WEBVTT - Powell’s Dark Tone Designed To Pressure Fiscal Policy: Dutta 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penl podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa brahma Witz. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.560 at Bloomberg dot com. Earlier this morning, we heard some 0:00:21.680 --> 0:00:25.480 really interesting discussion uh with FED Chairman j Pale to 0:00:25.520 --> 0:00:28.520 Peterson Institute talking about the impact of the coronavirus on 0:00:28.720 --> 0:00:32.240 the economy, and Chairman Pal warns of a broad virus 0:00:32.360 --> 0:00:36.400 danger and he certainly batted down any expectations of negative 0:00:36.880 --> 0:00:40.000 rates out there, but certainly a somber longer term view 0:00:40.120 --> 0:00:41.920 from the chairman to get a sense of kind of 0:00:41.960 --> 0:00:44.120 what some of the details are there that we should 0:00:44.120 --> 0:00:46.159 be paying attention to. We welcome Neil Dada ahead of 0:00:46.400 --> 0:00:49.600 US Economics at Renaissance Macro Research. So Neil, thanks so 0:00:49.680 --> 0:00:52.199 much for joining us. What was the key takeaway or 0:00:52.280 --> 0:00:54.960 key takeaways for you from what we heard from Chairman 0:00:55.000 --> 0:00:59.280 Pal this morning. Well, I think the most important takeaway 0:00:59.440 --> 0:01:03.800 is that he's leaning into fiscal authorities quite hard. U. 0:01:04.040 --> 0:01:07.880 He sounded pretty somber and um, you know, downbeat about 0:01:07.920 --> 0:01:09.959 the outlook. In my view, I think he kind of 0:01:10.000 --> 0:01:12.800 needs to do that. It's almost by design. If he 0:01:12.880 --> 0:01:15.360 sounds upbeat, that takes the pressure off on the heat 0:01:15.360 --> 0:01:19.000 off the ciscal authorities. If he sounds more negative, UM, 0:01:19.040 --> 0:01:23.040 I think he keeps the pressure on them. So UM. 0:01:23.160 --> 0:01:25.520 So to me, that, well, that's what was important. I 0:01:25.560 --> 0:01:27.840 also thought it was quite interesting they talked about how 0:01:28.560 --> 0:01:33.399 liquidity crises now can evolve into solvency problems later. Um. Again, 0:01:33.440 --> 0:01:36.040 that sort of speaks to this idea that the less 0:01:36.080 --> 0:01:38.399 they do now, the more pain there can be later. 0:01:38.480 --> 0:01:40.200 So that kind of speaks to the sort of second 0:01:40.200 --> 0:01:42.920 and third order effects from the initial shock um that 0:01:42.959 --> 0:01:44.760 I think a lot of people are worried about right now. 0:01:44.840 --> 0:01:48.520 So UM, I thought it was a pretty um you know. 0:01:48.640 --> 0:01:50.640 I mean, like like I said, I think I think 0:01:50.680 --> 0:01:54.040 he's negative. I think it's by design. Um. I think 0:01:54.120 --> 0:01:57.600 I think it's important for fiscal um you know, for 0:01:57.640 --> 0:02:03.120 our politicians to kind of um not declare victory too soon. 0:02:03.400 --> 0:02:06.320 And in my view that means really two things. And 0:02:06.400 --> 0:02:09.520 the most immediate term, UM, it means we need some 0:02:09.600 --> 0:02:12.880 kind of a stay in local aid package. UM, you know, 0:02:13.160 --> 0:02:17.360 from the federal government, you need to kind of backstop 0:02:17.400 --> 0:02:22.000 the revenue shortfalls that states are seeing. And UM, I 0:02:22.040 --> 0:02:26.359 think number two in the summer, when things presumably will 0:02:26.360 --> 0:02:30.600 feel a little bit better than they do right now. UM, 0:02:30.639 --> 0:02:33.400 we've kind of set up a cliff type scenario with 0:02:33.400 --> 0:02:36.040 with respect to fiscal policy, because we're going to see 0:02:37.000 --> 0:02:41.120 a robust unemployment insurance program evaporate for many millions of people. 