1
00:00:02,520 --> 00:00:07,000
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:08,640 --> 00:00:13,000
Speaker 2: This is Bloomberg business Week, Daily reporting from the magazine

3
00:00:13,000 --> 00:00:17,599
Speaker 2: that helps global leaders stay ahead with insight on the people, companies,

4
00:00:17,640 --> 00:00:22,520
Speaker 2: and trends shaping today's complex economy. Plus global business finance

5
00:00:22,560 --> 00:00:25,880
Speaker 2: and tech news as it happens. The Bloomberg Business Week

6
00:00:25,960 --> 00:00:31,320
Speaker 2: Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.

7
00:00:31,680 --> 00:00:35,040
Speaker 3: Shares of Amazon hire in the aftermarket. Let's get to

8
00:00:35,080 --> 00:00:38,240
Speaker 3: it with our team. Two members killer members, if you will,

9
00:00:38,240 --> 00:00:41,040
Speaker 3: of our Bloomberg Intelligence team. We're talking about Punham Goyle,

10
00:00:41,080 --> 00:00:44,080
Speaker 3: She's Bloomberg Intelligence Senior analyst for e Commerce and ath Leisure,

11
00:00:44,120 --> 00:00:47,800
Speaker 3: and Anna Agrana, Bloomberg Intelligence Senior technology analysts.

12
00:00:48,000 --> 00:00:48,320
Speaker 4: Put them.

13
00:00:48,400 --> 00:00:50,880
Speaker 3: Let me kick it off with you. In terms of Amazon,

14
00:00:51,200 --> 00:00:52,400
Speaker 3: what's jumping out here for you?

15
00:00:53,760 --> 00:00:56,800
Speaker 5: Look, it looks like Broadbates Bob, broad based strength across

16
00:00:56,840 --> 00:00:59,280
Speaker 5: the board. The retail numbers were particularly good, and that

17
00:00:59,360 --> 00:01:01,640
Speaker 5: was expected because we had the prime day shift moving

18
00:01:01,640 --> 00:01:05,119
Speaker 5: in from three Q to two Q. So overall, really

19
00:01:05,200 --> 00:01:07,840
Speaker 5: nice numbers here on the retail side. Consumers came to

20
00:01:07,880 --> 00:01:10,560
Speaker 5: Amazon to shop prime day sales, and the shift to

21
00:01:10,640 --> 00:01:13,360
Speaker 5: online just continues to appear more and more apparent as

22
00:01:13,400 --> 00:01:15,520
Speaker 5: we moved through a tough consumer spending cycle.

23
00:01:15,800 --> 00:01:18,680
Speaker 1: What's this third quarter net sales miss one ninety seven

24
00:01:18,720 --> 00:01:20,520
Speaker 1: to two hundred and two billion, the estimates for two

25
00:01:20,560 --> 00:01:21,920
Speaker 1: hundred and four billion dollars poon.

26
00:01:21,959 --> 00:01:22,160
Speaker 4: Hm.

27
00:01:23,000 --> 00:01:24,840
Speaker 5: I think part of it is the prime day shift,

28
00:01:24,880 --> 00:01:25,800
Speaker 5: right when you think about.

29
00:01:26,000 --> 00:01:28,160
Speaker 1: But analysts knew about that, so they should have.

30
00:01:28,280 --> 00:01:30,200
Speaker 5: Yes, but we don't know how much, right, we don't

31
00:01:30,240 --> 00:01:32,960
Speaker 5: know how much dollar volume has moved into two Q.

32
00:01:33,000 --> 00:01:34,800
Speaker 5: If you look at the beat that we saw, analysts

33
00:01:34,840 --> 00:01:38,520
Speaker 5: were expecting revenues to be up, but they came and

34
00:01:38,560 --> 00:01:40,919
Speaker 5: even higher them though, right, thirteen point seven percent online

35
00:01:40,920 --> 00:01:43,640
Speaker 5: revenues was the expectation and they came in at fifteen percent.

36
00:01:44,080 --> 00:01:47,200
Speaker 5: So a couple of billion dollars there could be part

37
00:01:47,440 --> 00:01:49,480
Speaker 5: of the movement that we're seeing here in the guidance

38
00:01:49,520 --> 00:01:49,880
Speaker 5: as well.

39
00:01:49,960 --> 00:01:52,920
Speaker 3: All right, and rok Kman in on here. Let's talk

40
00:01:52,960 --> 00:01:58,080
Speaker 3: about AWS. What doing pretty well, to say the.

41
00:01:58,120 --> 00:02:01,960
Speaker 6: Least, actually much much better than what I would have

42
00:02:02,280 --> 00:02:05,720
Speaker 6: expected them in going from to thirty seven in constant

43
00:02:05,760 --> 00:02:08,960
Speaker 6: currency is phenomenal just because the size of this business

44
00:02:09,040 --> 00:02:10,880
Speaker 6: is so large, I mean, it's so much bigger than

45
00:02:10,919 --> 00:02:13,840
Speaker 6: Oracle and so much bigger than Google. But this is

46
00:02:13,880 --> 00:02:16,359
Speaker 6: a very big beat, frankly, and the bigger thing. The

47
00:02:16,400 --> 00:02:18,800
Speaker 6: biggest surprise for me was the margins. I would have

48
00:02:18,840 --> 00:02:21,640
Speaker 6: expected margins to go down with all these investments that

49
00:02:21,639 --> 00:02:24,799
Speaker 6: actually went up. So, you know, kudos to the AWS

50
00:02:24,840 --> 00:02:27,520
Speaker 6: team and we look to hear more about guidance for

51
00:02:27,520 --> 00:02:29,960
Speaker 6: a next quarter, and you know, how much longer can

52
00:02:29,960 --> 00:02:31,000
Speaker 6: these margins hold up?

53
00:02:31,560 --> 00:02:34,440
Speaker 1: Honor Rock. The AI and chips run rate, the each

54
00:02:34,440 --> 00:02:38,880
Speaker 1: eclipsed run rates of over twenty five billion dollars. Can

55
00:02:38,919 --> 00:02:42,400
Speaker 1: textualize that for US, as Romaine said, a division of

56
00:02:42,440 --> 00:02:45,440
Speaker 1: a division with twenty five billion dollar run rates.

57
00:02:46,080 --> 00:02:46,320
Speaker 7: Yeah.

58
00:02:46,400 --> 00:02:48,720
Speaker 6: I mean to be honest, I don't really care that

59
00:02:48,800 --> 00:02:51,239
Speaker 6: much about the AI net number. The number of the

60
00:02:51,320 --> 00:02:53,919
Speaker 6: chips is the one that I find it more exciting

61
00:02:53,960 --> 00:02:57,480
Speaker 6: because here's the thing. All these big companies that are

62
00:02:57,480 --> 00:03:00,600
Speaker 6: spending all this CAPEX, A large portion of that CAPIX

63
00:03:00,639 --> 00:03:04,440
Speaker 6: is going to buy GPUs and Vidio GPUs. If Amazon

64
00:03:04,480 --> 00:03:07,360
Speaker 6: can go and figure out their workloads onto their own chips,

65
00:03:07,639 --> 00:03:10,520
Speaker 6: it saves them massive amount of money and helps them

66
00:03:10,560 --> 00:03:13,480
Speaker 6: recognize the big backlock that they have without having to

67
00:03:13,520 --> 00:03:15,680
Speaker 6: spend you know, given video that cash flow. I think

68
00:03:15,720 --> 00:03:19,000
Speaker 6: that's one of the biggest differentiatives between Google, Amazon, and

69
00:03:19,080 --> 00:03:21,960
Speaker 6: Microsoft is you know, the first to have their own

70
00:03:22,040 --> 00:03:25,240
Speaker 6: chips that people are embracing at a fast pace. Meanwhile,

71
00:03:25,320 --> 00:03:27,200
Speaker 6: that's not the case with Microsoft.

72
00:03:27,639 --> 00:03:29,600
Speaker 3: Yeah, I think it's just fascinating. As I said, I

73
00:03:29,600 --> 00:03:31,600
Speaker 3: don't always think about Amazon as a chip company, but

74
00:03:31,639 --> 00:03:33,160
Speaker 3: you got to remember that they are doing this, and

75
00:03:33,240 --> 00:03:37,080
Speaker 3: increasingly these big tech guys are doing it. Put them

76
00:03:37,120 --> 00:03:39,720
Speaker 3: Come on back in here, anything here, I know we're

77
00:03:39,720 --> 00:03:42,080
Speaker 3: still getting information. There's still stuff we're going to get

78
00:03:42,080 --> 00:03:44,120
Speaker 3: on the analysts called anything there that you find is

79
00:03:44,560 --> 00:03:47,000
Speaker 3: maybe something that's worth digging a little bit deeper into

80
00:03:47,120 --> 00:03:48,160
Speaker 3: and asking about.

81
00:03:49,320 --> 00:03:51,960
Speaker 5: I think the advertising business saw a nice pickup, right,

82
00:03:52,000 --> 00:03:54,960
Speaker 5: twenty six percent growth rates this quarter is a is

83
00:03:55,000 --> 00:03:56,960
Speaker 5: a step up from the close to twenty percent that

84
00:03:57,000 --> 00:03:59,800
Speaker 5: they've been reporting for the past few quarters. Was that

85
00:03:59,840 --> 00:04:02,600
Speaker 5: also led by the prime day shift given such a

86
00:04:02,600 --> 00:04:06,120
Speaker 5: big event moved into the second quarter to advertising dollars

87
00:04:06,120 --> 00:04:09,480
Speaker 5: shift too, and we will we see that slowed down

88
00:04:09,560 --> 00:04:12,320
Speaker 5: a little in the next quarter. So I'm really looking

89
00:04:12,320 --> 00:04:16,359
Speaker 5: to better understand how this prime day shift affected and

90
00:04:16,480 --> 00:04:19,320
Speaker 5: helped to queue across the board and what it really

91
00:04:19,320 --> 00:04:21,840
Speaker 5: does to three Q. They've never quantified it, so we're

92
00:04:21,839 --> 00:04:22,839
Speaker 5: hoping to get some color.

93
00:04:23,200 --> 00:04:27,279
Speaker 1: Well, how big is prime Like how big is Prime Day?

94
00:04:27,279 --> 00:04:30,240
Speaker 1: Because I know we know from a metrics perspective, but

95
00:04:30,320 --> 00:04:33,520
Speaker 1: Prime Day kind of started a few years ago as

96
00:04:33,560 --> 00:04:36,839
Speaker 1: this offshoot of what was it Alibaba doing Singles Day?

97
00:04:37,120 --> 00:04:39,440
Speaker 1: Is that what sort of inspired it years ago?

98
00:04:39,600 --> 00:04:41,800
Speaker 5: I mean that could have inspired it. But you know

99
00:04:41,839 --> 00:04:43,720
Speaker 5: Prime Day was a once a year phenomenal.

100
00:04:43,880 --> 00:04:45,760
Speaker 1: Yeah, I know, it's like holiday right a week.

101
00:04:45,839 --> 00:04:49,440
Speaker 5: It's now twice a year, right, So it's really just

102
00:04:49,600 --> 00:04:53,040
Speaker 5: a move to pull shoppers to spend earlier. So if

103
00:04:53,040 --> 00:04:55,400
Speaker 5: you think about the timing of Prime Day, right this time,

104
00:04:55,440 --> 00:04:58,920
Speaker 5: they moved it into June usually in July, so really

105
00:04:59,000 --> 00:05:02,320
Speaker 5: capturing spend for back to school, for these peak holiday

106
00:05:02,320 --> 00:05:05,720
Speaker 5: moments where consumers are looking to stretch their dollars. They're

107
00:05:05,800 --> 00:05:08,960
Speaker 5: essentially taking the dollars up front and trying to get

108
00:05:08,960 --> 00:05:13,120
Speaker 5: the consumers suspend it with them versus elsewhere. Does that happen?

109
00:05:13,720 --> 00:05:16,400
Speaker 5: Yes and no, because around Prime Day, it's not just

110
00:05:16,480 --> 00:05:19,719
Speaker 5: Amazon that's striking the deals. It's also Walmart, it's also Target,

111
00:05:19,760 --> 00:05:22,880
Speaker 5: it's also best Buy. Everyone is having their own version

112
00:05:22,920 --> 00:05:24,320
Speaker 5: of deals around this day.

113
00:05:24,400 --> 00:05:27,080
Speaker 3: Anything to get us to buy I know how that works. Hey,

114
00:05:27,200 --> 00:05:30,200
Speaker 3: Just to remind everybody we're talking with Putnamcoil Bloomberg Intelligence

115
00:05:30,240 --> 00:05:33,600
Speaker 3: senior analysts for e commerce and at Leisure, Anaragrana, Bloomberg Intelligence,

116
00:05:33,640 --> 00:05:37,520
Speaker 3: senior technology analyst joining us. If you have a question,

117
00:05:37,680 --> 00:05:40,000
Speaker 3: let us know. We'd love to bring you into the conversation.

118
00:05:40,400 --> 00:05:43,440
Speaker 3: For those who are Bloomberg dot com subscribers and terminal clients,

119
00:05:44,800 --> 00:05:47,720
Speaker 3: ask a question of our panelist. Just submit questions for

120
00:05:47,800 --> 00:05:51,240
Speaker 3: our team to answer live on air Bloomberg dot com

121
00:05:51,279 --> 00:05:54,360
Speaker 3: slash ask Radio. Send them to Bloomberg dot com slash

122
00:05:54,400 --> 00:05:57,880
Speaker 3: ask Radio, and then you can certainly catch their answers

123
00:05:58,000 --> 00:05:58,960
Speaker 3: live on air with us.

