Speaker 1: This is Bloomberg Business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news as it happened. Its
Speaker 1: Bloomberg Business Week with Carol Messier and Bloomberg Quick Takes.
Speaker 1: Tim Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the
Speaker 1: weekend edition of Bloomberg Business Week. We know that everyone
Speaker 1: is still talking about FIT Chief J. Powell's comments this
Speaker 1: past week signaling the Fed will slow the pace of
Speaker 1: interest rate increases next month, yet stressing the need for
Speaker 1: rates to keep rising for some time to beat inflation.
Speaker 1: No doubt about it, Tim, it was top of mine.
Speaker 1: Also top of mind Carol protests in China, Apple's exposure
Speaker 1: to that, and a recent conversation that we had with
Speaker 1: Cathy Wood. She of course is the founder's CEO and
Speaker 1: ce IO of our convest who covered everything from the
Speaker 1: collapse of f t X and Sam Bankman Freed to Ellen,
Speaker 1: Tesla and Twitter. We even talked about General Motors stock
Speaker 1: that she's been buying. The full in depth conversation in
Speaker 1: our second hour. All of that to come, we beat
Speaker 1: again with the chaos in the place known as iPhone City.
Speaker 1: We're following the protests over the COVID zero lockdown policies
Speaker 1: in China. That may be easing, but time will tell.
Speaker 1: Related to all of that, a Bloomberg exclusive, it's in
Speaker 1: the text section of the new issue up Bloomberg Business Week.
Speaker 1: It's about Apple's reliance on China and how it's growing
Speaker 1: perilous because of the chaos in the world's second largest
Speaker 1: economy and a country that turns out tons of Apple products.
Speaker 1: We bring in Joshua Breusteing. He's technology editor a Bloomberg
Speaker 1: Business Week. He joined us along with the editor of
Speaker 1: the magazine, Jill Webber. Where Apple gets its iPhones predominantly
Speaker 1: has been from fox Con facilities in China. UM and
Speaker 1: with the COVID zero situation in China and sort of
Speaker 1: how the country and company have responded fox Con to
Speaker 1: the circumstances, it's really led this to be a quite
Speaker 1: hot situation. Josh What transpired that and what were you
Speaker 1: guys watching as you started to pull this story together. Yeah,
Speaker 1: The largest iPhone production facility, known as iPhone City UH
Speaker 1: is in Shangho, China. About of the latest iPhone fourteen
Speaker 1: models are produced there and since October they have been
Speaker 1: UM experiencing a COVID outbreak within the plant. This is
Speaker 1: an enormous place, About two hundred thousand people work there,
Speaker 1: and UM fox Con which runs the facility, attempted to
Speaker 1: UM lock the plant down. UM isolate UH workers who
Speaker 1: may have COVID and UM and try to keep the
Speaker 1: this this the outbreak from spreading. The problem was they
Speaker 1: weren't really prepared to handle this and UM workers were
Speaker 1: complaining of unsanitary conditions of being held in places where
Speaker 1: they didn't have access to adequate food. Hundreds of workers
Speaker 1: left the plant in October and UH there were some
Speaker 1: some violent protests from workers who were protesting that they
Speaker 1: were not going to get paid if they didn't stay
Speaker 1: through a certain amount of time and just she described
Speaker 1: the dorm tory sort of pretty awful conditions during this lockout.
Speaker 1: But these are pretty coveted jobs in China, are they not. Yeah, absolutely,
Speaker 1: there were workers who are leaving jobs UM that it
Speaker 1: was surprising because people get these jobs and they're known
Speaker 1: as good jobs. What's happened over the recent past has
Speaker 1: been that the COVID situation has really changed the way
Speaker 1: that this production facility operates, and people thought they had
Speaker 1: something good and now feel like they're being really mistreated.
Speaker 1: I feel like the eyes are on Apple right now
Speaker 1: and watching what they are doing, and we have seen them,
Speaker 1: you know, begin to branch out. How how does you
Speaker 1: and your team kind of think about what's going on
Speaker 1: with Apple specifically and what it means more broadly. Yeah. Absolutely.
Speaker 1: I mean, if you want to look at a situation
Speaker 1: for a company that kind of represents something larger, you
Speaker 1: have the world's most valuable company. It makes an enormous
Speaker 1: amount of phones in China, and what you've seen Apple
Speaker 1: do is look to diversify a fox con its main
Speaker 1: manufacturing partners moving to other countries, to India, Vietnam. So
Speaker 1: you see it looking for for alternatives if things aren't
Speaker 1: going to be if they can't count on China, they
Speaker 1: need to know where else they can get phones from.
Speaker 1: So what's the status now, Josh, It's it sounds like
Speaker 1: it's just chaos there They actually still or the assembly
Speaker 1: line still working or is it sort of in a
Speaker 1: frozen while all this plays out. Yeah, so the facility
Speaker 1: is still working. There are are clearly disruptions. UM. We've
Speaker 1: reported that UM someone familiar with the operations says there
Speaker 1: could be a production shortfall of close to six million
Speaker 1: iPhone Pro units this year. The thought is that they
Speaker 1: maybe they could recover that next year, but these are
Speaker 1: serious production interruptions. UM and Apple has already been dealing
Speaker 1: UM with this even before the acute problem of the
Speaker 1: last couple of weeks. Josh, some of the reporting was
Speaker 1: incredible because of how specific and inside the operations and
Speaker 1: the protests we were able to get. What stood out
Speaker 1: to you as you worked on the story. I think
Speaker 1: it was really interesting to hear from some of the
Speaker 1: workers who were there that the story that that we're
Speaker 1: publishing UM focuses on one worker who had been making
Speaker 1: phones for a decade. UM finally got fed up in
Speaker 1: October and left, went home, was lowered back by more money,
Speaker 1: and UH immediately was was actually in a quarantine period
Speaker 1: UM when these protests broke out last week, and then decided,
Speaker 1: you know, I can't stay here like I came back, UM,
Speaker 1: I'm going to go find a job at a different place.
Speaker 1: As he said, other people are hiring. Will you talk
Speaker 1: about you know these workers or or the team talks
Speaker 1: about workers in isolation. There's no food, there's trash piling up.
Speaker 1: I mean, these are it sounds like pretty horrible conditions. Yeah. Absolutely,
Speaker 1: And I think that what you're seeing is a breaking point.
Speaker 1: I mean, at one point we describe they built barriers
Speaker 1: between the dormitories and the production facilities so that people
Speaker 1: basically couldn't stray or or run away, basically in between
Speaker 1: home and the job. And I don't know, that's pretty dystopia.
Speaker 1: It's a little bit like a prison. Absolutely, Hey, Josh,
Speaker 1: just long term here, Um, no doubt fox Con has
Speaker 1: uh an, Apple will have this longstanding relationship with China,
Speaker 1: But what other options does Apple and fox can potentially
Speaker 1: having the long term? So fox Con is already making
Speaker 1: more iPhone four team models in India, more than any
Speaker 1: previous generation, and it's expanded into Vietnam and Thailand as well,
Speaker 1: And I think that's a sign of how much Chinese
Speaker 1: policies are potentially hurting China itself. At the same time, um,
Speaker 1: Apples spent decades building up this production capability, and it's
Speaker 1: not like it can just turn off this switch and
Speaker 1: turn around somewhere else if it really wants to reduce
Speaker 1: its reduction up reliance on China. It's going to be
Speaker 1: a long term project. That was Joshua Breustein. He's technology
Speaker 1: editor for the magazine Bloomberg Business. We editor Joel Webber
Speaker 1: with us there as well. Mike Regan's sticking around for
Speaker 1: our next segment coming up after the break, we examine
Speaker 1: the broader implications of the Chinese COVID response that has
Speaker 1: put tons of millions of people on the brink. You're
Speaker 1: listening to Bloomberg Business Week. This is Bloomberg. This is
Speaker 1: Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes.
Speaker 1: Tim Stenovik from Bloomberg Radio. Hard to miss the videos
Speaker 1: and pictures and stories about the protests that have erupted
Speaker 1: over the past week or so across China as its
Speaker 1: populous rails against the country's COVID zero strategy. We've got
Speaker 1: the perfect voice to help explain what's happening in the
Speaker 1: People's Republic and what it means for President Shi jang Ping,
Speaker 1: who's just a few weeks removed from cementing his rule
Speaker 1: at the twentie National Congress of the Chinese Communist Party.
