transactions is the real estate 0:04:45.560 --> 0:04:48.880 is usually milked and it can be to the detriment 0:04:49.000 --> 0:04:50.440 of the retail operations. 0:04:50.800 --> 0:04:53.000 Talk to us about that, like a relative performance between 0:04:53.000 --> 0:04:56.039 like a Macy's store and a comparable Bloomingdale store. Is 0:04:56.040 --> 0:04:58.880 the Bloomingdale store maturely more profitable? 0:04:58.920 --> 0:05:02.920 I guess yes, they don't disclose the profitability on Bloomingdale's 0:05:02.960 --> 0:05:07.599 versus Macy's, but Bloomingdale's outperforms, as does bloom Mercury. This year, 0:05:07.640 --> 0:05:10.200 their comp sales were down one point six percent because 0:05:10.200 --> 0:05:13.920 the aspirational luxury consumer is spending less and we've been, 0:05:14.240 --> 0:05:18.680 you know, hearing about the overall luxury business being impacted, 0:05:18.800 --> 0:05:23.880 especially after we came off the post pandemic spending from 0:05:24.120 --> 0:05:29.719 stimulus checks that really had that aspirational customer going after luxury. 0:05:30.000 --> 0:05:32.919 So now that that's kind of falling back, we're seeing 0:05:32.960 --> 0:05:35.960 more of a normalization. This is something Nordstrom Asco slided, 0:05:36.400 --> 0:05:38.960 so their sales were just down one point six percent, 0:05:39.040 --> 0:05:42.359 but they think that could probably stabilize and go higher 0:05:42.480 --> 0:05:44.960 next year. And of course, you know what the beauty 0:05:45.000 --> 0:05:48.360 side on luxury, you know that's posting positive comp sales. 0:05:48.640 --> 0:05:51.039 Yeah, Mary, I was going to ask about then the inventory. 0:05:51.760 --> 0:05:54.960 Macy's notoriously last year struggled with inventory. The last quarter 0:05:54.960 --> 0:05:56.880 we saw they really got it together. What did we 0:05:56.920 --> 0:05:58.440 learn this quarter about their inventory? 0:05:58.800 --> 0:06:01.040 Yeah, so even though inventory it was up two percent 0:06:01.120 --> 0:06:05.679 year every year, it's still down over twenty percent versus 0:06:05.839 --> 0:06:09.680 twenty nineteen. So they've really done a great job reducing 0:06:09.680 --> 0:06:13.720 their inventory, and that means that they're having less clearance activity. 0:06:14.000 --> 0:06:16.240 This is something that's going to affect their first quarter 0:06:16.640 --> 0:06:19.719 because last year they had more clearance and this year less. 0:06:20.120 --> 0:06:23.680 So they're doing a great job overall. They've just been 0:06:24.200 --> 0:06:29.280 improving their execution with data technology, logistics, and they're going 0:06:29.320 --> 0:06:32.480 to be even employing some generative AI. They've already been 0:06:32.480 --> 0:06:36.400 employing machine learning, so we'll see more. And they're going 0:06:36.440 --> 0:06:39.279 to be streamlining operations. We didn't talk about that, but 0:06:39.320 --> 0:06:42.919 they're going to be consolidating some of their facilities, so 0:06:42.960 --> 0:06:46.560 they've really and they've reduced layers within the management structure, 0:06:47.080 --> 0:06:51.640 so overall simplifying the operations. So all of these things 0:06:51.920 --> 0:06:55.880 could restore positive growth in twenty twenty five. 0:06:56.000 --> 0:06:58.640 Our thanks to Mary Ross Gilbert, senior equity analysts who 0:06:58.680 --> 0:07:00.479 covers retail for Bloomberg and Eligence. 0:07:00.600 --> 0:07:02.080 We moved now to the auto industry. 