WEBVTT - DOJ Drops Powell Probe, Smoothing Path for Warsh to Lead Fed 

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<v Speaker 2>Through Department of Justice has dropped its investigation into JPL

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<v Speaker 2>and the Federal Reserve regarding its building cost overrun.

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<v Speaker 3>Let's bring in Michael.

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<v Speaker 2>McKee, our chief International Economics and Policy correspondent, Mike, this

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<v Speaker 2>is something that should smooth the path for Kevin Walsh,

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<v Speaker 2>President Trump's nominee for the Federal Reserve chair to become

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<v Speaker 2>FED chair, doesn't it.

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<v Speaker 3>It smooths the path.

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<v Speaker 4>But whether the path gets taken or not, we don't

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<v Speaker 4>know yet, because we don't know whether the agreement to

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<v Speaker 4>have the Inspector General continue a probe to the buildings,

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<v Speaker 4>and we don't know whether that includes Powell, which Piro

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<v Speaker 4>had included. Well, we don't know whether that's enough for

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<v Speaker 4>Tom Tillis to say, okay, let's have a vote.

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<v Speaker 3>He has not commented.

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<v Speaker 4>And everybody's madly watching his Twitter feed and et cetera

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<v Speaker 4>to see what he thinks that would be step one,

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<v Speaker 4>and then step two is getting the nomination to a

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<v Speaker 4>vote in committee and getting it out to the floor.

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<v Speaker 3>There isn't a lot of legislative days left, but they

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<v Speaker 3>can make things happen if they want to. So it

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<v Speaker 3>is odds are a little better now.

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<v Speaker 5>Yep.

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<v Speaker 3>Shall we say we're.

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<v Speaker 6>Talking in the studio to Elliott Stein. He's a litigation

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<v Speaker 6>analyst for Bloomberg Intelligence, he's a lawyer. He said, if

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<v Speaker 6>you were advising Chairman j Powell, he would say, you

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<v Speaker 6>need to get an immunity your agreement. Yeah, I mean,

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<v Speaker 6>that's well, that's a big move.

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<v Speaker 4>That's been my thought all along because Inspector General's reports

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<v Speaker 4>and they were talking about also the Banking Committee maybe

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<v Speaker 4>doing an investigational congressional investigations. Both of those can lead

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<v Speaker 4>to criminal referrals to the Justice Department. So the question

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<v Speaker 4>is a obviously, they could find that Jay Powell had

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<v Speaker 4>his hand in the cookie jar, which I very very

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<v Speaker 4>much doubt, but there could be just some pretext in

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<v Speaker 4>the IG's report that Janine Piro would seize on again

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<v Speaker 4>once j once Kevin Warsh is in as chair, and

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<v Speaker 4>then go after Powell because Trump wants revenge. So I

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<v Speaker 4>think that it's not going to satisfy the FED chair

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<v Speaker 4>unless he has some kind of immunity agreement.

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<v Speaker 2>Mike Dumb question, how does this change the FMC meeting?

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<v Speaker 2>The deliberations next week, They begin on Tuesday, and they

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<v Speaker 2>come out with their decision Wednesday two pm. You will

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<v Speaker 2>be of course announcing it for us here on Bloomberg

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<v Speaker 2>Television and Bloomberg Radio, and then J Powell takes the

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<v Speaker 2>lectern at two thirty pm to hold his news conference.

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<v Speaker 3>I don't think it changes much at all.

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<v Speaker 4>It's not going to be a factor in the decision

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<v Speaker 4>making in terms of interest rates, in terms of the

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<v Speaker 4>there is no new economic outlook or dot plot at

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<v Speaker 4>this meeting, so it was going to be pretty much

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<v Speaker 4>a quiet meeting, and that leaves the vacuum to be

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<v Speaker 4>filled by questions about and to J Powell, which I

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<v Speaker 4>think is what we still get.