0:02:41.520 --> 0:02:47.840 And these are individuals in many cases that UM work 0:02:47.880 --> 0:02:50.960 in industries like leaving, hospitality, retail that will be slow 0:02:51.000 --> 0:02:54.240 to come back. UM. And they also have very high 0:02:54.320 --> 0:02:58.280 propensities to consume. They usually spend what they get. So UM, 0:02:58.400 --> 0:03:00.000 those are the two things I think on the fiscal 0:03:00.120 --> 0:03:02.280 side that I'm kind of keeping an eye on right now. 0:03:02.360 --> 0:03:05.920 And I think Powell's right to kind of say that, UM, 0:03:05.960 --> 0:03:09.560 you know, while their costs to doing this, UM, the 0:03:09.639 --> 0:03:12.880 benefits probably away the cost at this point. Neil, I 0:03:12.919 --> 0:03:16.959 love speaking with you because when I sometimes feel gloomy, 0:03:17.200 --> 0:03:21.000 you often bring an optimistic view to the table, and 0:03:21.040 --> 0:03:25.080 I'm trying to find the optimistic view right now, especially 0:03:25.120 --> 0:03:28.400 after fed Share Powells testimony. I know that this is 0:03:28.440 --> 0:03:31.880 by design, but some of the statistics themselves all throughout 0:03:31.919 --> 0:03:35.800 one among people who are working in February, almost of 0:03:35.840 --> 0:03:38.760 those in households making less than forty tho dollars a 0:03:38.840 --> 0:03:41.760 year had lost a job in March. Meanwhile, Stan druck 0:03:41.760 --> 0:03:45.280 and Miller, the billionaire who has been very successful, said 0:03:45.320 --> 0:03:48.400 that the risk reward calculation for equities right now is 0:03:48.440 --> 0:03:51.280 the worst he's seen in his career. What do you 0:03:51.360 --> 0:03:55.720 have to say about that? So? I think, Um, I 0:03:55.760 --> 0:03:59.080 don't buy into this idea that the markets have priced 0:03:59.120 --> 0:04:02.000 in some kind of of you know, glory V shaped 0:04:02.080 --> 0:04:04.800 style of recovery and it's off to the races. Um. 0:04:04.840 --> 0:04:06.800 I think that's sort of a red herring that people 0:04:06.840 --> 0:04:09.760 are talking about. It's like everyone's looking for a V 0:04:09.840 --> 0:04:12.840 shaped recovery except for me. You know, I don't. I 0:04:12.840 --> 0:04:14.240 don't buy that at all. I mean, I think the 0:04:14.240 --> 0:04:16.800 markets in the economy are more or less telling you 0:04:16.880 --> 0:04:19.560 the same thing. We've done a reasonably good job of 0:04:19.640 --> 0:04:22.280 clipping off the left tail rist scenario. I don't think 0:04:22.279 --> 0:04:24.360 in L shape recovery is likely to happen on the 0:04:24.360 --> 0:04:27.120 other end of this. At the same time, we've opened 0:04:27.120 --> 0:04:31.200 things up a little, things have loosened a bit. Um. 0:04:31.320 --> 0:04:35.360 The process is going slowly and gradually, and we've had 0:04:35.400 --> 0:04:37.960 our initial bounce off belows and we're kind of treading water. 0:04:39.120 --> 0:04:40.839 So I think the stock market and the economy are 0:04:40.880 --> 0:04:43.360 more or less giving you the same message you asked 0:04:43.360 --> 0:04:48.080 for something optimistic. There's always been somewhere Lisa, and um 0:04:48.160 --> 0:04:50.640 and and and I'll tell you that. You know, it's 0:04:50.640 --> 0:04:54.560 pretty obvious to me that the economy bottomed sometime in 0:04:54.600 --> 0:04:56.880 the middle of April, meaning the level of activity isn't 0:04:56.920 --> 0:05:00.799 getting any worse. If you look at specific sectors, loively, housing, 0:05:01.360 --> 0:05:04.120 there's some evidence that things are reviving a little bit 0:05:04.120 --> 0:05:08.599 more rapidly than originally anticipated. As an example, mortgage purchase 0:05:08.640 --> 0:05:11.240 applications are up now four weeks in a row. This 0:05:11.600 --> 0:05:15.320 preceded the sort of expiration of some of these formal 0:05:15.400 --> 0:05:21.320 shels formal formal shelter in place orders, right, So, um, 0:05:21.360 --> 0:05:24.080 the housing market recovery started even before these orders went, 0:05:24.520 --> 0:05:26.920 you know, expired, and it's still recovering. It's up four 0:05:26.920 --> 0:05:31.320 weeks in a row. Um, we've recouped about two thirds 0:05:31.320 --> 0:05:36.440 of the loss since mid March. So um, that's that's 0:05:36.440 --> 0:05:39.680 a surprise. Um, and it's you know, I mean the 0:05:39.720 --> 0:05:41.760 fact that homebuying demand is picked up. I think it's 0:05:41.760 --> 0:05:43.960 a it's a good thing, it's an interesting sign. So 0:05:43.960 --> 0:05:47.240 