124
00:05:59,000 --> 00:06:00,520
Speaker 1: Hey, I want to just look at the shares of

125
00:06:00,600 --> 00:06:04,800
Speaker 1: roadblocks real quick. The gaming company down about eleven percent

126
00:06:05,040 --> 00:06:07,359
Speaker 1: in the after hours, just taking a look at what

127
00:06:07,480 --> 00:06:10,600
Speaker 1: exactly is happening. Second quarter daily active users came in

128
00:06:10,680 --> 00:06:12,880
Speaker 1: below estimates one hundred and twenty three million. The SMOs

129
00:06:12,880 --> 00:06:15,760
Speaker 1: for one hundred and twenty eight point seven million dollar

130
00:06:16,080 --> 00:06:19,239
Speaker 1: million users. That was really that what missed the average

131
00:06:19,240 --> 00:06:22,359
Speaker 1: analyst estimate, and that is what has has investors concern.

132
00:06:22,440 --> 00:06:25,680
Speaker 1: Bookings came in a little shy. Hours engaged came in shy.

133
00:06:25,800 --> 00:06:28,600
Speaker 1: Revenue did come in higher than expected, though a loss

134
00:06:28,640 --> 00:06:30,560
Speaker 1: per share at twenty six cents. The estimos for a

135
00:06:30,600 --> 00:06:33,360
Speaker 1: lost percent at thirty four cents lost per share rather

136
00:06:33,480 --> 00:06:35,680
Speaker 1: shares down eleven and a half percent from the after.

137
00:06:35,480 --> 00:06:38,360
Speaker 3: Hours all right, so getting hammered. Going in the other direction,

138
00:06:38,400 --> 00:06:41,200
Speaker 3: shares of Amazon continuing to rally. Our spencer soper out

139
00:06:41,240 --> 00:06:44,800
Speaker 3: with his story. Amazon reported cloud computing revenue that beat

140
00:06:44,839 --> 00:06:49,000
Speaker 3: analyst estimates, with booming demand for artificial intelligence services accelerating

141
00:06:49,000 --> 00:06:52,560
Speaker 3: sales for the fifth straight word. Revenue jump thirty seven

142
00:06:52,600 --> 00:06:55,880
Speaker 3: percent to forty two point two billion at Amazon Web Services,

143
00:06:55,880 --> 00:06:58,560
Speaker 3: which generates about a fifth of the company's revenue and

144
00:06:58,640 --> 00:07:01,960
Speaker 3: most of its operating offit. It was the fastest base

145
00:07:02,000 --> 00:07:04,360
Speaker 3: of growth since the fourth quarter of twenty twenty one.

146
00:07:04,400 --> 00:07:07,880
Speaker 3: Analyston average forecast sales of forty point six billion, according

147
00:07:07,920 --> 00:07:12,320
Speaker 3: to data compiled by Bloomberg. You know, anaug you have

148
00:07:12,480 --> 00:07:17,720
Speaker 3: Amazon against the other hyperscalers. What is it that's unique?

149
00:07:17,760 --> 00:07:19,160
Speaker 3: I mean you talk a little bit about the chips,

150
00:07:19,160 --> 00:07:21,880
Speaker 3: and that certainly kind of keeps a lid on some

151
00:07:21,960 --> 00:07:25,600
Speaker 3: of their costs and their access situation among the chip

152
00:07:25,640 --> 00:07:28,920
Speaker 3: demands that we've seen out there. But what is the

153
00:07:29,000 --> 00:07:30,560
Speaker 3: special sauce of Amazon?

154
00:07:32,280 --> 00:07:34,920
Speaker 6: So the first and foremost, it is the largest public

155
00:07:34,920 --> 00:07:38,440
Speaker 6: cloud provider. It has a much longer history of working

156
00:07:38,480 --> 00:07:42,280
Speaker 6: with enterprises. So remember when we talk about AI adoption,

157
00:07:42,920 --> 00:07:46,960
Speaker 6: you think about chid gpd app, it's primarily hosted on

158
00:07:47,040 --> 00:07:50,040
Speaker 6: Microsoft Asure that's a consumer app. But now you think

159
00:07:50,080 --> 00:07:53,880
Speaker 6: about AWS and enterprise AI adoption, that's where a lot

160
00:07:53,920 --> 00:07:56,800
Speaker 6: of large companies around the world would be building their

161
00:07:57,200 --> 00:08:00,920
Speaker 6: application or they would be infusing AI into their older application.

162
00:08:01,000 --> 00:08:03,680
Speaker 6: So that's a big difference, is the enterprise presence as

163
00:08:03,760 --> 00:08:06,120
Speaker 6: well as the and you know, for the Microsoft is

164
00:08:06,120 --> 00:08:09,200
Speaker 6: on the consumer side. Microsoft does both, but for Amazon

165
00:08:09,280 --> 00:08:12,000
Speaker 6: that's primarily the bread and butter. The other thing is

166
00:08:12,080 --> 00:08:15,600
Speaker 6: they're also the key or the preferred cloud provider for

167
00:08:15,680 --> 00:08:19,080
Speaker 6: anthropic and we have seen a massive boost in anthropics

168
00:08:19,240 --> 00:08:22,160
Speaker 6: use for coding agents, and I think that's also helping

169
00:08:22,200 --> 00:08:25,480
Speaker 6: AWS in that case. And then if you think you

170
00:08:25,520 --> 00:08:29,240
Speaker 6: know the future of AI is enterprise adoption, you know,

171
00:08:29,280 --> 00:08:31,760
Speaker 6: Amazon has a lot of data, it has a lot

172
00:08:31,760 --> 00:08:34,480
Speaker 6: of services, so it's right in the middle of this

173
00:08:34,800 --> 00:08:38,479
Speaker 6: entire I would say a diffusion within companies.

174
00:08:39,520 --> 00:08:41,560
Speaker 1: I want to bring in Ed Lolo to the conversation.

175
00:08:41,760 --> 00:08:45,280
Speaker 1: He's the host of Bloomberg Tech out there in San Francisco.

176
00:08:45,800 --> 00:08:49,440
Speaker 1: And what sticks out to you? Amazon's numbers up, the

177
00:08:49,440 --> 00:08:51,880
Speaker 1: stock up eight point nine percent in the after hour? Yeah,

178
00:08:52,000 --> 00:08:52,760
Speaker 1: what's sticks on you?

179
00:08:53,760 --> 00:08:55,560
Speaker 8: And Ana Rag will forgive me because I missed the

180
00:08:55,600 --> 00:08:57,320
Speaker 8: first part of your conversation. I was on the phone

181
00:08:57,320 --> 00:08:59,640
Speaker 8: with the CFO. But I mean, this is a bet

182
00:08:59,640 --> 00:09:03,400
Speaker 8: on every metric where AWS absolutely matters most. You know,

183
00:09:03,480 --> 00:09:07,520
Speaker 8: thirty seven percent growth against street expectation of thirty one percent.

184
00:09:08,720 --> 00:09:11,320
Speaker 8: You know, it's it's a pretty straightforward set of numbers

185
00:09:11,360 --> 00:09:14,080
Speaker 8: where you know they will be peppered with questions on

186
00:09:14,120 --> 00:09:16,439
Speaker 8: the call for the same magic formula that we discussed

187
00:09:16,800 --> 00:09:20,319
Speaker 8: in the last few afternoons, capital expenditure, direction of travel,

188
00:09:20,480 --> 00:09:23,920
Speaker 8: and other points of tangible evidence that the AI from

189
00:09:23,960 --> 00:09:26,280
Speaker 8: Amazon is gaining traction in its different guises.

190
00:09:26,360 --> 00:09:29,319
Speaker 1: What did you hear from the c CFO that.

191
00:09:29,679 --> 00:09:31,680
Speaker 8: As I suppose to the CFO of a different company,

192
00:09:32,120 --> 00:09:33,200
Speaker 8: described are your comes things?

193
00:09:33,200 --> 00:09:35,199
Speaker 1: Which CFO? Which CFL were you talking to?

194
00:09:35,360 --> 00:09:37,040
Speaker 8: Sorry, I was talking to the I was talking to

195
00:09:37,080 --> 00:09:37,600
Speaker 8: the rivians.

196
00:09:37,640 --> 00:09:39,679
Speaker 1: Okay, we're going to get to that later.

197
00:09:39,960 --> 00:09:44,320
Speaker 8: Okay, great, but yeah, like again, you know an ANORAG like,

198
00:09:44,440 --> 00:09:46,520
Speaker 8: I'm such a massive ANAG fan, and so if I

199
00:09:46,520 --> 00:09:48,520
Speaker 8: say something and he's like, that's done, let him say

200
00:09:48,559 --> 00:09:52,160
Speaker 8: it's done. But you know, operating income also like a

201
00:09:52,240 --> 00:09:55,200
Speaker 8: huge beat. And you know, if the concern of the

202
00:09:55,240 --> 00:09:59,160
Speaker 8: market for the hyperscalers is that they want to see

203
00:09:59,520 --> 00:10:03,000
Speaker 8: free CA flow and profit and a commitment to spend

204
00:10:03,040 --> 00:10:05,160
Speaker 8: and continue top line growth, they kind of got all

205
00:10:05,200 --> 00:10:07,800
Speaker 8: of that. There's not a lot left to complain about,

206
00:10:07,920 --> 00:10:08,400
Speaker 8: is there.

207
00:10:11,200 --> 00:10:12,680
Speaker 3: Anna Rog you want to come in on that.

208
00:10:12,880 --> 00:10:15,280
Speaker 6: No, I absolutely agree with that. In fact, that's what

209
00:10:15,400 --> 00:10:17,080
Speaker 6: I was trying to figure out. Can I find any

210
00:10:17,120 --> 00:10:20,120
Speaker 6: mistakes over here? But we don't. And in fact, which

211
00:10:20,120 --> 00:10:21,640
Speaker 6: is why I said, you know, when you think of

212
00:10:21,800 --> 00:10:24,959
Speaker 6: enterprise adoption and AI, you really cannot think of anybody

213
00:10:24,960 --> 00:10:28,400
Speaker 6: better than AWS because of given that how much of

214
00:10:28,559 --> 00:10:32,960
Speaker 6: world applications the house already you know, within their ecosystem.

215
00:10:33,040 --> 00:10:35,960
Speaker 6: So the big question now is how much they have

216
00:10:36,080 --> 00:10:39,559
Speaker 6: to spend for the next twelve months to get this

217
00:10:39,720 --> 00:10:42,959
Speaker 6: kind of rate going. We saw the AWUS growth rate

218
00:10:43,040 --> 00:10:46,240
Speaker 6: jump to thirty seven percent. You know next quarter, is

219
00:10:46,280 --> 00:10:48,560
Speaker 6: it going to be faster than that or do we

220
00:10:48,600 --> 00:10:51,160
Speaker 6: see some moderation in that? So now we are really

221
00:10:51,200 --> 00:10:53,800
Speaker 6: getting into, to be honest, fifty basis points here or

222
00:10:53,800 --> 00:10:56,440
Speaker 6: one hundred basis points here, it's are you're nitpicking at

223
00:10:56,440 --> 00:10:56,839
Speaker 6: this point?

224
00:10:56,840 --> 00:11:00,880
Speaker 1: Frankly they we're getting some questions from viewers listeners around

225
00:11:00,880 --> 00:11:03,680
Speaker 1: the world. Just a reminder. Subscribers to Bloomberg dot com

226
00:11:03,679 --> 00:11:07,000
Speaker 1: and terminal subscribers can ask questions Bloomberg dot com slash

227
00:11:07,040 --> 00:11:09,720
Speaker 1: Ask Radio. I want to throw this one. This is

228
00:11:09,720 --> 00:11:13,400
Speaker 1: from Connor in Auckland, New Zealand. Thanks for stand up late,

229
00:11:13,440 --> 00:11:16,360
Speaker 1: I guess early in the morning for us. Connor, Microsoft

230
00:11:16,440 --> 00:11:20,240
Speaker 1: and Amazon are making good progress in enterprise AI. How

231
00:11:20,280 --> 00:11:24,040
Speaker 1: sticky are their product offerings? Will there be big swings

232
00:11:24,120 --> 00:11:26,559
Speaker 1: in market share going forward? On a rock? I think

233
00:11:26,559 --> 00:11:27,760
Speaker 1: this is a good question for you.