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<v Speaker 3>But it doesn't change the way.

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<v Speaker 4>The markets are going to react to this because it's

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<v Speaker 4>not going to really involve interest rate policy. It'll start

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<v Speaker 4>to as we move forward, once Kevin Warsh gets finally confirmed,

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<v Speaker 4>then we'll maybe see some reaction to what people think

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<v Speaker 4>he might do.

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<v Speaker 6>But in this press conference, next Wednesday, which you'll be

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<v Speaker 6>attending in Washington.

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<v Speaker 3>Don't you think mister powellill have to have.

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<v Speaker 6>A definitive statement one way or the other, as opposed

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<v Speaker 6>to kind of we'll see how it develops.

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<v Speaker 3>I'm not sure he has to. He's getting close to

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<v Speaker 3>the time.

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<v Speaker 4>When he's not chaired anymore, and that would be in

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<v Speaker 4>theory when you would make a resignation announcement.

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<v Speaker 3>That's mid May or end of May May fifteenth, OK.

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<v Speaker 3>And so maybe he says something.

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<v Speaker 4>But again, as we were talking about the idea of

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<v Speaker 4>a immunity grant, he may be waiting for something like that.

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<v Speaker 3>It's just not at all clear.

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<v Speaker 4>He also may want to stay on because he wants

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<v Speaker 4>to see how things develop.

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<v Speaker 3>But that's not the worm, right.

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<v Speaker 2>That doesn't usually happen.

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<v Speaker 4>It's not the way it's been done in the past.

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<v Speaker 4>There's only been one FED chair who stayed on as

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<v Speaker 4>a governor, and that was in the late nineteen forties,

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<v Speaker 4>early nineteen fifties, and so that's not likely to happen again.

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<v Speaker 4>I would think that Jay Powell would end up leaving,

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<v Speaker 4>but he could end up staying for a couple of months.

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<v Speaker 6>And Stewart Paul from Bloomerick Economics are saying, you know,

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<v Speaker 6>his hands are kind of tied me Kevin Wah. She

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<v Speaker 6>can't go out there and start just slashing short term

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<v Speaker 6>rates because that's going to really stoke inflation and you'd

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<v Speaker 6>see rates go up on the back end of the

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<v Speaker 6>curve and all that. I mean, he's not much he

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<v Speaker 6>can really do, Kenny.

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<v Speaker 4>No, And I think it's going to take a while

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<v Speaker 4>for people really to internalize that because the markets are

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<v Speaker 4>all hoping so much for rate cuts, but when you

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<v Speaker 4>look at what's happening with the war, with the oil prices,

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<v Speaker 4>with the economy in general, the fact that we've seen

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<v Speaker 4>inflation rising, he can't come in the door and start

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<v Speaker 4>cutting rates. So it'll take a while before anybody's going

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<v Speaker 4>to be able to point to the Fed and say, well,

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<v Speaker 4>that was Kevin Warsh pushing them to do that, because

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<v Speaker 4>they're not going to do that right away, and there

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<v Speaker 4>won't be any kind of decision about other reforms immediately.

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<v Speaker 4>But he could work on things like communications. He doesn't

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<v Speaker 4>like the dot plot. Maybe they get rid of that.

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<v Speaker 4>Those things might even come before any rate stay with us.

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<v Speaker 3>More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 6>You want to talk to tech, you talk to Dan

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<v Speaker 6>I's globalhead of Technology Research at web Bush Securities. Dan,

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<v Speaker 6>I'm guessing the conversations you're having with your clients over

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<v Speaker 6>the last several weeks are a lot different than what

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<v Speaker 6>they were kind of late last year as it relates

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<v Speaker 6>to tech. How do you frame it out for us?

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<v Speaker 5>Look, Paul, I think right now it's really about okay,

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<v Speaker 5>cap backs, but where's the monetization? Are you starting to

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<v Speaker 5>see it? Is it starting to actually spread out beyond

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<v Speaker 5>just big tech? And I think you're starting to see

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<v Speaker 5>that obviously with Intel, Cisco and others look at it.