it's something we're keeping an eye on. Yeah, Neil Data, 0:05:47.320 --> 0:05:49.360 thank you so much for being with us as always. Uh, 0:05:49.480 --> 0:05:52.039 it's always wonderful to get your perspective, Neil Data, head 0:05:52.040 --> 0:05:55.280 of US economics at Renaissance Macro Research. And I will 0:05:55.320 --> 0:05:57.800 tell you in the housing market, Paul, I wonder how 0:05:57.839 --> 0:06:01.920 bifurcated it is with now on urban centers getting the 0:06:01.920 --> 0:06:04.400 bulk of the purchasing right now. We hear so much 0:06:04.400 --> 0:06:07.480 about this in Denise PELAGRENI was talking about this how 0:06:07.520 --> 0:06:09.520 people are looking to get out of the city right now, 0:06:09.600 --> 0:06:11.799 perhaps because they've been sheltering in place in a studio 0:06:11.920 --> 0:06:15.680 or concerned about the density factor, but that seems to 0:06:15.680 --> 0:06:17.599 be something persistent. I wonder if it's going to be 0:06:17.640 --> 0:06:21.440 your diehard city personally, you're not considering leaving the city. Well, 0:06:21.480 --> 0:06:24.960 I'm I'm born and raised here and I've lived outside 0:06:24.960 --> 0:06:27.280 of the city, but you know, for for the time being, 0:06:27.360 --> 0:06:29.440 I'm here, and it will be interesting to see how 0:06:29.440 --> 0:06:33.200 the city transforms, especially if it gets cheaper for individuals 0:06:33.240 --> 0:06:36.440 to live here. How that affects things especially, I'm not 0:06:36.440 --> 0:06:41.760 going to get into it. Vanguard is known as the 0:06:41.800 --> 0:06:45.120 firm that really pioneered the index fund, that really has 0:06:45.200 --> 0:06:48.520 led the charge into passive investing. So it came as 0:06:48.520 --> 0:06:52.000 a surprise to some people in February when it announced 0:06:52.040 --> 0:06:55.880 a partnership with Harbor Vest UH Strategic Partnership to provide 0:06:55.920 --> 0:06:59.479 qualified investors with access to private equity, which is decidedly 0:06:59.600 --> 0:07:02.600 not indexible in the same kind of way as public equities. 0:07:02.920 --> 0:07:06.120 The question is, then the world got turned on its head. 0:07:06.400 --> 0:07:10.240 What is the opportunity now in private equity joining us now? 0:07:10.240 --> 0:07:12.600 I'm so glad to say fran Can i Ree, principle 0:07:12.680 --> 0:07:16.080 and global head of Private Investment at Vanguard frand thank 0:07:16.080 --> 0:07:18.240 you so much for being with us. I would love 0:07:18.280 --> 0:07:22.280 to start just first with how strong or weak demand 0:07:22.320 --> 0:07:24.680 has been for private equity at a time when some 0:07:24.720 --> 0:07:28.280 of the smaller businesses that these firms invest in are 0:07:28.320 --> 0:07:33.960 getting incredibly challenged by the pandemic and related shutdowns. Oh yes, 0:07:34.000 --> 0:07:37.920 thank you. And the supply coming in and the client 0:07:38.040 --> 0:07:43.080 interests coming in continues, despite as you mentioned, the health 0:07:43.120 --> 0:07:46.400 crisis and the market volatility. UM. I think a lot 0:07:46.400 --> 0:07:50.120 of investors see the case for private equity UM. The 0:07:50.160 --> 0:07:54.280 case also has extended in full and bear markets. So 0:07:54.480 --> 0:07:57.960 private equity tends to be a replacement to public equity 0:07:58.080 --> 0:08:01.400 or a compliment. And we've seen in other bear market 0:08:01.480 --> 0:08:05.040 environments where private equity has held its own. So Frank 0:08:05.040 --> 0:08:08.680 gives a sense of kind of the thinking behind at Vanguard. Again, 0:08:08.720 --> 0:08:11.720 as Lisa was saying earlier, you guys are the big 0:08:11.920 --> 0:08:15.080 giant player and indexing, and what's the thinking behind getting 0:08:15.120 --> 0:08:20.000 into the private equity business. Yeah, thanks, Um. I think 0:08:20.000 --> 0:08:22.840 most people may now mel us as indexing, but when 0:08:22.840 --> 0:08:26.880 we started Vanguard, Jack Bogel started Vanguard, we started as 0:08:26.920 --> 0:08:32.000 an actively managed shop and our first offerings were active 0:08:32.520 --> 0:08:35.200 uh in nature. And so while we get very well 0:08:35.200 --> 0:08:38.319 known for our indexing, I'm very proud of our indexing franchise. 