234
00:11:28,840 --> 00:11:30,720
Speaker 6: So the way we think about it is the pie

235
00:11:30,800 --> 00:11:32,640
Speaker 6: is growing at such a fast space they will all

236
00:11:32,640 --> 00:11:35,600
Speaker 6: make money. I'm fairly confident about it. But the question

237
00:11:35,720 --> 00:11:38,280
Speaker 6: is what kind of money they will be making. Are

238
00:11:38,320 --> 00:11:41,720
Speaker 6: they making money renting GPUs and training models or are

239
00:11:41,720 --> 00:11:44,760
Speaker 6: you building AI applications on top of it? We like

240
00:11:44,840 --> 00:11:47,520
Speaker 6: the second kind of business better because in the long run,

241
00:11:47,600 --> 00:11:49,960
Speaker 6: it's very difficult to take it off. So let's say

242
00:11:50,000 --> 00:11:52,840
Speaker 6: go back, you know, twenty years or fifteen years. If

243
00:11:53,040 --> 00:11:57,360
Speaker 6: Lyft or Uber started their application on AWS, that's a

244
00:11:57,360 --> 00:12:01,840
Speaker 6: cloud native application. As the application is growing, AWS makes

245
00:12:01,880 --> 00:12:04,480
Speaker 6: more money. If you are developing a brand new AI

246
00:12:04,559 --> 00:12:07,600
Speaker 6: application today, if you pick one of these three or

247
00:12:07,679 --> 00:12:12,160
Speaker 6: four cloud platforms, as you as those apps get bigger,

248
00:12:12,360 --> 00:12:15,080
Speaker 6: you're going to make money. So it's a perpetual revenue stream.

249
00:12:15,240 --> 00:12:17,480
Speaker 6: It's very difficult to take that out and move it

250
00:12:17,520 --> 00:12:20,120
Speaker 6: somewhere else. But if you're only training models, that's a

251
00:12:20,200 --> 00:12:21,360
Speaker 6: very different revenue stream.

252
00:12:21,559 --> 00:12:21,760
Speaker 4: Yeah.

253
00:12:21,800 --> 00:12:24,199
Speaker 3: It's interesting too because I was just looking at Spencer Soaper,

254
00:12:24,320 --> 00:12:26,199
Speaker 3: the story that he's got on the Bloomberg Terminal or

255
00:12:26,240 --> 00:12:28,800
Speaker 3: Bloomberg Spencer Soaper. He says the company lacks a hit

256
00:12:29,200 --> 00:12:32,199
Speaker 3: consumer AI product on par with open ais chatchypt and

257
00:12:32,240 --> 00:12:36,000
Speaker 3: Anthropics Claude, but has ink deals, committing both AI labs

258
00:12:36,040 --> 00:12:38,400
Speaker 3: to spend at least one hundred billion dollars in services

259
00:12:38,600 --> 00:12:41,560
Speaker 3: from the Amazon Web Services cloud unit in the coming years.

260
00:12:41,600 --> 00:12:44,440
Speaker 3: I mean anag that's a big deal.

261
00:12:45,679 --> 00:12:48,160
Speaker 6: Yeah. So one of the things that Mike Microsoft said

262
00:12:48,200 --> 00:12:52,719
Speaker 6: yesterday was the sequential increase in commercial real performance obligations

263
00:12:52,800 --> 00:12:54,760
Speaker 6: or the backlog that they had. I think it was

264
00:12:54,760 --> 00:12:57,560
Speaker 6: about forty five billion. All of that was from non

265
00:12:57,600 --> 00:13:00,839
Speaker 6: frontier model companies, which is that it's not anthropic. That

266
00:13:00,920 --> 00:13:03,000
Speaker 6: is not opening eye because remember, what is the biggest

267
00:13:03,000 --> 00:13:05,680
Speaker 6: fear right now in the market is what if open

268
00:13:05,720 --> 00:13:07,760
Speaker 6: eie is not able to take care of the commitments

269
00:13:07,880 --> 00:13:10,560
Speaker 6: or entropic and so forth. But what they're saying is

270
00:13:10,720 --> 00:13:13,920
Speaker 6: the business now they're coming in in their backlocker and

271
00:13:14,000 --> 00:13:17,680
Speaker 6: their bookings is from non frontier models. And that's really

272
00:13:17,760 --> 00:13:20,080
Speaker 6: I think one of the most important questions that we

273
00:13:20,160 --> 00:13:23,360
Speaker 6: want to ask the company today is if they talk

274
00:13:23,400 --> 00:13:26,160
Speaker 6: about cloud commitments, where are those cloud commitments coming in?

275
00:13:26,280 --> 00:13:28,280
Speaker 6: Is it the three or four companies or is it

276
00:13:28,320 --> 00:13:29,880
Speaker 6: more diversified.

277
00:13:29,640 --> 00:13:32,040
Speaker 3: Right exactly in terms of exposure to maybe just a

278
00:13:32,040 --> 00:13:32,920
Speaker 3: few big customers.

279
00:13:33,040 --> 00:13:33,360
Speaker 6: Put them.

280
00:13:33,440 --> 00:13:35,120
Speaker 3: I want to bring you back we spent. We talk

281
00:13:35,200 --> 00:13:37,120
Speaker 3: so much about AWS and I know we do that

282
00:13:37,160 --> 00:13:39,360
Speaker 3: with you as well. It's so important in terms of

283
00:13:39,440 --> 00:13:42,400
Speaker 3: what really makes money for Amazon. But you think about

284
00:13:42,480 --> 00:13:44,360
Speaker 3: I mean, they sell a lot of stuff, so many

285
00:13:44,400 --> 00:13:47,880
Speaker 3: of us relate to Amazon as a retailer how do

286
00:13:47,960 --> 00:13:52,080
Speaker 3: they think about increasingly using AI to kind of juice

287
00:13:52,120 --> 00:13:54,960
Speaker 3: the numbers and maybe improve the profitability on the retail

288
00:13:54,960 --> 00:13:55,600
Speaker 3: side of things.

289
00:13:56,640 --> 00:13:58,840
Speaker 5: Yeah, AI has been a big push on the retail side,

290
00:13:58,840 --> 00:14:01,679
Speaker 5: and actually I think Amazon does the best better than anyone.

291
00:14:01,720 --> 00:14:05,360
Speaker 5: When they introduced Alexa for Shopping for example, Alexa plus,

292
00:14:05,800 --> 00:14:07,920
Speaker 5: it's pretty clever. You know, you go to the search bar,

293
00:14:08,000 --> 00:14:12,000
Speaker 5: you can compare pricing. You can say, I'm looking for

294
00:14:12,120 --> 00:14:15,400
Speaker 5: this item and when was it priced cheapest, and if

295
00:14:15,400 --> 00:14:17,959
Speaker 5: it drops to that price, buy it for me. I mean,

296
00:14:18,120 --> 00:14:20,280
Speaker 5: just that simple, and it'll show up at your door.

297
00:14:20,600 --> 00:14:23,200
Speaker 5: So I do think that they're gaining traction there. In fact,

298
00:14:23,200 --> 00:14:26,280
Speaker 5: in the release, I believe they said that interactions and

299
00:14:26,440 --> 00:14:31,440
Speaker 5: active users doubled over second quarter just with AI adoption

300
00:14:31,560 --> 00:14:34,560
Speaker 5: and Alexa for Shopping, So they're making momentum here. We

301
00:14:34,680 --> 00:14:38,040
Speaker 5: do think that the investments that they make and Alexa

302
00:14:38,080 --> 00:14:41,160
Speaker 5: for Shopping and AI will continue to not only help

303
00:14:41,200 --> 00:14:44,800
Speaker 5: them with customer service and conversion online, but also improve

304
00:14:45,000 --> 00:14:47,360
Speaker 5: margins on the retail side, which are slimmed to none.

305
00:14:47,680 --> 00:14:51,600
Speaker 2: If you're listening to the Bloomberg Business Weekdaily podcast, catch

306
00:14:51,640 --> 00:14:54,880
Speaker 2: us live weekday afternoons from two to five pm Eastern.

307
00:14:55,040 --> 00:14:58,080
Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg

308
00:14:58,160 --> 00:15:00,480
Speaker 2: Business app, or watch us love I have on.

309
00:15:00,440 --> 00:15:06,040
Speaker 3: YouTube covering Apple, covering Amazon, putumoil with us from Bloomberg Intelligence,

310
00:15:06,120 --> 00:15:09,200
Speaker 3: Anara Grana as well an ed La Lowe, host of

311
00:15:09,240 --> 00:15:12,240
Speaker 3: Bloomberg Tech. But again, folks, we are expecting Apple to

312
00:15:12,320 --> 00:15:15,280
Speaker 3: cross any moment, and here they go. So let's get

313
00:15:15,280 --> 00:15:19,200
Speaker 3: to the numbers. Third quarter revenue one hundred nine point

314
00:15:19,240 --> 00:15:21,280
Speaker 3: forty two billion, that's a beat. One hundred and eight

315
00:15:21,280 --> 00:15:23,960
Speaker 3: point eighty five is what the street was expecting. Third

316
00:15:24,040 --> 00:15:27,560
Speaker 3: quarter EPs two dollars two cents a share. That is

317
00:15:27,600 --> 00:15:30,160
Speaker 3: definitely above what the street was forecasting of a dollar

318
00:15:30,240 --> 00:15:33,240
Speaker 3: eighty nine a share. If we go to third quarter

319
00:15:34,160 --> 00:15:37,600
Speaker 3: products revenue seventy eight point sixty eight billion, that two

320
00:15:37,640 --> 00:15:40,040
Speaker 3: is better than the street estimate of seventy seven point

321
00:15:40,520 --> 00:15:44,720
Speaker 3: twenty five billion. Services revenue thirty point seventy four billion,

322
00:15:44,800 --> 00:15:47,640
Speaker 3: a little bit light thirty one point thirty six billion.

323
00:15:47,720 --> 00:15:50,880
Speaker 3: And again we're kind of highlighting here on the Bloomberg

324
00:15:50,880 --> 00:15:52,960
Speaker 3: what we call our red sticky, our red headlines. Third

325
00:15:53,040 --> 00:15:56,280
Speaker 3: quarter revenue again better than what the street was forecasting.

326
00:15:56,320 --> 00:15:59,080
Speaker 3: One hundred and nine point forty two billion versus one

327
00:15:59,120 --> 00:16:01,120
Speaker 3: hundred and eight point eighty five billion. We're now getting

328
00:16:01,120 --> 00:16:02,360
Speaker 3: iPhone revenue as well too.

329
00:16:02,560 --> 00:16:05,720
Speaker 1: Yeah, the headline's crossing fast and furious. iPhone revenue coming

330
00:16:05,720 --> 00:16:08,640
Speaker 1: in above estimates at fifty four point two five billion

331
00:16:08,680 --> 00:16:11,600
Speaker 1: dollars the estimates for fifty three point six billion dollars.

332
00:16:11,640 --> 00:16:14,040
Speaker 1: Shares Apple down about two point four percent in the

333
00:16:14,080 --> 00:16:17,040
Speaker 1: after hours. Apple also declaring a cash dividend of twenty

334
00:16:17,160 --> 00:16:20,680
Speaker 1: seven dollars a share. Third quarter grated China revenue coming

335
00:16:20,720 --> 00:16:23,520
Speaker 1: in shy of estimates at eighteen point eight two billion dollars.

336
00:16:23,520 --> 00:16:26,960
Speaker 1: The estimate was for nineteen point five eight billion dollars.

337
00:16:27,520 --> 00:16:30,600
Speaker 1: Apple shares falling about two point four percent in the

338
00:16:30,760 --> 00:16:34,360
Speaker 1: post market. When these numbers crossed, they did shoot higher,

339
00:16:34,400 --> 00:16:37,760
Speaker 1: ever so slightly. You know, watch the after hours carefully

340
00:16:38,400 --> 00:16:41,120
Speaker 1: and with caution. We haven't heard yet what they're going

341
00:16:41,200 --> 00:16:44,360
Speaker 1: to say on the call. Very light commentary too, as

342
00:16:44,400 --> 00:16:47,680
Speaker 1: Apple is wont to do in their press release, just

343
00:16:47,760 --> 00:16:50,680
Speaker 1: saying that the company's proud to report the strongest dudon

344
00:16:50,760 --> 00:16:53,480
Speaker 1: quarter ever with double digit revenue growth across iPhone, Mac

345
00:16:53,560 --> 00:16:56,960
Speaker 1: and services and in every geographic segment. This is Tim Cook.

346
00:16:56,800 --> 00:17:00,200
Speaker 3: Setting June quarter records for both EPs and operating cash. Hello,

347
00:17:00,760 --> 00:17:02,560
Speaker 3: still here with our team, ed Lolo, I want to

348
00:17:02,560 --> 00:17:04,240
Speaker 3: bring you back in here. I know you're just kind

349
00:17:04,240 --> 00:17:08,000
Speaker 3: of going through the numbers. Two initial thoughts here. Again,

350
00:17:08,160 --> 00:17:09,840
Speaker 3: we continue to see this dock down about two and

351
00:17:09,880 --> 00:17:11,280
Speaker 3: a half percent here in the aftermarket.

352
00:17:11,400 --> 00:17:15,200
Speaker 8: Yeah, it's a slight beat against consensus or expectations across

353
00:17:15,240 --> 00:17:18,239
Speaker 8: the board. Other In iPad, I see a miss, and

354
00:17:18,280 --> 00:17:20,840
Speaker 8: then in services I see a miss on gross margin

355
00:17:20,960 --> 00:17:24,400
Speaker 8: coming in at fifty point one percent. Apple does explain

356
00:17:24,480 --> 00:17:28,399
Speaker 8: that there was roughly two percentage points benefit gross margin

357
00:17:28,480 --> 00:17:32,640
Speaker 8: from Tariffree funds, so we can we can reltigate that

358
00:17:32,720 --> 00:17:36,560
Speaker 8: on the accounting side. But EPs therefore includes an eleven

359
00:17:36,600 --> 00:17:39,720
Speaker 8: cent benefit from those Tariffrey funds. But that's what I see.