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<v Speaker 5>And obviously it's been a huge debate right relatively anthropic

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<v Speaker 5>software goes trade. We saw what happened this week in

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<v Speaker 5>terms of Service Now and others, So I think I

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<v Speaker 5>would call it a huge debat, and that's why it

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<v Speaker 5>all leads to next week really being like huge pieces

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<v Speaker 5>to the puzzle. Of the tech trade.

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<v Speaker 2>What is the market sentiment like right now when it

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<v Speaker 2>comes to CAPEX, Because for a while, if companies reported

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<v Speaker 2>ended up saying that CAPEX would be more than they

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<v Speaker 2>had forecast, it was seen as okay, and then it

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<v Speaker 2>was seen as negative. How are investors feeling right now?

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<v Speaker 5>Yeah, it sort of. That's been a hot and cold

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<v Speaker 5>situation right relative to the cap backs. I think now

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<v Speaker 5>there's almost a consensus view where it's like, Okay, cap

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<v Speaker 5>BAX is going to be reiterated by big tech. No

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<v Speaker 5>big tech company is going to go down cappacs go

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<v Speaker 5>into next week. If they did, stock would be down

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<v Speaker 5>because that would ultimately be a negative in this arms race.

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<v Speaker 5>I think the big question is going to be with

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<v Speaker 5>the hyper scale or especifically Microsoft, Google, Amazon. Do you

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<v Speaker 5>see accelerations beats when it comes to cloud growth? That's

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<v Speaker 5>important in terms of capacity. What it really means is

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<v Speaker 5>the cap BAX is now starting to bear fruit. The

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<v Speaker 5>miztions happening. You're seeing it on the software on the

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<v Speaker 5>hyper scale outside and look, that's that's the big piece,

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<v Speaker 5>that's really the de beat. Do you start to seeing monization?

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<v Speaker 5>I think we start to see it next week and

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<v Speaker 5>I think med is another one. We'll see it on

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<v Speaker 5>the advertising side.

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<v Speaker 6>Dan, I know you initiated coverage of Oracle. Talk to

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<v Speaker 6>us about that company. How you see it participating in

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<v Speaker 6>this in this tech stack here going forward?

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<v Speaker 5>Yeah, and Paul I covered it for many years. And

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<v Speaker 5>the reason I like re initiate on and here just

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<v Speaker 5>because I believe the street is way miscalculating this name.

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<v Speaker 5>I mean, look, I get the worries about the debt

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<v Speaker 5>and what they're taking on given to open AI and

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<v Speaker 5>what they're going for in terms of the six seven

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<v Speaker 5>hundred billion that they're going after the fifty billion a debt.

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<v Speaker 5>I think Oracle is going to be a tremendously bigger

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<v Speaker 5>company the next two three, four years and is today.

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<v Speaker 5>I think investments are way discounting their ability to monetize

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<v Speaker 5>what's going to be this backlog. And really, you know,

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<v Speaker 5>more and more companies move to the AI revolution with

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<v Speaker 5>the Oracle and that's a whole colt. I mean two

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<v Speaker 5>twenty values price target, but this stock ultimately that could

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<v Speaker 5>double as they monetize AI over the coming years and

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<v Speaker 5>think way way over sold.

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<v Speaker 2>I mean, the thing with Oracle is that it needs

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<v Speaker 2>to borrow so much money that it's got to tap

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<v Speaker 2>the public markets and the private markets kind of everywhere

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<v Speaker 2>in order to be able to fund this build out.

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<v Speaker 2>And we've heard from Moody's warning that private credit funds

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<v Speaker 2>with a lot of exposure to software and tech face

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<v Speaker 2>a lot of refinancing risks because there's a bunch of

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<v Speaker 2>debt that matures starting in twenty twenty eight. How do

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<v Speaker 2>you think about that in terms of what that means

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<v Speaker 2>for these big tech companies needs to borrow.