0:08:38.720 --> 0:08:42.400 We're actually one of the largest active investors on the 0:08:42.480 --> 0:08:45.599 public equity side. We're also by far one of the 0:08:45.679 --> 0:08:49.040 largest active managers on the fixed income side, both taxable 0:08:49.120 --> 0:08:53.160 fixed income and tax exempts. So for us, we've always 0:08:53.160 --> 0:08:58.400 been a very large, vibrant, active shop, and private equity 0:08:58.480 --> 0:09:01.360 just extends that from the public markets. For the private 0:09:01.360 --> 0:09:05.600 markets fran This was the rage heading into this crisis, 0:09:05.840 --> 0:09:08.439 or right before it, where a vast amount of money, 0:09:08.480 --> 0:09:12.920 record sums were flooding into private equity firms public private 0:09:12.960 --> 0:09:16.480 debt funds, the idea being that public markets were still 0:09:16.480 --> 0:09:19.480 flush with cash, that really the private markets were the 0:09:19.480 --> 0:09:24.959 ones that still held opportunity. I'm wondering, though, liquidity and 0:09:25.200 --> 0:09:28.000 solvency are different, and there are people who are saying 0:09:28.000 --> 0:09:30.240 that private equity hasn't sold off to the same degree 0:09:30.280 --> 0:09:33.000 that public markets have, but it's simply a function of 0:09:33.040 --> 0:09:36.000 there not trading as much. Would you agree with that? 0:09:36.080 --> 0:09:38.680 Do you think that private equity has seen the same 0:09:38.720 --> 0:09:41.080 scope of declines, we just may not be able to 0:09:41.120 --> 0:09:45.200 see them in the same way. Yeah, that's probably correct. 0:09:45.280 --> 0:09:49.360 There's three maybe main components. One, you have appraisal based 0:09:50.000 --> 0:09:54.439 valuation versus with the public markets are priced instant caneatives 0:09:54.720 --> 0:09:58.400 for liquidity at that second, so it's the price that 0:09:58.440 --> 0:10:01.920 will clear supply and demand. And whereas private equity is 0:10:01.920 --> 0:10:06.160 a much longer duration investment, so the investors and the 0:10:06.240 --> 0:10:11.200 investments themselves are much longer duration investments and they don't trade, 0:10:11.280 --> 0:10:15.920 so a very small amount trades relative to its float, 0:10:16.440 --> 0:10:20.000 which is very different from the public equity market. So, Frank, 0:10:20.040 --> 0:10:21.640 give us a sense of kind of as you look 0:10:21.640 --> 0:10:24.439 at the market today, it must be really difficult to 0:10:24.480 --> 0:10:28.079 get a sense of where true value is. How are 0:10:28.120 --> 0:10:30.440 you and in your team kind of trying to work 0:10:30.480 --> 0:10:34.520 through that challenge. But the great thing for us at Vanguard, 0:10:34.559 --> 0:10:39.360 we launched on March five, and so for us, it's 0:10:38.920 --> 0:10:42.480 for us it's a new uh. So we actually have 0:10:42.600 --> 0:10:44.920 no money in the ground, So we actually see this 0:10:45.000 --> 0:10:49.160 as very opportunistic for Vanguard investors because we're not We 0:10:49.160 --> 0:10:53.760 were not buying in November, December, January. We would have 0:10:53.920 --> 0:10:55.720 if we were in the market, but we are entering 0:10:55.760 --> 0:10:59.400 actually at a pretty good time because the valuations have reset. 0:11:00.920 --> 0:11:05.480 So where are you seeing the potential opportunities here? So 0:11:05.559 --> 0:11:08.920 we very much like our roots on the public equity 0:11:09.000 --> 0:11:11.960 side and public fixed income side, are offering is going 0:11:12.000 --> 0:11:17.200 to be very broad based, very global. Um will likely 0:11:17.920 --> 0:11:24.280 have thirty to forty gps inside this offering, with seven 0:11:24.360 --> 0:11:29.120 to eight hundred different holding companies, it'll globally diversified. I 0:11:29.280 --> 0:11:31.400 don't want to interrupt you, Fran, but this sounds a 0:11:31.440 --> 0:11:34.560 lot like an index fund of private equity is that 0:11:34.559 --> 0:11:38.479 what it's aiming to be? Did we just lose