Speaker 1: Andy Brown is former editorial director at Bloomberg New Economy
Speaker 1: he spent three decades and Asia's both China editor and
Speaker 1: columnist for The Wall Street Journal. Andy now leads the
Speaker 1: China Hub as a partner over at Brunswick Group. That's
Speaker 1: a critical issues advisory firm. He joined me and Bloomberg
Speaker 1: Market senior editor Mike Reagan last Monday. I think it
Speaker 1: is the beginning of the end of COVID zero and
Speaker 1: it is going to be I fear a messy, chaotic,
Speaker 1: uh and deadly unwinding of an irrational, poorly conceived, and
Speaker 1: and disastrously executed policy that has Ci Jimping's name all
Speaker 1: over it. He owns it, and he owns the public
Speaker 1: outrage that led to this, to these street protests and
Speaker 1: campus protests all all over all over China over the weekend. Look,
Speaker 1: it's an indictment of she himself, but it's also an
Speaker 1: indictment of the system that he set up UM. And
Speaker 1: it is a top down, heavy handed, personalized system, UM inflexible, ideological,
Speaker 1: highly politicized, at times brutal. And the system failed, and
Speaker 1: it's failed catastrophically. And you know, the irony is that
Speaker 1: it has triggered precisely the thing that s Jimping most fears.
Speaker 1: So you know for the first time protest, right, well, protest,
Speaker 1: but the type of protests, so you know their protests
Speaker 1: in China occur all the time, Okay, but they're you
Speaker 1: they're almost always localized, single issue protests. Uh. You know,
Speaker 1: workers aren't getting paid in a factory or in a
Speaker 1: rural area. You know, some government connected business has grabbed
Speaker 1: your land. A lot of protests, um, this is but
Speaker 1: they're never they're never networked, right and and they're very
Speaker 1: easily contained. This These are nationwide protests that bring together
Speaker 1: disparate groups of people, poor people, rich people, students, workers
Speaker 1: together for a common cause, and that is to defeat
Speaker 1: COVID zero, which has led to enormous amounts of frustration
Speaker 1: within the population. And the trigger for this was a
Speaker 1: fire in the room chi in an apartment blog killed
Speaker 1: at least ten people, including we see the picture of
Speaker 1: this lovely weaker lady and and and her children. And
Speaker 1: the suspicion was that they had got trapped in their
Speaker 1: apartment by COVID restrictions. So fire exit's being blocked or
Speaker 1: you know, in these concrete barriers to get placed around
Speaker 1: box of the fire trucks couldn't get in and extinguished
Speaker 1: the blaze. And this triggered something very deep, very emotional.
Speaker 1: You know that that that lady was was everybody's mother,
Speaker 1: everybody's sister, you know, everybody's wife. Those children could have
Speaker 1: been my kids, because you've got four hundred million people
Speaker 1: in China now living under some kind of a lockdown.
Speaker 1: Many of those in precisely those conditions. You know, their
Speaker 1: front doors have been welded closed because they can't get out,
Speaker 1: and people live in fear and have been living in
Speaker 1: fear now for a long time. And so you know,
Speaker 1: this fire just just triggered this, this this swelling sort
Speaker 1: of a surge of anger right across the country, and
Speaker 1: it was so big, it wasn't you know how how
Speaker 1: clever they are and how how you know efficient they are,
Speaker 1: and that blow kicking discussion on social media, this out
Speaker 1: this outbreak a bust was was was just so passionate
Speaker 1: that they couldn't contain it. S Jimping has no good
Speaker 1: options here, Okay, he only has tough decisions, difficult trade offs.
Speaker 1: So I am I'm pretty sure that with every fiber
Speaker 1: of his body he wants to crack down. Okay, I
Speaker 1: mean he is haunted by the collapse of the Soviet Union,
Speaker 1: which you know, he blames. They lost their ideology, abandoned
Speaker 1: style and repudiated style, and but they lost controls of
Speaker 1: the levers of power. They compromised, you know, Glass, Gnast
Speaker 1: and PARASTROI. He's absolutely determined that that is not going
Speaker 1: to happen. And he doesn't he doesn't want his policy,
Speaker 1: his signature policy, to be derailed, to be challenged by
Speaker 1: street protests. And I'm pretty sure that they are already now,
Speaker 1: you know, going off to some of these leaders of
Speaker 1: the protest. But here's the thing. The more you know,
Speaker 1: if if he cracks down uh violently, you know, he
Speaker 1: he could he could promoke an even bigger social explosion.
Speaker 1: People have had enough. I mean, they've they're really up
Speaker 1: to here with with zero COVID. Now, on the other hand,
Speaker 1: if he opens up and opens up too quickly, uh,
Speaker 1: he risks an explosion in cases and and and mass death. Uh.
Speaker 1: You know, even under the most optimistic scenarios, if if
Speaker 1: they opened up like Taiwan did, what Singapore did? You know,
Speaker 1: because of the infectiousness of Omi crown, you know, and
Speaker 1: the vulnerabilities that you have in and even a highly
Speaker 1: vaccinated uh society, you're still going to get you know,
Speaker 1: a million or more deaths. Now that that's dynamite, spry
Speaker 1: and big. You know, the Americans lost a million, Uh,
Speaker 1: the Europeans lost a million. This proves you know, the
Speaker 1: the decadence and incompetence and the corruption of their system.
Speaker 1: Their their careless system. But we in China have to
Speaker 1: have a have a superior system. You know, nobody, very
Speaker 1: few people died outside of the original outbreak, so he's
Speaker 1: he's going to be very very careful. And but you know, look,
Speaker 1: uh this, you know, the real problem here is that
Speaker 1: there has been a staggering failure and it is the
Speaker 1: failure to build defenses against omicron that you know, they've
Speaker 1: been so fixated on, you know, on zero COVID that
Speaker 1: they haven't invested in ICU beds, in train specialist medical staff.
Speaker 1: Most importantly, they haven't uh adequately vaccinated the elderly population,
Speaker 1: you know, so and and of course they have no
Speaker 1: natural immunity. Now, Andy, do you think if China had
Speaker 1: accepted the Western vaccines, the Maderida and visor vaccines, would
Speaker 1: would it be a whole different scenario here? Would would
Speaker 1: the they'd be able to open a lot, a lot
Speaker 1: less risky than they are now. You know, I think
Speaker 1: people exaggerate this point. Uh, look is baffling, right, why
Speaker 1: they didn't take m RNA vaccine. It's the best in
Speaker 1: class vaccine, but it's not. It's not the game change
Speaker 1: that people say it. It might be Chinese vaccines, Okay,
Speaker 1: they're fine, right, they do a fine job. Um, they
Speaker 1: prevent serious illness, they prevent death. But that's if you
Speaker 1: have your your three dose regimen, right, you get your
Speaker 1: two vaccines and your boosted. The problem that they have
Speaker 1: is that they haven't insisted that the elderly get vaccinated.
Speaker 1: That was Andy Brown. He's a partner at Brunswick Group
Speaker 1: and a former colleague of ours here at Bloomberg, where
Speaker 1: he was editorial director at Bloomberg New Economy. Mike g
Speaker 1: Regan will be back a bit later in the program. Meantime,
Speaker 1: we've seen more protests flare up in various parts of China,
Speaker 1: even amid optimism that China make ease off some of
Speaker 1: its COVID zero policies, including about to speed up COVID
Speaker 1: shots for the elderly, Still ahead on Bloomberg Business Week.
Speaker 1: Our cover story sheds land on the potentially deadly game
Speaker 1: being played by some young American users of the wildly
Speaker 1: popular Chinese own social media platform TikTok. This is Bloomberg
Speaker 1: broadcasting from the financial capital of the world, Bloomberg eleven
Speaker 1: Frio in New York to Washington, d C. Bloomberg to Boston,
Speaker 1: Bloomberg one oh six one to San Francisco, Bloomberg nine
Speaker 1: sixty to the country Sirius XM Chado one nine team,
Speaker 1: and around the globe the Bloomberg Business app and Bloomberg
Speaker 1: Radio dot Com. This is Bloomberg Business Week. Time now
Speaker 1: for this week's cover story. Also Bloomberg Big Take from
Speaker 1: the past week. This one is heart wrenching and disturbing.
Speaker 1: It's in the latest issue of Bloomberg Business Week. It's
Speaker 1: on how TikTok's viral challenges, specifically the so called blackout challenge,
Speaker 1: are luring young users to their deaths. Bloomberg investigative reporter
Speaker 1: Olivia Carville reveals how the company behind the most popular
Speaker 1: app in the US is responding to these horrifying cases
Speaker 1: and the consistent failure of the platform's age verification mechanisms.
Speaker 1: Olivia and Bloomberg Business Week editor Joe Weber join us
Speaker 1: with more. This is one of these things that everyone
Speaker 1: just assumes, you know, kids are not going to find
Speaker 1: them ols in places that they're not supposed to be in.
Speaker 1: Just truly scary. Some of these corners can become Olivia
Speaker 1: bring us into how you went about reporting the story,
Speaker 1: because it really involves some tragic elements. Yeah, it does.