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<v Speaker 5>Yeah, I think it's a great point. Obviously a huge debate.

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<v Speaker 5>When you get things like Toma, Bravo Medallion, some other thing,

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<v Speaker 5>you can paint them all with the same brush. Right

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<v Speaker 5>when you look at Oracle, you're talking about a company

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<v Speaker 5>that the amount of debt that don't take on is

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<v Speaker 5>still pretty small relative to their cash flow generation and

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<v Speaker 5>the overall what I believe structured the business. I think

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<v Speaker 5>they'll be able to raise and they've already sort of

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<v Speaker 5>laid out to forty five to fifty billion. How they're

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<v Speaker 5>going to do that now? Is it ideal? Because companies

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<v Speaker 5>obviously free cast flow. You don't want to see software

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<v Speaker 5>companies take on debt, But Scott. My view is to

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<v Speaker 5>take on fifty billion of debt to go after seven

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<v Speaker 5>eight hundred billion, that that, to me is a bet

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<v Speaker 5>that I want to see them take.

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<v Speaker 6>Hey, Dan, let's switch gears to Tesla. They made some

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<v Speaker 6>news just yesterday kind of talking about capex and they're

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<v Speaker 6>boosting their CAPEX to twenty five billion dollars for AI

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<v Speaker 6>and for their robot business. Put that in context for us,

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<v Speaker 6>how do you think that? Is that a good move

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<v Speaker 6>for this company?

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<v Speaker 5>I think it's exactly what they need to do. I mean,

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<v Speaker 5>we've always talked about a lot. It's like the future

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<v Speaker 5>is about autonomous robotics optimal. I mean, this is a

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<v Speaker 5>company from a physical aid perspective. I viewed Nvidia and

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<v Speaker 5>Tesla to best physical AI plays in the market. I

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<v Speaker 5>want to see them do this step by step, build it,

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<v Speaker 5>because that's really the next five ten years. That's what Tesla.

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<v Speaker 5>Tesla is an AI company going forward. This is not

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<v Speaker 5>an auto company.

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<v Speaker 2>Yeah, that's that's been made very clear. I mean, certainly

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<v Speaker 2>Elon Musk has been pushing that narrative for a long time.

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<v Speaker 5>Now.

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<v Speaker 2>I'm curious, and this is a might be a really

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<v Speaker 2>basic question, but how does the warrant iron and the

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<v Speaker 2>uncertainty there affect these big tech companies as they report.

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<v Speaker 2>I mean, do we expect any kind of mention of

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<v Speaker 2>the uncertainty, the fog of war affecting their decision making

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<v Speaker 2>their planning in any way.

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<v Speaker 5>I mean, like Service now hit it a bit writ

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<v Speaker 5>in terms of the Middle East deals. Look, I think

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<v Speaker 5>when you think in terms of a lot of the

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<v Speaker 5>buildouts outside the US, some of the big data center,

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<v Speaker 5>big AI buildouts are in UAE, Saudi. But I don't

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<v Speaker 5>really think that that's something that's going to be a

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<v Speaker 5>huge thing on the conference call. I think that's much

0:12:11.120 --> 0:12:15.720
<v Speaker 5>more year and a half from now, two years from now. Now,

0:12:15.760 --> 0:12:20.920
<v Speaker 5>I think the big question is supply helium, especially through

0:12:20.960 --> 0:12:23.199
<v Speaker 5>the street. We were just an easier for two weeks.

