1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,720 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 7 00:00:32,960 --> 00:00:35,400 Speaker 1: we've had some mixed results out of retailers, but one 8 00:00:35,400 --> 00:00:38,360 Speaker 1: really positive one was out of Target earlier today. The 9 00:00:38,479 --> 00:00:42,559 Speaker 1: shares UH surged more than four percent initially, but have 10 00:00:42,680 --> 00:00:45,240 Speaker 1: retraced some of those gains and are up a little 11 00:00:45,240 --> 00:00:47,440 Speaker 1: bit more than three percent now. To give a better 12 00:00:47,479 --> 00:00:51,519 Speaker 1: sense of what was driving the positive better than expected 13 00:00:51,520 --> 00:00:54,880 Speaker 1: returns for Target and what this might mean for Walmart, 14 00:00:54,920 --> 00:00:57,800 Speaker 1: is Scott Mushkin. He's managing director and senior staples retail 15 00:00:57,840 --> 00:01:02,200 Speaker 1: analyst for Wolf Research in New York City. Scott first 16 00:01:02,560 --> 00:01:06,200 Speaker 1: with Target, I mean, was there anything negative here or 17 00:01:06,319 --> 00:01:08,920 Speaker 1: was this just, you know, unrelentingly a positive scene And 18 00:01:08,959 --> 00:01:12,160 Speaker 1: how did they turn around their outlooks so much? Yeah? 19 00:01:12,160 --> 00:01:13,600 Speaker 1: I mean I think if you look at the quarter, 20 00:01:13,640 --> 00:01:17,160 Speaker 1: it was just straight out positive. Um, you know, as 21 00:01:17,200 --> 00:01:19,680 Speaker 1: we look across our sector staples retail, and we also 22 00:01:19,720 --> 00:01:22,360 Speaker 1: do some of the hardline names like home depot Um. 23 00:01:22,440 --> 00:01:25,040 Speaker 1: People are just outperforming right now. The economy strong, we 24 00:01:25,160 --> 00:01:28,959 Speaker 1: got low, very low unemployment rate, Wage growth has been percolating. 25 00:01:29,000 --> 00:01:31,679 Speaker 1: The stock market everyone knows has been on fire. Housing 26 00:01:31,720 --> 00:01:34,000 Speaker 1: markets good and so what we've been saying to people, 27 00:01:34,040 --> 00:01:37,080 Speaker 1: if you're not doing well, now, when will you do well? 28 00:01:37,760 --> 00:01:39,360 Speaker 1: But I would, you know, throw a little cold water 29 00:01:39,400 --> 00:01:41,360 Speaker 1: on that. For Target, I mean, their numbers are still 30 00:01:41,400 --> 00:01:44,000 Speaker 1: going to be down year over year, uh, their ebit, 31 00:01:44,520 --> 00:01:47,560 Speaker 1: their earnings will be down. So you know, while it's 32 00:01:47,560 --> 00:01:49,760 Speaker 1: definitely much better than they thought they were going to 33 00:01:49,800 --> 00:01:51,560 Speaker 1: do at the start of the year, you know, Target 34 00:01:51,600 --> 00:01:54,720 Speaker 1: does still face some significant headwinds in this business. And 35 00:01:54,760 --> 00:01:57,240 Speaker 1: just to put perspective in stock gains today, the shares 36 00:01:57,240 --> 00:01:59,640 Speaker 1: are still down about year to date. So this has 37 00:01:59,680 --> 00:02:02,400 Speaker 1: been you know, you say, everybody has been doing well 38 00:02:02,440 --> 00:02:04,840 Speaker 1: at least in the stock world. Targets certainly hasn't. Other 39 00:02:04,880 --> 00:02:08,239 Speaker 1: retailers have also. Retailers have also gotten beaten up. Also 40 00:02:08,320 --> 00:02:10,720 Speaker 1: coach I should mention as well as Dick Sporting Goods 41 00:02:10,720 --> 00:02:14,880 Speaker 1: this week have gotten just crushed after worse than expected earnings, 42 00:02:14,919 --> 00:02:19,040 Speaker 1: so it hasn't been a uniformly positive situation. I want 43 00:02:19,040 --> 00:02:23,240 Speaker 1: to ask specifically about Targets online presence because this has 44 00:02:23,280 --> 00:02:27,160 Speaker 1: been a huge challenge in its fight with Amazon, and 45 00:02:27,200 --> 00:02:29,400 Speaker 1: can you give us an update on kind of how 46 00:02:29,480 --> 00:02:32,080 Speaker 1: much it's adapted to an online format and what the 47 00:02:32,080 --> 00:02:34,520 Speaker 1: growth has been like there. Yeah, I mean the growth 48 00:02:34,520 --> 00:02:37,320 Speaker 1: has been really strong. I think they were up in 49 00:02:37,400 --> 00:02:41,160 Speaker 1: the quarter um and you know they're you know, they're 50 00:02:41,160 --> 00:02:45,160 Speaker 1: on a collision course. Targeting in Amazon a very significant one. 51 00:02:45,600 --> 00:02:48,840 Speaker 1: One of the things Targets doing is Target Restock, which 52 00:02:48,919 --> 00:02:51,600 Speaker 1: is consumable items. If you order it by two pm, 53 00:02:51,800 --> 00:02:54,480 Speaker 1: you get it the next day, uh, for kind of 54 00:02:54,680 --> 00:02:59,000 Speaker 1: reordable consumables. It's really right aimed at what Amazon is 55 00:02:59,040 --> 00:03:01,400 Speaker 1: doing with Amazon Now out on Amazon next Day with 56 00:03:01,440 --> 00:03:05,120 Speaker 1: their Prime membership and of course subscribe and save. And 57 00:03:05,280 --> 00:03:08,080 Speaker 1: this is our caution with the space and and I 58 00:03:08,120 --> 00:03:09,960 Speaker 1: think you said, you know, not everyone's doing well, and 59 00:03:09,960 --> 00:03:12,840 Speaker 1: that's correct, but sales for a lot of people have 60 00:03:12,960 --> 00:03:15,240 Speaker 1: gotten a little bit better. But the problem with that 61 00:03:15,440 --> 00:03:19,320 Speaker 1: is it's costing a lot to generate those sales. And 62 00:03:19,360 --> 00:03:21,000 Speaker 1: that's going to be the same thing with Target when 63 00:03:21,040 --> 00:03:23,080 Speaker 1: they when they expand into e commerce. They go all 64 00:03:23,160 --> 00:03:28,160 Speaker 1: these programs, same day delivery, stores doing delivery. The question 65 00:03:28,280 --> 00:03:31,959 Speaker 1: is will Target make more money three years from now 66 00:03:32,000 --> 00:03:35,840 Speaker 1: than it does today? And given the battle and suing 67 00:03:35,840 --> 00:03:38,960 Speaker 1: with Amazon, battle and suing with Walmart, it's really hard 68 00:03:39,040 --> 00:03:41,040 Speaker 1: to see that it's just going to cost more to 69 00:03:41,080 --> 00:03:44,000 Speaker 1: do business. This is this is a really fascinating point. 