360
00:17:39,880 --> 00:17:41,680
Speaker 8: You know, Tim summed it up. Well, the Greater China

361
00:17:41,720 --> 00:17:44,600
Speaker 8: will be a question, right, but I see iPad miss

362
00:17:44,600 --> 00:17:48,280
Speaker 8: and services miss services more likely to be a concern.

363
00:17:48,320 --> 00:17:51,840
Speaker 8: If it's a miss, then iPad maybe, but otherwise strong.

364
00:17:52,280 --> 00:17:52,480
Speaker 4: Yeah.

365
00:17:52,640 --> 00:17:55,639
Speaker 3: Mark Gurbin's going to join us too for the conversation

366
00:17:55,720 --> 00:17:58,120
Speaker 3: in a little bit. But he's also pointing at gross

367
00:17:58,160 --> 00:18:00,800
Speaker 3: margins slightly above what Wall Street wants. But again, the

368
00:18:00,840 --> 00:18:03,399
Speaker 3: stock down about two percent, but let's not forget the

369
00:18:03,400 --> 00:18:06,800
Speaker 3: stock has been on quite a rally so far this year.

370
00:18:06,840 --> 00:18:08,080
Speaker 3: What you're looking perplex?

371
00:18:08,240 --> 00:18:08,639
Speaker 9: Yeah, I am.

372
00:18:08,680 --> 00:18:11,800
Speaker 1: I want to bring in on a rag. Yeah, I

373
00:18:11,840 --> 00:18:14,560
Speaker 1: know that you expected that the string of strong iPhone

374
00:18:14,600 --> 00:18:17,640
Speaker 1: results would continue this quarter next given the company hasn't

375
00:18:17,720 --> 00:18:21,440
Speaker 1: raised prices for smartphones, has your view changed at all

376
00:18:22,040 --> 00:18:24,320
Speaker 1: given what we've seen in the last few minutes with

377
00:18:24,320 --> 00:18:26,240
Speaker 1: with with these numbers coming out.

378
00:18:27,040 --> 00:18:28,840
Speaker 6: No, there was a beat on the iPhone number, so

379
00:18:28,880 --> 00:18:31,920
Speaker 6: that's there. But here is the kicker. And I'm looking

380
00:18:32,000 --> 00:18:34,920
Speaker 6: at gross margins which was also pretty decent, which was

381
00:18:34,960 --> 00:18:36,960
Speaker 6: a Now that's a surprise because you would.

382
00:18:36,760 --> 00:18:37,760
Speaker 1: Have max the memory price.

383
00:18:37,760 --> 00:18:41,600
Speaker 6: I memory process just started. Think. The only place where

384
00:18:41,640 --> 00:18:44,400
Speaker 6: I see slight hiccup is great to China. So we'll

385
00:18:44,400 --> 00:18:47,680
Speaker 6: find out what happened here. But it's a very minor way, boy,

386
00:18:47,760 --> 00:18:48,920
Speaker 6: very minor miss.

387
00:18:48,640 --> 00:18:50,840
Speaker 1: On rog Are you saying that Apple doesn't need to

388
00:18:50,920 --> 00:18:53,040
Speaker 1: rate raise prices because their margins are intact?

389
00:18:54,080 --> 00:18:56,800
Speaker 6: I hope see for their sake, if they can figure

390
00:18:56,800 --> 00:19:00,240
Speaker 6: out not to raise iPhone lower end prices, it's going

391
00:19:00,320 --> 00:19:01,879
Speaker 6: to be very good for them. I think you have

392
00:19:01,920 --> 00:19:04,480
Speaker 6: to raise prices first of all, because the memory costs

393
00:19:04,480 --> 00:19:07,000
Speaker 6: are very high. But I think you and we think

394
00:19:07,119 --> 00:19:09,040
Speaker 6: it's better to do it on the higher end phones

395
00:19:09,080 --> 00:19:12,040
Speaker 6: because you know, people like you are not sensitive to

396
00:19:12,400 --> 00:19:15,040
Speaker 6: and you know, another few hundred dollars on an iPhone promac.

397
00:19:15,080 --> 00:19:16,840
Speaker 6: So it's not going to that's not going to be

398
00:19:16,880 --> 00:19:20,480
Speaker 6: the difference it can make going to be. See, that's

399
00:19:20,520 --> 00:19:23,320
Speaker 6: another reason why they did that. That's another reason why

400
00:19:23,320 --> 00:19:26,280
Speaker 6: they did that. So the thing is, I think there

401
00:19:26,320 --> 00:19:29,040
Speaker 6: is one more good quarter or iPhone coming in, but

402
00:19:29,080 --> 00:19:31,960
Speaker 6: then things get harder for them next year because then

403
00:19:32,080 --> 00:19:34,840
Speaker 6: comparisons get tough. You know, this is not a company

404
00:19:34,880 --> 00:19:37,680
Speaker 6: you can grow iPhone twenty two percent year after year.

405
00:19:37,800 --> 00:19:39,960
Speaker 6: You know, this is not a brand new product. This

406
00:19:40,080 --> 00:19:43,600
Speaker 6: is a replacement cycle story. So you could see a

407
00:19:43,640 --> 00:19:45,879
Speaker 6: little bit of a push for people pulling forward some

408
00:19:45,960 --> 00:19:47,760
Speaker 6: of these things, but things are going to get hard

409
00:19:47,800 --> 00:19:50,000
Speaker 6: next year when you get into tougher comparisons.

410
00:19:50,040 --> 00:19:52,080
Speaker 1: I want to bring in Mark Reman, he's back with US.

411
00:19:52,359 --> 00:19:55,520
Speaker 1: Apple shares down four percent in the after hours. Marcus Bloomberg,

412
00:19:55,600 --> 00:19:57,760
Speaker 1: news managing at IT for Global Consumer Tech. You were

413
00:19:57,800 --> 00:20:00,840
Speaker 1: live blogging while you're on TV. Yes, what's your take?

414
00:20:01,680 --> 00:20:03,600
Speaker 10: My take is that the iPhone number looks great. My

415
00:20:03,680 --> 00:20:06,440
Speaker 10: take is that the Mac number looks amazing. My take

416
00:20:06,480 --> 00:20:09,600
Speaker 10: is that service is a little soft and the China

417
00:20:09,840 --> 00:20:13,320
Speaker 10: number missed the estimate we have here on the Bloomberg terminal.

418
00:20:13,680 --> 00:20:15,720
Speaker 10: But at the same time, that is, you know, pretty

419
00:20:15,800 --> 00:20:18,720
Speaker 10: nice growth on an annual basis where they were sort

420
00:20:18,720 --> 00:20:20,560
Speaker 10: of I guess in the toilet in China a couple

421
00:20:20,600 --> 00:20:23,640
Speaker 10: of years ago and last year, but they've totally rebounded there.

422
00:20:24,800 --> 00:20:26,359
Speaker 10: It's going to be interesting to see how the foldable

423
00:20:26,400 --> 00:20:29,000
Speaker 10: iPhone performs there as a status symbol well north of

424
00:20:29,040 --> 00:20:30,760
Speaker 10: two grand, so I think it's gonna be a hot

425
00:20:30,800 --> 00:20:33,520
Speaker 10: product there, especially because foldibles are taking over a smartphone

426
00:20:33,520 --> 00:20:34,120
Speaker 10: market in China.

427
00:20:34,200 --> 00:20:36,119
Speaker 1: Yeah, I know you're gonna buy a foldable phone.

428
00:20:36,119 --> 00:20:38,760
Speaker 10: Course we'll be first in line.

429
00:20:38,920 --> 00:20:41,200
Speaker 1: So is it the light services in China that's moving

430
00:20:41,200 --> 00:20:42,800
Speaker 1: the stock lower? I mean, I know stock was twenty

431
00:20:42,880 --> 00:20:44,600
Speaker 1: up to more than twenty two percent going into this

432
00:20:44,720 --> 00:20:45,480
Speaker 1: prem Yes.

433
00:20:45,480 --> 00:20:48,680
Speaker 10: Yes, I mean they smashed Mac right, But like, I

434
00:20:48,680 --> 00:20:51,399
Speaker 10: don't think investors have fully grasped the importance of the

435
00:20:51,440 --> 00:20:53,600
Speaker 10: Mac at this point. I mean it sort of feels

436
00:20:53,640 --> 00:20:56,280
Speaker 10: like an afterthought compared to the iPhone and the iPad.

437
00:20:56,520 --> 00:20:58,800
Speaker 10: The iPad is always light. Wearaballs have been light for

438
00:20:58,840 --> 00:21:00,720
Speaker 10: a couple of years now because they haven't really done

439
00:21:00,760 --> 00:21:03,040
Speaker 10: a ton there, But that is going to accelerate big

440
00:21:03,080 --> 00:21:05,399
Speaker 10: time over the next three years with these AI devices.

441
00:21:05,400 --> 00:21:08,520
Speaker 10: Glasses are going to shoot those numbers up.

442
00:21:08,760 --> 00:21:09,880
Speaker 1: You think people will buy those?

443
00:21:10,280 --> 00:21:10,600
Speaker 4: I do.

444
00:21:10,760 --> 00:21:11,800
Speaker 10: I think you'll buy them too.

445
00:21:12,080 --> 00:21:14,879
Speaker 1: Tell me about them, Well, they're.

446
00:21:14,640 --> 00:21:18,800
Speaker 10: Going the Apple is not going necessarily after the smartphone market.

447
00:21:19,400 --> 00:21:22,359
Speaker 10: They're looking to create glasses that people want to wear,

448
00:21:22,800 --> 00:21:25,320
Speaker 10: just like the Apple Watch replace the traditional watch market.

449
00:21:25,560 --> 00:21:27,920
Speaker 10: They think that their smart glasses are going to replace

450
00:21:28,200 --> 00:21:30,800
Speaker 10: sort of the low end to mid tier glasses market,

451
00:21:30,920 --> 00:21:33,679
Speaker 10: not the Maison Bonets of the world, but you know,

452
00:21:33,800 --> 00:21:37,359
Speaker 10: the Eslar Luxaticas of the world. So they're really going

453
00:21:37,440 --> 00:21:40,919
Speaker 10: to go after those brands there. It'll have cameras built in,

454
00:21:40,960 --> 00:21:42,480
Speaker 10: I'll do all the stuff that Meta does, but a

455
00:21:42,520 --> 00:21:44,879
Speaker 10: little bit more premium and applely because it'll integrate with

456
00:21:44,920 --> 00:21:47,800
Speaker 10: your iPhone, whereas they've really held back iPhone integration with

457
00:21:47,800 --> 00:21:49,400
Speaker 10: the metaglasses over the past couple years.

458
00:21:49,480 --> 00:21:52,280
Speaker 3: Do they actually create something that is you know, competitive

459
00:21:52,280 --> 00:21:55,199
Speaker 3: in terms of share at the company that moves the

460
00:21:55,240 --> 00:21:58,440
Speaker 3: needle in terms of the iPhone, does something else finally

461
00:21:58,480 --> 00:22:01,800
Speaker 3: come over in terms of contributing more to the bottom

462
00:22:01,800 --> 00:22:02,920
Speaker 3: line as the top line?

463
00:22:02,960 --> 00:22:04,520
Speaker 10: You know, I think Turnis will be CEO for the

464
00:22:04,520 --> 00:22:07,520
Speaker 10: next fifteen years, unless again, something goes wrong that we're

465
00:22:07,520 --> 00:22:09,679
Speaker 10: not expecting. And someone asked me earlier today on one

466
00:22:09,720 --> 00:22:11,840
Speaker 10: of the programs, what's going to be the most important

467
00:22:11,880 --> 00:22:15,920
Speaker 10: product in Turnas's tenure, and I, to their surprise, said

468
00:22:15,920 --> 00:22:19,560
Speaker 10: the iPhone. I think it's going to be the case

469
00:22:19,600 --> 00:22:21,320
Speaker 10: that we're always going to carry something in our pocket.

470
00:22:21,359 --> 00:22:23,440
Speaker 10: The iPhone or something like it is always going to

471
00:22:23,440 --> 00:22:25,320
Speaker 10: be at the center of everything, and then we're going

472
00:22:25,359 --> 00:22:28,840
Speaker 10: to be augmented by glasses, watches, earbuds.

473
00:22:28,320 --> 00:22:28,919
Speaker 1: You name it.

474
00:22:29,760 --> 00:22:32,800
Speaker 10: But at some point there will be a transition to

475
00:22:32,840 --> 00:22:35,760
Speaker 10: be had. I just don't see it anytime in the

476
00:22:35,800 --> 00:22:36,320
Speaker 10: near future.

477
00:22:36,400 --> 00:22:37,840
Speaker 1: Has Apple given up on the Vision Pro?

478
00:22:38,200 --> 00:22:41,480
Speaker 10: Has Apple given up on the Vision Pro? It's on

479
00:22:41,600 --> 00:22:44,439
Speaker 10: the back burners of all back burners at this point.

480
00:22:45,320 --> 00:22:50,200
Speaker 10: There's a revamped version that's lighter in development. I don't

481
00:22:50,200 --> 00:22:52,160
Speaker 10: anticipate it before the end of twenty eight or early

482
00:22:52,200 --> 00:22:55,240
Speaker 10: twenty nine. Could go further back from that because they

483
00:22:55,240 --> 00:22:58,679
Speaker 10: have been heavily prioritizing this glasses push smart glasses with

484
00:22:58,720 --> 00:23:01,920
Speaker 10: no display, smart glass is with ar display. They've got

485
00:23:01,920 --> 00:23:04,879
Speaker 10: a long roadmap of multiple generations ahead of both of

486
00:23:04,920 --> 00:23:08,520
Speaker 10: those categories, and you'll see them introduce the glasses strategies

487
00:23:08,560 --> 00:23:10,240
Speaker 10: early as June of next year.

