WEBVTT - Anticipating Fed's Plan Amid Banking Turmoil 0:00:01.280 --> 0:00:05.640 This is Bloomberg business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business, finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio. 0:00:20.480 --> 0:00:22.160 It's twenty four hours from now. We will be well 0:00:22.200 --> 0:00:24.080 into the press conference with the Chair of the Federal 0:00:24.079 --> 0:00:28.720 Reserve J. Powell following the FOMC second Monetary Policy of 0:00:28.720 --> 0:00:30.560 the year. It's a meeting that a few weeks ago 0:00:30.720 --> 0:00:32.360 was still all about the Fed on a mission to 0:00:32.400 --> 0:00:35.080 bring down inflation and perhaps be more aggressive to do so. 0:00:35.479 --> 0:00:37.800 Then the collapse of three banks in the US, then 0:00:37.920 --> 0:00:41.080 ubs buying credit suites, and then we had investors pricing 0:00:41.080 --> 0:00:43.080 in rate cuts later in the year, although that seems 0:00:43.080 --> 0:00:45.320 to be tempering back as well. So let's try and 0:00:45.320 --> 0:00:47.720 make some sense out of this environment. Back with us 0:00:48.000 --> 0:00:51.080 is doctor Steve Skanky, chief Economic advisor over at kill Point, 0:00:51.200 --> 0:00:54.360 former US Treasuring and White House National Security Council staff member. 0:00:54.680 --> 0:00:57.000 He's based in Washington, joining us today via zoom from 0:00:57.040 --> 0:01:01.720 Cape Canaveral, Florida. Are you looking to the skies, Steve, 0:01:01.800 --> 0:01:04.600 for inspiration about what the Fed may or may not 0:01:04.920 --> 0:01:09.039 tell us tomorrow it's going to be tricky for J Powell. Well, 0:01:09.080 --> 0:01:12.320 you know, Carol there, you're absolutely right about that. But 0:01:12.480 --> 0:01:15.440 what are the amazing things down here? Is there are 0:01:15.600 --> 0:01:21.639 rocket launches several times a month, and there's there's something 0:01:21.800 --> 0:01:29.600 absolutely amazing about seeing those go up, define gravity, beautiful plume, 0:01:30.640 --> 0:01:35.080 and away they go out of sight and it is inspiring. 0:01:35.680 --> 0:01:39.080 And I wonder if if the f o MC members 0:01:40.200 --> 0:01:43.720 are maybe doing that too, is it a reminder that 0:01:44.120 --> 0:01:46.520 life goes on and there's a bigger world beyond us. 0:01:46.560 --> 0:01:48.960 I'm getting all crazy, but I guess my point is 0:01:49.400 --> 0:01:51.560 when the FED looks at its mission, you know it's 0:01:51.560 --> 0:01:54.320 got you know, it's looking at the labor market more importantly, 0:01:54.320 --> 0:01:56.760 it's looking at inflation that is still a persistent problem. 0:01:56.840 --> 0:01:58.800 And then it's looking at the last week and a half. 0:02:00.080 --> 0:02:01.920 We're two weeks ago, two and a half weeks ago, 0:02:02.000 --> 0:02:04.400 we weren't talking about a bank crisis, and yet we 0:02:04.480 --> 0:02:06.200 have over the last week and a half. What do 0:02:06.240 --> 0:02:09.000 you think the FED needs to be focusing on in 0:02:09.000 --> 0:02:13.800 its decision tomorrow. Well, the FED is primarily focused on 0:02:13.840 --> 0:02:19.600 getting inflation under control without without bringing anything else. While 0:02:19.639 --> 0:02:22.919 I think they shouldn't have been surprised by what happened 0:02:23.960 --> 0:02:28.160 with some of the banks and the fragility of you know, 0:02:28.200 --> 0:02:32.959 a couple hundred others that have massive holdings of longer 0:02:33.000 --> 0:02:36.840 dated treasuries. I think it did catch them a little 0:02:36.880 --> 0:02:43.880 bit by surprise. Generally, the Fed doesn't think of its 0:02:44.040 --> 0:02:48.320 monetary policy tools that is, raising a lower interest rates, 0:02:48.320 --> 0:02:53.600 increased in reducing the money supply as having as being 0:02:53.639 --> 0:02:59.200 a tool that they use to assure the stability and 0:03:00.600 --> 0:03:04.840 health of the banking system. But of course it does 0:03:04.919 --> 0:03:06.840 has an impact that it does have an impact, and 0:03:06.880 --> 0:03:09.800 when we saw what happened with the two banks that 0:03:09.840 --> 0:03:13.679 went out, and then of course the continuing