0:12:23.240 --> 0:12:28.160
<v Speaker 5>I continue to think unless this stale me last past

0:12:28.320 --> 0:12:32.480
<v Speaker 5>Memorial Day into June July. Like for now, I think

0:12:32.480 --> 0:12:36.480
<v Speaker 5>it's pretty contained. But look, I think I think investors

0:12:36.559 --> 0:12:39.240
<v Speaker 5>want to understand what the demand environment looks like, and

0:12:39.320 --> 0:12:42.959
<v Speaker 5>these companies they're not slowing things down in any way

0:12:43.280 --> 0:12:45.160
<v Speaker 5>right because of the geoput.

0:12:45.360 --> 0:12:46.000
<v Speaker 3>Stay with us.

0:12:46.120 --> 0:12:48.520
<v Speaker 6>More from Bloomberg Intelligence coming up after this.

0:12:52.360 --> 0:12:56.040
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:12:56.120 --> 0:12:59.200
<v Speaker 1>weekdays at ten am Eastern on Apple Coarcklay, and Android

0:12:59.240 --> 0:13:02.520
<v Speaker 1>Otto with the Work Business app. Listen on demand wherever

0:13:02.600 --> 0:13:05.720
<v Speaker 1>you get your podcasts, or watch us live on YouTube.

0:13:06.160 --> 0:13:09.839
<v Speaker 6>We often talked about the restaurant industry because we think

0:13:09.880 --> 0:13:11.320
<v Speaker 6>it's a really good way to get a sense of

0:13:11.360 --> 0:13:13.679
<v Speaker 6>how the consumer is faring out there. Because there's so

0:13:13.720 --> 0:13:16.960
<v Speaker 6>many different strata within the or so many tiers within

0:13:17.000 --> 0:13:19.360
<v Speaker 6>the restaurant industry, gives you a good view of the consumer.

0:13:19.600 --> 0:13:23.280
<v Speaker 6>One of the key cost issues for the restaurant industry

0:13:23.320 --> 0:13:26.120
<v Speaker 6>is labor. It's usually can I get enough labor at

0:13:26.120 --> 0:13:27.920
<v Speaker 6>the right price. So we want to delve into that

0:13:27.960 --> 0:13:30.600
<v Speaker 6>a little bit. Chad Moutraye, chief economists for the National

0:13:30.720 --> 0:13:35.199
<v Speaker 6>Restaurant Association, Chad talk to us about the labor component

0:13:35.240 --> 0:13:38.400
<v Speaker 6>of the restaurant industry in this country. We've got labor

0:13:38.440 --> 0:13:41.439
<v Speaker 6>participation pretty low levels, I think the lowest in the

0:13:41.520 --> 0:13:43.840
<v Speaker 6>last four or five years. We've got immigration reform, which

0:13:43.880 --> 0:13:47.040
<v Speaker 6>is choked off a source of labor here. How's that

0:13:47.080 --> 0:13:48.439
<v Speaker 6>impacting the restaurant industry.

0:13:49.760 --> 0:13:52.600
<v Speaker 7>Well, the good news is that only twenty two percent

0:13:52.640 --> 0:13:55.360
<v Speaker 7>of restaurants told US last year that they were understaff,

0:13:55.480 --> 0:13:59.360
<v Speaker 7>so that was the lowest we've seen since the pandemic.

0:14:00.120 --> 0:14:03.440
<v Speaker 7>Yet you still continue to see, you know, restaurants struggling

0:14:03.480 --> 0:14:07.160
<v Speaker 7>with managers, chefs, really highly skilled workers. You've seen even

0:14:07.520 --> 0:14:11.200
<v Speaker 7>stories about dishwashers being a challenge. I think the immigration

0:14:11.280 --> 0:14:14.600
<v Speaker 7>story certainly is also very challenging for a lot of

0:14:14.640 --> 0:14:17.640
<v Speaker 7>restaurants in terms of their ability to retain workers, to

0:14:17.679 --> 0:14:21.360
<v Speaker 7>get workers to show up right. Certainly, that affects sales

0:14:21.400 --> 0:14:24.800
<v Speaker 7>as well. In general, I think it's easier to hire

0:14:24.840 --> 0:14:27.680
<v Speaker 7>today than it was, say two or three years ago,

0:14:28.120 --> 0:14:30.240
<v Speaker 7>but it's still a challenge. There's a lot of turnover

0:14:30.320 --> 0:14:33.360
<v Speaker 7>in the sector, and the ability to fill those jobs

0:14:33.360 --> 0:14:34.640
<v Speaker 7>can be pretty challenging.