Speaker 1: I started reporting this piece by trying to get a
Speaker 1: sense of what happens inside TikTok. After a child dies
Speaker 1: participating in an online challenge, and maybe there's been a
Speaker 1: headline and some local news reports connecting TikTok to their death,
Speaker 1: how does the company respond and what happens internally? And
Speaker 1: the way to answer that question was to try and
Speaker 1: build sources on their trust and safety team. This is
Speaker 1: the team that is built within TikTok to handle the
Speaker 1: worst case scenarios. These are the fixes of the Internet,
Speaker 1: the people who come in and clean up the mess,
Speaker 1: protect the company's reputation, but also try and protect users.
Speaker 1: And I spoke to more than two dozen current and
Speaker 1: former trust and safety insiders to get a sense of
Speaker 1: what happens at TikTok, and that's how we were able
Speaker 1: to tell the story is really through the lens of
Speaker 1: that trust and safety team. Your piece starts out with
Speaker 1: just the tragic story of Ariannia Royo. Can you share
Speaker 1: her story and what her family has gone through. Arianne
Speaker 1: was a nine year old girl. She lived down in Milwaukee, Wisconsin,
Speaker 1: and she loved TikTok. You know, this is the most
Speaker 1: popular app in the world, and it is hard to
Speaker 1: deny the success of this company. Seventy percent of teenagers
Speaker 1: in America are using TikTok, and they're using it more
Speaker 1: than all of the other apps out there, Facebook, Snapchat, Twitter.
Speaker 1: So Arianni, like most kids, fell in love with TikTok
Speaker 1: and she was using the platform on a daily basis
Speaker 1: and she really enjoyed participating in the trending challenges. In
Speaker 1: February of last year, she attempted the Blackout challenge, which
Speaker 1: is where children try and choke themselves with household objects
Speaker 1: until they black out and then film the adrenaline and
Speaker 1: rush or the high they get regaining consciousness. But at
Speaker 1: the age of nine, Ariani unfortunately was unable to save herself.
Speaker 1: She had choked herself with a metal dog leash and
Speaker 1: she tragically died. So Olivia. Obviously TikTok is aware that
Speaker 1: there's a challenge here and that they have happened. There's
Speaker 1: been lawsuits. What does the company have to say about
Speaker 1: it and with their official response, and then what are
Speaker 1: others saying about that response? Yeah, I mean, these dangerous
Speaker 1: challenges bounce across platforms. They exist on TikTok, but they
Speaker 1: exist on all the others as well, and users actually
Speaker 1: try and sidestep safety restrictions by doing things like misspelling keywords.
Speaker 1: So rather than writing blackout challenge, which has been banned
Speaker 1: on TikTok, they'll right black out with a zero and
Speaker 1: try and get around the the artificial intelligence or the
Speaker 1: systems that have been set up to try and protect kids.
Speaker 1: So TikTok really doesn't want this content on its platform.
Speaker 1: It's done what it can to train its moderators to
Speaker 1: take down any content relating to the Blackout Challenge, and
Speaker 1: it also prevents anyone from being able to search for
Speaker 1: Blackout Challenge related content in the app, and it set
Speaker 1: those um those safety restrictions in place at the start
Speaker 1: of last year, after the first ten year old girl
Speaker 1: died attempting this particular challenge, but unfortunately, kids are smart
Speaker 1: and they know how to get around these safety restrictions
Speaker 1: and they're doing that, and that means that the challenges
Speaker 1: continuing to spread across social media platforms. And the most
Speaker 1: recent cases that we could find of deaths associated to
Speaker 1: the blackout challenge was August of this year. So despite
Speaker 1: all of those safety features being implemented, the deaths have
Speaker 1: kept happening. Where do you think we need to go
Speaker 1: from here to get on top of this, Well, that
Speaker 1: question of age verification is like the elephant in the room.
Speaker 1: This is one of the hardest things for these social
Speaker 1: media platforms to do. How can you tell the exact
Speaker 1: age of the person who was on the app, you know,
Speaker 1: using that device. And don't forget that children's content is
Speaker 1: allowed on TikTok. You can film your children or your
Speaker 1: siblings who are under the age of thirteen and post
Speaker 1: about it. Every social media platform in the US at
Speaker 1: least has a rule that says you have to be
Speaker 1: over the age of thirteen to use the product. You know,
Speaker 1: they call it within the industry the age gate, and
Speaker 1: it's very hard to enforce that. So these companies are
Speaker 1: trying to find ways around it. But this is one
Speaker 1: of the biggest challenges that social media platforms face. That
Speaker 1: was Bloomberg Investigative reporter Olivia Carville and Bloomberg Business We
Speaker 1: Get It or Jil Weber on this week's cover story.
Speaker 1: Just head to Bloomberg dot com or check it out
Speaker 1: on the terminal for a full length video feature on
Speaker 1: this piece. Hard to stomach, but I gotta say it
Speaker 1: important for the parents of young kids to see and
Speaker 1: know about. You're listening to Bloomberg Business Week. Coming up next,
Speaker 1: we shift gears and take a look at a key
Speaker 1: area of the consumer economy, the travel and hospitality sector.
Speaker 1: Then we get a post Thanksgiving pulse check with Price
Speaker 1: Line CEO bread Larth. This is Bloomberg. You're listening to
Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes
Speaker 1: Tim Stinovik from Bloomberg Radio. Just over two and a
Speaker 1: half million passengers passed through US airport checkpoints last Sunday,
Speaker 1: according to Transportation Security Administration data. We're talking about the
Speaker 1: t s A. That's the most in a single day
Speaker 1: since before the COVID nineteen pandemic, up about four and
Speaker 1: a half percent from the same day last year. Again,
Speaker 1: according to the t S, a still a little one
Speaker 1: day tally fell about eleven percent shy the same figure
Speaker 1: in that's when two point eight million travelers were screened.
Speaker 1: With a look at the travel scene this past weekend
Speaker 1: and what maybe to come a bloomberg market, Senior editor
Speaker 1: Mike Reagan and Carol spoke with Priceline CEO Brett Keller
Speaker 1: on the heels of a cross country flight to the
Speaker 1: East Coast. The plane was completely packed, you know, a
Speaker 1: little bit of a delay coming into New York, but overall,
Speaker 1: you know, the Thanksgiving period of travel across the tree
Speaker 1: was very smooth. Yeah, Brett. Obviously, inflation has been the
Speaker 1: hot topic all year. I'm wondering what you're seeing as
Speaker 1: far as prices in the travel, hotel, airfare, that sort
Speaker 1: of thing. Are they rising as much as you know,
Speaker 1: cp I would suggest something like seven Actually a little
Speaker 1: hotter than that. Um depends on, you know, whether you're
Speaker 1: booking a flight or book in a hotel, but they're
Speaker 1: both up on the hotel side, you know, prices up
Speaker 1: seven eight percent versus where they were a year ago today,
Speaker 1: so a little less in the CPI. But when you
Speaker 1: look at flies and they're closer to fift, especially if
Speaker 1: you're flying overseas. So with the cost of jet fuel,
Speaker 1: you know, really up fifty where it was a year ago.
Speaker 1: That's pushing prices higher along with labor costs, and consumers
Speaker 1: seem to be shaking off those higher prices. They continue
Speaker 1: to prioritize travel over other purchases and are really hitting
Speaker 1: the road. So here at price line, you know, we're
Speaker 1: really seeing good, healthy travel demand. October actually accelerated from
Speaker 1: where it was in August and September. As we look
Speaker 1: into next year, patterns seem to be holding up at
Speaker 1: least so far. So are we back at levels based
Speaker 1: on what you're seeing off your platform? Brett, Yeah, we're
Speaker 1: very close. On the hotel front. If you just look
Speaker 1: at industry data broadly, for for the hotel category, you know,
Speaker 1: their occupancy rates are just about where they were in
Speaker 1: two thousand nineteen, maybe a percentage point below, but very healthy.
Speaker 1: On the flight side, even higher in the nineties in
Speaker 1: terms of you know, seat capacity utilization. So things look
Speaker 1: pretty good in the industry right now. And you know,
Speaker 1: consumers no longer have any COVID concerns, especially here in
Speaker 1: domestic travel in the US, and we're seeing a really
Speaker 1: strong demand into Europe and now starting into Asia as
Speaker 1: they've lifted restrictions there. Let me just just to follow
Speaker 1: on that. So I am always curious Brett on a
Speaker 1: platform like yours, I mean, how much visibility do you
Speaker 1: have looking out? Is it a couple of months, is
Speaker 1: it's six months, is it twelve months? What kind of
Speaker 1: visibility do you have in terms of what the environment
Speaker 1: might be for travel heading? Sure, Well, the average booking
Speaker 1: window for a consumer booking you know out into the
Speaker 1: future is usually pretty close in two three to four weeks.