488
00:23:10,320 --> 00:23:11,520
Speaker 3: What do you want to hear on the call?

489
00:23:12,040 --> 00:23:14,760
Speaker 10: I want to hear about the memory shortage. I know

490
00:23:14,800 --> 00:23:18,119
Speaker 10: it's not sexy, but investors are interested in that. I

491
00:23:18,200 --> 00:23:20,760
Speaker 10: want to hear about Tim Cook's thoughts on how the

492
00:23:20,760 --> 00:23:24,480
Speaker 10: transition is going. Most importantly, I want to hear Turnas's

493
00:23:24,600 --> 00:23:26,359
Speaker 10: vision for Apple. Are we going to hear that on

494
00:23:26,400 --> 00:23:27,760
Speaker 10: this call? Are we going to hear that on the

495
00:23:27,760 --> 00:23:30,560
Speaker 10: next call? Probably not. These guys don't really say anything.

496
00:23:30,720 --> 00:23:34,960
Speaker 1: I'm laughing because you know, you shared with us earlier

497
00:23:35,040 --> 00:23:38,040
Speaker 1: about John Turnas and Tim Cook being dressed identically, Like,

498
00:23:38,359 --> 00:23:40,040
Speaker 1: you know, his vision is going to be whatever Tim

499
00:23:40,040 --> 00:23:41,080
Speaker 1: Cook says the vision.

500
00:23:40,880 --> 00:23:41,800
Speaker 3: Is Is it going to be?

501
00:23:42,000 --> 00:23:43,520
Speaker 10: Is it is that what it's going to be?

502
00:23:43,680 --> 00:23:43,880
Speaker 9: Yeah?

503
00:23:44,080 --> 00:23:44,959
Speaker 2: No, I think that.

504
00:23:45,160 --> 00:23:47,080
Speaker 10: I mean he's going to come in and make major

505
00:23:47,200 --> 00:23:49,760
Speaker 10: changes to the company, just like you know Steve Jobs.

506
00:23:49,920 --> 00:23:52,320
Speaker 10: Arguably one of the greatest CEOs and visionaries of all time.

507
00:23:52,359 --> 00:23:54,200
Speaker 10: Tim Cook came in there. It's not like you took

508
00:23:54,200 --> 00:23:56,720
Speaker 10: a wrecking ball, but he shook things up pretty quickly.

509
00:23:57,240 --> 00:23:59,119
Speaker 10: He was the one who instated the buyback program. He

510
00:23:59,160 --> 00:24:02,040
Speaker 10: was the one who in state did environmental initiatives. He

511
00:24:02,080 --> 00:24:03,639
Speaker 10: was the one who in stated and tons of new

512
00:24:03,640 --> 00:24:06,000
Speaker 10: product lines. And you can bet Turnus is going to

513
00:24:06,040 --> 00:24:08,440
Speaker 10: do the same thing. And so we'll see how long

514
00:24:08,480 --> 00:24:10,119
Speaker 10: that takes. But he's not going to come on and

515
00:24:10,160 --> 00:24:12,400
Speaker 10: say he's going to do things differently than his predecessor.

516
00:24:12,440 --> 00:24:14,120
Speaker 10: He's going to go on and say how incredible Tim

517
00:24:14,160 --> 00:24:17,000
Speaker 10: Cook has done and even if I do half of

518
00:24:17,040 --> 00:24:18,440
Speaker 10: what you do, it'll be a success.

519
00:24:18,600 --> 00:24:18,919
Speaker 4: Yeah.

520
00:24:19,359 --> 00:24:22,720
Speaker 1: So five trillion dollar market cap pretty close to it.

521
00:24:22,840 --> 00:24:25,760
Speaker 1: Expectations were high going into this print. What's the question

522
00:24:26,000 --> 00:24:27,840
Speaker 1: that if you were able to ask a question on

523
00:24:27,880 --> 00:24:28,879
Speaker 1: the call today, what would it be?

524
00:24:29,520 --> 00:24:31,560
Speaker 10: If I were able to answer or ask a question,

525
00:24:31,800 --> 00:24:34,399
Speaker 10: I would straight up ask turnas what is your vision

526
00:24:35,119 --> 00:24:38,520
Speaker 10: for the future of this company? How are you going

527
00:24:38,680 --> 00:24:41,040
Speaker 10: to get to this next stage of growth and how

528
00:24:41,040 --> 00:24:44,560
Speaker 10: are you going to create an AI device strategy? Well,

529
00:24:44,680 --> 00:24:46,200
Speaker 10: I mean the good news is I don't get a

530
00:24:46,280 --> 00:24:48,840
Speaker 10: question because the bad news is he wouldn't answer.

531
00:24:48,560 --> 00:24:51,520
Speaker 1: That, And just I was keeping track, that was three questions.

532
00:24:51,680 --> 00:24:53,000
Speaker 10: Well, you know, I'm a joist.

533
00:24:53,080 --> 00:24:54,159
Speaker 1: That's what these analysts do too.

534
00:24:54,320 --> 00:24:55,840
Speaker 3: But if he's not going to answer a question about

535
00:24:55,960 --> 00:24:57,960
Speaker 3: vision and you kind of know that, where else would

536
00:24:58,000 --> 00:24:59,080
Speaker 3: you what else would you want to know?

537
00:25:00,000 --> 00:25:02,359
Speaker 10: I want to drill down into his operational expertise and

538
00:25:02,400 --> 00:25:04,920
Speaker 10: get his viewpoint as someone who's not from the operations

539
00:25:04,920 --> 00:25:07,560
Speaker 10: department about the memory shortage, how long he sees that

540
00:25:07,640 --> 00:25:10,240
Speaker 10: running for, and what work is going on internally to

541
00:25:10,240 --> 00:25:11,840
Speaker 10: solve that other than just hiking prices.

542
00:25:12,440 --> 00:25:15,560
Speaker 3: Stay with us more from Bloomberg Business Weekdaily coming up

543
00:25:15,760 --> 00:25:16,320
Speaker 3: after this.

544
00:25:19,840 --> 00:25:23,640
Speaker 2: You are listening to the Bloomberg Business Weekdaily Podcast. Catch

545
00:25:23,720 --> 00:25:26,960
Speaker 2: us live weekday afternoons from two to five pm Eastern.

546
00:25:27,080 --> 00:25:30,159
Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg

547
00:25:30,200 --> 00:25:32,920
Speaker 2: Business app, or watch us live on YouTube.

548
00:25:33,680 --> 00:25:36,480
Speaker 11: I am here with the Jersey Mike CEO, Charlie Morrison. Charlie,

549
00:25:36,480 --> 00:25:38,359
Speaker 11: thanks for doing Congratulations on listening today.

550
00:25:38,400 --> 00:25:40,080
Speaker 4: Thank you. It's a great day for Jersey Mikes.

551
00:25:40,119 --> 00:25:42,679
Speaker 11: I have to say I don't envy any CEO that

552
00:25:42,720 --> 00:25:44,840
Speaker 11: has to list in this crazy market we're living right now,

553
00:25:44,840 --> 00:25:46,800
Speaker 11: it has been quite volatile, and especially for a lot.

554
00:25:46,680 --> 00:25:47,360
Speaker 4: Of your peers.

555
00:25:47,680 --> 00:25:50,520
Speaker 11: I mean Sweet Green down four percent, Shakeshack down twenty

556
00:25:50,520 --> 00:25:53,280
Speaker 11: four percent year to date, Wingstop also, which you once

557
00:25:53,440 --> 00:25:55,800
Speaker 11: led down forty four percent. So why was a middle

558
00:25:55,840 --> 00:25:57,600
Speaker 11: of that? Why was now the right time to ipo?

559
00:25:57,840 --> 00:26:00,000
Speaker 9: I think it's a great time to ipo Jersey Mikes.

560
00:26:00,080 --> 00:26:02,080
Speaker 9: This is a brand that's been built over many, many years.

561
00:26:02,160 --> 00:26:04,399
Speaker 9: We have a rich history of over seventy years, the

562
00:26:04,480 --> 00:26:07,280
Speaker 9: last twenty years alone, the only brand that can cite

563
00:26:07,359 --> 00:26:10,520
Speaker 9: twenty consecutive years of positive same store sales growth. We've

564
00:26:10,560 --> 00:26:13,000
Speaker 9: been able to navigate the choppy waters over many, many

565
00:26:13,080 --> 00:26:16,000
Speaker 9: many times through our cycle. Even this year, year to

566
00:26:16,119 --> 00:26:19,800
Speaker 9: date same store sales continue to grow. We've seen sequential

567
00:26:19,840 --> 00:26:23,080
Speaker 9: improvement from quarter one to quarter two, exiting quarter two

568
00:26:23,080 --> 00:26:25,880
Speaker 9: at two point three percent same store sales growth, most

569
00:26:25,880 --> 00:26:28,200
Speaker 9: of that driven by traffic. So it's a great time

570
00:26:28,240 --> 00:26:30,080
Speaker 9: to bring this brand to the market. We can deal

571
00:26:30,080 --> 00:26:31,959
Speaker 9: with some of the challenges that are in there, but

572
00:26:32,040 --> 00:26:33,280
Speaker 9: really it's for the long term.

573
00:26:33,359 --> 00:26:35,399
Speaker 11: So this is the fundamentals look good heading into this.

574
00:26:35,440 --> 00:26:38,080
Speaker 11: But was there ever a banker that was thinking, hey, Charlie,

575
00:26:38,280 --> 00:26:39,960
Speaker 11: maybe now is not the time, Maybe we need a

576
00:26:39,960 --> 00:26:42,080
Speaker 11: wait for commer waters not at all to me, fall

577
00:26:42,119 --> 00:26:42,560
Speaker 11: team ahead.

578
00:26:42,800 --> 00:26:44,359
Speaker 4: Yeah, this is a brand that's really well built for

579
00:26:44,400 --> 00:26:45,080
Speaker 4: the public market.

580
00:26:45,200 --> 00:26:47,920
Speaker 11: What about the pricing, because shares have fallen initially down

581
00:26:47,960 --> 00:26:50,080
Speaker 11: eight point seven percent, that they've come back of course,

582
00:26:50,119 --> 00:26:52,159
Speaker 11: now down only about four percent. What do you think

583
00:26:52,160 --> 00:26:54,320
Speaker 11: of the pricing? Was the pricing off perhaps and that's

584
00:26:54,320 --> 00:26:56,919
Speaker 11: why we're falling today? Maybe valuations a little bit too

585
00:26:56,960 --> 00:26:58,720
Speaker 11: pricely rich to richly priced.

586
00:26:58,760 --> 00:27:00,439
Speaker 9: Rather, No, I don't think it has anything to do

587
00:27:00,480 --> 00:27:02,359
Speaker 9: with the price and anythink market's been a little choppy

588
00:27:02,359 --> 00:27:04,439
Speaker 9: over the last few days trying to find its place.

589
00:27:05,160 --> 00:27:07,320
Speaker 4: Again. We're not looking at today's price. We're not worried

590
00:27:07,320 --> 00:27:07,679
Speaker 4: about this.

591
00:27:07,720 --> 00:27:10,239
Speaker 9: We're worried about the long term and continuing to do

592
00:27:10,280 --> 00:27:12,240
Speaker 9: what we do well, which is grow restaurants, grow our

593
00:27:12,280 --> 00:27:15,240
Speaker 9: same store sales growth, continue to deliver great value for

594
00:27:15,240 --> 00:27:17,000
Speaker 9: our shareholders and we know they're going to win over

595
00:27:17,000 --> 00:27:17,440
Speaker 9: the long term.

596
00:27:17,440 --> 00:27:19,240
Speaker 11: Well, let's talk about the long term because now with

597
00:27:19,359 --> 00:27:22,240
Speaker 11: IPO proceeds in hand, what do you want to do

598
00:27:22,240 --> 00:27:24,040
Speaker 11: with them? What are the opportunities for growth that you're

599
00:27:24,040 --> 00:27:24,880
Speaker 11: going to be pursuing.

600
00:27:25,119 --> 00:27:27,080
Speaker 9: Well, I mean, we're a brand that is an asset

601
00:27:27,160 --> 00:27:29,720
Speaker 9: light model, so we're a ninety nine percent franchise. We

602
00:27:29,800 --> 00:27:32,440
Speaker 9: generate a lot of cash, we carry some debt. We're

603
00:27:32,520 --> 00:27:35,120
Speaker 9: using the primary proceeds just to pay down our debt

604
00:27:35,160 --> 00:27:36,920
Speaker 9: a little bit, so we get down below four and

605
00:27:36,920 --> 00:27:40,240
Speaker 9: a half times are EBITDA and that's okay. Over time,

606
00:27:40,280 --> 00:27:42,639
Speaker 9: we really will use our cash to return that capital

607
00:27:42,720 --> 00:27:46,520
Speaker 9: back to shareholders, which is very much the common practice

608
00:27:46,640 --> 00:27:50,000
Speaker 9: in a business like ours, and that'll be the continued

609
00:27:50,000 --> 00:27:50,720
Speaker 9: pace over time.