0:14:34.920 --> 0:14:36.880
<v Speaker 2>And I imagine the ability to fill those jobs in

0:14:36.920 --> 0:14:40.440
<v Speaker 2>certain markets is harder than in other markets as well.

0:14:40.480 --> 0:14:43.080
<v Speaker 2>How does that change the landscape of the restaurant industry

0:14:43.120 --> 0:14:43.800
<v Speaker 2>in this country?

0:14:45.480 --> 0:14:48.040
<v Speaker 7>Well, I think, you know, certainly, I think restaurants have

0:14:48.080 --> 0:14:50.280
<v Speaker 7>had to look at ways that they can fill those

0:14:50.360 --> 0:14:51.040
<v Speaker 7>jobs quicker.

0:14:51.120 --> 0:14:51.280
<v Speaker 3>Right.

0:14:51.320 --> 0:14:54.120
<v Speaker 7>So technology is certainly one of those enablers that really

0:14:54.160 --> 0:14:57.080
<v Speaker 7>gets you to speed up that hiring process. The last

0:14:57.080 --> 0:14:59.240
<v Speaker 7>thing you want if you're a restaurant. Keep in mind

0:14:59.280 --> 0:15:02.440
<v Speaker 7>we're in the hospitalality business is to be understaffed, that

0:15:02.480 --> 0:15:05.880
<v Speaker 7>can affect sales, that could affect overall employee morale. And

0:15:05.920 --> 0:15:09.280
<v Speaker 7>so we've seen, through a lot of investments in technology,

0:15:09.400 --> 0:15:12.200
<v Speaker 7>the ability to speed that up from weeks to days.

0:15:12.440 --> 0:15:14.880
<v Speaker 7>So I think we've seen a lot of restaurants certainly

0:15:14.920 --> 0:15:18.280
<v Speaker 7>adopt that overall model, maybe doing some multi training of

0:15:18.960 --> 0:15:23.600
<v Speaker 7>their staff so they can perform other roles. But as

0:15:23.880 --> 0:15:26.000
<v Speaker 7>we said earlier, well, overall wage growth is up at

0:15:26.040 --> 0:15:29.320
<v Speaker 7>least thirty five percent since the pandemic, and when I

0:15:29.360 --> 0:15:32.640
<v Speaker 7>talk to operators, labor costs even more than food costs,

0:15:32.800 --> 0:15:35.200
<v Speaker 7>are really one of the bigger challenges that they're facing

0:15:35.280 --> 0:15:35.720
<v Speaker 7>right now.

0:15:36.320 --> 0:15:39.240
<v Speaker 6>Well, usually for a lot of people, including myself, the

0:15:39.280 --> 0:15:42.960
<v Speaker 6>restaurant industry is kind of an entry level into the workforce.

0:15:44.200 --> 0:15:48.400
<v Speaker 6>Is that how those trends changing? If at all, that's

0:15:48.640 --> 0:15:51.000
<v Speaker 6>still very true, Paul. You know, the reality is half

0:15:51.040 --> 0:15:53.560
<v Speaker 6>of all Americans got their first job in a restaurant,

0:15:53.600 --> 0:15:58.000
<v Speaker 6>including me, and if you include everyone who's had any

0:15:58.040 --> 0:16:00.720
<v Speaker 6>experience in a restaurant, that's two thirds of all Americans, right,

0:16:00.760 --> 0:16:04.360
<v Speaker 6>And so we are often that training ground for people,