70 00:03:44,000 --> 00:03:46,520 Speaker 1: In other words, people say, well, they need to adopt 71 00:03:46,600 --> 00:03:50,240 Speaker 1: the online reality of today, and yet to do so 72 00:03:50,720 --> 00:03:53,320 Speaker 1: costs a lot of money. So you know, whether they 73 00:03:53,320 --> 00:03:56,840 Speaker 1: can increase their sales enough to overcome and then some 74 00:03:57,360 --> 00:04:00,600 Speaker 1: those costs is a big question. Mark can just get 75 00:04:00,640 --> 00:04:03,320 Speaker 1: a little bit more granular about what the costs are. 76 00:04:03,440 --> 00:04:05,800 Speaker 1: I mean, it wouldn't they rely on you know, a 77 00:04:05,880 --> 00:04:09,520 Speaker 1: FedEx or UPS or US postal service, And I mean 78 00:04:09,760 --> 00:04:12,720 Speaker 1: where where's the big costs going to come from? Yeah, 79 00:04:12,760 --> 00:04:14,680 Speaker 1: I mean, I mean you nailed it with what you said, 80 00:04:14,760 --> 00:04:18,840 Speaker 1: and so I mean the cost is basically, um, you're 81 00:04:18,839 --> 00:04:21,320 Speaker 1: having to when customers used to drive to your store 82 00:04:21,400 --> 00:04:24,520 Speaker 1: pick the stuff off them shulves the shelves themselves. Now 83 00:04:24,640 --> 00:04:26,880 Speaker 1: what you have to do is either set up a 84 00:04:26,880 --> 00:04:30,479 Speaker 1: whole distribution network to deal with them online or pick 85 00:04:30,560 --> 00:04:33,720 Speaker 1: the stuff off the shelves yourself and either have them 86 00:04:33,720 --> 00:04:36,039 Speaker 1: pick it up or send it out to them. I mean, 87 00:04:36,080 --> 00:04:39,520 Speaker 1: the margin hit can be anywhere from you know, five 88 00:04:39,960 --> 00:04:43,479 Speaker 1: basis points to you're not making any money. Uh, And 89 00:04:43,600 --> 00:04:48,000 Speaker 1: this is really the challenge facing all retail. On top 90 00:04:48,040 --> 00:04:49,920 Speaker 1: of it, everyone has too many stores. The stores are 91 00:04:49,920 --> 00:04:51,800 Speaker 1: too big. I mean, you can go through the litany 92 00:04:51,839 --> 00:04:55,919 Speaker 1: of challenges um and demographics is another challenge where we 93 00:04:55,960 --> 00:04:58,839 Speaker 1: just don't have as many people having kids. So you know, 94 00:04:58,880 --> 00:05:00,920 Speaker 1: Targets got a lot in front of it, a lot 95 00:05:00,960 --> 00:05:03,120 Speaker 1: of tight But you got to hand it to the team. 96 00:05:03,120 --> 00:05:06,040 Speaker 1: They're working really hard to address these things. It's just 97 00:05:06,360 --> 00:05:09,600 Speaker 1: from an equity investor's perspective, or you're gonna have more 98 00:05:09,640 --> 00:05:11,479 Speaker 1: money in your pocket in three years or less, it 99 00:05:11,520 --> 00:05:13,640 Speaker 1: looks like it's going to be less. And that's why 100 00:05:13,640 --> 00:05:16,680 Speaker 1: we remain pretty negative on the stock. So just looking ahead, 101 00:05:16,720 --> 00:05:20,000 Speaker 1: So Walmart's going to be reporting earnings tomorrow and it 102 00:05:20,080 --> 00:05:22,960 Speaker 1: shares her down just to touch less than two tents 103 00:05:22,960 --> 00:05:25,680 Speaker 1: of a percent, And I just have to wonder whether 104 00:05:25,880 --> 00:05:28,440 Speaker 1: Walmart's shared dip, if you can even call it, that 105 00:05:29,200 --> 00:05:32,320 Speaker 1: is a direct response to targets positive earnings because there 106 00:05:32,320 --> 00:05:34,719 Speaker 1: seems to be a sort of fixed pool that the 107 00:05:34,760 --> 00:05:37,600 Speaker 1: two are fighting over and when one does better, the 108 00:05:37,640 --> 00:05:40,719 Speaker 1: other is going to do worse. Is that a proper interpretation? 109 00:05:41,279 --> 00:05:43,120 Speaker 1: I mean, I think that's a huge concern. Right, Like 110 00:05:43,120 --> 00:05:46,400 Speaker 1: we've you know, we've seen Amazon report their sales are 111 00:05:46,400 --> 00:05:50,479 Speaker 1: better than expected, targets sales are better than expected. Walmart 112 00:05:50,560 --> 00:05:52,640 Speaker 1: I think is doing you know, decently. Well, I'm not 113 00:05:52,680 --> 00:05:56,560 Speaker 1: sure that their sales have accelerated thus far this year. Um, 114 00:05:56,600 --> 00:05:59,120 Speaker 1: you know, Walmart is really an interesting company where you know, 115 00:05:59,560 --> 00:06:03,279 Speaker 1: invest is gravitated towards it so much this year. But 116 00:06:03,320 --> 00:06:05,720 Speaker 1: if you look at the numbers, some fascinating numbers here 117 00:06:06,080 --> 00:06:09,680 Speaker 1: EBITDA at Walmart, is actually looks like this year will 118 00:06:09,680 --> 00:06:11,400 Speaker 1: be the same as it was in two thousand and 119 00:06:11,440 --> 00:06:13,880 Speaker 1: eleven and net earnings the same as they were in 120 00:06:13,880 --> 00:06:17,120 Speaker 1: two thousand and eight. Yet the stock is like thirty 121 00:06:17,160 --> 00:06:20,000 Speaker 1: dollars higher. So what I've been saying to people is 122 00:06:20,000 --> 00:06:22,520 Speaker 1: that company better ripped the kill not to cover off 123 00:06:22,520 --> 00:06:25,559 Speaker 1: the ball tomorrow, or you probably have some downside because 124 00:06:25,600 --> 00:06:30,440 Speaker 1: it's really seen significant equity appreciation and anticipation of a 125 00:06:31,040 --> 00:06:33,640 Speaker 1: of a turnaround, and you know, we were made really 126 00:06:33,680 --> 00:06:35,320 Speaker 1: cautious into the back half of the year on the 127 00:06:35,480 --> 00:06:39,479 Speaker 1: entire space. As Amazon continues to add fulfillment centers, it's 128 00:06:39,520 --> 00:06:40,960 Speaker 1: just going to be a blood bath as we get 129 00:06:41,000 --> 00:06:44,080 Speaker 1: to your end, a blood bath within Walmart as well 130 00:06:44,080 --> 00:06:47,080 Speaker 1: target the Walmart target and where you've even gotten a 131 00:06:47,080 --> 00:06:49,599 Speaker 1: little bit more nervous around Amazon. We took our rating 132 00:06:49,640 --> 00:06:54,880 Speaker 1: from out perform down to appear perform. It's just everybody's 133 00:06:54,920 --> 00:06:56,839 Speaker 1: gearing up. We call it the clash of the Titans 134 00:06:56,880 --> 00:06:59,880 Speaker 1: between Amazon and Walmart. But if you've been following anything, 135 00:06:59,880 --> 00:07:02,680 Speaker 1: you know some of these small regional grocers they're adding 136 