610
00:27:50,800 --> 00:27:52,800
Speaker 11: I know one of the growth strategies that you're pursuing

611
00:27:52,840 --> 00:27:56,800
Speaker 11: these international expansion. You have big plans for the UK specifically.

612
00:27:57,200 --> 00:27:59,120
Speaker 11: I know the market. I lived there for a while

613
00:27:59,160 --> 00:28:01,800
Speaker 11: for about six years. They do it this subway, so

614
00:28:01,840 --> 00:28:05,000
Speaker 11: they know sandwiches quality might vary there, but they love

615
00:28:05,080 --> 00:28:07,760
Speaker 11: like a Tesco's meal deal where they get a sandwich

616
00:28:07,800 --> 00:28:09,560
Speaker 11: and a bag of crisps as they would call it,

617
00:28:09,560 --> 00:28:12,520
Speaker 11: for four pounds. How do you convince them and how

618
00:28:12,560 --> 00:28:14,960
Speaker 11: are you certain that a British audience would like a

619
00:28:15,080 --> 00:28:15,720
Speaker 11: Jersey mics.

620
00:28:15,760 --> 00:28:18,800
Speaker 9: Well, we know people all over the world enjoy sandwiches

621
00:28:18,880 --> 00:28:22,119
Speaker 9: and sub sandwiches. Certainly the market's been well established. What

622
00:28:22,200 --> 00:28:24,520
Speaker 9: they don't know is the authenticity of how to really

623
00:28:24,560 --> 00:28:26,800
Speaker 9: deliver a deli style sandwich the right way, the way

624
00:28:26,800 --> 00:28:29,160
Speaker 9: we do it here at Jersey Mics. That's been part

625
00:28:29,160 --> 00:28:31,280
Speaker 9: of who we are for the last fifty years. It's

626
00:28:31,320 --> 00:28:33,480
Speaker 9: exactly what we're going to bring to the UK. We're

627
00:28:33,480 --> 00:28:35,520
Speaker 9: going to bring the brand in its full force to

628
00:28:35,600 --> 00:28:38,440
Speaker 9: the UK, and look, we have a hot sub option

629
00:28:38,520 --> 00:28:41,480
Speaker 9: as well, so our cheese steaks are hot subs. Other

630
00:28:41,600 --> 00:28:44,520
Speaker 9: products will be anchored on the menu and we're going

631
00:28:44,600 --> 00:28:45,680
Speaker 9: to do it in a high quality way.

632
00:28:45,720 --> 00:28:47,720
Speaker 4: People want that kind of authenticity.

633
00:28:47,760 --> 00:28:50,560
Speaker 9: Anything for really, I mean one little thing. Maybe we

634
00:28:50,640 --> 00:28:53,560
Speaker 9: might bring salted beef to the protein mix and lineup.

635
00:28:53,560 --> 00:28:56,040
Speaker 9: We know that's a big fan favorite overseas in the UK,

636
00:28:56,600 --> 00:28:58,920
Speaker 9: and so you might see that change. But otherwise it's

637
00:28:58,920 --> 00:29:00,600
Speaker 9: going to be authentically what we've been all about it

638
00:29:00,680 --> 00:29:01,800
Speaker 9: Jersey Micas's.

639
00:29:01,440 --> 00:29:03,720
Speaker 11: Love this subtle dig of they know subs out there,

640
00:29:03,760 --> 00:29:07,320
Speaker 11: but like maybe not the real deli style Charlie. Elsewhere

641
00:29:07,360 --> 00:29:09,560
Speaker 11: here in the US there has been this real concern

642
00:29:10,160 --> 00:29:14,400
Speaker 11: about the outbreak of silas fora and the concern about

643
00:29:14,400 --> 00:29:16,320
Speaker 11: iceberg Lettuce. I know a lot of the majority of

644
00:29:16,760 --> 00:29:20,040
Speaker 11: Jersey mic subs use Iceberg lettuce, Is your supply chain

645
00:29:20,080 --> 00:29:20,840
Speaker 11: affected at all?

646
00:29:20,960 --> 00:29:22,600
Speaker 4: We are not. We're not affected at all.

647
00:29:22,640 --> 00:29:25,520
Speaker 9: In fact, we do buy wholehead Iceberg lettuce, but we

648
00:29:25,600 --> 00:29:28,680
Speaker 9: buy it from primarily Salinas, California this time of year,

649
00:29:28,840 --> 00:29:31,880
Speaker 9: none from Mexico. We actually take very good care of

650
00:29:31,920 --> 00:29:33,720
Speaker 9: that product. We bring it in a whole head fashion.

651
00:29:33,760 --> 00:29:36,080
Speaker 9: We peel the outer leaves off, wash it carefully, and

652
00:29:36,120 --> 00:29:38,640
Speaker 9: actually shred it for our customers right there, and so

653
00:29:38,840 --> 00:29:40,440
Speaker 9: we don't see any risk associated.

654
00:29:40,520 --> 00:29:41,920
Speaker 4: That hasn't impacted our business.

655
00:29:42,080 --> 00:29:44,920
Speaker 11: It maybe hasn't impacted your supply change. Sopotely said the

656
00:29:44,920 --> 00:29:47,040
Speaker 11: same thing. We source it somewhere else, But yesterday they

657
00:29:47,040 --> 00:29:50,320
Speaker 11: pointed out it has impacted sales because the psychological concerns

658
00:29:50,520 --> 00:29:53,560
Speaker 11: our consumers pushing back or maybe at least not asking

659
00:29:53,560 --> 00:29:54,680
Speaker 11: for lettuce on their sandwiches.

660
00:29:54,800 --> 00:29:56,960
Speaker 9: Well, every one of our sandwiches can be customized because

661
00:29:56,960 --> 00:29:58,320
Speaker 9: we make it to order right in front of you,

662
00:29:58,360 --> 00:30:00,160
Speaker 9: and so if a customer wants to opt out out

663
00:30:00,160 --> 00:30:01,480
Speaker 9: of the lettus, that's fine with us.

664
00:30:01,520 --> 00:30:02,880
Speaker 4: We'll accommodate that happening.

665
00:30:03,080 --> 00:30:05,200
Speaker 9: And then not really, I mean, we've seen I mean,

666
00:30:05,240 --> 00:30:07,080
Speaker 9: we've been eating them for the last two weeks on

667
00:30:07,120 --> 00:30:07,400
Speaker 9: the road.

668
00:30:07,400 --> 00:30:08,280
Speaker 4: We've been enjoying them.

669
00:30:08,440 --> 00:30:11,600
Speaker 9: I think customers understand that the supply chain moves very quickly.

670
00:30:11,760 --> 00:30:14,440
Speaker 9: The product's probably out of the supply chain and everything's fine.

671
00:30:14,600 --> 00:30:16,880
Speaker 11: The credit card and debit card data that the Bloomberg

672
00:30:16,880 --> 00:30:19,520
Speaker 11: team cracks tracks does show a little bit of slowing

673
00:30:19,840 --> 00:30:21,840
Speaker 11: in July for Jersey Mike. Certainly still growing, but a

674
00:30:21,880 --> 00:30:24,120
Speaker 11: slow down in that growth. What accounts for that then,

675
00:30:24,120 --> 00:30:25,560
Speaker 11: if it's not the lettuce.

676
00:30:25,200 --> 00:30:27,120
Speaker 9: Of it all, well, I think there's a lot going

677
00:30:27,160 --> 00:30:29,120
Speaker 9: on in the marketplace right now. I wouldn't look to

678
00:30:29,200 --> 00:30:31,960
Speaker 9: any one or two weeks as indicative. Lots of things

679
00:30:32,040 --> 00:30:34,080
Speaker 9: kind of ebb and flow, and too often you can

680
00:30:34,080 --> 00:30:36,360
Speaker 9: get too much data that'll point to two different things.

681
00:30:36,360 --> 00:30:37,720
Speaker 4: But right now we haven't seen much of it.

682
00:30:37,800 --> 00:30:40,520
Speaker 11: So summer sales have been strong, maybe besides a little

683
00:30:40,520 --> 00:30:40,960
Speaker 11: bit of July.

684
00:30:41,520 --> 00:30:44,720
Speaker 9: Yeah, we haven't talked about anything about this particular quarter

685
00:30:44,800 --> 00:30:47,400
Speaker 9: at this point. We certainly saw strong performance in the

686
00:30:47,400 --> 00:30:50,560
Speaker 9: first quarter sequentially improving in the second quarter. We exited

687
00:30:50,560 --> 00:30:53,040
Speaker 9: the second quarter on a strong note as well, and

688
00:30:53,120 --> 00:30:54,840
Speaker 9: so we're going to continue to play our game and

689
00:30:55,400 --> 00:30:57,840
Speaker 9: execute a game plan that is going to drive long term,

690
00:30:57,880 --> 00:30:59,240
Speaker 9: sustainable same source sales growth.

691
00:30:59,280 --> 00:31:00,320
Speaker 11: So I hate to do this to you, and I

692
00:31:00,360 --> 00:31:02,520
Speaker 11: hope you don't check your social media mentions, but if

693
00:31:02,520 --> 00:31:05,080
Speaker 11: you just look up Jersey mics, there is just a

694
00:31:05,360 --> 00:31:07,360
Speaker 11: wide swath of people who say, ah, since you know,

695
00:31:07,440 --> 00:31:10,959
Speaker 11: the Blackstone pe overlords came in, they've changed the sandwiches.

696
00:31:11,440 --> 00:31:14,160
Speaker 11: They have, you know, shrunken size. People love to complain

697
00:31:14,160 --> 00:31:17,680
Speaker 11: that like Pe comes and ruins their favorite sandwiches. Charlie,

698
00:31:17,720 --> 00:31:20,360
Speaker 11: can you say here, definitively have the sandwiches change at all,

699
00:31:20,440 --> 00:31:23,160
Speaker 11: quality or otherwise not as since you came into the Hell.

700
00:31:23,280 --> 00:31:23,760
Speaker 4: Not at all.

701
00:31:23,800 --> 00:31:26,000
Speaker 9: That's just hype and social media. They like to pick

702
00:31:26,000 --> 00:31:28,160
Speaker 9: on people for that reason. We haven't done nothing. I mean,

703
00:31:28,200 --> 00:31:30,600
Speaker 9: I've been involved almost as long as Blackstone has.

704
00:31:30,800 --> 00:31:32,360
Speaker 4: We haven't changed a thing. Why would we.

705
00:31:32,440 --> 00:31:35,240
Speaker 9: This brand has grown twenty consecutive years positive same sort

706
00:31:35,240 --> 00:31:37,000
Speaker 9: of sales growth. We don't need to change them. In you,

707
00:31:37,080 --> 00:31:39,360
Speaker 9: we enjoy one of the lowest food costs in the industry.

708
00:31:39,640 --> 00:31:42,000
Speaker 9: Our franchisees have some of the highest cash on cash

709
00:31:42,040 --> 00:31:44,880
Speaker 9: returns in the industry. They want to grow and build

710
00:31:44,960 --> 00:31:46,680
Speaker 9: more stores, and they're going to do that and so

711
00:31:47,080 --> 00:31:49,240
Speaker 9: no need to change anything. We love this brand, we

712
00:31:49,320 --> 00:31:51,280
Speaker 9: love the way we delivered the product, and we're going

713
00:31:51,360 --> 00:31:52,800
Speaker 9: to continue to do it that way for a long

714
00:31:52,840 --> 00:31:53,320
Speaker 9: time to come.

715
00:31:53,440 --> 00:31:56,080
Speaker 11: On the cost, because generally this market, if you track

716
00:31:56,120 --> 00:31:59,480
Speaker 11: the macro data things like dairy meats, the prices have

717
00:31:59,560 --> 00:32:01,960
Speaker 11: been right, saying how have you been accounting for that?

718
00:32:02,040 --> 00:32:03,320
Speaker 11: How do you keep your margins?

719
00:32:03,680 --> 00:32:06,840
Speaker 9: Well, we have a very diverse lineup in our menu

720
00:32:06,920 --> 00:32:10,200
Speaker 9: in terms of the proteins that we offer, so beef, chicken, pork,

721
00:32:10,240 --> 00:32:13,040
Speaker 9: different products all within our menu, and we're able to

722
00:32:13,080 --> 00:32:15,440
Speaker 9: balance that over time. So as one is high like

723
00:32:15,480 --> 00:32:18,040
Speaker 9: beef prices today, we focus on other parts of our

724
00:32:18,080 --> 00:32:19,200
Speaker 9: business and we've been able.

725
00:32:19,000 --> 00:32:20,000
Speaker 4: To maintain that over time.

726
00:32:20,000 --> 00:32:22,600
Speaker 9: We also have a very scaled supply chain over three

727
00:32:22,600 --> 00:32:25,720
Speaker 9: thousand restaurants strong. We buy in very high volumes and

728
00:32:25,840 --> 00:32:28,040
Speaker 9: are able to handle that back to our franchisees in

729
00:32:28,040 --> 00:32:30,080
Speaker 9: the form of a very low food cost around twenty

730
00:32:30,080 --> 00:32:32,320
Speaker 9: seven percent of sales, which is industry leading.

731
00:32:32,760 --> 00:32:34,800
Speaker 11: How about prices, Are you able to use that as

732
00:32:34,800 --> 00:32:37,440
Speaker 11: a lever to charge more prices for higher prices for

733
00:32:37,480 --> 00:32:38,040
Speaker 11: your sandwiches?