0:07:02.120 --> 0:07:03.520 You know, we were told earlier in the week that 0:07:03.600 --> 0:07:06.600 Apple is canceling a decade long effort to build an. 0:07:06.520 --> 0:07:08.920 EV For more on this in the current state of 0:07:08.960 --> 0:07:11.320 the electric vehicle industry, we were joined by David Welch, 0:07:11.360 --> 0:07:14.160 Bloomberg Detroit Bureau chief. We first asked for his take 0:07:14.280 --> 0:07:15.240 on this week's news. 0:07:15.440 --> 0:07:18.200 Look, really, take the airplane up about twenty thousand feet 0:07:18.240 --> 0:07:21.760 on Apple's decision. Their margins are what thirty or forty percent, 0:07:22.360 --> 0:07:25.640 and gross margins for Tesla and General motors about the 0:07:25.680 --> 0:07:28.120 same in these days at about sixteen percent, and you 0:07:28.120 --> 0:07:30.440 have to spend billions of dollars to make this vehicle. 0:07:30.760 --> 0:07:33.200 Why would they do that? So I think that's really 0:07:33.320 --> 0:07:35.800 what this is about. They were looking at an electric 0:07:35.840 --> 0:07:37.560 vehicle that was going to be about one hundred thousand dollars, 0:07:37.600 --> 0:07:39.400 So this was going to be a luxury Apple EV 0:07:40.080 --> 0:07:43.680 and we're you know, we see Rivian, we see Lucid. Yeah, 0:07:43.760 --> 0:07:44.840 you know that's rare. 0:07:44.960 --> 0:07:45.320 Frid Air. 0:07:45.600 --> 0:07:47.680 That's a tough sell. There's just they're just don't that 0:07:47.760 --> 0:07:50.120 many people who can afford one hundred thousand dollars vehicle. 0:07:50.800 --> 0:07:53.280 And then one other thing I'd like to bring up 0:07:53.280 --> 0:07:55.600 with Apple is they talked about Apple TV for a 0:07:55.640 --> 0:07:58.000 long time and everyone thought we were going to have 0:07:58.080 --> 0:08:01.480 this Apple TV hanging on the wall. But eaking television just 0:08:01.480 --> 0:08:04.920 allows you high capital the bow marching business kind of 0:08:05.000 --> 0:08:07.960 like automobiles. And then they gave us a box with content. 0:08:08.120 --> 0:08:12.200 So you know, Apple supplies car plator automakers. You know, 0:08:12.320 --> 0:08:14.840 they may still have an auto play with some kind 0:08:14.880 --> 0:08:18.280 of content sort of thing in their vehicles. But I 0:08:18.360 --> 0:08:20.880 think they looked at the capital side of this and said, 0:08:20.920 --> 0:08:22.760 you know, that's not what they do. They create cool 0:08:22.800 --> 0:08:26.360 stuff and contract someone else to make it. The business 0:08:26.440 --> 0:08:27.480 just never made a lot of sense. 0:08:27.960 --> 0:08:30.880 Hey, David, what's the feeling in Detroit these days as 0:08:30.960 --> 0:08:33.480 to kind of how this EV thing is going to 0:08:33.600 --> 0:08:36.280 evolve going forward? I mean, it seems to have hit 0:08:36.360 --> 0:08:39.040 kind of a lull here in terms of the enthusiasm, 0:08:39.120 --> 0:08:40.400 and I guess a lot of folks are trying to 0:08:40.400 --> 0:08:42.640 get a sense of Is it because the costs is 0:08:42.720 --> 0:08:46.800 just too high? Is it because people just don't like evs? 0:08:47.000 --> 0:08:49.280 Is it because there's not enough choice, there's not enough 0:08:49.360 --> 0:08:52.360 charging stations. What's the feeling in Detroit is how this 0:08:52.400 --> 0:08:53.240 thing will evolve? 0:08:54.240 --> 0:08:58.480 It's all of that, but I would say especially choice 0:08:58.920 --> 0:09:02.000 and price. I mean, look, there's one EV on the 0:09:02.120 --> 0:09:04.520 US market that sells for less than forty thousand dollars. 