00:07:02,760 --> 00:07:05,359 Speaker 1: online capabilities. I mean, this is just going to be 137 00:07:05,440 --> 00:07:08,320 Speaker 1: a trench war and it's going to be long, and 138 00:07:08,360 --> 00:07:11,160 Speaker 1: it's gonna be hard. And just to sort of extrapolate out, 139 00:07:11,160 --> 00:07:13,120 Speaker 1: when you talk about a blood bath, are you talking 140 00:07:13,160 --> 00:07:16,560 Speaker 1: about steep discounts that will end up eating into the 141 00:07:16,560 --> 00:07:20,040 Speaker 1: bottom line, expenditures for distribution networks that are going to 142 00:07:20,120 --> 00:07:22,640 Speaker 1: eat into the bottom line, as well as a losing 143 00:07:22,680 --> 00:07:24,680 Speaker 1: market share which will also eat into the bottom line. 144 00:07:24,720 --> 00:07:27,600 Speaker 1: Is that sort of the trifecta you're viewing again, you 145 00:07:27,680 --> 00:07:30,560 Speaker 1: nailed it, Yeah, I mean that's the trifecta, like that's 146 00:07:30,560 --> 00:07:32,200 Speaker 1: our big concern as we get to the back half 147 00:07:32,200 --> 00:07:36,640 Speaker 1: and I actually add one more labor costs rising rapidly 148 00:07:37,320 --> 00:07:39,760 Speaker 1: UM and so this is an issue for the companies too. 149 00:07:39,840 --> 00:07:42,360 Speaker 1: So you know the theme, it's just costing more to 150 00:07:42,360 --> 00:07:45,760 Speaker 1: do business. Returns are coming down, it's harder to generate 151 00:07:45,800 --> 00:07:50,360 Speaker 1: those sales makes and and you know, everyone knows what 152 00:07:50,400 --> 00:07:54,400 Speaker 1: happened last year last holiday period. Everyone's gearing up. These 153 00:07:54,400 --> 00:07:57,480 Speaker 1: businesses can't afford to lose the traffic, to lose the share. 154 00:07:58,120 --> 00:08:00,120 Speaker 1: And if you listen to the Target conference called they 155 00:08:00,120 --> 00:08:03,440 Speaker 1: were they had hints of caution around their fourth quarter 156 00:08:03,880 --> 00:08:05,840 Speaker 1: because they know they've got to keep the traffic. They 157 00:08:05,880 --> 00:08:08,200 Speaker 1: know they've got to keep the share, and one of 158 00:08:08,200 --> 00:08:10,400 Speaker 1: the best ways to do that is to get more promotional, 159 00:08:10,480 --> 00:08:13,600 Speaker 1: get more aggressive, throw more labor at the stores. UM. 160 00:08:13,640 --> 00:08:16,560 Speaker 1: So we're not looking for a very you know, a 161 00:08:16,640 --> 00:08:19,720 Speaker 1: very good fourth quarter out of retail um. You know, 162 00:08:19,760 --> 00:08:22,239 Speaker 1: the one saving grace. Maybe the economy. Economy is definitely 163 00:08:22,240 --> 00:08:24,720 Speaker 1: picked up. Maybe that will will help, but will it 164 00:08:24,720 --> 00:08:28,960 Speaker 1: be enough. Scott Mushkin with some rather sobering words about 165 00:08:29,000 --> 00:08:31,680 Speaker 1: the entire retailer industry. Scott Mushkin is managing director and 166 00:08:31,720 --> 00:08:47,240 Speaker 1: senior Staples Retail and US at Wolf Research in New York. Well, 167 00:08:47,280 --> 00:08:49,600 Speaker 1: they might be expressing concerns about aluminium, but they are 168 00:08:49,600 --> 00:08:54,960 Speaker 1: certainly not expressing concerns about bitcoin. Bitcoin has surged eighty 169 00:08:55,240 --> 00:08:59,840 Speaker 1: nine percent since mid July, shocking rally that has some 170 00:09:00,240 --> 00:09:02,880 Speaker 1: scratching their heads and wondering how long this can last. 171 00:09:03,120 --> 00:09:06,000 Speaker 1: Josh Deppman joins US now he's president of Fintech Investment 172 00:09:06,080 --> 00:09:09,160 Speaker 1: Group UH and Josh, I want to get your sense 173 00:09:09,200 --> 00:09:13,160 Speaker 1: of what exactly has been behind the acceleration in the 174 00:09:13,240 --> 00:09:16,959 Speaker 1: rally and bitcoin that we've seen over the past few weeks. Well, personally, 175 00:09:17,000 --> 00:09:21,040 Speaker 1: I believe that bitcoin is an excellent store of value, 176 00:09:21,080 --> 00:09:23,959 Speaker 1: and people are starting to realize that with the stock 177 00:09:24,000 --> 00:09:26,920 Speaker 1: market at all time highs, no interest rate in any 178 00:09:26,960 --> 00:09:31,640 Speaker 1: bearing securities, that bitcoin actually can serve as an impetus 179 00:09:31,720 --> 00:09:34,840 Speaker 1: to go even higher and maybe even two five thousand 180 00:09:34,840 --> 00:09:36,920 Speaker 1: by the end of this month, And currently it is 181 00:09:37,000 --> 00:09:42,200 Speaker 1: at about four thousand, So it's you're expecting it to 182 00:09:42,240 --> 00:09:45,440 Speaker 1: climb another good chunk by the end of this month. 183 00:09:45,720 --> 00:09:47,160 Speaker 1: You know, I hear what you're saying, and this is 184 00:09:47,200 --> 00:09:49,120 Speaker 1: something that a lot of people have said, which is 185 00:09:49,600 --> 00:09:52,560 Speaker 1: as central banks seek to devalue their currencies are at 186 00:09:52,640 --> 00:09:56,880 Speaker 1: least buy assets and in parking these stimulus efforts, that 187 00:09:57,040 --> 00:10:00,600 Speaker 1: why not go into a cryptocurrency that's backed by uh, 188 00:10:00,600 --> 00:10:04,760 Speaker 1: this sort of blockchain technology in this sense of sort 189 00:10:04,760 --> 00:10:09,000 Speaker 1: of communal creation of what it means to have a currency. 190 00:10:09,040 --> 00:10:11,320 Speaker 1: At the same time, nothing really has happened in the 191 00:10:11,360 --> 00:10:14,280 Speaker 1: past few weeks to sort of, uh indicate that it's 192 00:10:14,320 --> 00:10:16,480 Speaker 1: more of a good time to go into this than 193 00:10:16,600 --> 00:10:19,520 Speaker 1: than in the past. Right. Well, I mean, you know, 194 00:10:19,559 --> 00:10:22,160 Speaker 1: the key is that it is a store of value, 195 00:10:22,400 --> 00:10:24,280 Speaker 1: that there is a limited supply. And one of the 196 00:10:24,320 --> 00:10:27,360 Speaker 1: things that's great about bitcoin, uh is that you know, 197 00:10:27,440 --> 00:10:30,280 Speaker 1: it is a kind of a ubiquitous coin even though 198 00:10:30,320 --> 00:10:32,280 Speaker 1: that it you know, it does have a limited amount 199 00:10:32,280 --> 00:10:34,199 Speaker 1: that can be there. People have heard of it, People 200 00:10:34,240 --> 00:10:36,840 Speaker 1: know of it, and there's more and more adoption in 201 00:10:36,960 --> 00:10:40,600 Speaker 1: retail and businesses that are willing to take bitcoin. You pay, 202 00:10:40,400 --> 00:10:43,120 Speaker 1: you pay your employees in bitcoin, right, yeah, we do. 203 00:10:43,240 --> 00:10:45,160 Speaker 1: They have that option, yes, and the ones that have 204 00:10:46,120 --> 00:10:48,880 Speaker 1: received their paying bitcoin are much more happy than the 205 00:10:48,880 --> 00:10:52,400 Speaker 1: ones who have taken the fiat currency lately. Do you 206 00:10:52,160 --> 00:10:57,400 Speaker 1: do you personally spend bitcoin at retailers? Uh? We do um, 207 00:10:57,440 --> 00:11:00,120 Speaker 1: you know, in where I live in the land or 208 00:11:00,160 --> 00:11:03,600 Speaker 1: that there aren't a lot of places that accept bitcoin. 