734
00:32:38,160 --> 00:32:40,800
Speaker 9: Certainly over time we do take price. Our long term

735
00:32:40,840 --> 00:32:43,680
Speaker 9: algorithm is low single digit same store sales growth for

736
00:32:43,720 --> 00:32:46,600
Speaker 9: this business that will be equally balanced between price and

737
00:32:46,680 --> 00:32:49,920
Speaker 9: transaction growth. We air towards transaction growth. That's really how

738
00:32:49,960 --> 00:32:51,920
Speaker 9: you grow the health of the business over time. We've

739
00:32:51,960 --> 00:32:55,080
Speaker 9: taken some price as we've seen commodity inflation, not nearly

740
00:32:55,120 --> 00:32:57,640
Speaker 9: as much as some other brands, and that, quite frankly,

741
00:32:57,720 --> 00:33:00,640
Speaker 9: is what's been fueling our growth this year and years

742
00:33:00,640 --> 00:33:03,000
Speaker 9: prior compared to the rest of the concepts out there.

743
00:33:03,040 --> 00:33:04,560
Speaker 11: All right, Charlie, that's all we have time for. Thank

744
00:33:04,560 --> 00:33:05,760
Speaker 11: you so much and congratulations.

745
00:33:05,760 --> 00:33:06,720
Speaker 4: Ah pleasure, thank you.

746
00:33:07,280 --> 00:33:10,400
Speaker 3: Stay with us. More from Bloomberg Business Weekdaily coming up

747
00:33:10,640 --> 00:33:11,160
Speaker 3: after this.

748
00:33:14,560 --> 00:33:18,040
Speaker 2: If you are listening to the Bloomberg Business Weekdaily podcast,

749
00:33:18,240 --> 00:33:21,840
Speaker 2: catch us live weekday afternoons from two to five pm Eastern.

750
00:33:21,920 --> 00:33:25,000
Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg

751
00:33:25,040 --> 00:33:27,760
Speaker 2: Business app, or watch us live on YouTube.

752
00:33:28,680 --> 00:33:31,360
Speaker 3: Monetary policy matters not just by what we say or

753
00:33:31,400 --> 00:33:33,160
Speaker 3: even what we do. So what did he say? What

754
00:33:33,200 --> 00:33:35,240
Speaker 3: did he do? That's what we want to kind of

755
00:33:35,240 --> 00:33:37,520
Speaker 3: get to. Let's get to it with Stuart Paul. He's

756
00:33:37,520 --> 00:33:40,360
Speaker 3: Bloomberg Economics US and Canada. Economist on set with us

757
00:33:40,400 --> 00:33:43,520
Speaker 3: right here at Bloomberg headquarters in New York City, our

758
00:33:43,640 --> 00:33:46,560
Speaker 3: Jersey out there at our Bloomberg Princeton Bureau, Bloomberg Intelligence

759
00:33:46,600 --> 00:33:50,360
Speaker 3: chief US interest rate strategists. So, Stuart Aira, I put

760
00:33:50,360 --> 00:33:54,560
Speaker 3: this pose, this question to you both. Are we overreacting? Reacting?

761
00:33:54,640 --> 00:33:56,600
Speaker 3: Is us a new version of greenspan speak? We know

762
00:33:57,320 --> 00:34:02,360
Speaker 3: the iconic fed share. He often intentional used vague, highly technical,

763
00:34:02,640 --> 00:34:06,600
Speaker 3: ambiguous language when talking about or asked about monetary policy,

764
00:34:07,040 --> 00:34:09,560
Speaker 3: and you had to read between the lines. So is this,

765
00:34:10,160 --> 00:34:12,759
Speaker 3: let me start with you, Stuart, Kevin Worsh doing the

766
00:34:12,760 --> 00:34:14,200
Speaker 3: same thing, or is he just kind of new on

767
00:34:14,239 --> 00:34:15,359
Speaker 3: the job finding his way.

768
00:34:15,600 --> 00:34:17,439
Speaker 7: I think that it's an attempt at the same thing.

769
00:34:17,480 --> 00:34:20,799
Speaker 7: I think that Kevin Worsh's attempt to use abstraction or obfuscation.

770
00:34:21,120 --> 00:34:25,800
Speaker 7: It is intended to provide less guidance to financial markets

771
00:34:25,800 --> 00:34:29,000
Speaker 7: and to market participants. But we live in a materially

772
00:34:29,040 --> 00:34:31,200
Speaker 7: different world than we did twenty years ago, and Alan

773
00:34:31,280 --> 00:34:34,439
Speaker 7: greenspand would do the same thing. Market participants are used

774
00:34:34,440 --> 00:34:37,560
Speaker 7: to guidance, for one, and we are also in a

775
00:34:37,600 --> 00:34:40,400
Speaker 7: period where we're trying to understand the federal reserves reaction

776
00:34:40,600 --> 00:34:44,080
Speaker 7: function separate apart from the verbal guidance that's being given.

777
00:34:44,320 --> 00:34:46,319
Speaker 7: So I think that the different world that we live

778
00:34:46,360 --> 00:34:51,360
Speaker 7: in actually makes it almost impossible for Kevin Worsh to

779
00:34:51,360 --> 00:34:55,640
Speaker 7: pull off a good Alan Greenspan impression. I also think

780
00:34:55,719 --> 00:34:59,280
Speaker 7: that the abstraction and obfuscation is an attempt to basically

781
00:34:59,400 --> 00:35:00,200
Speaker 7: kick the can.

782
00:35:00,080 --> 00:35:01,160
Speaker 1: Down the road a little bit.

783
00:35:01,800 --> 00:35:05,640
Speaker 7: And when you see market pricing starting to get ahead

784
00:35:05,680 --> 00:35:10,080
Speaker 7: of the FED, it actually makes it it's him failing

785
00:35:10,120 --> 00:35:12,080
Speaker 7: to do his job. If his attempt is to buy

786
00:35:12,239 --> 00:35:14,839
Speaker 7: additional time by kicking the can down the road, If

787
00:35:15,000 --> 00:35:18,640
Speaker 7: failure to provide guidance ends up resulting any sort of

788
00:35:18,680 --> 00:35:21,160
Speaker 7: additional market pricing, that will end up getting a rate hike,

789
00:35:21,239 --> 00:35:23,839
Speaker 7: let's say in September, then he's not achieving the goal

790
00:35:23,840 --> 00:35:25,120
Speaker 7: of kicking the can down the road.

791
00:35:25,320 --> 00:35:27,640
Speaker 1: We're gonna bring you in just a second. But I

792
00:35:27,640 --> 00:35:29,359
Speaker 1: want to just pull on this thread a little bit.

793
00:35:29,400 --> 00:35:31,200
Speaker 1: Why is he kicking the can? Which can is he

794
00:35:31,280 --> 00:35:32,520
Speaker 1: kicking down the road? And why do you think he's

795
00:35:32,560 --> 00:35:32,880
Speaker 1: giving this.

796
00:35:33,280 --> 00:35:35,360
Speaker 7: To go back to the To go back to the

797
00:35:35,360 --> 00:35:38,040
Speaker 7: Alan Greenspan analogy. One thing that we know that Kevin

798
00:35:38,080 --> 00:35:42,120
Speaker 7: Worsh is indexing on is the potential for AI to

799
00:35:42,239 --> 00:35:45,600
Speaker 7: produce a lot of productivity gains and additional supply capacity

800
00:35:45,640 --> 00:35:48,560
Speaker 7: that would result in disinflation, and that would make a

801
00:35:48,680 --> 00:35:53,000
Speaker 7: rate hike today a policy misstep. I think that he's

802
00:35:53,040 --> 00:35:56,600
Speaker 7: trying to draw a similar comparison to his circumstances today

803
00:35:56,680 --> 00:35:59,200
Speaker 7: to what Alan greenspand was doing in the nineties, and

804
00:35:59,280 --> 00:36:01,759
Speaker 7: so by buying some time before he has to make

805
00:36:01,840 --> 00:36:08,040
Speaker 7: any decision on policy rates, he's essentially trying to This

806
00:36:08,080 --> 00:36:10,960
Speaker 7: is the cancacking exercise. He's trying to buy that time

807
00:36:11,000 --> 00:36:13,439
Speaker 7: to avoid the potential for a policy misstep by moving

808
00:36:13,480 --> 00:36:14,480
Speaker 7: too soon in either direction.

809
00:36:14,560 --> 00:36:17,479
Speaker 3: Right now, wise Man would say, is he right, which

810
00:36:17,520 --> 00:36:20,080
Speaker 3: is something I often hear in my life from various

811
00:36:20,120 --> 00:36:24,319
Speaker 3: people in my circle in world you're right about everything. Oh,

812
00:36:24,360 --> 00:36:26,759
Speaker 3: it's not me, it's not me. Hey, Irack, come on

813
00:36:26,840 --> 00:36:29,560
Speaker 3: in on this same question to you. Is it Alan

814
00:36:29,560 --> 00:36:31,839
Speaker 3: Greenspan two point zero or is he just figuring things out?

815
00:36:31,880 --> 00:36:33,960
Speaker 3: Or do you kind of agree with what we just

816
00:36:33,960 --> 00:36:36,000
Speaker 3: got from Stewart Well.

817
00:36:36,360 --> 00:36:38,960
Speaker 12: I think he is trying to bring things back to

818
00:36:39,000 --> 00:36:42,560
Speaker 12: the pre global financial crisis communications period, and I mean

819
00:36:42,600 --> 00:36:45,920
Speaker 12: you've seen that very clearly in the last two statements

820
00:36:46,160 --> 00:36:48,480
Speaker 12: where you have one hundred and fifteen words compared to

821
00:36:48,640 --> 00:36:50,800
Speaker 12: the eight hundred words that we had in twenty fourteen

822
00:36:51,239 --> 00:36:55,840
Speaker 12: in the post meeting statement. I think that the market's

823
00:36:55,880 --> 00:36:57,759
Speaker 12: not going to like what Kevin Watrish is trying to do,

824
00:36:57,800 --> 00:37:01,400
Speaker 12: and not because it doesn't provide but mostly because it

825
00:37:01,400 --> 00:37:03,359
Speaker 12: doesn't provide any information at all.

826
00:37:03,480 --> 00:37:04,760
Speaker 1: Right, so one why.

827
00:37:04,600 --> 00:37:06,920
Speaker 12: Bother having the press conference? He said that the reason

828
00:37:07,040 --> 00:37:09,080
Speaker 12: they're doing it is because they promised to do it.

829
00:37:09,960 --> 00:37:11,879
Speaker 12: He could have just made a statement and said I'm

830
00:37:11,880 --> 00:37:14,000
Speaker 12: not taking any questions and walked away. That might have,

831
00:37:14,360 --> 00:37:16,520
Speaker 12: you know, helped him his cause at least a little bit.

832
00:37:17,200 --> 00:37:19,560
Speaker 12: And the market's not very trusting of him right now,

833
00:37:19,560 --> 00:37:21,840
Speaker 12: and in order to get that trust back, he is

834
00:37:21,920 --> 00:37:24,439
Speaker 12: going to have to kind of live up to there,

835
00:37:25,560 --> 00:37:27,839
Speaker 12: to what they've been saying. And he said we want

836
00:37:27,840 --> 00:37:30,799
Speaker 12: to fight inflation. Well to the market that's saying, okay, well,

837
00:37:30,800 --> 00:37:32,960
Speaker 12: if you're fighting inflation, that means you have to increase

838
00:37:33,000 --> 00:37:36,279
Speaker 12: interest rates. If they don't increase interest rates and you

839
00:37:36,360 --> 00:37:40,000
Speaker 12: still have three plus percent year on year PCE over

840
00:37:40,040 --> 00:37:42,040
Speaker 12: the next couple of months, the market's not going to

841
00:37:42,120 --> 00:37:43,359
Speaker 12: like that, and you're going to see more of what

842
00:37:43,400 --> 00:37:45,759
Speaker 12: you saw yesterday. You'll see higher yields in the long

843
00:37:45,880 --> 00:37:48,360
Speaker 12: end because there's going to be a lack of trust

844
00:37:48,400 --> 00:37:49,239
Speaker 12: in the Central Bank.

845
00:37:49,400 --> 00:37:52,040
Speaker 1: How high could that yield on the long end get, IIRA.

846
00:37:53,200 --> 00:37:55,680
Speaker 12: Well, so it'll be difficult for it, I think, to

847
00:37:55,719 --> 00:37:57,680
Speaker 12: break around five and a half percent, but that would

848
00:37:57,719 --> 00:38:00,600
Speaker 12: still be the highest level in almost two decades.

849
00:38:00,680 --> 00:38:00,879
Speaker 4: Right.