Speaker 1: That's really where most of the bookings happen. But we
Speaker 1: do see, you know, well into the future people will
Speaker 1: book out to three and four months for certain types
Speaker 1: of vacations, and so that's a good proxy for what
Speaker 1: we're seeing, and so far that data looks pretty good.
Speaker 1: Things are still relatively healthy as we look into the
Speaker 1: future into first quarter of next year, so you know,
Speaker 1: demand again appears to be holding up um and we'll
Speaker 1: we'll see where it goes from there. But so far,
Speaker 1: we're we're happy with how things are playing out in
Speaker 1: the travel space. You know, Brett, I think probably a
Speaker 1: lot of listeners hit your site looking for a deal,
Speaker 1: of course, you know, or any tips on how to
Speaker 1: save a few bucks in this holiday season considering prices
Speaker 1: of everything are higher. There any sort of tricks of
Speaker 1: the trade you could share with us, Yeah, absolutely, listen.
Speaker 1: This is why price Line was founded, you know twenty
Speaker 1: five years ago, was to help consumers navigate a very
Speaker 1: complex space and and find savings. So when when you
Speaker 1: think about ways to save money today and this really
Speaker 1: high priced environment, one is you really need to avoid
Speaker 1: these high peak travel dates if your schedule allows, and
Speaker 1: more and more consumers are able to do that now.
Speaker 1: So for example, with the upcoming holidays, try your best
Speaker 1: not to fly on the twenty three and right right
Speaker 1: before and right after a Christmas holiday or the day
Speaker 1: after New Year's Day. Really try and push that out
Speaker 1: a couple of days. You can save fifteen because they
Speaker 1: really optimally price for those dates. From the airline side,
Speaker 1: a second way is on a site like price Line,
Speaker 1: you can book with mixed carriers. You can fly out
Speaker 1: on one airline, fly back on another that can typically
Speaker 1: deliver you anywhere from five percent off of what you
Speaker 1: would pay if you flew out and back on the
Speaker 1: same carrier. So by mixing and matching carriers, you can
Speaker 1: save money. And a third is to package right and
Speaker 1: bundle your your your books together. So if you're going
Speaker 1: to book a hotel and a flight, bundle those together.
Speaker 1: You will save money because we have access to especially
Speaker 1: negotiated rays that can only be used in that bundled experience,
Speaker 1: and that does deliver real value up to you know,
Speaker 1: a couple of hundred dollars a trip when you really
Speaker 1: are thoughtful about destinations and how you book those together.
Speaker 1: You guys do have lots of data you can see
Speaker 1: in real time, like what's interesting to people, what are
Speaker 1: the most popular flights that people are booking right now? Well, uh,
Speaker 1: you know, coming out of consumers really stayed close to
Speaker 1: home and many of them were not really even leaving
Speaker 1: the country. Uh. And so we've seen big markets really
Speaker 1: start to open up this year, especially for Christmas and
Speaker 1: New Year's. So New York, Atlanta, Las Vegas, l A
Speaker 1: all very very top of the charts right now. Also Orlando. Uh,
Speaker 1: that's always been a number one or number two market
Speaker 1: for US in particular, but really for the country, and
Speaker 1: it continues to be a top market for consumers. Of
Speaker 1: what we're seeing a lot more. The second half is
Speaker 1: people are leaving the US to travel overseas, and when
Speaker 1: you look at where they're going in Europe, obviously London
Speaker 1: is a big market, but they're also heading into many
Speaker 1: other interesting destinations there and a few now moving into Asia.
Speaker 1: But really for the holiday period, warm destinations are at
Speaker 1: the top of the list. Locations like Cancoon, Jamaica, Dominican
Speaker 1: Republic are very very appealing to consumers just looking to
Speaker 1: get a break and get some sunshine. A colleague of
Speaker 1: ours here uh said, yep, we just came back from
Speaker 1: Jamaica and so yeah, people, Mike are out and about
Speaker 1: and they're getting out of the US. I'll take any
Speaker 1: of those destinations. Yes, yes, and yes, hot sand, a
Speaker 1: golf course, swimming pool, one of those drinks with the umbrella.
Speaker 1: But Brett, you know, it's such an unusual economic environment
Speaker 1: that we're in right now. We have high inflation but
Speaker 1: super low unemployment. Everyone's worried about a recession. I'm wondering
Speaker 1: which of those variables matter the most to your business.
Speaker 1: You know, is it unemployment, is it g d P
Speaker 1: is an inflation is you know, my guess is unemployment
Speaker 1: is is probably the main thing that would sort of
Speaker 1: be a headwind to travel. Is that a fair assumption. Yeah,
Speaker 1: I think that's a fair assumption. I've been in the
Speaker 1: industry for over twenty five years. You know, we went
Speaker 1: through this back in oh eight, and travel is a
Speaker 1: very resilient category. People seem to prioritize that they always
Speaker 1: want to have that opportunity to visit family, to take
Speaker 1: a break, and so you know, if you're unemployed, obviously
Speaker 1: that makes it very, very challenging to pull together the
Speaker 1: dollars that's required to to take a trip like this.
Speaker 1: But what people will typically do if they're constrained is
Speaker 1: they'll start to modify how they travel. They may drive
Speaker 1: instead of fly, they may you know, drop down a
Speaker 1: star category. Um, they'll find ways to save money but
Speaker 1: still take that trip. And we're not necessarily seeing that
Speaker 1: trade down happen yet, but certainly that's what consumers may
Speaker 1: end up doing if they're really pressed for cash. Right,
Speaker 1: we spend I feel like every day in and out
Speaker 1: here at Bloomberg, because of the upcoming FED meeting, because
Speaker 1: of the FED conversations, because of j pal speaking this week,
Speaker 1: we talk about, you know, the prospect of a recession,
Speaker 1: whether it will be shallow, whether it will be deep,
Speaker 1: whether the FED will overdo it. What's the conversations constructive
Speaker 1: conversations you guys are having at priceline Um when it
Speaker 1: comes to the economic outlook and the possibility of a recession. Sure, well,
Speaker 1: that's obviously on everyone's mind here as well as we
Speaker 1: read the news and everything that's going on in the
Speaker 1: in the category. It's interesting though, is so far the
Speaker 1: hotel chains, the major airlines, they are all signaling good, strong,
Speaker 1: healthy demand for their product. And a lot of that
Speaker 1: obviously is because of consumers not being able to travel
Speaker 1: for really a good year and a half, and so
Speaker 1: that's propelling travel forward. And you know, when you think
Speaker 1: about what consumers are looking to do with whatever extra
Speaker 1: cash they have, they are prioritizing this now over really commodities.
Speaker 1: So you know, as we think about a recession, we're thinking, yeah,
Speaker 1: this could be this could be obviously harmful to the
Speaker 1: industry longer term, but we just don't see that. And
Speaker 1: historically when you look back to Ohay, it weathered that
Speaker 1: very very well as well, So we're very optimistic about
Speaker 1: the next couple of years, even in the face of
Speaker 1: what could be, you know, a recession. But you know,
Speaker 1: you can't predict the future anymore. It's it's becoming a
Speaker 1: bit a bit too challenging, you know, Brett. Quickly, I
Speaker 1: was looking at some of the notes that you sent
Speaker 1: us before the show Um and Cruises. The price you gave,
Speaker 1: the low price for a cruise ship per night made
Speaker 1: my eyes pop out. Is that a type of seventy
Speaker 1: dollars a night you can you can go on a
Speaker 1: cruise work. No, that's absolutely an accurate figure. In fact,
Speaker 1: you know, that's one of and most people don't know this,
Speaker 1: it is one of the most cost effective vacations there
Speaker 1: are because it typically includes obviously food and beverage as well,
Speaker 1: so you bring that together. It's a it's a really
Speaker 1: nice vacation. Now you have to get yourself to a
Speaker 1: cruise port, but there are ways to either drive there
Speaker 1: or find a cheap flight to get you there to
Speaker 1: then get you onto that cruise line. And now you know,
Speaker 1: the cruise lines obviously had a tough time through COVID
Speaker 1: and continue to have a lot of excess capacity, more
Speaker 1: so than many of the other travel categories. So they're
Speaker 1: really they're really rolling out the credits and other things
Speaker 1: to get you onto those ships. That was Priceline CEO
Speaker 1: Brett Keller with me and Mike Reagan. Priceline, by the way,
Speaker 1: a subsidiary of the publicly held Booking Holdings. And that
Speaker 1: wraps up our first hour of the weekend edition of
Speaker 1: Bloomberg Business Week from Bloomberg Radio. I'm Carol Masser and
Speaker 1: I'm Tim Stanovic. Ahead in our next hour, we go
Speaker 1: in depth with Kathy Wood of our convest on everything
Speaker 1: from Elon Musk to this year's FED policy and the
Speaker 1: latest on crypto deep freeze brought on by the collapse
Speaker 1: of ft X. Great voice for so much going on
Speaker 1: right now. Yes, a lot of people have lost a
Speaker 1: lot of money around the crypto acid ecosystem, uh, losing
Speaker 1: value here. But if we're right on the underlying techno
Speaker 1: apology and the underlying rules that bitcoin and ether ethereum
Speaker 1: are going to play in this new world, Uh, then
Speaker 1: I think we're going to recover pretty quickly. Stick around.