issues with 0:03:14.360 --> 0:03:20.000 Credit Swiss, but it was they were very effective, I believe, 0:03:20.680 --> 0:03:25.320 in putting together a package that said wait a minute, 0:03:26.000 --> 0:03:31.640 we were certainly paid attention to the banking community. All 0:03:31.680 --> 0:03:36.119 these other tools that will help address the particular problems 0:03:36.880 --> 0:03:40.840 that we've seen with the two banks that they closed 0:03:41.200 --> 0:03:45.480 and with the other ones that were lined up at 0:03:45.520 --> 0:03:50.160 their discount window. And Steve. We did hear from Treasury 0:03:50.200 --> 0:03:53.840 Secretary Janet Yellen earlier in her talking about how the 0:03:53.880 --> 0:03:57.440 government could backstop more deposits if necessary to stop containing 0:03:57.480 --> 0:03:59.960 And you're talking about these tools and we're looking at 0:04:00.000 --> 0:04:02.960 the market reaction that's obviously helping things. But is this 0:04:03.160 --> 0:04:06.240 enough for what we're seeing right now? Does there need 0:04:06.240 --> 0:04:12.080 to be more? Well, it's it's certainly enough until it 0:04:12.200 --> 0:04:17.640 doesn't work. But at the moment, and it's very fortunate 0:04:17.720 --> 0:04:21.680 that the Treasury Secretary Janet Yellen is a former FED 0:04:21.760 --> 0:04:26.960 share as well and has a pretty good understanding about 0:04:27.000 --> 0:04:30.880 the stability issues within the system and how those can 0:04:30.920 --> 0:04:36.279 become problematic. But just the fact that we saw borrowings 0:04:36.279 --> 0:04:41.080 at the discount window last week week reach your record 0:04:41.080 --> 0:04:43.960 of one hundred and fifty three billion dollars, the highest 0:04:43.960 --> 0:04:48.640 that it was during the Great Financial Crisis was what 0:04:48.880 --> 0:04:52.640 was not even that one hundred and forty three billion 0:04:52.720 --> 0:04:57.200 in new loans guaranteed by the FED, and there emergency 0:04:57.279 --> 0:05:01.760 loans also jumped by three hundred billion. I think they've 0:05:01.800 --> 0:05:06.080 demonised The point is they've demonstrated that they can back 0:05:06.160 --> 0:05:10.720 the truck up and send the money out to assure 0:05:11.640 --> 0:05:14.480 the public that they can get their deposits when they 0:05:14.520 --> 0:05:18.560 want to get them, and that what might otherwise happen 0:05:18.800 --> 0:05:22.479 with longer data treasuries and their balance sheet that they 0:05:22.520 --> 0:05:25.640 would otherwise have to sell at a loss. They're not 0:05:25.640 --> 0:05:27.960 gonna have to do that because of the tools they 0:05:28.000 --> 0:05:34.880 announced previously ten days ago. And I think that is 0:05:34.920 --> 0:05:37.560 that is bringing competence. I mean, just with what we've 0:05:37.600 --> 0:05:43.120 seen with banking stocks and particularly small to midsized regional 0:05:43.120 --> 0:05:47.920 banking stock, Great US are bouncing back up again. So 0:05:48.320 --> 0:05:51.800 I want to make sure I understand, Steve, so have 0:05:51.920 --> 0:05:55.039 things calmed down? Is the system working enough in terms 0:05:55.080 --> 0:05:58.279 of backstopping and making sure the global financial system is 0:05:58.279 --> 0:06:01.359 secure that the FED can should raise rates tomorrow because 0:06:01.360 --> 0:06:04.000 they've got to continue to bring down inflation, because we 0:06:04.200 --> 0:06:08.760 know statistics still show us that it's a problem inflation. 0:06:10.760 --> 0:06:16.560 It's a big problem, and it disproportionately affects lower income groups, 0:06:17.240 --> 0:06:20.320 and the FED is particularly sensitive that. And as we've 0:06:20.360 --> 0:06:24.719 just watched a room, Powell through his first and now 0:06:24.880 --> 0:06:29.039 second term is shair. He pays a lot of attention 0:06:29.160 --> 0:06:35.880 to disadvantage labor groups and the public generally. You know 0:06:35.920 --> 0:06:38.279 a couple of times at his press conference during his 0:06:38.320 --> 0:06:42.479 announcement he's speaking over the head of the media and 0:06:42.680 --> 0:06:47.280 straight to main street. So he cares a lot about that, 0:06:48.160 --> 0:06:50.240 and so they are paying a lot of attention to that, 0:06:50.760 --> 0:06:56.320 and getting inflation under control is what of his primary concerns, 0:06:56.560 --> 0:06:59.840 not just because it's a mandate of the Federal Reserve, 0:07:00.640 --> 0:07:04.960 sees the detrimental impact it has on so many families, 0:07:04.960 --> 0:07:08.039 and so he does want to ring that out. And 0:07:08.320 --> 0:07:11.400 if they're confident right now they seem to be that 0:07:11.440 --> 0:07:15.200 the tools to backstop the banking system are in place 0:07:15.200 --> 0:07:19.000 and working, I think he's going to continue to march ahead. 0:07:19.160 --> 0:07:21.680 Having said that, if he's talking to main Street as well, Steve, 0:07:21.760 --> 0:07:23.880 I mean this whole idea that if the Fed does 0:07:24.000 --> 0:07:28.400 rates rates and this banking problem is maybe deeper than 0:07:28.440 --> 0:07:32.080 we know at this juncture, then everybody on Main Street 0:07:32.080 --> 0:07:34.160 it's going to be impacted in a big way ultimately 0:07:34.160 --> 0:07:37.480 as things slow down, as we maybe then go into 0:07:37.600 --> 0:07:42.240 a deeper recession. So hence the quandary for the Federal 0:07:42.240 --> 0:07:44.239 Reserve kind of damned if you do, damned if you don't. 0:07:44.320 --> 0:07:48.600 So you think at this point, based on how things 0:07:48.640 --> 0:07:53.320 and markets are operating, the Fed can confidently go ahead 0:07:53.920 --> 0:07:58.120 with a quarter point hike. I believe that they can, 0:07:58.120 --> 0:08:01.280 and I believe that they will. What will be really 0:08:01.320 --> 0:08:06.480 interesting is what their summary of economic projections show. You know, 0:08:06.600 --> 0:08:11.280 a data is due out at this meeting, and you 0:08:11.320 --> 0:08:14.040 know the Soll dot plot that we that we pay 0:08:14.080 --> 0:08:17.640 attention to but don't always pay too close attention to, 0:08:18.000 --> 0:08:20.200 is is going to give us an indication as to 0:08:20.240 --> 0:08:23.880 where they think rates are going after this. There's a 0:08:23.920 --> 0:08:28.040 strong belief that that they'll raise a quarter point now 0:08:28.040 --> 0:08:30.760 and maybe another quarter point at their next meeting, and 0:08:30.800 --> 0:08:33.280 then they're going to pause. And if you look at 0:08:33.320 --> 0:08:37.880 FED fun futures, there's still a belief although it's it's 0:08:37.920 --> 0:08:41.720 declining that will right cuts at the end of the year, 0:08:42.040 --> 0:08:47.760 which was clearly not the case after Powell's congressional testimony 0:08:48.720 --> 0:08:52.760 now two weeks ago, Steve, we do know that tighter 0:08:52.800 --> 0:08:56.240 financial conditions obviously are a principal objective for the Fed's 0:08:56.240 --> 0:08:58.400 efforts to combat in fleation. How much do you think 0:08:58.400 --> 0:09:04.680 these banking issues well actually tighten financial conditions. I think significantly. 0:09:05.600 --> 0:09:10.199 We'd already seen just from the beginning of the year 0:09:11.120 --> 0:09:15.400 banks shoring up their balance sheets, tightening up their lending standards, 0:09:16.320 --> 0:09:21.200 and with what we've seen right now, while they're holdings 0:09:21.200 --> 0:09:28.720 of government securities or backstop their loans, that could create 0:09:28.760 --> 0:09:33.440 problems for them are not, And so I think that 0:09:33.480 --> 0:09:36.520 we're going to see a tightening of liquidity as a 0:09:36.600 --> 0:09:38.520 result of this and as a result of what's going 0:09:38.520 --> 0:09:41.760 on in the banking system, which is what the FED 0:09:41.840 --> 0:09:44.640 would like to have. You know, they've been very frustrated 0:09:44.920 --> 0:09:47.640 that with all that they've done with quantitative tightening and 0:09:47.720 --> 0:09:51.600 raising interest rates, that the financial system has still had 0:09:51.640 --> 0:09:54.800 plenty of liquidity. This will be a change for that, 0:09:55.160 --> 0:09:57.480 and it does play into what they like to see happen. 