209 00:11:04,360 --> 00:11:05,920 Speaker 1: But when we're on the road, you know, if if 210 00:11:05,960 --> 00:11:08,839 Speaker 1: there's an ability to pay for it in bitcoin, we do, 211 00:11:09,960 --> 00:11:12,520 Speaker 1: so I have to wonder, you know, A big question 212 00:11:12,559 --> 00:11:15,960 Speaker 1: mark about bitcoin is, yes, there might be a limited 213 00:11:16,080 --> 00:11:20,880 Speaker 1: store of the cryptocurrency, but nothing's backing it and it's 214 00:11:20,920 --> 00:11:26,080 Speaker 1: not adopted by any nation. And normally a currency is 215 00:11:26,080 --> 00:11:28,560 Speaker 1: thought to be something that is backed by the good 216 00:11:28,600 --> 00:11:33,600 Speaker 1: faith and the economic engine of a country. That's not 217 00:11:33,640 --> 00:11:36,280 Speaker 1: the case here. Well, no, it isn't. And quite frankly, 218 00:11:36,320 --> 00:11:39,880 Speaker 1: the cryptocurrency is kind of a misnomer. Uh. These are 219 00:11:40,000 --> 00:11:43,840 Speaker 1: these are commodities, these are digital assets. There's no ownership, 220 00:11:44,400 --> 00:11:46,400 Speaker 1: you don't have voting rights. There's a lot of things 221 00:11:46,440 --> 00:11:49,120 Speaker 1: that you don't have with bitcoin that you would say 222 00:11:49,120 --> 00:11:51,760 Speaker 1: in a security like you know, shares of Microsoft or 223 00:11:51,760 --> 00:11:55,319 Speaker 1: what have you. However, because there is a limited avout 224 00:11:55,360 --> 00:11:58,040 Speaker 1: of value and there is no central government that could 225 00:11:58,080 --> 00:12:02,280 Speaker 1: come in and uh mess around with changing rates, adding liquidity, 226 00:12:02,360 --> 00:12:06,719 Speaker 1: taking away liquidity. Uh, there is a certain stability with 227 00:12:06,840 --> 00:12:10,240 Speaker 1: that model that lends itself for some trust and some 228 00:12:10,280 --> 00:12:13,480 Speaker 1: beliefs and Uh. I think that's why people are migrating 229 00:12:13,520 --> 00:12:17,200 Speaker 1: to it, because they see what a disaster the central 230 00:12:17,240 --> 00:12:20,240 Speaker 1: banks have become. And you know, anything that's regulated by 231 00:12:20,280 --> 00:12:23,440 Speaker 1: the government has a tendency to uh just become more 232 00:12:23,480 --> 00:12:25,280 Speaker 1: and more regulated. You know. I take issue with the 233 00:12:25,360 --> 00:12:28,600 Speaker 1: idea that the central banks have become disasters because some 234 00:12:28,679 --> 00:12:30,960 Speaker 1: would say that they stepped in and they prevented another, 235 00:12:31,320 --> 00:12:35,480 Speaker 1: uh financial crisis that was at least another great recession, 236 00:12:35,520 --> 00:12:38,280 Speaker 1: great depression, as as what we saw in the thirties. 237 00:12:38,320 --> 00:12:40,040 Speaker 1: So you know, I mean some people could say that 238 00:12:40,080 --> 00:12:41,640 Speaker 1: they did what they needed to do and we haven't 239 00:12:41,640 --> 00:12:46,040 Speaker 1: seen rampant inflation and the economy has continued to grind higher, 240 00:12:46,200 --> 00:12:49,160 Speaker 1: So you know, there is this feeling. Yes, central banks 241 00:12:49,160 --> 00:12:52,199 Speaker 1: have certainly stepped into the markets and it propped them 242 00:12:52,240 --> 00:12:54,800 Speaker 1: up in a big way. But I do have to, 243 00:12:55,120 --> 00:12:57,000 Speaker 1: uh take issue with that. And I also have to 244 00:12:57,080 --> 00:12:58,800 Speaker 1: question one other thing that you're you're saying, which is 245 00:12:58,920 --> 00:13:04,079 Speaker 1: ubiquitousness of bitcoin. I have yet to see a retailer 246 00:13:04,080 --> 00:13:06,000 Speaker 1: that has a sign up that says we accept bitcoin. 247 00:13:06,120 --> 00:13:09,520 Speaker 1: Where is this cryptocurrency ubiquitous and sort of where is 248 00:13:09,520 --> 00:13:11,680 Speaker 1: it accepted? That sort of gives you the sense that 249 00:13:11,720 --> 00:13:14,000 Speaker 1: it's a long lasting I mean, you can buy stuff 250 00:13:14,040 --> 00:13:18,280 Speaker 1: on on overstock, dot com, Virgin Atlantic, Dell Computers, Starbucks 251 00:13:18,320 --> 00:13:22,880 Speaker 1: has uh venues where you can pay in bitcoin. Um, 252 00:13:22,920 --> 00:13:26,440 Speaker 1: there will be more uh And and if if the 253 00:13:26,760 --> 00:13:29,760 Speaker 1: segment that's happening is coming out, it's going to allow 254 00:13:30,080 --> 00:13:34,079 Speaker 1: the transaction time to be greatly increased, and then therefore 255 00:13:34,480 --> 00:13:37,160 Speaker 1: it'll be a lot easier to pay in bitcoin. Uh. 256 00:13:37,200 --> 00:13:39,000 Speaker 1: And that's something that's coming up here in the next 257 00:13:39,040 --> 00:13:41,200 Speaker 1: month or so. And if if that happens, which we 258 00:13:41,240 --> 00:13:44,000 Speaker 1: believe it will, we believe they'll be even more increased 259 00:13:44,040 --> 00:13:48,080 Speaker 1: acceptance of bitcoin. In other words, if people can transact 260 00:13:48,120 --> 00:13:50,480 Speaker 1: with bitcoin, not only can they do it more quickly, 261 00:13:50,520 --> 00:13:53,559 Speaker 1: but also I assume the settlement and the back office 262 00:13:53,640 --> 00:13:56,240 Speaker 1: costs will also be reduced. Correct, That is correct. So 263 00:13:56,320 --> 00:13:59,079 Speaker 1: that's a big piece of it as well. Right, absolutely, So, 264 00:13:59,360 --> 00:14:01,120 Speaker 1: are more of your eployees asking to be paid in 