Speaker 1: This is Bloomberg. This is Bloomberg Business Week inside from
Speaker 1: the reporters and editors who bring you America's most trusted
Speaker 1: business magazine, plus global business finance and tech news as
Speaker 1: it happened, Sloomberg Business Week with Carol Messier and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Plenty of head
Speaker 1: in our second hour of the weekend edition of Bloomberg
Speaker 1: Business Week, including our comprehensive interview with Kathy Wood of
Speaker 1: our convest everything from Elon Musk and Twitter and Tesla
Speaker 1: to the ft X implosion. First up this hour, the
Speaker 1: crypto crash from a different angle. The Business Week team
Speaker 1: has a story online at Bloomberg dot com, slash business
Speaker 1: Week and on the term at All about how the
Speaker 1: digital asset turmoil is actually helping couples rekindle their relationships
Speaker 1: at an angle I didn't see Bloomberg Markets Senior editor
Speaker 1: Mike Reagan, and I got more from Business Week contributor
Speaker 1: Joel Stein, as well as the Markets and Finance editor
Speaker 1: for the magazine, Pat right Near. I think all of
Speaker 1: us who spent any time reporting on crypto got to
Speaker 1: know people for whom crypto became kind of a defining
Speaker 1: part of their lives. I mean, you know, a lot
Speaker 1: of people listening to this are just ordinary finance workaholics
Speaker 1: who have a hard enough time sort of paying attention
Speaker 1: to this stuff. Um, you know, when the markets are
Speaker 1: open to crypto has this quality of never being closed,
Speaker 1: even on the weekends and bringing a lot of things
Speaker 1: outside of people's peripheral vision. And UM, I think a
Speaker 1: lot of people have had a hard time kind of
Speaker 1: emotionally managing that. And um, the side effect of that
Speaker 1: is that it's hard on people's relationships. But um, Joel,
Speaker 1: tell me how you kind of came came onto this. Uh,
Speaker 1: these were some people you knew. Yes, my friend Igor
Speaker 1: Hiller who's in the piece, And he was the guy
Speaker 1: I always called when I ever got assigned a crypto
Speaker 1: story to ask him like the basics of like what
Speaker 1: the hell this is all about? And he was over
Speaker 1: for dinner with his longtime girlfriend. They've been together for
Speaker 1: like four years, and they told us that kind of
Speaker 1: like what started as a really funny story and turned
Speaker 1: really kind of sad and serious where they almost broke
Speaker 1: up because he wasn't paying any attention to the relationship
Speaker 1: because he was so obsessed with his cryptop and hanging
Speaker 1: out with them and just checking his phone constantly and
Speaker 1: waiting for n f T drops and just like you know,
Speaker 1: degenerate gambler, maybe you'd call it de Jenning when he
Speaker 1: went into these kind of phases and uh, and she
Speaker 1: kind of gave him an ultimatum that was either crypto
Speaker 1: or her. But you know, Joe, you mentioned those n
Speaker 1: f T drops and I get the impression reading this
Speaker 1: that U n f T is almost really worsened this
Speaker 1: situation because you're stuck there waiting for these things to drop,
Speaker 1: and they can be delayed. Did you get that sense
Speaker 1: to that? You know, the the addiction was almost first
Speaker 1: when it came to n f T s, both because
Speaker 1: of the time consumption and also sort of the potential
Speaker 1: upside and those as an investments, at least for a
Speaker 1: hot minute. There, for a hot minute, n f T
Speaker 1: s were. But throughout the entire you know, crypto cycle,
Speaker 1: there was always a different thing that could occupy you
Speaker 1: twenty four hours a day because crypto markets don't close.
Speaker 1: So during the D five farming phase, there was always
Speaker 1: some new farm that was opening up that you had
Speaker 1: to get involved and get their coin real quick, or
Speaker 1: there'd be a coin drop, right like, people were creating
Speaker 1: new coins all the time, and Elon Musk or someone
Speaker 1: else would tell you that this was a hot coin
Speaker 1: you had to get, and you had to get it,
Speaker 1: you know, when it was minted. So I don't think
Speaker 1: it was just n f t s. There were there
Speaker 1: was always some new craze that you had to get
Speaker 1: involved in, and you know, maybe you had to simp
Speaker 1: some star in order to get involved in that, you know,
Speaker 1: um in that discord channel and by I guess those
Speaker 1: are off in n f t s. But yeah, there
Speaker 1: was always a new craze and even if you kept
Speaker 1: up with one of them, there'd be a new one
Speaker 1: that popped up. Pat, come on back in on the conversation. Yeah.
Speaker 1: You know. One of the things I'm thinking about a lot,
Speaker 1: with all of the really serious stuff having happening now,
Speaker 1: is that, um. You know, UM, we've learned that markets
Speaker 1: can grow up faster than you can teach yourself how
Speaker 1: to think about them, and I think also faster than
Speaker 1: you can teach yourself how to emotionally handle them. Um.
Speaker 1: You know, in the last two years in crypto, even
Speaker 1: for people who aren't investing in it, um, it's been uh,
Speaker 1: something that has moved so fast that it just keeps
Speaker 1: you kind of like mentally and emotionally agitated. Um, but
Speaker 1: you know, I mean I also kind of want to
Speaker 1: talk a little bit about sort of you know, the
Speaker 1: people who are the partners in these situations, and Joel's
Speaker 1: sort of like what they felt like they had to
Speaker 1: do to kind of get ahold of their relationships and
Speaker 1: really like bring their partners back from the brink. Yeah,
Speaker 1: and almost every case there was a guy, and it
Speaker 1: was almost always a young with always the fact we
Speaker 1: were looking all around all we could find with young men,
Speaker 1: uh and and the and the numbers, IM polls and
Speaker 1: and kind of play this out. But it's a bunch
Speaker 1: of young men and they get so wrapped up in
Speaker 1: this and they think it's going to be a life
Speaker 1: changing moment that they can't miss out on. It's all fomo,
Speaker 1: and that there's going to be generational wealth created for
Speaker 1: their grandchildren if they just stick to this one thing.
Speaker 1: And they all kind of we're able to get their
Speaker 1: spouse or more like their girlfriend involved to an extent,
Speaker 1: but um, not as much as they would have liked.
Speaker 1: And then there their relationships started to wither because they
Speaker 1: were so devoted to this one thing. Yeah, Joe, I
Speaker 1: wonder if, you know, if these guys really are creating
Speaker 1: wealth through this, if that sort of changes the equation
Speaker 1: with the wives and girlfriends a little bit too. Were
Speaker 1: any of these guys actually, you know, doing well with
Speaker 1: their trading enough to you know, sort of get the
Speaker 1: get the day pass from their wives and girlfriends? Sure?
Speaker 1: I mean, some of these guys, you know, on a
Speaker 1: exciting day could make ten dollars the guys I was
Speaker 1: talking to at least, and that that goes a little,
Speaker 1: you know, a long way and convincing your girlfriend that's okay,
Speaker 1: you didn't go out with her this weekend. But you know,
Speaker 1: those days were few and far between, especially as the
Speaker 1: markets started to dry up at the beginning of this year.
Speaker 1: But in a lot of these cases, eventually, either because
Speaker 1: of the crash or because of ultimatums, the boyfriends somewhat
Speaker 1: came around and people were able to resolve their relationships.