0:09:57.880 --> 0:09:59.400 It does mean they're going to have to watch it 0:09:59.440 --> 0:10:04.920 more close. Yeah, that we don't get another surprise. Okay, Well, 0:10:04.960 --> 0:10:07.839 it feels like we are always living with the expectation 0:10:07.920 --> 0:10:10.720 of surprises. M Steve. Great to check in with you. 0:10:10.800 --> 0:10:14.000 Doctor Steve Skanky, chief Economic advisor of at keel Point, 0:10:14.080 --> 0:10:16.319 joining us via zoom from Cape Canaveral, Florida. He's a 0:10:16.360 --> 0:10:19.520 former US Treasury and White House National Security Council staff member. 0:10:19.800 --> 0:10:23.200 Weighing in on that FED decision tomorrow. You're listening to 0:10:23.280 --> 0:10:27.400 the Bloomberg Business Week podcast. Catch us live weekday afternoons 0:10:27.480 --> 0:10:30.679 from three to six Eastern Listen on Bloomberg dot com, 0:10:30.679 --> 0:10:33.840 the Ihard Radio app and the Bloomberg Business app or 0:10:33.880 --> 0:10:46.920 watch us live on YouTube together. All right, everybody, so 0:10:47.679 --> 0:10:51.120 keeping up watching that GameStop results in the after hours 0:10:51.240 --> 0:10:54.480 certainly rallying. But as we just talked about, more than 0:10:54.520 --> 0:10:56.960 just a one quarter story. We're waiting for Nike to 0:10:57.000 --> 0:10:59.680 come out in the meantime. One of the things that 0:10:59.720 --> 0:11:02.280 has been on our radar, and that is what's going 0:11:02.320 --> 0:11:06.000 on between Russia and China. Specifically Russian President Vladimir Putin 0:11:06.040 --> 0:11:09.360 meeting with Chinese President Jijimping, who has been in Russia 0:11:09.679 --> 0:11:13.160 for three days of meetings, two days so far under way. 0:11:13.880 --> 0:11:17.320 They've talked about the war in Ukraine, maybe an ending, 0:11:17.480 --> 0:11:19.880 maybe peace. A lot of things going on. Meantime. You've 0:11:19.880 --> 0:11:22.640 got President Biden set to unveil tight restrictions on new 0:11:22.640 --> 0:11:26.840 operations in China by semiconductor makers that get federal funds 0:11:26.840 --> 0:11:29.360 to build in the United States. So a lot going 0:11:29.400 --> 0:11:32.199 on back with us. Is Tiff Roberts. He's senior Fellow 0:11:32.240 --> 0:11:35.840 at the Atlantic Council's Indo Pacific Security Initiatives. He's former 0:11:35.880 --> 0:11:38.560 Bloomberg Business Week China Bureau chief, author of The Myth 0:11:38.640 --> 0:11:41.520 of Chinese Capitalism, The Work of the Factory and the 0:11:41.559 --> 0:11:45.280 future of the world. Joining us once again from Montana, Tiff. 0:11:45.600 --> 0:11:50.920 Nice to be with you again, g and Putin. Should 0:11:50.960 --> 0:11:56.559 the world be worried? I yes, nice to be back, Carol, 0:11:56.960 --> 0:12:01.760 But yes, I do think the world should be China 0:12:01.800 --> 0:12:05.920 has been selling this ongoing visit by Shijimping to Moscow 0:12:05.960 --> 0:12:09.600 and the meetings Putin as a mission of peace and 0:12:10.120 --> 0:12:13.600 talking about their twelve point plan to try to bring 0:12:13.640 --> 0:12:19.000 peace in Ukraine. But I think that's really a bit 0:12:19.040 --> 0:12:23.880 of propaganda. If you look at, for example, the commentary 0:12:23.960 --> 0:12:29.760 that Shijimping published in Russian media. Putin also did a 0:12:29.760 --> 0:12:32.880 commentary in Chinese media right on the eve of the visit. 0:12:33.480 --> 0:12:36.440 Jim Ping talks about how the two countries Russian China 0:12:36.520 --> 0:12:42.120 are united in opposition to hegemony, domination and bullying. I 0:12:42.160 --> 0:12:46.640 think it's really about showing their mutual opposition to a 0:12:46.800 --> 0:12:51.440 US led world order. And something that really struck me 0:12:51.640 --> 0:12:53.680 is just when it comes to these chip makers that 0:12:53.720 --> 0:12:57.480 obviously have that exposure toward China, what do you think 0:12:57.640 --> 0:13:00.200 from a broad sense, a big picture sense, do you 0:13:00.200 --> 0:13:03.360 think this means for corporate American especially these semiconductor type 0:13:03.440 --> 0:13:08.120 companies that aren't going to benefit from this, well, I 0:13:08.160 --> 0:13:13.480 think it's not good news for corporate America. The already 0:13:14.160 --> 0:13:17.720 multiple problems, very real problems in the US China relationships 0:13:17.720 --> 0:13:22.199 have been putting pressure on corporate America. And you mentioned semiconductors. 