265 00:14:01,160 --> 00:14:04,160 Speaker 1: bitcoin these days? Yes? They are? What proportion of your 266 00:14:04,160 --> 00:14:08,240 Speaker 1: employees are paid in bitcoin? Uh? Probably, um, you know, 267 00:14:08,280 --> 00:14:11,800 Speaker 1: and we we allow them, um, you know, to access 268 00:14:11,840 --> 00:14:16,240 Speaker 1: coins that that we mind ourselves. Uh. And basically we 269 00:14:16,440 --> 00:14:19,320 Speaker 1: think that uh, you know, at least for the time 270 00:14:19,360 --> 00:14:22,200 Speaker 1: being we think that the more more are going to 271 00:14:22,240 --> 00:14:24,640 Speaker 1: be paid in bitcoin. Josh Detman, thank you so much 272 00:14:24,680 --> 00:14:27,520 Speaker 1: for joining me. Uh, such an interesting area. I'm looking 273 00:14:27,560 --> 00:14:29,400 Speaker 1: at the chart right now. It is a kind of 274 00:14:29,440 --> 00:14:32,720 Speaker 1: mind blowing to see the rally. It looks like a 275 00:14:32,840 --> 00:14:36,800 Speaker 1: rocket taking off of bitcoin's value. Josh Dettman as president 276 00:14:36,840 --> 00:14:40,640 Speaker 1: of Fintech Investment Group in Florida. And we will keep 277 00:14:41,000 --> 00:14:43,920 Speaker 1: talking about bitcoin, but not only bitcoin, but also uh 278 00:14:43,960 --> 00:14:46,480 Speaker 1: the blockchain technology behind it that is being adopted by 279 00:14:46,520 --> 00:15:01,520 Speaker 1: more big investment firms. So yesterday we were talking about 280 00:15:01,560 --> 00:15:04,400 Speaker 1: the retail sales and how the U as a consumer 281 00:15:04,440 --> 00:15:07,720 Speaker 1: appears to be in really good shape. And then we 282 00:15:07,840 --> 00:15:12,640 Speaker 1: get this from our own Adam Tempkin, a story about 283 00:15:12,720 --> 00:15:17,320 Speaker 1: how deep subprime auto loans are experiencing delinquencies at the 284 00:15:17,400 --> 00:15:21,120 Speaker 1: fastest pace since the crisis. That sounds bad. Adam Tempkin 285 00:15:21,240 --> 00:15:23,880 Speaker 1: joins us now to explain what's behind this and how 286 00:15:23,920 --> 00:15:26,360 Speaker 1: concerning this really is. Adam Tompkin is a credit markets 287 00:15:26,360 --> 00:15:28,800 Speaker 1: reporter here at Bloomberg News. So Adam, let's just get 288 00:15:28,840 --> 00:15:32,400 Speaker 1: a big picture sense of what the delinquency rate is 289 00:15:32,920 --> 00:15:36,840 Speaker 1: and just the backdrop for deep subprime auto loans, which 290 00:15:36,880 --> 00:15:40,360 Speaker 1: to my recollection are at the highest proportion of overall 291 00:15:40,480 --> 00:15:43,680 Speaker 1: subprime auto loans that they've ever been. That's right, even 292 00:15:43,680 --> 00:15:45,720 Speaker 1: though subprime as a whole is decreased a little bit, 293 00:15:45,880 --> 00:15:49,880 Speaker 1: deep subprime, which is a what what equifox calls advantage 294 00:15:49,920 --> 00:15:51,720 Speaker 1: score which is similar to FI GO of less than 295 00:15:51,760 --> 00:15:56,680 Speaker 1: five thirty, has actually increased, and the delinquency rate for 296 00:15:56,720 --> 00:16:00,240 Speaker 1: those least credit worthy borrowers it's as high as was 297 00:16:00,320 --> 00:16:04,080 Speaker 1: for loans originated in OH seven and O eight um. 298 00:16:04,160 --> 00:16:07,440 Speaker 1: And those credit scores are about the same, you know, 299 00:16:07,600 --> 00:16:10,200 Speaker 1: that range bound five thirty or less, But yet the 300 00:16:10,240 --> 00:16:12,840 Speaker 1: performance of the loans is getting worse for those people. 301 00:16:13,160 --> 00:16:15,240 Speaker 1: So what does this mean? Does this mean that the 302 00:16:15,280 --> 00:16:19,640 Speaker 1: originators of these loans were irresponsible or a little bit 303 00:16:19,720 --> 00:16:22,760 Speaker 1: lax with their lending standards. Does this mean that perhaps 304 00:16:22,760 --> 00:16:25,520 Speaker 1: the American consumer isn't as in good shape as people 305 00:16:25,560 --> 00:16:29,000 Speaker 1: had expected, or is this a comment on the underlying 306 00:16:29,720 --> 00:16:32,120 Speaker 1: value of the car? I mean, what's your takeaway from this? Well, 307 00:16:32,160 --> 00:16:36,080 Speaker 1: equifox feels that this is really about shifting market share 308 00:16:36,280 --> 00:16:39,840 Speaker 1: in the auto loan market. So basically, you had three 309 00:16:39,960 --> 00:16:43,680 Speaker 1: kind of newish players post crisis that got into subprime 310 00:16:43,760 --> 00:16:48,760 Speaker 1: lending dealer finance companies, mono lines and independent finance companies 311 00:16:48,800 --> 00:16:51,640 Speaker 1: mino lines. To be clear, our bond in chures right, No, no, no, 312 00:16:51,680 --> 00:16:53,680 Speaker 1: this is a different type of mono line. These are 313 00:16:53,800 --> 00:16:58,200 Speaker 1: if that's recollection from the crisis ere These are sort 314 00:16:58,200 --> 00:17:02,400 Speaker 1: of non bank lenders, but they don't have a parent company. 315 00:17:02,440 --> 00:17:05,000 Speaker 1: They're just doing their own thing, so that distinguishes them 316 00:17:05,000 --> 00:17:09,560 Speaker 1: from what they call captive of finance companies. The captive 317 00:17:09,600 --> 00:17:11,399 Speaker 1: finance are like the Ford or GM when they have 318 00:17:12,840 --> 00:17:14,800 Speaker 1: and these other the model line, as you say, are 319 00:17:14,880 --> 00:17:19,600 Speaker 1: independent companies that finance themselves with what we basically securities 320 00:17:19,720 --> 00:17:22,720 Speaker 1: or yes, all these deep subprime lenders that have entered 321 00:17:22,720 --> 00:17:27,520 Speaker 1: the market and through competition have loosened underwriting since the crisis. 322 00:17:27,800 --> 00:17:30,879 Speaker 1: They tend to fund themselves through asset back securities. But 323 00:17:31,000 --> 00:17:34,040 Speaker 1: mind you, it's still a very small proportion of the 324 00:17:34,119 --> 00:17:37,199 Speaker 1: overall auto lending market. So what you have is you 325 00:17:37,240 --> 00:17:41,639 Speaker 1: have on one hand, banks, credit unions and um, you know, 326 00:17:42,000 --> 00:17:46,480 Speaker 1: finance companies with parent companies doing very concervative underwriting since 327 00:17:46,520 --> 00:17:51,199 Speaker 1: the crisis, and that's or more of overall auto lending. 