frand 0:11:38.679 --> 0:11:41.440 did he just hang off on that question He was saying, 0:11:42.559 --> 0:11:44.800 I don't think so. I think we just lost him. 0:11:44.840 --> 0:11:46.760 But that's sort of the question that some people have 0:11:46.920 --> 0:11:49.240 is that are we going to end up getting some 0:11:49.280 --> 0:11:53.680 sort of indexing factor among private equity funds and could 0:11:53.800 --> 0:11:56.520 Vanguard's entrance into it be that. I mean, that's not 0:11:56.559 --> 0:11:59.400 what he said. We didn't get his response on that. 0:11:59.440 --> 0:12:01.760 We will have to have him back to discuss it, 0:12:01.840 --> 0:12:04.640 because it is a really interesting point. In other words, 0:12:04.679 --> 0:12:07.320 how much mainstreaming are you gonna end up seeing in 0:12:07.360 --> 0:12:10.120 the private equity industry? Paul, Yeah, And you know some people, 0:12:10.320 --> 0:12:12.920 you know, they see Vanguard and the likes of the Vanguards, 0:12:12.960 --> 0:12:15.040 you know, get into private equity that say top of 0:12:15.080 --> 0:12:18.320 the market when you know, as you were mentioning earlierly. So, 0:12:18.360 --> 0:12:21.079 there's so much capital flowing into the private equity space 0:12:21.120 --> 0:12:23.880 in the in the period before the pandemic, and there's 0:12:23.920 --> 0:12:26.360 not that many places to find good deals, and we 0:12:26.400 --> 0:12:29.079 saw this cash kind of piling up on the sidelines 0:12:29.160 --> 0:12:31.880 and the question is is there too much cast chasing 0:12:31.880 --> 0:12:36.160 too few deals? Uh? Pushing the prices up and returns down. 0:12:36.400 --> 0:12:39.400 I think the days of getting I R are those 0:12:39.440 --> 0:12:42.480 are certainly gone. And the questions can you get double 0:12:42.480 --> 0:12:46.240 digit consistent returns in the private equity market? If anything, though, 0:12:46.280 --> 0:12:49.840 Paul I will say that this downturn gives certain private 0:12:49.840 --> 0:12:53.880 equity firms certainly raising funds now a better chance of 0:12:53.920 --> 0:12:56.840 getting that I are going forward just given some of 0:12:56.880 --> 0:12:59.120 the valuations. Yes, and I think we're seeing a lot 0:12:59.160 --> 0:13:01.800 of money flow into a stress credit funds and uh, 0:13:02.000 --> 0:13:04.400 you know, you really if you can do your credit work, Uh, 0:13:04.440 --> 0:13:06.920 you know, certainly some returns there. So we thank fran 0:13:07.080 --> 0:13:10.160 Fran Canary, principle and global head of Private Investments at Vanguard, 0:13:10.559 --> 0:13:12.920 joining us here to talk about the private equity business 0:13:13.000 --> 0:13:16.920 and the opportunities in a pandemic world. This is Bloomberg. 0:13:20.760 --> 0:13:24.120 The people are starting to debate how this coronavirus and 0:13:24.160 --> 0:13:28.599 the will change economic will change consumer behavior? Is it 0:13:28.720 --> 0:13:31.640 changing consumer behavior and to what degree and across which 0:13:31.960 --> 0:13:34.280 activities you know, people are you know, as it relates 0:13:34.320 --> 0:13:37.400 to purchasing goods and services, people are doing more and 0:13:37.440 --> 0:13:39.520 more of it online and then when they do, in 0:13:39.559 --> 0:13:41.520 fact venture out to the stores, are they using more 0:13:41.600 --> 0:13:44.480 or less cash, deborit cards, credit cards, all that type 0:13:44.480 --> 0:13:48.200 of things. Fascinating to see how this pandemic will impact 0:13:48.200 --> 0:13:51.720 consumer behavior going forward as we think about payments and 0:13:51.760 --> 0:13:55.000 how we actually buy stuff when we're out in the stores. Uh. 0:13:55.040 --> 0:13:57.960 We're really fortunate to have Lynda Kirkpatrick, President for the 0:13:58.040 --> 0:14:01.280 U s issuers at MasterCard UH joining us. So, Lynda, 0:14:01.320 --> 0:14:04.079 give us a sense of what you're seeing in terms 0:14:04.120 --> 0:14:07.080 of the credit and debit card activity on your network. 