0:13:22.679 --> 0:13:27.200 The US is in the midst of an a radical 0:13:27.360 --> 0:13:32.440 rethinking of its semiconductor relationship with China, and as as 0:13:32.720 --> 0:13:36.000 I think Carol mentioned in the introduction, there's new restrictions 0:13:36.000 --> 0:13:41.640 coming almost every week on US companies, US persons being 0:13:41.679 --> 0:13:45.560 associated in any way with the Chinese semiconductor industry. Well, 0:13:45.559 --> 0:13:50.320 it's a big market for the US on the semiconductor side, 0:13:50.520 --> 0:13:54.000 and obviously more broadly, so this is not good news. 0:13:54.559 --> 0:13:57.160 One more source of very real tension between the US 0:13:57.240 --> 0:14:01.720 and China. This budding relations ships growing stronger and stronger 0:14:01.760 --> 0:14:06.800 between Russian and China, one more reason to one more 0:14:06.840 --> 0:14:09.640 place where there's really bad news for the US corporate 0:14:10.120 --> 0:14:12.880 relationship with China. Are we at the point of no 0:14:13.000 --> 0:14:17.240 return where China and President Gees specifically have turned its 0:14:17.280 --> 0:14:22.080 back on the United States. I think we can't say 0:14:22.120 --> 0:14:24.560 we're at the point of no return, but I would 0:14:24.680 --> 0:14:29.000 note that last week or during the two sessions the 0:14:29.040 --> 0:14:35.320 annual Legislatives meetings held in Beijing. Shijingping actually singled out 0:14:35.360 --> 0:14:39.320 the US by name, which he doesn't usually do, and 0:14:39.400 --> 0:14:42.640 said that they were leading a block of world nations 0:14:42.680 --> 0:14:47.360 that were trying to contain and suppress China and bringing 0:14:47.360 --> 0:14:51.080 severe challenges to China's development. That's a big deal. Shijing 0:14:51.080 --> 0:14:53.840 Ping usually when he's referring to the US will say 0:14:53.880 --> 0:14:58.840 something like certain countries or hostile foreign forces. But I 0:14:58.880 --> 0:15:01.200 think the fact that he meant in the US at 0:15:01.200 --> 0:15:05.320 this point by name shows just how bad the relationship 0:15:05.400 --> 0:15:08.160 is getting. All Right, tiff for at risk of sounding 0:15:08.160 --> 0:15:10.760 really stupid, but I'm okay with that. I mean, is 0:15:10.880 --> 0:15:17.680 China desperate? I don't think China feels desperate at this point. 0:15:17.440 --> 0:15:21.200 I think that what they're doing is, first of all, 0:15:21.360 --> 0:15:23.560 they're going to do their best to try to continue 0:15:23.600 --> 0:15:28.600 to woo American corporates to China. The spokesman for the 0:15:28.640 --> 0:15:32.880 Ministry of Commerce during the same legislative meetings basically sent 0:15:32.920 --> 0:15:35.160 out the message we're open for business, we want you, 0:15:35.560 --> 0:15:37.840 we want you back now that we're lifting we've lifted 0:15:37.840 --> 0:15:41.400 the restrictions from the pandemic, So they want corporate America. 0:15:41.440 --> 0:15:43.840 But they're going to try to sort of divide and conquer. 0:15:43.880 --> 0:15:47.480 They realize that the relationship with Washington is in very 0:15:47.520 --> 0:15:50.120 dire strait. At the same time, they're trying to woo 0:15:50.120 --> 0:15:55.200 Europe and it's obviously not easy when they've cited to 0:15:55.240 --> 0:15:57.880 the degree to which they have with Poutin in the 0:15:57.920 --> 0:16:01.720 invasion of Ukraine. And you were talking about the strained 0:16:01.720 --> 0:16:04.760 relationship China does have with Washington. What do you think 0:16:04.800 --> 0:16:07.840 the long game is here for China? What is the 0:16:08.400 --> 0:16:13.600 sort of motivation to all of this? I do think 0:16:13.640 --> 0:16:18.480 and I am concerned that China is deciding that the 0:16:18.520 --> 0:16:22.560 two sides are implacably opposed to each other and that 0:16:22.720 --> 0:16:28.440 they're the room for actual cooperation is narrowing. So UM, 0:16:28.720 --> 0:16:31.560 I hope that's not the case, but I do feel 0:16:31.600 --> 0:16:34.280 I do get that feeling that this is increasingly how 0:16:34.320 --> 0:16:37.720 Beijing seals I think, as I said, they're they're certainly 0:16:37.760 --> 0:16:40.360 not going to close the door to American companies, They're 0:16:40.360 --> 0:16:43.280 certainly not going to close the door to the European Union. 