0:09:04.520 --> 0:09:07.640 Now it's a Nissan a Lead. It's a compact hatchback, 0:09:07.720 --> 0:09:10.959 which Americans hate, that gets about two hundred miles of range, 0:09:11.400 --> 0:09:13.679 and so everything else is much more expensive than that, 0:09:14.120 --> 0:09:17.880 and for most Americans that doesn't cut it, particularly when 0:09:17.880 --> 0:09:20.000 the charging network is bad. It's all these things are 0:09:20.040 --> 0:09:23.600 sort of related. But I think the carmakers are now 0:09:23.960 --> 0:09:28.360 really cautiously watching this and in the vehicle to watch 0:09:29.120 --> 0:09:32.000 in the next year is General Motors is going to 0:09:32.040 --> 0:09:34.960 sell an electric Chevy Equinox. So the Equinox is a 0:09:35.000 --> 0:09:38.000 small crossover reshuerv. It's that's kind of the new family 0:09:38.040 --> 0:09:40.880 car because no one buys Sedanze and they're going to 0:09:40.880 --> 0:09:43.400 sell that EV for thirty five thousand dollars and it'll 0:09:43.400 --> 0:09:45.480 go three hundred and twenty miles on a charge, which 0:09:45.520 --> 0:09:49.040 is pretty good. And that will kind of tell us 0:09:49.160 --> 0:09:51.600 if the mass market is ready to go electric, because 0:09:51.679 --> 0:09:53.160 right now, a lot of the people who buy evs, 0:09:53.240 --> 0:09:55.360 they're not just early adopters and rich people. They are 0:09:55.400 --> 0:09:57.240 early adopters and rich people with three or four other 0:09:57.280 --> 0:09:59.200 cars in the garage. So if they need to drive 0:09:59.400 --> 0:10:02.160 on a long run trip, they pull the land rover around, 0:10:02.360 --> 0:10:06.040 gass it up, and go. And so can the industry 0:10:06.120 --> 0:10:10.360 sell evs to people who have one car in their gage? 0:10:09.920 --> 0:10:12.040 And we'll see. So that's going to tell us a 0:10:12.040 --> 0:10:14.520 lot about what's going to happen with this market and 0:10:14.840 --> 0:10:17.320 how flat the middle of this S curve is in 0:10:17.440 --> 0:10:18.840 order to get to the next. 0:10:18.600 --> 0:10:21.920 Way, David, I'm also wondering just the mood, I mean, 0:10:21.960 --> 0:10:23.280 to Paul's point, the mood in. 0:10:23.320 --> 0:10:27.560 Detroit, Like, how do the workers feel about all of this? Right? 0:10:27.600 --> 0:10:29.560 I mean, we know the shift to evs eventually, when 0:10:29.559 --> 0:10:31.920 you're just making EV's, you need less workers, et cetera. 0:10:32.880 --> 0:10:34.320 And I'm just wondering, kind. 0:10:34.200 --> 0:10:36.960 Of, yeah, like how do they feel right now? 0:10:38.080 --> 0:10:41.559 So I'm not totally convinced by the way that it's 0:10:41.600 --> 0:10:43.640 going to need fewer workers. I think over a long 0:10:43.679 --> 0:10:46.400 period of time maybe, but that's a different issue that 0:10:46.480 --> 0:10:49.720 the union worker does think that, and they also think 0:10:49.720 --> 0:10:52.480 that the engine and transmission jobs will be gone and 0:10:52.720 --> 0:10:55.079 batteries will come in from someplace else. 0:10:54.920 --> 0:10:56.520 And they won't be the ones making them. 0:10:56.559 --> 0:10:58.520 So there is a lot of fear, and I think 0:10:58.520 --> 0:11:00.600 they're breathing some kind of a side of relief that 0:11:00.679 --> 0:11:02.959 maybe a lot of these workers are a bit older, 0:11:02.960 --> 0:11:06.000 they'll be retired before this is a real issue. And 0:11:06.600 --> 0:11:09.160 so I think if you're the union, you're looking at 0:11:09.160 --> 0:11:12.680 this transition as being longer and slower than everybody thought 0:11:12.840 --> 0:11:16.600 probably two years ago, and so to be more manageable, 0:11:17.000 --> 0:11:18.960 you know that the you know, the attrition can be 0:11:19.040 --> 0:11:22.120 just done by retirements and people want to lose their 0:11:22.200 --> 0:11:23.640 jobs and be left with nothing. 