Speaker 1: And in a lot of the cases where I talk
Speaker 1: to people, So, Joe, what do you think happens if
Speaker 1: the crypto market takes off again? Are these guys incurriagible
Speaker 1: or they they learned their lesson? How do you see
Speaker 1: a plane? I mean, do you know any gamblers to
Speaker 1: be encourageable. Um, you know, I think there's there's hope
Speaker 1: that the lessons were learned, but I think it's it's
Speaker 1: a very powerful draw. That was Bloomberg Business Week contributor
Speaker 1: Joel Stein, with Markets and Finance editor Pat Rigneer Mike
Speaker 1: Reagan taking part there as well. That angle right caught
Speaker 1: us by surprise. I didn't see that coming. Yeah, exactly,
Speaker 1: all right, you're listening to Bloomberg Business Week. Coming up,
Speaker 1: we go the Distance with our invest founder and CEO
Speaker 1: Kathy Wood on f t X SPF and Elon Musk's
Speaker 1: latest venture. I think opening up the algorithms which we
Speaker 1: think he will do, and taking away the kind of
Speaker 1: human driven censorship and allowing the transparency of the algorithms
Speaker 1: that they do put out there. And I think it's
Speaker 1: going to be very healthy. This is Bloomberg. This is
Speaker 1: Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes
Speaker 1: Tim Stinovik from Bloomberg Radio. Whatever happened, why ever happened?
Speaker 1: I had a duty, at a duty to all of
Speaker 1: our stakeholders, to our customers, our creditors. I had to
Speaker 1: do to our employees, to our investors and to the
Speaker 1: regulators in the world to do right by them, to
Speaker 1: make sure the rain things happened at the company, and
Speaker 1: clearly I'd do a good job of that. I was
Speaker 1: shocked by what happened this month. That was fd X
Speaker 1: founder Sandby had been freed from the New York Times
Speaker 1: Deal Book summit on Wednesday, trying to explain the collapse
Speaker 1: of his crypto exchange and trading from Alameda. Certainly a
Speaker 1: lot of questions though still to be answered. All Right,
Speaker 1: for the rest of this hour, speaking of questions and
Speaker 1: views when it comes to SPF and Alameda and f
Speaker 1: t X. For the rest of this hour, we've got
Speaker 1: a well known investor to address many of the big
Speaker 1: stories of the day, including that latest crypto meltdown. We're
Speaker 1: also going to talk about elon, Twitter, Ellen and Tesla
Speaker 1: and so much more. Okay, we're talking about Kathy Wood.
Speaker 1: She's the founder, CEO and c IO of Arc invest
Speaker 1: who joined us prior to Thanksgiving. This was in the
Speaker 1: wake of spfs crypto empire just going belly up, and
Speaker 1: despite the deepest freeze yet in the crypto winter, Cathy
Speaker 1: Wood is staying the course. It's been a very challenging few.
Speaker 1: Uh while I should say twenty months, but uh, you know,
Speaker 1: we're looking at our portfolios right now, and um, we
Speaker 1: are back to where we were in terms of calling
Speaker 1: them deep value portfolios. If you give us a five
Speaker 1: year investment time horizon, I mean, we're seeing incredible values
Speaker 1: for the kinds of growth, kind of growth that our
Speaker 1: portfolios are going to deliver. You know where I want
Speaker 1: to go. I gotta talk to you about the crypto space.
Speaker 1: You um, you know it's it's a world you know
Speaker 1: really well. We think about the ft X collapse, the
Speaker 1: coming undone of Sam Makman freed. You know, you have
Speaker 1: been buying into some of the different names in the
Speaker 1: cryptos based coin base, gray scale, Bitcoin trust. Why should
Speaker 1: investors trust crypto? Why do you trust crypto at this point?
Speaker 1: If you look at the block chains, let's let's use
Speaker 1: the Bitcoin blockchain and ethereum, what you'll find is they
Speaker 1: have the infrastructure. The technology has not skipped a beat
Speaker 1: throughout this entire crisis. In fact, the hash rate, Bitcoin's
Speaker 1: hash rate is at an all time high, and that
Speaker 1: is a real indication of this security of the network.
Speaker 1: On ethereum, we're seeing the total value UH staked at
Speaker 1: twenty four billion. That is an all time high. So
Speaker 1: we think the infrastructure is working beautifully. UM. As far
Speaker 1: as coin Base, UH, this is an onshore regulated UH
Speaker 1: company and wanting to help shape regulations. Brian Armstrong, the CEO,
Speaker 1: and Alicia uh CFO have been leaning in into what's
Speaker 1: going on right now and saying, Okay, regulators, we need
Speaker 1: more clarity in order to protect investors. Those who wanted
Speaker 1: to get involved with a certain types of crypto were
Speaker 1: forced off shore and look at what's happened. So UM,
Speaker 1: I I think that coin base is going to come
Speaker 1: out here looking very very strong. It just lost a
Speaker 1: very big competitor in t X. Well what is the
Speaker 1: market missing though, because you know that could be one narrative, Cathy.
Speaker 1: But at the same time, we haven't exactly seen shares
Speaker 1: of coin based rally since f t x is collapse.
Speaker 1: Do you think to you that represents potentially broader concern
Speaker 1: about just people's interest in crypto following ft x is collapse. No,
Speaker 1: I think it's more fear. I think many people say
Speaker 1: we don't know what we don't know UH, and UH,
Speaker 1: so what we do is we step back, you know,
Speaker 1: put a little perspective into the situation here, and what
Speaker 1: do we have. So the entire crypto asset ecosystem is
Speaker 1: an eight hundred billion dollar ecosystem. Apple is three times
Speaker 1: larger in terms of market cap. So that's some perspective.
Speaker 1: Many people are saying, well, okay, is this another Lehman?
Speaker 1: Could this be uh, you know, could could we see
Speaker 1: the domino effect here? I've just given you one reason why.
Speaker 1: The banking system back in oh eight oh nine trillions
Speaker 1: and trillions of dollars and it was the global banking system.
Speaker 1: Right now we have it seems from f t X
Speaker 1: h five to ten billion dollars in creditors. If ash
Speaker 1: as f t X has filed bankruptcy, they will be
Speaker 1: making claims. If you look at Lehman, that was one
Speaker 1: point to trillion dollars in claims. So again just trying
Speaker 1: to put perspective, this is fraud, this is made off.
Speaker 1: Made off was sixty four billion dollars in claims. Again
Speaker 1: f t X five to ten billion. Now I know
Speaker 1: that crypto assets are you know, they attract a lot
Speaker 1: of attention. This is um you know, the three revolutions
Speaker 1: we talk about all the time you know, a new
Speaker 1: monetary system in terms of the first global private meaning
Speaker 1: not government controlled digital uh, well spased monetary system that's Bitcoin.
Speaker 1: A very big idea. Defy is a very big idea.
Speaker 1: And uh, while that has been thrown into question in
Speaker 1: terms of you know, shifting from one exchange to another,
Speaker 1: we've had a lot of shifting around. But I think, uh,
Speaker 1: I think DEFY in terms of taking the middlemen out
Speaker 1: of financial services and and making the ecosystem much more
Speaker 1: transparent with much less counterparty risk, is going to take off.
Speaker 1: It will continue to move forward, we believe. I think
Speaker 1: one of the things we're trying to figure out is
Speaker 1: how long that we think the industry will be feeling
Speaker 1: the ramifications of f t X. I mean, one thing
Speaker 1: we've learned right with SPF and f t X is
Speaker 1: what we didn't know. So how long do you think
Speaker 1: this goes on? Because you obviously have faith in it,
Speaker 1: You've been buying into it, and you think this is
Speaker 1: a good entry point at this point, whether it's gray Scale,
Speaker 1: whether it's coin base, but um, how long do you
Speaker 1: think we continue to feel the effect? And do you
Speaker 1: think there's more contagion to be felt? Um, well, we
Speaker 1: always look for the whale, uh in in a situation
Speaker 1: like this, and if if there was a whale out there,
Speaker 1: it was f t X and and Sam Bankman Freed,
Speaker 1: you know, king of the hill. Uh. So I think
Speaker 1: we found the whale. And uh, you know, I'm sure
Speaker 1: they are going there's going to be more fallout, but
Speaker 1: we see how big the whale is. And yes, a
Speaker 1: lot of people have lost a lot of money around
Speaker 1: uh the crypto acid ecosystem, uh, losing value here. But
Speaker 1: if we're right on the underlying technology and the underlying
Speaker 1: roles that bitcoin and ether ethereum are going to play
Speaker 1: in this new world, Uh, then I think we're going
Speaker 1: to recover pretty quickly. More ahead with our invest founder,
Speaker 1: CEO and ce IO, Cathy would coming up. She's gonna
Speaker 1: tell us more about her one on one meeting with
Speaker 1: Sam Bankman Freed that is in a different time when
Speaker 1: f t X was still flying high, plus why she
Speaker 1: thinks SPF is a fraud on the level of Bernie
Speaker 1: made off. And we do want to emphasize to listeners
Speaker 1: that regulators are still probing exactly what happened with f
Speaker 1: t X and Bloomberg News will continue to provide new
Speaker 1: information as the case unfolds. I think the thing that
Speaker 1: is shocking is how many people were very close to him,
Speaker 1: and one would have presumed looked at all of the
Speaker 1: documents and got a sense of the books. You're listening
Speaker 1: to Bloomberg Business Week. This is Bloomberg broadcasting from the
Speaker 1: financial capital of the world, Bloomberg eleven Rio in New
Speaker 1: York to Washington, d C. Bloomberg to Boston, Bloomberg one
Speaker 1: oh six one does San Francisco, Bloomberg nine sixty to
Speaker 1: the country Sirius XM Chado one nineteen and around the
Speaker 1: globe of Bloomberg Business app and Bloomberg Radio dot Com.