0:16:43.760 --> 0:16:51.040 Um they if the US, If the US were to 0:16:51.040 --> 0:16:53.560 move a little closer to what China thinks is a 0:16:53.600 --> 0:16:57.280 proper bilateral relationship, I bet Beijing would be willing to 0:16:57.440 --> 0:17:00.520 more than willing to talk with Washington, but I do 0:17:00.600 --> 0:17:03.520 think that the trend lines are pretty bad. You know, 0:17:03.560 --> 0:17:06.560 you talk about closing doors, and it's interesting. There's another 0:17:06.600 --> 0:17:09.520 story in the Bloomberg Tiff today about Vanguard planning to 0:17:09.520 --> 0:17:13.159 shutter its business in China. This is after they've been 0:17:13.280 --> 0:17:15.200 I guess, a retreat two years ago. This accordin to 0:17:15.240 --> 0:17:18.080 folks familiar with the matter. But you know, in our 0:17:18.119 --> 0:17:20.479 story it says the moves will market complete exit from 0:17:20.560 --> 0:17:23.000 China for the seven point one trillion dollars giant, which 0:17:23.000 --> 0:17:26.359 one saw significant potential in the world's second largest economy. 0:17:26.680 --> 0:17:28.719 I've said it a million times before because I think 0:17:28.720 --> 0:17:31.119 about at the beginning of my career, any company I 0:17:31.200 --> 0:17:33.560 talked to, it was as China was real, you know, 0:17:33.720 --> 0:17:38.639 was opening its doors and kind of almost begging multinationals 0:17:38.840 --> 0:17:41.600 from around the world to come in set up shot, 0:17:41.640 --> 0:17:44.600 you know, kind of teach us what you know. And 0:17:44.640 --> 0:17:47.000 it's it's only you know, a few decades ago that 0:17:47.200 --> 0:17:52.000 I feel like things have changed dramatically. So it's pretty significant. 0:17:52.040 --> 0:17:56.520 The shift, I think it really is significant. We're seeing 0:17:57.880 --> 0:18:00.960 hedge funds pulling out. Came in early after the pandemic 0:18:00.960 --> 0:18:03.880 restrictions were lifted, and then they were they started getting out. 0:18:04.160 --> 0:18:07.919 We see surveys by the American Chamber of Commerce that 0:18:07.960 --> 0:18:10.639 are showing that for the first time, China is not 0:18:10.720 --> 0:18:15.720 even a top three investment choice for American companies. You're 0:18:15.760 --> 0:18:20.160 seeing companies, American companies say that they are very they 0:18:20.160 --> 0:18:23.280 feel very little optimism about the China market going forward. 0:18:23.560 --> 0:18:27.320 And yeah, we're seeing some big prominent examples like Vanguard. 0:18:27.840 --> 0:18:30.760 It sounds like that are thinking of actually moving on 0:18:30.880 --> 0:18:34.399 somewhere else. So I do think there's been a real shift. 0:18:35.160 --> 0:18:37.800 China's trying to China doesn't want to see that happen, 0:18:37.880 --> 0:18:40.200 as I said a moment ago, so they're trying to 0:18:40.320 --> 0:18:43.360 They're trying to make put out this message of we're 0:18:43.400 --> 0:18:46.640 open to the world. I'll come back investors. But things 0:18:46.640 --> 0:18:49.119 aren't looking very good on that front. Hey, hold on 0:18:49.119 --> 0:18:51.159 for a second. Tip. Just want to mention. Nike results 0:18:51.160 --> 0:18:53.440 are out. Third quarter revenue. It's big beat, twelve point 0:18:53.480 --> 0:18:56.359 three nine billion. The estimate was for eleven point fifty 0:18:56.400 --> 0:19:00.000 two billion. Speaking of China, an important market for the company. 0:19:00.040 --> 0:19:03.040 A third quarter greater China revenue one point ninety nine billion. 