0:11:24.679 --> 0:11:27.400 It'll just But it is the commitment from the car 0:11:27.440 --> 0:11:31.040 companies still there, David, because I could make an argument 0:11:31.679 --> 0:11:33.959 I think half of this country will never go electric 0:11:34.040 --> 0:11:36.920 for reasons other than economics, other than powertrain. 0:11:37.800 --> 0:11:40.040 Was it like, look or what politics? 0:11:40.520 --> 0:11:41.400 I'm not going green? 0:11:42.280 --> 0:11:45.240 That's interesting. I've sort of thought for a long time 0:11:45.320 --> 0:11:49.040 that Elon Musk has gone conservative for two reasons. One, 0:11:49.120 --> 0:11:51.520 he's been fighting with the government, so he hates regulators. 0:11:51.840 --> 0:11:55.000 Democrats get pinned with regulation, so he went conservative. I 0:11:55.000 --> 0:11:57.480 think the other is that guy's a brilliant marketer. It's 0:11:57.520 --> 0:12:00.800 the most underrated thing about Elon Musk. He knows that 0:12:00.960 --> 0:12:04.240 EV's have been politicized, he knows conservatives don't like them, 0:12:04.840 --> 0:12:07.600 and so I think he went conservative because maybe they'll 0:12:07.600 --> 0:12:09.880 buy evs from their guy. Right, He's the guy on 0:12:09.920 --> 0:12:12.280 Twitter letting them say whatever they want. And I've always 0:12:12.640 --> 0:12:15.080 sort of thought, with no evidence, that maybe that's what 0:12:15.120 --> 0:12:17.440 he's doing. But eventually everyone's going to go EV because 0:12:17.440 --> 0:12:20.079 that'll just be the powertrain available. Question is how long 0:12:20.120 --> 0:12:21.440 does it take to get there? 0:12:21.840 --> 0:12:24.240 Our thanks to David Welch, Bloomberg Detroit Bureau Chief. 0:12:24.480 --> 0:12:26.040 All right, coming up, we're going to break down why 0:12:26.040 --> 0:12:28.520 a Capital One discovered deal will likely fase a rigorous 0:12:28.559 --> 0:12:30.360 antitrust review by the DOJ. 0:12:30.760 --> 0:12:33.560 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:33.600 --> 0:12:35.880 depth research and data on two thousand companies and one 0:12:35.920 --> 0:12:36.920 hundred and thirty industries. 0:12:37.000 --> 0:12:39.920 I'll Paul Sweeney and Am alex deal, and this is Bloomberg. 0:12:51.280 --> 0:12:55.160 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:12:55.240 --> 0:12:58.320 weekdays at ten am Eastern on Effo card playing Enroud 0:12:58.360 --> 0:13:01.440 Otto with the Bloomberg Business App. Listen on demand wherever 0:13:01.520 --> 0:13:04.640 you get your podcasts, or watch us live on YouTube. 0:13:06.240 --> 0:13:08.160 Next, we take a look at the anti trust base. 0:13:08.200 --> 0:13:10.720 So it's likely the Capital Ones bid for Discover will 0:13:10.760 --> 0:13:13.600 face a rigorous anti trust review by the DOJ. And 0:13:13.679 --> 0:13:16.040 this comes as the proposed thirty five point three billion 0:13:16.080 --> 0:13:18.959 dollar mega merger would create the largest credit card lender 0:13:19.040 --> 0:13:19.800 in the US. 0:13:20.160 --> 0:13:22.640 To discuss this and other deals that are facing scrutiny, 0:13:22.760 --> 0:13:26.360 we were joined by Jennifer Ree, Bloomberg Intelligence Senior litigation analyst. 0:13:26.720 --> 0:13:29.720 We first asked Jennifer for her Capital One Discover prediction. 