0:14:07.120 --> 0:14:12.480 How is consumer behavior changing? Thanks? Called, Well, we've seen 0:14:12.600 --> 0:14:15.960 an increase in contactless payments in particular over the past 0:14:16.240 --> 0:14:19.120 couple of months. And you know, the payments industry has 0:14:19.160 --> 0:14:23.080 been investing in contact with capabilities for a while. So Linda, 0:14:23.640 --> 0:14:26.160 sorry to interrupt, but you know, to find what is 0:14:26.240 --> 0:14:29.160 contactless payments, because I find that it's much less prevalent 0:14:29.200 --> 0:14:32.280 in the US than it is, saying Europe. Yeah, that's right. 0:14:32.280 --> 0:14:36.240 Calls contactless is where you have technology that's embedded into 0:14:36.760 --> 0:14:40.040 a typical credit or debit cards that allows a consumer 0:14:40.640 --> 0:14:44.440 to tap their card at a terminal rather than inserting 0:14:44.440 --> 0:14:48.400 it or swiping it and avoiding contact with the terminal altogether. 0:14:48.560 --> 0:14:52.560 So it's using technology that prevents that contact with the 0:14:52.880 --> 0:14:55.720 with the register and it's just the safe and secure 0:14:55.800 --> 0:14:58.880 is every other product on the marketing fact that it 0:14:58.920 --> 0:15:03.760 has the safest UH technology embedded into into the card. 0:15:04.080 --> 0:15:06.160 UH and it's really a fast and easy way for 0:15:06.200 --> 0:15:11.320 consumers to go about their day and their purchases UH 0:15:11.360 --> 0:15:14.680 in general. So in with those with those payments, we've 0:15:14.720 --> 0:15:17.320 seen them in crease over the past few months. UH 0:15:17.360 --> 0:15:19.720 and and we believe this is a reflection of the 0:15:19.720 --> 0:15:23.160 current environment. We wanted to really under better understand how 0:15:23.240 --> 0:15:26.920 these consumer behaviors were changing and how we can support 0:15:27.360 --> 0:15:31.160 consumers and merchants as we moved through uh COVID nineteens. 0:15:31.160 --> 0:15:34.520 So we actually conducted a survey seventeen thousand people nineteen 0:15:34.520 --> 0:15:37.720 countries around the globe and UH of those we've surveyed, 0:15:37.800 --> 0:15:42.760 nearly of consumers say that they're now using some form 0:15:42.840 --> 0:15:46.640 of contactless payments and they cite safety, health and security 0:15:46.680 --> 0:15:49.400 reasons as as key drivers of that. And you know, 0:15:49.480 --> 0:15:54.800 Mastercard's own data shows that our contactless transactions grew twice 0:15:54.800 --> 0:15:57.760 as fast globally and three times as fast in the 0:15:57.880 --> 0:16:01.360 US as non contactless transactions in grocery and drug stores 0:16:01.360 --> 0:16:06.400 in particular. UH. So we are seeing arise in contactless 0:16:06.440 --> 0:16:08.520 both here in the US as well as markets outside 0:16:08.560 --> 0:16:11.640 the US. Even in our in our first quarter contactless 0:16:11.640 --> 0:16:17.200 transactions group forty per cent. I'm wondering, Linda, how easy 0:16:17.200 --> 0:16:20.880 it is to determine the shifts in the market right now, 0:16:21.360 --> 0:16:24.400 given how many people are staying at home and aren't 0:16:24.480 --> 0:16:27.360 spending as much, And if you could just speak to 0:16:27.520 --> 0:16:30.440 the not spending as much aspect a little bit as well, 0:16:30.920 --> 0:16:32.960 that might give people a sense of just how much 0:16:33.000 --> 0:16:37.080 spending has contracted. Yeah, you know what we're seeing with 0:16:37.120 --> 0:16:41.240 respect to consumer spending is it's really being focused in 0:16:41.280 --> 0:16:45.960 the food and pharmacy areas. So people are still absolutely spending. 0:16:45.960 --> 0:16:48.640 If you look at our transaction data and our purchase 0:16:48.720 --> 0:16:52.680 volume data, we're seeing, uh, we're seeing spend and we're 0:16:52.720 --> 0:16:56.120 seeing growth as of the end of the first quarter 0:16:56.360 --> 0:16:59.280 and into the second, but we're seeing it very concentrated 0:16:59.280 --> 0:17:03.560 in category that are everyday items and necessity items, and 0:17:03.960 --> 0:17:09.359 certainly digital and e commerce transactions have grown exponentially as well, 0:17:09.640 --> 0:17:13.320 So we've really seen a shift from uh, certain categories 0:17:13.359 --> 0:17:16.720 to other categories. But we are seeing sustained periods of 0:17:17.119 --> 0:17:21.920 spend and growth, and again, contactless Uh, ways to pay 0:17:22.400 --> 0:17:25.399 are are really on the rise because it you know, 0:17:25.400 --> 0:17:29.320 it's a product that lends itself to an environment where uh, 0:17:29.359 --> 0:17:32.159 you know, the CDC and other health officials are encouraging 0:17:32.200 --> 0:17:36.840 consumers not to come in contact with with cashiers and terminals. 