0:19:03.119 --> 0:19:05.199 That's a little bit light. The street was looking for 0:19:05.280 --> 0:19:07.640 two point zero three billion, but the company is saying 0:19:07.640 --> 0:19:10.760 it made quote tremendous progress on inventory, and we're seeing 0:19:10.760 --> 0:19:14.040 shares of Nike up about four percent in the aftermarket. Hey, Tiff, 0:19:14.040 --> 0:19:16.119 just got about thirty seconds. Last time you were on, 0:19:16.160 --> 0:19:17.679 I asked if you were writing a new book. You 0:19:17.720 --> 0:19:20.240 said you were heading in that direction. The title you 0:19:20.320 --> 0:19:22.800 offered up maybe China isn't going to take over the world. 0:19:22.920 --> 0:19:24.840 Would that still be the title? And just got about 0:19:24.840 --> 0:19:32.440 thirty seconds. Absolutely, I see tremendous structural challenges facing China. Demography, 0:19:33.200 --> 0:19:37.520 growing inequality, and above all this politicization from the top 0:19:37.600 --> 0:19:43.240 leadership and ching himself. That makes it much less likely 0:19:43.280 --> 0:19:45.479 it's going to be the economic superpower many of us 0:19:45.520 --> 0:19:47.359 thought it was going to be. All right, Well, always 0:19:47.359 --> 0:19:49.560 appreciate when you can join us to talk about this subject. 0:19:49.560 --> 0:19:52.320 Tiff Roberts he senior fellow at the Atlantic Council's Into 0:19:52.359 --> 0:19:56.600 Pacific Security Initiatives, former Blueberg Business Week China bureau chief. 0:19:56.600 --> 0:19:59.639 He knows a lot about this, the myth of Chinese capitalism, 0:19:59.720 --> 0:20:01.760 that's the book he wrote just a couple of years ago. 0:20:01.760 --> 0:20:03.840 But as I like to kill him, sounds like he 0:20:03.880 --> 0:20:05.960 is getting ready to write another book. Nike third quarter 0:20:06.000 --> 0:20:08.320 EPs IT two is a beat seventy nine cents versus 0:20:08.359 --> 0:20:10.600 fifty four. Stock is up three point three percent in 0:20:10.640 --> 0:20:18.120 the after hours. This is Bloomberg Business Week. You're listening 0:20:18.160 --> 0:20:21.800 to the Bloomberg Business Week podcast. Catch us live weekday 0:20:21.840 --> 0:20:25.359 afternoons from three to six Eastern on Bloomberg Radio, the 0:20:25.400 --> 0:20:28.920 Bloomberg Business app, and YouTube. You can also listen live 0:20:29.040 --> 0:20:32.159 on Amazon Alexa from our flagship New York station, Just 0:20:32.359 --> 0:20:37.240 Say Alexa play Bloomberg eleven thirty. As we get ready 0:20:37.280 --> 0:20:39.040 for the next FED meeting, we continue to talk to 0:20:39.080 --> 0:20:41.200 individuals that might give us an insight into what's going 0:20:41.240 --> 0:20:44.760 on with consumers and just the business landscape, what is 0:20:44.800 --> 0:20:46.840 going on when it comes to it spending, and I 0:20:46.880 --> 0:20:49.240 do feel like our next guest plays into both of 0:20:49.240 --> 0:20:52.520 these worlds big time. With This is Maju Kua Villa. 0:20:52.640 --> 0:20:54.680 He is CEO of Bolt It's a checkout in e 0:20:54.760 --> 0:20:58.080 commerce platform company. He's former VP and general manager for 0:20:58.119 --> 0:21:01.320 Amazon's Global Logistics. Was at Amazon and part of the 0:21:01.320 --> 0:21:04.199 team that built out Amazon Primed. He's joining us here 0:21:04.240 --> 0:21:06.760 in our Bloomberg Interactive Broker Studio. So nice to have 0:21:06.800 --> 0:21:10.320 you here with justin myself. How are you and let's 0:21:10.320 --> 0:21:13.440 start big broad How would you describe the business environment 0:21:13.520 --> 0:21:16.880 right now? Well, I mean there's a lot going on. 0:21:17.359 --> 0:21:19.520 That would be an understatement, but we are very excited 0:21:19.520 --> 0:21:22.840 about what we see for the future and for retailers, 0:21:22.880 --> 0:21:26.560 for example, we look at three things. Number one, really 0:21:26.600 --> 0:21:29.680 focus on the consumer because there's a lot of changing 0:21:29.680 --> 0:21:32.560 for the consumer right now, helping to figure out how 0:21:32.560 --> 0:21:35.120 can we really focus on the consumer. Number two, so 0:21:35.200 --> 0:21:38.760 much happening on from a technology perspective. We were nobody 0:21:38.880 --> 0:21:42.200 was talking about generati ai last year. Now that's top 0:21:42.240 --> 0:21:44.959 of mind for everybody, and that's just one thing. So 0:21:45.040 --> 0:21:47.080 many happening in the technology, so how can we innovate 0:21:47.200 --> 0:21:51.240 fast and