328 00:17:51,520 --> 00:17:54,359 Speaker 1: And then you have mono lines, independent finance companies and 329 00:17:54,400 --> 00:17:57,879 Speaker 1: dealer finance. They're doing a lot of subprime, and they're 330 00:17:57,920 --> 00:18:01,320 Speaker 1: getting their going down the credit spect from and they're 331 00:18:01,359 --> 00:18:03,959 Speaker 1: doing a lot of this subprime and deep subprime lending. So, 332 00:18:04,000 --> 00:18:05,840 Speaker 1: you know, here's a dilemma that I've been thinking about 333 00:18:05,840 --> 00:18:08,280 Speaker 1: a lot because we have been hearing about problems within 334 00:18:08,320 --> 00:18:10,920 Speaker 1: the auto lending sector for a while that perhaps things 335 00:18:10,920 --> 00:18:14,760 Speaker 1: got out of control. Uh. The amount of auto related 336 00:18:14,920 --> 00:18:17,959 Speaker 1: dead outstanding in the US has reached an all time high. 337 00:18:18,000 --> 00:18:21,359 Speaker 1: You have people who are like pulling back and tightening standards, 338 00:18:21,400 --> 00:18:25,879 Speaker 1: like Wells Fargo. Um. But I'm wondering how much this 339 00:18:25,960 --> 00:18:29,760 Speaker 1: is idiosyncratic to the auto industry and the auto lending 340 00:18:29,880 --> 00:18:33,879 Speaker 1: sector versus the overall consumer, because we are also seeing 341 00:18:33,920 --> 00:18:39,000 Speaker 1: an uptick intolinquencies among credit cards, uh, credit card dead um. 342 00:18:39,040 --> 00:18:41,760 Speaker 1: And you are seeing, although to a smaller extent, you're 343 00:18:41,760 --> 00:18:45,919 Speaker 1: seeing a little bit of a weakening within higher rated borrowers, 344 00:18:45,960 --> 00:18:49,040 Speaker 1: more credit worthy borrowers as well with their auto loans. 345 00:18:49,080 --> 00:18:51,160 Speaker 1: So you know, when you talk to analysts, are they 346 00:18:51,280 --> 00:18:56,000 Speaker 1: concerned about a broader base weakening of the consumer? Well, 347 00:18:56,040 --> 00:18:59,280 Speaker 1: I spoke to you Equifox's chief economist Amy cottson she 348 00:18:59,320 --> 00:19:03,159 Speaker 1: didn't think so she thinks that this is idiosyncratic to 349 00:19:03,359 --> 00:19:06,879 Speaker 1: the auto market and shifting. Um, you know, basically the 350 00:19:07,160 --> 00:19:11,679 Speaker 1: auto ending market has shifted towards these newer entrants that 351 00:19:11,760 --> 00:19:15,119 Speaker 1: are willing to take on the risk. These like the monolnes, 352 00:19:15,200 --> 00:19:16,440 Speaker 1: the deal you know, can you give us some names 353 00:19:16,440 --> 00:19:20,040 Speaker 1: of them the companies, Yeah, like Westlake, Exeter, Scopos. And 354 00:19:20,080 --> 00:19:23,040 Speaker 1: by the way, these are all asset backed securities issuers, 355 00:19:23,119 --> 00:19:26,359 Speaker 1: and you know those deals, those bonds are protected. But 356 00:19:26,400 --> 00:19:28,800 Speaker 1: when you think about the actual borrower, you know, it's 357 00:19:28,840 --> 00:19:32,000 Speaker 1: not a great situation. Uh. The way that this happens 358 00:19:32,040 --> 00:19:35,479 Speaker 1: is when cars are repossessed. Um, you know, the lenders 359 00:19:35,480 --> 00:19:37,480 Speaker 1: try to get money back when people are not paying 360 00:19:37,520 --> 00:19:41,920 Speaker 1: their their loans. However, use car prices are going down, 361 00:19:42,359 --> 00:19:46,159 Speaker 1: so interest rates are going up. So I have to wonder, 362 00:19:46,359 --> 00:19:49,199 Speaker 1: you know, who's feeling this pain right because somebody's not 363 00:19:49,200 --> 00:19:51,439 Speaker 1: getting their money paid back. If you're seeing more delinquencies 364 00:19:51,440 --> 00:19:54,560 Speaker 1: and more losses. Are people who hold the bonds that 365 00:19:54,600 --> 00:19:57,280 Speaker 1: are backed by these auto loans? Are they starting to 366 00:19:57,320 --> 00:20:00,679 Speaker 1: see losses? Are the actual companies, the monol lines, as 367 00:20:00,680 --> 00:20:05,480 Speaker 1: you say, are the independent independent financing units, Are they 368 00:20:05,840 --> 00:20:09,800 Speaker 1: feeling pressure or threatening bankruptcy or is this just all 369 00:20:09,880 --> 00:20:11,920 Speaker 1: kind of going out in the wash because the yields 370 00:20:11,920 --> 00:20:13,919 Speaker 1: are so high anyway on these things. Well as far 371 00:20:13,960 --> 00:20:16,439 Speaker 1: as the asset backed bonds, which again a lot of 372 00:20:16,440 --> 00:20:19,560 Speaker 1: this deep subprime stuff goes into these asset backed bonds, 373 00:20:19,640 --> 00:20:23,000 Speaker 1: those happen to be very well protected with you know, 374 00:20:23,119 --> 00:20:27,719 Speaker 1: credit enhancement and you know other overcollateralization, other protections. So 375 00:20:27,960 --> 00:20:30,959 Speaker 1: bond investors have not really been feeling it, despite the 376 00:20:31,000 --> 00:20:34,800 Speaker 1: fact that delinquencies have been rising. But you know, you 377 00:20:34,880 --> 00:20:37,960 Speaker 1: have your poorer borrowers, first of all, on the hook 378 00:20:38,040 --> 00:20:40,800 Speaker 1: for loans that that can't pay back, and often the 379 00:20:40,800 --> 00:20:43,080 Speaker 1: car has already been been repossessed. And I will say, 380 00:20:43,080 --> 00:20:45,240 Speaker 1: and this is an undertold story, but some of these 381 00:20:45,280 --> 00:20:49,160 Speaker 1: borrowers of these uh consumers are paying rates of what 382 00:20:49,320 --> 00:20:55,600 Speaker 1: like or more on these loans, which is crazy, very 383 00:20:55,720 --> 00:20:58,680 Speaker 1: very high, and they're underwater because their car no longer 384 00:20:58,760 --> 00:21:01,600 Speaker 1: is worthwhile. So probably they're going to be uh, probably 385 00:21:01,600 --> 00:21:04,639 Speaker 1: suffering the most in all of this. Adam Tompkin, thank 386 00:21:04,640 --> 00:21:07,160 Speaker 1: you so much for joining us. Really uh, really informative. 