0:17:36.840 --> 0:17:39.720 It's it's really the rough product at the right time, Linda, 0:17:39.800 --> 0:17:42.520 I'm wondering how difficult it is to get some of 0:17:42.560 --> 0:17:46.200 the stores that you partner with to invest in contact 0:17:46.280 --> 0:17:51.119 lists equipment now given their cash struggles. Yes, so the 0:17:51.160 --> 0:17:55.720 good news is that most merchants in the US have 0:17:55.880 --> 0:18:01.160 invested in contact with capability already. The upgraded the terminals 0:18:01.160 --> 0:18:05.040 to accept ship several years ago, and at this point 0:18:05.040 --> 0:18:08.920 we have six of our volume at MasterCard, actually close 0:18:08.960 --> 0:18:13.640 to sixty happening at terminals that have contactless capabilities. So 0:18:14.040 --> 0:18:18.000 acceptance by and large is is there. Uh. And we 0:18:18.080 --> 0:18:23.720 actually had great commitments from are issuing financial institutions to 0:18:23.960 --> 0:18:26.800 issue those contactless cards, and many of them now are 0:18:26.840 --> 0:18:30.720 already in market. Uh. So we're now seeing the benefit 0:18:30.760 --> 0:18:33.040 of that investment on the merchant side and the bank 0:18:33.119 --> 0:18:36.600 side as consumers are using these products more readily. You know, 0:18:36.640 --> 0:18:41.240 we wouldn't have anticipated when we started this journey UH 0:18:41.280 --> 0:18:45.520 several years ago towards you know, chip and contactless that uh, 0:18:45.680 --> 0:18:47.679 that we would have a pandemic that would make it 0:18:47.720 --> 0:18:50.280 ever more relevant. But but certainly now we have the 0:18:50.320 --> 0:18:53.560 health benefits in additions to safety and security benefits that 0:18:53.640 --> 0:18:57.360 contactless spring. Linda Kirkpatrick, thank you so much for being 0:18:57.359 --> 0:18:59.800 with US. President of US issue or as at MasterCard 0:19:00.200 --> 0:19:06.440 based in New York, Well shares of grub Hub yesterday 0:19:06.600 --> 0:19:10.600 searched as much as thirty nine percent after reports that 0:19:10.800 --> 0:19:15.359 Uber was planning to buy the food delivery company grub Hub. 0:19:15.440 --> 0:19:17.560 The question is a will it get through and be 0:19:17.880 --> 0:19:20.960 What is the goal in the combination of both of 0:19:21.000 --> 0:19:23.879 these companies joining US now as man Deep Singh, senior 0:19:23.920 --> 0:19:27.280 tech industry analyst at Bloomberg Intelligence, So what would Uber 0:19:27.880 --> 0:19:32.560 be looking to do with an acquisition of grub Hub. Sure, 0:19:32.720 --> 0:19:35.959 so one of the things that they are targeting is 0:19:36.080 --> 0:19:40.920 you know, positive even profitability. Obviously they set the goal 0:19:41.000 --> 0:19:43.520 for for Q twenty. We don't think that's going to 0:19:43.640 --> 0:19:46.119 happen even by the way, a whole lot of second, 0:19:46.280 --> 0:19:48.440 I'm not letting you get away with that. Basically, they're 0:19:48.440 --> 0:19:50.439 hoping to actually turn a profit at some point in 0:19:50.480 --> 0:19:55.000 life while they were trying to. But I think they 0:19:55.000 --> 0:19:59.639 were hit really badly with this COVID situation. Uh, Sadara 0:19:59.760 --> 0:20:04.040 say his businesses recession proves, but it seems, uh, you know, 0:20:04.119 --> 0:20:07.120 the volumes are done about fifty to sixt in core 0:20:07.280 --> 0:20:10.800 ride sharing, and now it's a matter of can this 0:20:11.160 --> 0:20:15.399 be a growth company? And investors are rethinking the whole 0:20:15.600 --> 0:20:19.280 notion of you know, Uber having a long addressable market 0:20:19.440 --> 0:20:23.239 where it can keep growing you know, every year. That 0:20:23.400 --> 0:20:26.560 is out of the window simply because white sharing at 0:20:26.600 --> 0:20:30.680 its core is declining, like I said, in volume, and 0:20:30.720 --> 0:20:32.960 we don't know when it will come back. Yes, the 0:20:33.000 --> 0:20:36.639 social distancing will be in effect for the foreseeable future, 0:20:37.000 --> 0:20:40.240 and even if things open up, the volumes are not 0:20:40.320 --> 0:20:42.840 going to come back right away. So we are talking 0:20:42.880 --> 0:20:47.720 about desoleration of pronounced deceleration in top line. And I 0:20:47.760 --> 0:20:50.919 think this is just an attempt to boost in organic growth. 0:20:50.960 --> 0:20:53.640 So grub hub kind of gives them one point five 0:20:53.680 --> 0:20:57.480 billion dollars in revenue, It helps them consolidate market share 0:20:57.520 --> 0:21:01.000 and really lower cash burn. That's key because they were 0:21:01.080 --> 0:21:05.480 losing fifty cents on every dollar of revenue in Uber red. 0:21:05.600 --> 0:21:08.560 So this kind of at least helps them lure that 0:21:08.680 --> 0:21:12.399 cash burn, which I think is extremely important given you know, 0:21:12.480 --> 0:21:16.800 the concern around liquidity for both Uber and Left so 0:21:16.840 --> 0:21:20.520 many deposition you know, acquisition, potential acquisition of growth hub. 0:21:21.280 --> 0:21:24.600 Kind of a tacit admission that the core right sharing 0:21:24.640 --> 0:21:28.879 business will not return to the growth rates it was 0:21:29.080 --> 0:21:33.360 before the pandemic, that maybe consumer behavior will be permanently altered, 0:21:33.520 --> 0:21:35.560 and one of the areas that may be altered. Is 0:21:35.600 --> 0:21:39.600 this the whole concept of right sharing. I wouldn't call 0:21:39.640 --> 0:21:43.399 it permanently altered, but I think for the foreseeable future, 0:21:43.560 --> 0:21:47.320 right sharing isn't coming back to the historical levels we 0:21:47.359 --> 0:21:51.359 have seen. And the fact that Uber is doubling down 0:21:51.480 --> 0:21:55.199 on food delivery, which is a lower growth margin business 0:21:55.359 --> 0:21:58.919 where they're losing money, just goes to show how desperate 0:21:59.000 --> 0:22:02.520 they are to at least push that top line. Because 0:22:02.600 --> 0:22:05.760 the last thing you want as Uber, you know, a 0:22:05.760 --> 0:22:09.720 company that has got scale and network effects, is to 0:22:10.280 --> 0:22:13.680 have you know, decline in top line growth. And that 0:22:13.960 --> 0:22:16.920 is very much of a possibility if this doesn't happen, 0:22:17.040 --> 0:22:22.199 because the core business is, like I said, declining at 0:22:22.240 --> 0:22:25.480 least for the next two quarters. There's a question Mandy 0:22:25.640 --> 0:22:29.639 it's a larger question about whether the sharing economy that 0:22:29.760 --> 0:22:32.280 was touted by so many of these tech startups and 0:22:32.320 --> 0:22:37.000 growth companies is dead in an era post pandemic. When 0:22:37.000 --> 0:22:39.480 you talk to individuals and when you look at the 0:22:39.520 --> 0:22:43.240 actual traffic at Uber and Left and how it's starting 0:22:43.240 --> 0:22:46.000 to recover in places that might be exiting the lockdown. 0:22:46.280 --> 0:22:49.520 There aren't many where Uber and Left have presents, But 0:22:49.680 --> 0:22:52.720 just in terms of the path forward, what are you 0:22:52.760 --> 0:22:57.719 hearing on that front? Well, so look at Airbnb and 0:22:57.800 --> 0:23:01.159 you know pretty much everybody, uh you know on the 0:23:01.160 --> 0:23:04.480 food delivery side is also part of the economy, and 0:23:04.960 --> 0:23:08.199 I think they do serve a purpose at the end 0:23:08.240 --> 0:23:11.400 of the day. They're all part of going digital and 0:23:11.440 --> 0:23:16.000 you know, helping improve utilization. The problem is just the 0:23:16.080 --> 0:23:19.720 cash burn. These business models are just not sustainable, and 0:23:19.760 --> 0:23:23.399 I think what covid situation has done is really brought 0:23:23.440 --> 0:23:26.600