0:16:04.360 --> 0:16:06.840
<v Speaker 6>even if you don't stay in the restaurant sector. You're

0:16:06.920 --> 0:16:09.080
<v Speaker 6>that training ground to learn some of those key skills

0:16:09.080 --> 0:16:11.480
<v Speaker 6>of how you work with people, how you continue to

0:16:11.480 --> 0:16:14.600
<v Speaker 6>get things done and work with under pressure. And I

0:16:14.640 --> 0:16:17.040
<v Speaker 6>think one of the challenges is that given where the

0:16:17.080 --> 0:16:20.120
<v Speaker 6>participation rate is now, you're seeing a lot of young men,

0:16:20.320 --> 0:16:22.320
<v Speaker 6>a lot of younger folks who are not getting some

0:16:22.400 --> 0:16:25.280
<v Speaker 6>of those early skills before they go out of the

0:16:25.280 --> 0:16:27.760
<v Speaker 6>workforce that they would have gotten in a restaurant sector,

0:16:28.040 --> 0:16:30.880
<v Speaker 6>a restaurant setting had they taken some of those jobs

0:16:30.920 --> 0:16:31.680
<v Speaker 6>in their team years.

0:16:32.360 --> 0:16:35.840
<v Speaker 2>Although certain policies might make the jobs more attractive now

0:16:35.880 --> 0:16:39.800
<v Speaker 2>to people, including the no tax on tips right. So

0:16:40.160 --> 0:16:44.840
<v Speaker 2>I'm wondering how that is showing up in hiring for restaurants.

0:16:45.040 --> 0:16:47.880
<v Speaker 2>Is that something that has marked a sea change.

0:16:48.960 --> 0:16:51.400
<v Speaker 7>Well, when I talk to operators, many of them are

0:16:51.440 --> 0:16:53.640
<v Speaker 7>saying that that is a huge selling point, the fact

0:16:53.640 --> 0:16:55.680
<v Speaker 7>that you know the first twenty five thousand dollars of

0:16:55.720 --> 0:16:57.840
<v Speaker 7>your tips are not taxed, right. You also have no

0:16:58.000 --> 0:17:01.360
<v Speaker 7>tax on overtime, and both of those those kind of

0:17:01.360 --> 0:17:04.320
<v Speaker 7>working in tandem, I think can help that overall recruitment

0:17:04.359 --> 0:17:07.879
<v Speaker 7>and retention story. Again, not everyone in the restaurant is

0:17:08.600 --> 0:17:10.680
<v Speaker 7>getting tips, but you know, to the extent that folks

0:17:10.720 --> 0:17:13.000
<v Speaker 7>are being those tips are being shared, I think it

0:17:13.000 --> 0:17:16.080
<v Speaker 7>certainly can be a huge recruitment tool for getting some

0:17:16.119 --> 0:17:17.400
<v Speaker 7>of those workers in the door.

0:17:18.240 --> 0:17:22.520
<v Speaker 6>So chat on the policy front, are there other policies

0:17:22.520 --> 0:17:25.199
<v Speaker 6>that would be helpful to the restaurant industry here, particularly

0:17:25.240 --> 0:17:25.920
<v Speaker 6>on the labor front.

0:17:27.680 --> 0:17:29.000
<v Speaker 7>Well, I think one of the things that we need

0:17:29.040 --> 0:17:31.719
<v Speaker 7>to keep in mind is that overall restaurant the restaurant

0:17:31.720 --> 0:17:34.479
<v Speaker 7>business is very challenging. We know that the typical profit

0:17:34.560 --> 0:17:37.479
<v Speaker 7>margin for a restaurant is just two point eight percent.

0:17:37.600 --> 0:17:42.200
<v Speaker 7>That's for full time for a full service restaurant. That's

0:17:42.240 --> 0:17:44.800
<v Speaker 7>well below where it would have been before the pandemic.