Speaker 1: This is Bloomberg Business Week. More now, from recent conversation
Speaker 1: with our invest founder, CEO and c I O Kathy
Speaker 1: would When we spoke with her on November twenty two,
Speaker 1: the scope of the ft X bankruptcy probe was and
Speaker 1: still is coming into focus, and even since our conversation
Speaker 1: with her, Carol, we've seen several other dominoes fall just
Speaker 1: in the last few days. That does, of course include
Speaker 1: block Fire recently filing for bankruptcy. Here we ask about
Speaker 1: Sam Bankman freed though and Cathy would. She did not
Speaker 1: mince words here. Again, we do remind you that investigators
Speaker 1: are still looking into whether he committed a crime end
Speaker 1: if so, on what scale, more like made off. We'll
Speaker 1: give us some give us an understanding of what your
Speaker 1: interactions were with Sam Bankman Freed before this followed. And
Speaker 1: have you spoken to him, because I know you were
Speaker 1: at Crypto Bahamas along with many other people earlier this year,
Speaker 1: the ft X Salt conference. Yes, I had a zoom
Speaker 1: my team and I had a zoom with Sam before
Speaker 1: that conference. I think they wanted to have us represented
Speaker 1: at the conference. But other than that one phone call
Speaker 1: just to set up I have never talked to him um,
Speaker 1: and by the end of the phone call seemed to
Speaker 1: be distracted by whatever else he was doing. So that
Speaker 1: was my one exposure to him. And you know, I
Speaker 1: think the thing that is shocking is how many people
Speaker 1: were very close to him, and one would have presumed
Speaker 1: looked at all of the documents and got a sense
Speaker 1: of the books. Uh. The fact that so many people
Speaker 1: were completely fooled um is quite shocking. You know. I
Speaker 1: think he had this aura around him or something that
Speaker 1: caused people to to to ask fewer questions than might
Speaker 1: otherwise have been the case. It's very hard to understand.
Speaker 1: Do you worry it all about as you buy into
Speaker 1: gray Scale, Kathy, you know the whole world of the
Speaker 1: Digital Currency Group and Barry Silver's company, I mean, the
Speaker 1: various connections that kind of go back to f t X.
Speaker 1: Are you at all worried about a liquidation or anything.
Speaker 1: We know that the Gray Scale investment trusts are the
Speaker 1: most valuable part of that company right now, we think
Speaker 1: they're going to try and hold on to that if
Speaker 1: nothing else. Now, one of the things that we know
Speaker 1: that Gray Scale and Michael Sun and Cheim a great
Speaker 1: Scale wanted was to convert this trust into an e
Speaker 1: t F. I think what's happened with the fallout here
Speaker 1: might increase the probability that a Bitcoin e t F
Speaker 1: will be approved. I'm not saying immediately, but we know that.
Speaker 1: And even the newest SEC commissioner him Lizarraga I think
Speaker 1: is his name, has come out and said we need
Speaker 1: as regulators to focus on decentralization and transparency. What is
Speaker 1: the most decentralized and transparent crypto asset in the world.
Speaker 1: It is bitcoin, And yet retail investors do not have
Speaker 1: easy access through liquid asset like uh an E t F,
Speaker 1: which honestly I don't understand given that they approved a
Speaker 1: bitcoin futures um, and so I think it might increase
Speaker 1: the odds we shall see. Well, and some of them
Speaker 1: been wondering whether or not you're playing the arbitrage um
Speaker 1: with GBTC right now, you know, is it that because
Speaker 1: of the trust deep discount at this point, is that
Speaker 1: the thinking for you to kind of be moving more
Speaker 1: money into this name, Well, it is one of the
Speaker 1: few securities we have to own securities in uh E
Speaker 1: t F s, so it is one of the few
Speaker 1: securities we can buy. And yes, it's at a very
Speaker 1: big discount, so it is more attractive bitcoin if they
Speaker 1: were to even liquidate it. You know, we've got such
Speaker 1: a big discount relative to to bitcoin. We don't think
Speaker 1: they're going to This is the most valuable property. I
Speaker 1: think they're going to hang onto it, and I think
Speaker 1: over time the discount will close. Don't know if it's
Speaker 1: because of a conversion to a bitcoin ETF. I'm sure
Speaker 1: the regulators will take a very close look at d
Speaker 1: CG and the gray scale Bitcoin Investment trust, but we
Speaker 1: do know this is a grant ord trust, highly regulated. Kathy,
Speaker 1: We've talked coin Base, We've talked g BTC. Are there
Speaker 1: any other opportunities in crypto that you see right now
Speaker 1: in the wake of f TXs collapse as prices have
Speaker 1: been beaten up. Well again for our e t f s.
Speaker 1: As you mentioned on coin base, we also owned Square
Speaker 1: and it is interesting that Jack Dorsey has chosen the
Speaker 1: most transparent, most decentralized crypto asset to center blocks crypto
Speaker 1: exposure too, and I realized he's trying to from a
Speaker 1: developer community point of view, leave them on their their own.
Speaker 1: But we do think bitcoin, uh, and you can see
Speaker 1: through the behavior of the infrastructure hasn't skipped a beat
Speaker 1: at more secure than it was yesterday, the day before,
Speaker 1: in the day before. So I have a feeling this
Speaker 1: is going to elevate Bitcoin in the eyes of not
Speaker 1: only the crypto world, but the investment world at large.
Speaker 1: And I have a feeling it's going to have more
Speaker 1: running room through the rest of the world. We think
Speaker 1: they're going to be very successful. That, of course is
Speaker 1: Kathy would of our convest will wrap up getting her
Speaker 1: thoughts on one of her longtime investments. Yes, safe to say, Tim,
Speaker 1: she is the original Tesla bowl. We asked Kathy Wood
Speaker 1: on where Elon his e V giant and yes, Twitter
Speaker 1: go from here? This is Bloomberg. You're listening to Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovich from Bloomberg Radio heading for home on this weekend
Speaker 1: broadcast and bringing you are Deep Dive with Kathy would
Speaker 1: of our Convest. We talked with her just before Thanksgiving.
Speaker 1: At the time, she reaffirmed her forecast her Bitcoin to
Speaker 1: reach a million dollars per coined by though she did
Speaker 1: say the recent crypto crash could slow institutional adoption. Of course,
Speaker 1: our Convest has interests that go well beyond digital assets.
Speaker 1: One of those is Elon Musk. Cathy Wood has already
Speaker 1: bet big and cashed in on Tesla. Now she's looking
Speaker 1: to do the same with Twitter, purchasing a private stake
Speaker 1: in Twitter via our adventure fund back in early November.
Speaker 1: The question now is mother Musk is the right person
Speaker 1: for this job too. We owned Twitter for quite a
Speaker 1: while and we sold it into the rumors that Ellen
Speaker 1: was going to buy it because we knew there would
Speaker 1: be a lot of controversy around that, so it moved
Speaker 1: into the sixties. I think it got to seventy and
Speaker 1: we sold there and have been watching from the sidelines.
Speaker 1: But if you look at that model longer run, it
Speaker 1: has not delivered on the promise. And I think opening
Speaker 1: up the algorithms which we think he will do, and
Speaker 1: taking away the kind of human driven censorship and allowing
Speaker 1: the transparency of the algorithm is that they do put
Speaker 1: out there, you know, allowing people to question them, I
Speaker 1: think it's going to be very healthy. If you look
Speaker 1: at the daily average users, I think the various metrics
Speaker 1: that you can count daily, they have been going up dramatically.
Speaker 1: So I know a lot of people who you know,
Speaker 1: basically decided to quit Twitter because they didn't like the
Speaker 1: kind of censorship and so forth that was going on.