0:13:30.080 --> 0:13:32.240 This one is such a tough one, you know. I 0:13:32.280 --> 0:13:34.560 think that the Department of Justice is kind of in 0:13:34.600 --> 0:13:36.920 a conundrum with this one, right because they're under a 0:13:36.960 --> 0:13:39.920 directive to get tougher on deals, and in particular get 0:13:39.920 --> 0:13:42.320 tougher on bank deals. I mean, this is come from 0:13:42.320 --> 0:13:45.400 back in twenty twenty one when President Biden issued an 0:13:45.400 --> 0:13:47.960 executive order saying, look, you know, we can't just rubber 0:13:47.960 --> 0:13:50.360 stamp these bank deals. We've got these huge banks. We've 0:13:50.360 --> 0:13:53.360 had problems with banking, and we need to get more aggressive. 0:13:53.600 --> 0:13:55.680 And the Department of Justice is on board with that, 0:13:55.760 --> 0:13:57.800 you know, we've heard their statement saying that they're on 0:13:57.840 --> 0:14:01.080 board with that. But we also have a market that 0:14:01.160 --> 0:14:04.400 simply hasn't been competitive for many, many, many years, and 0:14:04.400 --> 0:14:05.880 that's in credit card processing. 0:14:06.120 --> 0:14:06.280 Right. 0:14:06.320 --> 0:14:09.200 We really have just two biggies, Visa and MasterCard, and 0:14:09.360 --> 0:14:13.840 this deal provides an opportunity to really bolster competition in 0:14:13.880 --> 0:14:17.000 an area that's been problematic ever since. I can remember 0:14:17.240 --> 0:14:20.040 when I started anti trust, the very first lawsuit I 0:14:20.040 --> 0:14:23.040 worked on was the Department of Justice versus Visa and MasterCard, 0:14:23.320 --> 0:14:26.160 alleging that they were engaging in conduct that was blocking 0:14:26.160 --> 0:14:30.320 out Discover and American Express. And ever since then, we've 0:14:30.360 --> 0:14:34.560 had allegations of or private litigation public litigation against those 0:14:34.560 --> 0:14:37.600 two companies for anti trust violations, and we've had regulation. 0:14:38.160 --> 0:14:41.560 So this deal does have these strong pro competitive benefits, 0:14:41.560 --> 0:14:45.080 but you've also seen massive political reaction against it. So 0:14:45.360 --> 0:14:49.200 you really have two very strong opposing sides, and I 0:14:49.200 --> 0:14:51.800 think it's just going to come down to the investigation 0:14:51.960 --> 0:14:54.600 and how the Department of Justice views the credit card 0:14:54.600 --> 0:14:57.560 issuing market and the overlaps in the credit card issuing 0:14:57.560 --> 0:15:01.560 market between these two companies, and how out any potential 0:15:01.600 --> 0:15:05.040 for harm it might find against this this pro competitive aspect. 0:15:05.280 --> 0:15:08.120 So, but it seems like a reasonable argument that putting 0:15:08.120 --> 0:15:11.680 Capital One and Discovered together does in fact create a 0:15:11.800 --> 0:15:15.560 viable competitor to Visa master Card. Otherwise there will never 0:15:15.600 --> 0:15:17.120 be a viable competitor. 0:15:17.160 --> 0:15:20.000 Actly Yeah, No, that's exactly right. And that's why this 0:15:20.040 --> 0:15:22.880 is an unusual deal, because you know, all companies with 0:15:22.920 --> 0:15:24.520 deals come in and say, oh, there are all sorts 0:15:24.520 --> 0:15:27.000 of pro competitive benefits that are going to benefit consumers 0:15:27.000 --> 0:15:30.600 and innovation, et cetera. And usually sometimes they're kind of 0:15:31.000 --> 0:15:34.880 lawyer created. Sometimes they're really you know, it's unclear whether 0:15:34.920 --> 