0:17:44.800 --> 0:17:47.760
<v Speaker 7>We've seen those overall profits be continued to be squeezed,

0:17:48.200 --> 0:17:49.800
<v Speaker 7>and I think one of the stats that came out

0:17:49.840 --> 0:17:52.119
<v Speaker 7>in our State of the Industry report in February that

0:17:52.200 --> 0:17:54.919
<v Speaker 7>really was the most telling was that forty two percent

0:17:54.960 --> 0:17:58.800
<v Speaker 7>of restaurants were not profitable last year. Right, So profitability

0:17:58.880 --> 0:18:01.760
<v Speaker 7>is a real challenge, and I think it's incumbent, I think,

0:18:01.760 --> 0:18:04.760
<v Speaker 7>really on policy makers to recognize just how difficult the

0:18:04.800 --> 0:18:08.119
<v Speaker 7>math is for restaurants that try not to add additional

0:18:08.119 --> 0:18:10.720
<v Speaker 7>burdens to them in terms of regulatory burdens, et cetera.

0:18:11.280 --> 0:18:13.359
<v Speaker 7>And I think that's really I think one of the

0:18:13.440 --> 0:18:15.879
<v Speaker 7>more eye opening numbers that I look at for a

0:18:15.920 --> 0:18:19.240
<v Speaker 7>limited service restaurant, the typical profit margin is four percent. Again,

0:18:19.240 --> 0:18:21.560
<v Speaker 7>that would have been six percent before the pandemic, and

0:18:21.640 --> 0:18:26.320
<v Speaker 7>so that profit squeeze really really hits home the fact

0:18:26.320 --> 0:18:28.600
<v Speaker 7>that the math is just so challenging right now for

0:18:28.960 --> 0:18:31.280
<v Speaker 7>restaurant operators, and yet we still have people getting into

0:18:31.320 --> 0:18:34.520
<v Speaker 7>this business right so there's certainly I think a desire

0:18:34.800 --> 0:18:38.199
<v Speaker 7>and a churn. I think that is helpful and vibrant

0:18:38.280 --> 0:18:40.880
<v Speaker 7>for the sector, but it is challenging for many.

0:18:41.080 --> 0:18:44.560
<v Speaker 2>Operators that struggle to achieve profitability. How does that change

0:18:44.600 --> 0:18:47.439
<v Speaker 2>who actually owns and operates restaurants? Do we then have

0:18:47.560 --> 0:18:51.240
<v Speaker 2>more big companies owning restaurants and operating restaurants rather than

0:18:51.440 --> 0:18:53.000
<v Speaker 2>individuals or mom and pops.

0:18:54.400 --> 0:18:56.040
<v Speaker 7>Well, I think you see the diversity there. I mean,

0:18:56.080 --> 0:18:57.760
<v Speaker 7>the reality is, I mean, yes, we talk a lot

0:18:57.760 --> 0:19:00.600
<v Speaker 7>about closures, but there's a lot of flks getting into

0:19:00.640 --> 0:19:04.240
<v Speaker 7>this business too. And I think independent operators when you

0:19:04.280 --> 0:19:06.440
<v Speaker 7>know those mom and pop restaurants down the street, I

0:19:06.480 --> 0:19:08.919
<v Speaker 7>think there's certainly a desire to get out there to

0:19:09.000 --> 0:19:11.919
<v Speaker 7>cater to some of those new tastes. We are in

0:19:11.960 --> 0:19:14.720
<v Speaker 7>the hospitality business, and I think making sure that that

0:19:14.840 --> 0:19:17.600
<v Speaker 7>restaurants really are stressing some of those basics in terms

0:19:17.600 --> 0:19:20.959
<v Speaker 7>of delivering value, delivering on that overall experience, I think

0:19:21.000 --> 0:19:23.560
<v Speaker 7>there's certainly a lot of new opportunities to do that.

0:19:23.800 --> 0:19:28.480
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

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