Speaker 1: So I actually like what he's doing. It seems interestingly enough, though,
Speaker 1: that a lot of brands don't like what he's doing, Kathy,
Speaker 1: and we've seen some prominent companies pull back or at
Speaker 1: least pause advertising on the plant pot. Of course, I
Speaker 1: mean that makes sense if you know you don't necessarily
Speaker 1: want to support the guy who owns Tesla if you're
Speaker 1: making competitive vehicles to Tesla, but bigger brands that are
Speaker 1: worried about brand safety, and I'm wondering, you know, it
Speaker 1: doesn't seem like it's necessarily moving in the direction of
Speaker 1: increasing revenue from an advertorial perspective right now, I do
Speaker 1: think that this is not just an advertising vehicle. In fact,
Speaker 1: this is that probably might diminish quite significantly in terms
Speaker 1: of its importance longer run. You'll remember that Ellen started
Speaker 1: his entrepreneurial pursuits with a precursor to PayPal. So he
Speaker 1: very a very long time ago had this idea of
Speaker 1: a digital wallet, a super app like what's app um
Speaker 1: in mind, and of course took a big detour into
Speaker 1: another passion of his um. We know he knows a
Speaker 1: lot about this world, and I think if anyone in
Speaker 1: the US can do this, I think he can. I
Speaker 1: think he'll surround himself by the right business leaders. He's
Speaker 1: not going to do this himself. Many people say, aren't
Speaker 1: you worried about Tesla, No, we're not. Because of our
Speaker 1: work on electric vehicles. They are are grabbing a disproportionate
Speaker 1: share and will continue to do so of a market
Speaker 1: that we think will account for eighty five to of
Speaker 1: all cars sold in the world, So that's on automatic pilot.
Speaker 1: He's now working on autonomous, which we think is going
Speaker 1: to work. In fact, I just had the pleasure of
Speaker 1: riding in a Cruise car in San Francisco, an autonomous
Speaker 1: car GM just wanted to see, wanted to check it out,
Speaker 1: and I have to tell you I love the ride.
Speaker 1: And Uh, I know autonomous is possible because Cruise and
Speaker 1: Weimo are doing it, and we think Tesla is going
Speaker 1: to do it in a much bigger way. So that's Tesla.
Speaker 1: But onto Twitter, it really needed to be shaken up.
Speaker 1: I think think he can make it be a great
Speaker 1: business and very profitable. And if so, how I do
Speaker 1: think about the amount of data that Twitter has uh,
Speaker 1: and it's proprietary data, and think about the combination of
Speaker 1: that and artificial intelligence. Remember he has AI expertise and experts.
Speaker 1: I know he brought in some of his engineers, UH,
Speaker 1: and they are going to I think surprise and delight
Speaker 1: heading for a super app kind of product. And you know,
Speaker 1: by our estimates and you'll find this in our big ideas,
Speaker 1: I think it was um the value of each customer
Speaker 1: in a digital wallet, uh, should be in the twenty
Speaker 1: thousand plus range, because not just for financial services, it
Speaker 1: will ultimately be for commerce and AI is the glue
Speaker 1: that's going to pull this all together and the data
Speaker 1: that they have, the data is the new oil. You've
Speaker 1: heard that this is absolutely true in the case of Twitter. Well, Kathy,
Speaker 1: I mean the currency Twitter as a currency has worked
Speaker 1: really well for you. You've got one point five million
Speaker 1: followers on the platform. A lot of people see what
Speaker 1: you tweet. We saw eulogies being written for Twitter. It
Speaker 1: didn't end up dying as many people thought it would.
Speaker 1: But what would happen if Twitter went away? And are
Speaker 1: you concerned that this is an extremely productive social network
Speaker 1: for us? It is our most productive and you know
Speaker 1: it truly is the global public town square. You know
Speaker 1: I can write an open letter to the FED and
Speaker 1: put it out over Twitter. Now do I think the
Speaker 1: Fed's going to listen to me? No, I don't, but
Speaker 1: that they may listen, that the FED board members may
Speaker 1: listen to someone who might think that I have something
Speaker 1: to say, which is simply a question. Wait a minute,
Speaker 1: how can you be unanimous seventy five basis points at
Speaker 1: a time? How can you be unanimous when there is
Speaker 1: so much conflicting data out there, including an inverted yield
Speaker 1: curve now at seventy five basis points, that's crazy. I
Speaker 1: think we're going to look back in history and say,
Speaker 1: what were they thinking unanimous? Commodity prices are fall calling.
Speaker 1: You've got excess inventories all over the place. We're seeing
Speaker 1: massive discounting. I think we're going to see deflation and
Speaker 1: then they'll make a move in the opposite direction. But
Speaker 1: we need, we need a steadier hand than that. So
Speaker 1: when Kathy went to you, because you've argued this and
Speaker 1: you and you've put this out there in terms of
Speaker 1: FED policy, in terms of deflation, when do you think
Speaker 1: it will come? I think we're seeing it. I think
Speaker 1: if you look at a lot of commodity prices, not
Speaker 1: only are they down thirty two some of them from
Speaker 1: their peaks, they're down on a year over year basis.
Speaker 1: In fact, on oil itself is almost down on a
Speaker 1: year over year basis. Now the big pushbacks on this
Speaker 1: call we get our wages and rents. We're seeing rent
Speaker 1: inflation reverse quite suddenly and dramatically. What I think we
Speaker 1: will look back in history and say this inflation shock
Speaker 1: was the function of a supply shock caused by COVID
Speaker 1: supply chain probably ms afterwards, and even more problems after
Speaker 1: Russia's invasion of Ukraine. If I can just take one second,
Speaker 1: I would like to give an analogy to the late
Speaker 1: nineteen teams. We were in the middle of the massive
Speaker 1: innovation the history of the world had seen telephone, electricity,
Speaker 1: and automobile all at the same time. But we had
Speaker 1: World War One and we had the Spanish flu sound
Speaker 1: familiar now. That was much worse than what we've gone through.
Speaker 1: We've gone through nothing like that, But there were massive
Speaker 1: supply chain problems back then. And inflation peaked at twenty
Speaker 1: four percent right in June of nine, and by June
Speaker 1: of it was minus fifteen percent. So I think that
Speaker 1: our eight to ten percent inflation, which is where it
Speaker 1: was at the peak, is going to turn around and
Speaker 1: we're going to see some very big surprises on the
Speaker 1: inflation front. And you know who agrees with us, the
Speaker 1: bond market. Look at what the bond market is doing now,
Speaker 1: sevent inverted. That's telling us that the bond market is
Speaker 1: saying recession and or big surprises on the low side
Speaker 1: of inflation. Expectations, so and it's probably both. Kathy unfortunately,
Speaker 1: have a couple of minutes left here. One thing we
Speaker 1: did want to squeeze in. Um. We've been talking about
Speaker 1: in the newsroom that Alliance Bernstein is getting ready to
Speaker 1: launch actively managed disruptor e t f s. And from
Speaker 1: what I understand, you pitched them, you know, years ago. Um,
Speaker 1: how does that make you feel? And you know, to
Speaker 1: see from that you worked at kind of doing a
Speaker 1: very similar thing or looking to do something similar. Yes, well, um,
Speaker 1: Alliance Bernstein I believe got the first fully active, fully
Speaker 1: transparent e t F in I think it was early.
Speaker 1: It got the approved in early two thousand thirteen. So
Speaker 1: that's when I put my hand up and said I'll
Speaker 1: do that. And um uh, there were there was a
Speaker 1: belief that e t f s were not safe or
Speaker 1: you know, there were a lot of arguments against it.
Speaker 1: Probably the biggest one was mutual funds, which are much
Speaker 1: more profitable. I would say the economics there are higher
Speaker 1: than e t f s. How does it make me feel?
Speaker 1: You know, I'm the more the merrier. I I think
Speaker 1: this is a fantastic wrapper for the end consumer. It's
Speaker 1: fully liquid on like mutual funds, you have to wait
Speaker 1: till the end of the day. Transparent, fully transparent, that's
Speaker 1: what that's what investors want. UH. It is more tax effective,
Speaker 1: much more tax effective. We're seeing mutual funds that are
Speaker 1: down thirty percent this year, but they're slapping their investors
Speaker 1: with UH in capital tax gains. UH. And then finally,
Speaker 1: it's more cost effective when you because all of the
Speaker 1: what you see is what you get with these fees.
Speaker 1: There aren't a bunch of hidden fees. So it's a
Speaker 1: great rapper for the end consumer. I highly recommend it,
Speaker 1: and we're happy that that they that they are seeing
Speaker 1: the light. Now. That's Kathy would our can best founder,
Speaker 1: CEO and CEE. I. Oh, if you missed any of
Speaker 1: the conversation, just head on over to our podcast feed.
Speaker 1: And that wraps up the weekend edition of Bloomberg Business
Speaker 1: Week from Bloomberg Radio. Thanks so much for joining us.
Speaker 1: Big shout out to Bloomberg Market Senior editor Mike Reagan
Speaker 1: for helping us out. I'm Carol Masser and I'm Tim Stanovk.
Speaker 1: Be sure to tune into Bloomberg Business Week Monday through Friday,
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Speaker 1: Have a great weekend, everyone, stay safe. This is Bloomberg