0:15:37.040 they're going to come to fruition. And most of the 0:15:37.040 --> 0:15:39.520 time the Department of Justice or Federal Trade Commission are 0:15:39.520 --> 0:15:42.200 going to be very skeptical about those claims. They say 0:15:42.240 --> 0:15:44.880 they don't really ever bear fruit. But in this case, 0:15:45.080 --> 0:15:47.920 it's a much stronger claim, and it is kind of 0:15:48.000 --> 0:15:51.160 obvious to see how there really truly could be a 0:15:51.320 --> 0:15:54.520 very significant pro competitive benefit here, and so it could 0:15:54.560 --> 0:15:57.240 be one of these unique deals where that aspect is 0:15:57.320 --> 0:16:00.359 given more weight than usual by the Department of Justice 0:16:00.760 --> 0:16:04.520 and possibly be considered important enough to allow the deal 0:16:04.600 --> 0:16:06.880 to go through even if there might be some other issues. 0:16:07.280 --> 0:16:09.240 Jen couldn't I have made the same argument with say 0:16:09.280 --> 0:16:12.040 Spirit and Jet Blue, and that definitely didn't work out. 0:16:12.440 --> 0:16:14.200 You know, it's so interesting you bring that up, because 0:16:14.240 --> 0:16:16.840 I see so many parallels between that case and this case, 0:16:16.880 --> 0:16:20.000 even though completely different industries. Because there was a very 0:16:20.000 --> 0:16:23.520 strong argument that those two combined could have bolstered competition 0:16:23.560 --> 0:16:27.280 against the legacy airlines Delta, United, etc. But the problem 0:16:27.320 --> 0:16:29.600 there was that there was a small set of consumers 0:16:29.600 --> 0:16:32.880 that really depended on the unbundled low fares that were 0:16:32.920 --> 0:16:34.920 offered by Spirit and we're going to lose out where 0:16:35.000 --> 0:16:37.800 jet Blue took over those routes and retrofitted the planes 0:16:37.840 --> 0:16:41.320 and created more space but raised fares and a weird way, 0:16:41.360 --> 0:16:43.720 you kind of have the same dynamic here. You can 0:16:43.760 --> 0:16:47.000 create a lot more competition as against the incumbents, the 0:16:47.040 --> 0:16:50.720 big legacies Visa and MasterCard, but you might have some 0:16:50.760 --> 0:16:54.840 sort of a negative effect on underserved consumers. Because Capital 0:16:54.880 --> 0:16:57.640 wanted to discover when they issue credit they tend to 0:16:57.680 --> 0:17:00.800 focus more on underserved populations then do some of the 0:17:00.840 --> 0:17:03.760 other big issuers of credit, so people who are new 0:17:03.760 --> 0:17:08.200 to credit, people who carry a revolving balance, subprime borrowers. 0:17:08.440 --> 0:17:10.760 And it may be that there's a view that this 0:17:10.880 --> 0:17:14.080 impacts a smaller group of subprime borrowers, and in Jet 0:17:14.080 --> 0:17:16.040 Blue and Spirit at the end of the day, that 0:17:16.080 --> 0:17:19.000 one out the DOJ one because of that harmful impact 0:17:19.280 --> 0:17:22.359 on a small set of particular consumers. You have the 0:17:22.400 --> 0:17:25.159 same thing here, but what you might have here is 0:17:25.200 --> 0:17:28.080 a stronger argument on the pro competitive side than you 0:17:28.160 --> 0:17:28.960 had in that case. 0:17:29.359 --> 0:17:31.800 Is there an argument you made for some of these 0:17:32.080 --> 0:17:34.359 potential deals that are getting a hard time from the 0:17:34.440 --> 0:17:37.800 DJ or FTC to kind of bide time till the 0:17:37.880 --> 0:17:38.800 number six of this. 0:17:38.840 --> 0:17:41.640 Year absolutely went off the. 0:17:41.560 --> 0:17:43.560 Clock, Like is this part of a strategy? 