387 00:21:07,160 --> 00:21:10,200 Speaker 1: Adam Tompkin is a structured finance reporter for Bloomberg. We're 388 00:21:10,200 --> 00:21:13,439 Speaker 1: talking about deep subprime auto loans. This is a small 389 00:21:13,480 --> 00:21:16,960 Speaker 1: portion of the overall auto lending sector, about forty billion dollars, 390 00:21:16,960 --> 00:21:19,199 Speaker 1: but still very important as sort of a gauge of 391 00:21:19,240 --> 00:21:35,639 Speaker 1: the temperature in consumer credit worthiness. When we're looking on 392 00:21:35,680 --> 00:21:38,480 Speaker 1: our computers or at work, a lot of people don't 393 00:21:38,520 --> 00:21:41,320 Speaker 1: think about all of the back office support that goes 394 00:21:41,400 --> 00:21:46,680 Speaker 1: into storing, maintaining the data, enabling conferences that are virtual 395 00:21:46,720 --> 00:21:50,000 Speaker 1: with other people. But it is actually a massive business. 396 00:21:50,000 --> 00:21:52,600 Speaker 1: And here to tell us more about that is Stephen Smith, 397 00:21:52,680 --> 00:21:55,960 Speaker 1: chief executive officer and president of Equinix. We're also joined 398 00:21:56,119 --> 00:21:59,040 Speaker 1: by Josh Yatskoitz. He's a media and cable analyst for 399 00:21:59,240 --> 00:22:02,320 Speaker 1: Bloomberg in intelligence and Stephen, I wanted to start with you. 400 00:22:02,440 --> 00:22:06,479 Speaker 1: So Equinis was formed, which seems rather prescient frankly, because 401 00:22:06,600 --> 00:22:10,000 Speaker 1: it seems like, uh, it has only become more necessary 402 00:22:10,160 --> 00:22:13,280 Speaker 1: to store data and get somebody to maintain it all 403 00:22:13,320 --> 00:22:15,280 Speaker 1: for you, because it is a very difficult Can you 404 00:22:15,320 --> 00:22:17,639 Speaker 1: give us a sense of how big this market is 405 00:22:18,040 --> 00:22:20,800 Speaker 1: and how big you see it growing too? Well, it's 406 00:22:20,800 --> 00:22:23,800 Speaker 1: a great question. Um. The company is eighteen years old, 407 00:22:23,800 --> 00:22:27,200 Speaker 1: as you point out, and and it is a four 408 00:22:27,240 --> 00:22:30,520 Speaker 1: billion dollar revenue business been public for for a couple 409 00:22:30,520 --> 00:22:34,439 Speaker 1: of decades now, and the basic premise of the business 410 00:22:34,480 --> 00:22:37,679 Speaker 1: is we design, build and run big, massive data centers 411 00:22:37,680 --> 00:22:42,200 Speaker 1: on behalf of thousands of big customers, bid two of them, right, No, 412 00:22:42,280 --> 00:22:44,159 Speaker 1: we have a hundred two yes data centers, but we 413 00:22:44,200 --> 00:22:46,320 Speaker 1: have almost ten thousand customers and these are big global, 414 00:22:46,359 --> 00:22:50,440 Speaker 1: two thousand fortune businesses and small and medium businesses, all sizes. 415 00:22:50,960 --> 00:22:54,199 Speaker 1: But generally speaking, companies either do their own technology or 416 00:22:54,359 --> 00:22:57,560 Speaker 1: they today more increasingly in the last four or five years, 417 00:22:57,560 --> 00:23:00,920 Speaker 1: are going directly to the cloud, or third option for 418 00:23:00,960 --> 00:23:03,719 Speaker 1: them is to come to data centers like equin x, 419 00:23:04,200 --> 00:23:05,760 Speaker 1: where if they don't want to be in the data 420 00:23:05,760 --> 00:23:08,320 Speaker 1: center business themselves, portions of their I T can go 421 00:23:08,400 --> 00:23:11,119 Speaker 1: to co location where we give them private access to 422 00:23:11,119 --> 00:23:14,399 Speaker 1: the cloud providers, the networks, etcetera. So the company was 423 00:23:14,400 --> 00:23:17,040 Speaker 1: built on the premise of ninety eight, when the Internet 424 00:23:17,040 --> 00:23:19,760 Speaker 1: was scaling. The big network, the big telcos came to 425 00:23:19,800 --> 00:23:22,440 Speaker 1: the market and said we can't hand off traffic very 426 00:23:22,480 --> 00:23:24,680 Speaker 1: elegantly in the US. A start in the US and 427 00:23:24,760 --> 00:23:29,600 Speaker 1: Equinox was chosen as the company to facilitate networks handing 428 00:23:29,600 --> 00:23:32,240 Speaker 1: off traffic to scale the Internet that's how the company started, 429 00:23:32,480 --> 00:23:35,440 Speaker 1: and then since then we've just scaled it to help 430 00:23:35,480 --> 00:23:39,199 Speaker 1: scale all of this traffic, mobile, cloud data, all this 431 00:23:39,240 --> 00:23:42,240 Speaker 1: stuff today that we talk about requires massive amounts of 432 00:23:42,280 --> 00:23:45,560 Speaker 1: servers and storage, arraysing networking gear, and we glue it 433 00:23:45,600 --> 00:23:48,320 Speaker 1: all together inside these centers. Josh, can you give us 434 00:23:48,320 --> 00:23:51,440 Speaker 1: a sense of what the competitive landscape is, because I'm curious. 435 00:23:51,680 --> 00:23:53,080 Speaker 1: I just want to bring you in to sort of 436 00:23:53,080 --> 00:23:56,720 Speaker 1: give a picture of how much this area has grown 437 00:23:56,720 --> 00:24:00,000 Speaker 1: as far as companies they're trying to break in. Yeah, 438 00:24:00,119 --> 00:24:02,959 Speaker 1: UM Equinox is the biggest by far in the space. 439 00:24:03,280 --> 00:24:06,600 Speaker 1: There's other players on both It's called de retail space, 440 00:24:06,640 --> 00:24:10,080 Speaker 1: which specializes in the interconnections, and the whole space wholesale space, 441 00:24:10,119 --> 00:24:13,520 Speaker 1: which is one of these large UM large data centers 442 00:24:13,560 --> 00:24:17,719 Speaker 1: for large deployments. You have competitors on both sides. Uh, 443 00:24:17,800 --> 00:24:21,919 Speaker 1: the retail space is a little more fragmented. Equinox dominates 444 00:24:21,960 --> 00:24:25,439 Speaker 1: all over the world UM as as Steve can allude to, 445 00:24:25,840 --> 00:24:28,119 Speaker 1: but you have a lot of small players coming in. 446 00:24:28,160 --> 00:24:31,120 Speaker 1: There's just so much demand out there from cloud providers, 447 00:24:31,119 --> 00:24:34,600 Speaker 1: from enterprises from all over the space UM for interconnections 448 00:24:34,640 --> 00:24:37,400 Speaker 1: and just wholesale space in general that there is room 449 00:24:37,440 --> 00:24:39,960 Speaker 1: for everybody to grow, and everybody does seem to be 450 00:24:40,000 --> 00:24:43,600 Speaker 1: growing really well both. An interesting aspect that Josh knows 451 00:24:43,640 --> 00:24:46,680 Speaker 1: as well is that um even the big cloud providers 452 00:24:46,680 --> 00:24:50,680 Speaker 1: that are dominating the technology conversations today, the Microsoft, the AWSS, 453 00:24:50,720 --> 00:24:53,760 Speaker 