move fast? And number three, e commerce is 0:21:51.280 --> 0:21:55.720 still fifteen percent of the overall commerce. How can we 0:21:55.760 --> 0:21:59.800 get from fifteen to fifty? And that is actually in 0:21:59.840 --> 0:22:02.679 the hands of some of the big retailers, So we 0:22:02.720 --> 0:22:05.720 are excited about working on all three and helping the 0:22:05.800 --> 0:22:08.520 industry on that. Speaking though, to the environment, are you 0:22:08.640 --> 0:22:12.240 finding that you have more customers the growth in your 0:22:12.280 --> 0:22:15.240 business like they're coming to you like, is there growth 0:22:15.520 --> 0:22:19.600 that tells you the economic outlook, the economic environment maybe 0:22:19.640 --> 0:22:22.120 not so bad, the market environment not so bad. As 0:22:22.160 --> 0:22:25.639 we continue to talk about recession, no recession, soft landing, landing, 0:22:26.200 --> 0:22:30.200 all these different scenarios. Carol, That's interesting because for us, 0:22:30.240 --> 0:22:33.439 the product what we are providing, which is helping retailers 0:22:33.480 --> 0:22:37.560 with one of their number one problems, that's conversion a checkout. 0:22:38.040 --> 0:22:42.480 You know, around seventy percent of shoppers drop off right 0:22:42.600 --> 0:22:45.240 at the point of checkout. I do that a lot. Yeah, 0:22:45.760 --> 0:22:48.720 and on mobile that is eighty five percent because it's 0:22:48.720 --> 0:22:52.639 difficult or what are you see something? You're excited, You 0:22:52.680 --> 0:22:54.040 get all the way to check out, and then you 0:22:54.040 --> 0:22:56.640 are ready to buy. You have to fill in all 0:22:56.640 --> 0:22:59.119 these fields on every single side. Then you have to 0:22:59.160 --> 0:23:02.119 walk and get your walk, all the credit card typing, 0:23:02.119 --> 0:23:06.959 all that information, so many steps. So how can we 0:23:07.000 --> 0:23:09.159 remove all those frictions? And what if you have found 0:23:09.240 --> 0:23:12.919 is with Bold, we can remove pretty much all of 0:23:12.920 --> 0:23:15.399 those steps and make it a one click buying experience. 0:23:15.880 --> 0:23:20.200 And when we do that see around fifty percent increase 0:23:20.240 --> 0:23:22.920 in conversion versus someone who have to type in all 0:23:22.960 --> 0:23:25.000 that that problem. I have to suggest it makes me 0:23:25.040 --> 0:23:27.920 feel like, wait, maybe they're storing information somewhere. I wonder 0:23:27.920 --> 0:23:29.959 what you're thinking. How we thought about that as well too, 0:23:30.040 --> 0:23:32.919 because I'm definitely guilty of that, especially at certain price points. 0:23:32.960 --> 0:23:34.960 Sometimes I debate whether or not I want something. But 0:23:35.040 --> 0:23:37.920 I was curious as far as specifically, how exactly do 0:23:38.000 --> 0:23:40.720 you compete in that type of market? How do you 0:23:40.760 --> 0:23:43.679 compete in that way? Yeah, So think about from a 0:23:43.720 --> 0:23:46.720 consumer perspective. You are trying to buy something on a 0:23:47.480 --> 0:23:50.600 merchant site, and we give the opportunity for them to 0:23:50.680 --> 0:23:55.480 save that information right on the network. And now when 0:23:55.520 --> 0:23:58.520 they go to any other merchant site who are on 0:23:58.560 --> 0:24:01.719 the Bold network trying to buy something, we look up 0:24:01.760 --> 0:24:03.520 and see if they have or on the network, and 0:24:03.560 --> 0:24:06.080 if they are on the network, we pull up all 0:24:06.119 --> 0:24:10.800 the information and give them a faster experience to buy. 0:24:11.480 --> 0:24:15.000 And that what we do, though, is very unique in 0:24:15.000 --> 0:24:17.919 the sense that we do that in a very marching 0:24:18.040 --> 0:24:22.960 friendly way. Our magic sit behind the scenes. We empower 0:24:23.040 --> 0:24:25.560 march and we empower merchant to directly connect with the 0:24:25.600 --> 0:24:29.520 consumer without adding a friction of ourselves in the middle. 0:24:29.800 --> 0:24:32.320 So help me out here, because if I buy something 0:24:32.440 --> 0:24:34.800 through Apple Pay, I just say Apple pay and they 0:24:34.800 --> 0:24:37.119