0:17:43.760 --> 0:17:45.960 I mean absolutely, And look at Capital one and discover 0:17:46.119 --> 0:17:48.280 they very well are probably going to bleed into the 0:17:48.320 --> 0:17:53.119 next administration, whether it's Democrat or Republican, there is no doubt, Alex. 0:17:53.200 --> 0:17:57.520 I mean, historically Republican administrations have the reputation in the 0:17:57.560 --> 0:18:00.680 merger world of being more business friendly and also being 0:18:00.720 --> 0:18:03.439 far less skeptical of claims of efficiencies, giving them a 0:18:03.440 --> 0:18:05.600 lot more weight, and that's going to be important. As 0:18:05.640 --> 0:18:08.680 I mentioned, in this deal. Right now, it's a little 0:18:08.720 --> 0:18:11.200 bit of a wildcard. It used to be ten years 0:18:11.200 --> 0:18:14.480 ago that whoever came in to run the FTC, if 0:18:14.480 --> 0:18:17.520 we had a Republican president, whoever got appointed as chair, 0:18:17.840 --> 0:18:20.280 the Republican majority there, and whoever came in on the 0:18:20.320 --> 0:18:24.280 DOJ side, we're likely to be more business friendly or 0:18:24.400 --> 0:18:26.840 likely to look at efficiencies in a more friendly manner. 0:18:27.119 --> 0:18:29.680 Right now, though, we have kind of two different kinds 0:18:29.720 --> 0:18:32.000 of Republicans. You have sort of a Josh Holly type 0:18:32.040 --> 0:18:33.600 and that you guys may have seen in the news 0:18:33.600 --> 0:18:35.680 that he's already come out and complained about this deal, 0:18:36.000 --> 0:18:38.439 said the Department of Justice should block it. And then 0:18:38.480 --> 0:18:40.760 you kind of have the Joe Simon's type, who was 0:18:41.080 --> 0:18:43.880 the chair of the FTC in the previous Trump administration, 0:18:44.160 --> 0:18:46.320 a little bit more traditional in the way we think 0:18:46.359 --> 0:18:49.120 of Republicans in the antitrust world. And so I think 0:18:49.160 --> 0:18:51.280 to some extent it might depend on who you get 0:18:51.280 --> 0:18:54.199 at the DOJ, but I would still say that it 0:18:54.280 --> 0:18:57.920 ticks higher. The chances of getting cleared probably tick higher 0:18:57.960 --> 0:19:00.360 if we have a change of administrations next year. 0:19:00.520 --> 0:19:03.600 Our thanks to Jennifer Ree, Bloomberg Intelligence senior litigation analysts. 0:19:03.600 --> 0:19:05.520 All right, let's go to big tech, Paul, because Amazon 0:19:05.560 --> 0:19:09.320 dot Com finally joined the famous Dow Jones Industrial Average. 0:19:09.320 --> 0:19:12.440 So this week the e commerce giant replaced Walgreens Boots 0:19:12.440 --> 0:19:14.240 Alliance in the thirty stockage. 0:19:14.400 --> 0:19:17.080 Yes, Amazon's inclusion in the Dow is another milestone and 0:19:17.080 --> 0:19:20.000 the retailer's rapid expansion. The company already sells goods of 0:19:20.040 --> 0:19:22.840 all kinds and runs the world's largest cloud computing business. 0:19:23.080 --> 0:19:26.399 But Amazon is still working on ongoing initiatives to boost 0:19:26.400 --> 0:19:27.640 market share and profits. 0:19:27.680 --> 0:19:30.000 So discuss all things Amazon and the ladies in the 0:19:30.000 --> 0:19:32.600 retail space were joined now by Punham Goyle, senior US 0:19:32.680 --> 0:19:36.000 e Commerce and retail analysts at Bloomberg Intelligence. We first 0:19:36.040 --> 0:19:38.720 asked her why people are getting so excited about Amazon. 0:19:39.040 --> 0:19:41.399 I think it's all about profits. For a long time, 0:19:41.520 --> 0:19:44.639