1: the Google's and then and then Facebook and Apple, who 454 00:24:53,760 --> 00:24:56,680 Speaker 1: aren't really cloud providers but big hyper scaling companies, they 455 00:24:56,720 --> 00:24:59,640 Speaker 1: build these massive data centers in the middle of nowhere, 456 00:25:00,119 --> 00:25:03,480 Speaker 1: big server farms, you know, in the middle of Tennessee, Oklahoma, Finland, 457 00:25:03,760 --> 00:25:07,040 Speaker 1: where there's cheaper power, cheaper labor, low taxes. And then 458 00:25:07,040 --> 00:25:09,719 Speaker 1: when they when they when they distribute their network all 459 00:25:09,760 --> 00:25:12,159 Speaker 1: over the world, they use companies like Equinics, So they 460 00:25:12,200 --> 00:25:14,080 Speaker 1: put their capital in their big servant they build the 461 00:25:14,200 --> 00:25:17,240 Speaker 1: huge server farms, and then when they go to Frankfort, 462 00:25:17,280 --> 00:25:20,719 Speaker 1: into London, into Singapore and Shanghai and Dubai, they use 463 00:25:20,800 --> 00:25:24,199 Speaker 1: the data center capacity with companies like Equinics. We're just 464 00:25:24,240 --> 00:25:27,919 Speaker 1: the biggest in the world globally, and there's thousands of 465 00:25:27,920 --> 00:25:30,600 Speaker 1: these data center companies around the world that facilitate not 466 00:25:30,680 --> 00:25:35,520 Speaker 1: only cloud but enterprise data centers, etcetera. Can I'm feeling 467 00:25:35,560 --> 00:25:38,960 Speaker 1: a little behind the times as you talk, but I'm 468 00:25:39,000 --> 00:25:42,639 Speaker 1: trying to imagine what that means when they use equinics 469 00:25:42,680 --> 00:25:45,919 Speaker 1: to connect the rest of the world. Is it uh fibers, 470 00:25:46,119 --> 00:25:49,480 Speaker 1: Is it through satellites? Is it through I mean, how 471 00:25:49,560 --> 00:25:51,640 Speaker 1: how does it gets to you? It's both. So all 472 00:25:51,680 --> 00:25:53,800 Speaker 1: of our data centers are connected with each other in 473 00:25:53,840 --> 00:25:56,640 Speaker 1: each of the metropolitan areas and so and then we're 474 00:25:56,640 --> 00:25:59,280 Speaker 1: connected on top of the networks between metros, so between 475 00:25:59,359 --> 00:26:02,000 Speaker 1: Chicago and you ORC or anywhere in the world that 476 00:26:02,119 --> 00:26:05,880 Speaker 1: carriers connect the world, but in a metropolitan area they 477 00:26:05,920 --> 00:26:08,159 Speaker 1: do that inside of Econoxis data center. So we we 478 00:26:08,240 --> 00:26:10,119 Speaker 1: are that we are the central place. And this is 479 00:26:10,160 --> 00:26:13,440 Speaker 1: what started the company. It was six or seven of 480 00:26:13,480 --> 00:26:17,520 Speaker 1: the biggest telecos came into New York, d C, Chicago, Dallas, 481 00:26:17,560 --> 00:26:20,200 Speaker 1: Silicon Valley in l A, two places on the East coast, 482 00:26:20,240 --> 00:26:21,840 Speaker 1: two places on the West coast, and two places in 483 00:26:21,840 --> 00:26:25,760 Speaker 1: the middle of the country to facilitate scaling the Internet. 484 00:26:25,920 --> 00:26:28,480 Speaker 1: Can I ask, because we hear so much about telecommunication 485 00:26:28,520 --> 00:26:32,160 Speaker 1: companies and the need to upgrade their networks to five 486 00:26:32,240 --> 00:26:35,639 Speaker 1: G is there a sort of parallel problem that that 487 00:26:35,800 --> 00:26:39,160 Speaker 1: that you're facing as far as sort of upgrading the 488 00:26:39,280 --> 00:26:44,639 Speaker 1: overall technology underpinning this interconnectivity. It's part and parcel to it. 489 00:26:44,760 --> 00:26:47,239 Speaker 1: Five G is one technology that will make things go 490 00:26:47,440 --> 00:26:50,959 Speaker 1: faster and and go to the next level. We go 491 00:26:51,000 --> 00:26:53,119 Speaker 1: to four G T five G, everything gets faster, so 492 00:26:53,160 --> 00:26:57,120 Speaker 1: the latency is down to milliseconds and sometimes micro seconds. 493 00:26:57,640 --> 00:27:00,360 Speaker 1: So that's that's one technology that's going to facility. There's 494 00:27:00,400 --> 00:27:05,000 Speaker 1: also um up to fifty new undersea cables being laid 495 00:27:05,040 --> 00:27:07,639 Speaker 1: today between continents just to get ready for the data 496 00:27:07,680 --> 00:27:10,960 Speaker 1: explosion that cloud and mobile and all of this information 497 00:27:11,000 --> 00:27:13,200 Speaker 1: that we all used to run our businesses, including yours. 498 00:27:13,680 --> 00:27:16,480 Speaker 1: So so when you see that starting to happen in 499 00:27:16,520 --> 00:27:20,719 Speaker 1: the billions of dollars being invested to connect continents, connect cities, 500 00:27:20,760 --> 00:27:24,040 Speaker 1: connect buildings, connect things. This is this whole Internet of 501 00:27:24,080 --> 00:27:26,560 Speaker 1: things concept. It all gets done in data centers, cloud 502 00:27:26,600 --> 00:27:30,000 Speaker 1: sits and data centers. Cloud is a is a technology 503 00:27:30,000 --> 00:27:33,080 Speaker 1: paradigm shift to pay for it by the drink. You 504 00:27:33,160 --> 00:27:34,760 Speaker 1: used to you used to have to buy all your servers, 505 00:27:34,800 --> 00:27:37,240 Speaker 1: and today you say, I just want to use this 506 00:27:37,359 --> 00:27:39,399 Speaker 1: much compute, this much stores, and this most network, and 507 00:27:39,400 --> 00:27:41,600 Speaker 1: I want to pay a monthly fee. Steven Smith say 508 00:27:41,680 --> 00:27:43,520 Speaker 1: thank you so much for joining us, Chief executive officer 509 00:27:43,560 --> 00:27:45,960 Speaker 1: and president of Aquinix, which is based in San Francisco, 510 00:27:46,000 --> 00:27:48,280 Speaker 1: and our thanks to Josh Yasco, it's telecom, cable and 511 00:27:48,280 --> 00:27:53,159 Speaker 1: media analyst for Bloomberg Intelligence. Thanks for listening to the 512 00:27:53,160 --> 00:27:56,280 Speaker 1: Bloomberg P and L podcast. You can subscribe and listen 513 00:27:56,320 --> 00:28:00,480 Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform 514 00:28:00,520 --> 00:28:04,440 Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox. 515 00:28:04,760 --> 00:28:08,280 Speaker 1: I'm on Twitter at Lisa abramowits one before the podcast. 516 00:28:08,320 --> 00:28:10,920 Speaker 1: You can always catch us worldwide on Blueberg Radio