850
00:38:01,360 --> 00:38:04,880
Speaker 12: So that is a scenario where you have all of

851
00:38:04,880 --> 00:38:08,319
Speaker 12: these AI hyperscalers, and just about everyone who issues long

852
00:38:08,400 --> 00:38:11,120
Speaker 12: term debt is going to find it harder to borrow

853
00:38:11,320 --> 00:38:13,680
Speaker 12: or at least more expensive to borrow. Right now, whether

854
00:38:13,760 --> 00:38:16,440
Speaker 12: or not they're immune to higher interest rates or not,

855
00:38:16,719 --> 00:38:19,399
Speaker 12: I think is you have to be seen. But if

856
00:38:19,440 --> 00:38:21,520
Speaker 12: presumably if the long end goes up to five and

857
00:38:21,520 --> 00:38:23,319
Speaker 12: a half percent, you're probably going to get close to

858
00:38:23,360 --> 00:38:26,239
Speaker 12: five percent on the ten year, which means you're going

859
00:38:26,239 --> 00:38:28,080
Speaker 12: to have much higher mortgage rates. Right So you're going

860
00:38:28,120 --> 00:38:30,560
Speaker 12: to wind up with probably a slowing in the mortgage

861
00:38:30,600 --> 00:38:33,839
Speaker 12: market and the housing market in general, and it will

862
00:38:33,840 --> 00:38:36,600
Speaker 12: filter through to just about everything throughout the economy.

863
00:38:36,680 --> 00:38:38,960
Speaker 3: Right US mortgage rates already rising to a twelve month

864
00:38:39,040 --> 00:38:42,640
Speaker 3: high amid you know some of the fighting in Iran,

865
00:38:43,200 --> 00:38:45,759
Speaker 3: you know, feeling concerned about higher inflation. But it's just

866
00:38:45,920 --> 00:38:48,319
Speaker 3: kind of the general macro there on that Stuart, is.

867
00:38:48,520 --> 00:38:51,880
Speaker 1: There a real case to be made that it's not

868
00:38:51,880 --> 00:38:54,200
Speaker 1: really within the Fed's remit to communicate with us at all.

869
00:38:54,239 --> 00:38:57,120
Speaker 1: I mean, this is an organization that is responsible for

870
00:38:57,120 --> 00:39:02,280
Speaker 1: two things, maximum employment and stable prices, not explaining itself

871
00:39:02,320 --> 00:39:04,279
Speaker 1: to us, you know, eight times a year.

872
00:39:05,200 --> 00:39:10,120
Speaker 7: It's certainly not obligated to explain itself the way that

873
00:39:10,160 --> 00:39:12,800
Speaker 7: it has been, and certainly not obligated to bride guidance

874
00:39:12,840 --> 00:39:17,279
Speaker 7: to the extended guidance is useful in achieving those two objectives,

875
00:39:17,320 --> 00:39:21,960
Speaker 7: price stability and maximum employment. I think that and it's worked.

876
00:39:22,360 --> 00:39:26,760
Speaker 3: Right, has FED speak kind of like so much recent history,

877
00:39:26,800 --> 00:39:30,640
Speaker 3: which is FED speakers in general kind of maneuvering the market?

878
00:39:30,760 --> 00:39:31,279
Speaker 1: They get it.

879
00:39:31,520 --> 00:39:34,480
Speaker 7: Yeah, Look, I think that it has worked. I think

880
00:39:34,480 --> 00:39:37,120
Speaker 7: that communication as a tool is asymmetric. I think that

881
00:39:37,160 --> 00:39:40,879
Speaker 7: it's really valuable when policy rates are low. I think

882
00:39:40,920 --> 00:39:44,279
Speaker 7: that when you have two sided risk and you're trying

883
00:39:44,280 --> 00:39:46,320
Speaker 7: to be really deliberate about which direction you're going to

884
00:39:46,360 --> 00:39:48,360
Speaker 7: move on the policy front, you don't want to bind

885
00:39:48,400 --> 00:39:51,319
Speaker 7: your hands by offering too much guidance if you haven't

886
00:39:51,360 --> 00:39:53,520
Speaker 7: truly made up your mind on what you're going to

887
00:39:53,560 --> 00:39:56,000
Speaker 7: do over the next two years, it's actually it could

888
00:39:56,000 --> 00:39:58,600
Speaker 7: be a little bit detrimental to your own cause to

889
00:39:59,000 --> 00:40:01,399
Speaker 7: offer too much guide. One thing that I do want

890
00:40:01,440 --> 00:40:03,600
Speaker 7: to circle back to is the point that IRA made earlier,

891
00:40:03,680 --> 00:40:06,719
Speaker 7: which is one that Kevin Walsh also commented on during

892
00:40:06,719 --> 00:40:09,080
Speaker 7: his press conference, which is that if you end up

893
00:40:09,080 --> 00:40:11,000
Speaker 7: seeing selling off on the long end of the curve

894
00:40:11,040 --> 00:40:13,600
Speaker 7: and it does ripple through into the real economy, it's

895
00:40:13,600 --> 00:40:15,640
Speaker 7: almost as though markets are doing some of the heavy

896
00:40:15,680 --> 00:40:18,040
Speaker 7: lifting for the FED. But I think that I differ

897
00:40:18,120 --> 00:40:20,279
Speaker 7: from Chairman Warsh and maybe a little bit with IRA

898
00:40:20,400 --> 00:40:24,160
Speaker 7: here too. It seems as though over the last over

899
00:40:24,200 --> 00:40:28,239
Speaker 7: the last several years, the real economy has been basically

900
00:40:28,480 --> 00:40:32,840
Speaker 7: insensitive to both policy rates and even two longer term rates.

901
00:40:33,200 --> 00:40:36,240
Speaker 7: I think that where and maybe this is slicing everything

902
00:40:36,360 --> 00:40:38,400
Speaker 7: just a little bit too thin. The thing that I

903
00:40:38,480 --> 00:40:43,440
Speaker 7: worry about is where market volatility starts and deteriorating wealth

904
00:40:43,440 --> 00:40:46,799
Speaker 7: effects actually start weighing on consumer spending. It's really been

905
00:40:46,840 --> 00:40:50,359
Speaker 7: favorable wealth effects that have undergirded consumer spending in the

906
00:40:50,360 --> 00:40:52,920
Speaker 7: face of souring sentiment I think that if we end

907
00:40:53,000 --> 00:40:55,560
Speaker 7: up seeing that, we end up seeing market volatility and

908
00:40:55,600 --> 00:40:58,880
Speaker 7: deteriorating wealth effects. I think that that, frankly, will matter

909
00:40:58,960 --> 00:41:00,840
Speaker 7: more than sell off and bond.

910
00:41:00,640 --> 00:41:01,200
Speaker 1: To the log end.

911
00:41:01,400 --> 00:41:03,400
Speaker 3: Interesting, Hey, guys, what I want to do? And I

912
00:41:03,520 --> 00:41:06,680
Speaker 3: rack come on back in here. President Trump, shortly after

913
00:41:06,680 --> 00:41:10,040
Speaker 3: the decision, you know, made some comments about he's a

914
00:41:10,040 --> 00:41:12,799
Speaker 3: brilliant guy, I meaning Kevin Warsh he was in the

915
00:41:12,800 --> 00:41:16,000
Speaker 3: Oval office. He goes, I know, he'd love to actually

916
00:41:16,040 --> 00:41:17,920
Speaker 3: see lower interest rates. He's got a board, it's a

917
00:41:17,920 --> 00:41:20,520
Speaker 3: political board. They want to keep rates up, but we

918
00:41:20,600 --> 00:41:23,920
Speaker 3: fight through rates. Is this in your view? Do markets

919
00:41:23,960 --> 00:41:26,360
Speaker 3: think this is an independent fed share?

920
00:41:28,200 --> 00:41:28,319
Speaker 4: So?

921
00:41:28,480 --> 00:41:30,520
Speaker 12: Well, we we have you know, I talked to a

922
00:41:30,560 --> 00:41:32,800
Speaker 12: lot of investors every day. We have you know, several

923
00:41:33,040 --> 00:41:36,239
Speaker 12: thousand that we interact with on the Bloomberg terminal on

924
00:41:36,280 --> 00:41:38,800
Speaker 12: a regular basis. And one of the uh, one of

925
00:41:38,840 --> 00:41:41,040
Speaker 12: the things that people said was that there is a

926
00:41:41,120 --> 00:41:44,080
Speaker 12: large swath of investors who worry that worsh is not

927
00:41:44,440 --> 00:41:48,560
Speaker 12: uh you know, is in the is an accolade of Trump, right,

928
00:41:48,719 --> 00:41:51,000
Speaker 12: and that basically he wants the lower interest rates, but

929
00:41:51,040 --> 00:41:53,239
Speaker 12: he can't because of the committee. So you know what

930
00:41:53,239 --> 00:41:55,600
Speaker 12: President Trump said yesterday is not a surprise, and I

931
00:41:55,640 --> 00:41:58,680
Speaker 12: think it didn't really surprise many of us that you know,

932
00:41:58,719 --> 00:42:01,640
Speaker 12: Warsh maybe wants to keep where they are or ease them,

933
00:42:01,880 --> 00:42:05,040
Speaker 12: but there's a huge part of number, you know, swath

934
00:42:05,120 --> 00:42:07,439
Speaker 12: of people on the board that don't want to move

935
00:42:07,600 --> 00:42:09,920
Speaker 12: the UH, don't want to move interest rates or want

936
00:42:10,000 --> 00:42:12,400
Speaker 12: to increase them importantly, And I want to go back

937
00:42:12,440 --> 00:42:15,920
Speaker 12: to something that Stewart was mentioning before. There's a difference

938
00:42:15,960 --> 00:42:18,960
Speaker 12: between forward guidance and reaction function, right there are two

939
00:42:19,000 --> 00:42:19,760
Speaker 12: different things.

940
00:42:20,480 --> 00:42:21,920
Speaker 1: And I think Kevin.

941
00:42:21,719 --> 00:42:24,400
Speaker 12: Worsh you know, for as smart as he is, didn't

942
00:42:24,480 --> 00:42:27,840
Speaker 12: understand that the markets don't really necessarily need or want

943
00:42:28,200 --> 00:42:31,000
Speaker 12: the actual forward guidance. What they want to know is

944
00:42:31,120 --> 00:42:34,879
Speaker 12: what will you do if these three, four or five scenarios,

945
00:42:35,120 --> 00:42:37,440
Speaker 12: And if you do that, you'll actually will get then

946
00:42:37,520 --> 00:42:40,680
Speaker 12: the market reaction and what the market then telling the

947
00:42:40,719 --> 00:42:43,480
Speaker 12: Fed what it thinks is going to happen as a

948
00:42:43,520 --> 00:42:45,279
Speaker 12: forward looking discounting mechanism.

949
00:42:45,640 --> 00:42:46,399
Speaker 4: And you can't do.

950
00:42:46,400 --> 00:42:48,360
Speaker 12: That right now if you don't exactly know what the

951
00:42:48,400 --> 00:42:52,560
Speaker 12: reaction function is. Because you told us effectively at your

952
00:42:52,680 --> 00:42:55,000
Speaker 12: Humphrey hawkins sestimony that you're going to fight inflation and

953
00:42:55,040 --> 00:42:57,520
Speaker 12: you didn't, right, And that's where I think there's a

954
00:42:57,560 --> 00:43:00,480
Speaker 12: disconnect between the market and what Kevin wore think.

955
00:43:00,800 --> 00:43:03,680
Speaker 7: It's an interesting point that you make, Ira, And Kevin

956
00:43:03,719 --> 00:43:07,880
Speaker 7: Warsh said a few times over that he's happy that

957
00:43:08,000 --> 00:43:11,080
Speaker 7: markets are playing, that markets are playing the ball, they're

958
00:43:11,120 --> 00:43:13,880
Speaker 7: following the data rather than playing the ref the FED.

959
00:43:14,680 --> 00:43:17,160
Speaker 7: I think that that's a horrible analogy that Chairman worsh

960
00:43:17,280 --> 00:43:20,080
Speaker 7: was making though, because the FED is a player on

961
00:43:20,160 --> 00:43:23,080
Speaker 7: the field, right, So it's not the case that markets

962
00:43:23,080 --> 00:43:25,760
Speaker 7: can just strictly pay attention to the data without knowing

963
00:43:25,800 --> 00:43:29,160
Speaker 7: the fed's reaction function. You're exactly right, Ira, And when

964
00:43:29,320 --> 00:43:32,439
Speaker 7: Chairman Walsh is unwilling to specify either how he would

965
00:43:32,440 --> 00:43:35,000
Speaker 7: respond to different scenarios because he doesn't want to bind

966
00:43:35,040 --> 00:43:37,520
Speaker 7: his own hands, or he doesn't even want to specify

967
00:43:37,600 --> 00:43:41,400
Speaker 7: what inflation measures he's looking at, it becomes really difficult

968
00:43:41,560 --> 00:43:45,000
Speaker 7: for markets to anticipate what the other player on the

969
00:43:45,040 --> 00:43:47,560
Speaker 7: field is doing. To put this in sort of a

970
00:43:47,640 --> 00:43:51,759
Speaker 7: geopolitical context as an analogy, the US has always maintained this,

971
00:43:51,840 --> 00:43:55,239
Speaker 7: you know, sort of strategic ambiguity about what it would

972
00:43:55,280 --> 00:43:58,600
Speaker 7: do in the context of China and Iran, or excuse me,

973
00:43:58,680 --> 00:44:03,440
Speaker 7: China and Taiwan. But strategic ambiguity does not work for

974
00:44:04,120 --> 00:44:06,919
Speaker 7: the most important central bank. It does not work when

975
00:44:06,920 --> 00:44:09,760
Speaker 7: you have literally trillions of dollars moving around the world,

976
00:44:09,800 --> 00:44:12,279
Speaker 7: and it does not work when you're trying to at

977
00:44:12,400 --> 00:44:17,720
Speaker 7: least ensure stable prices, maximum employment and stability and financial markets.

978
00:44:17,800 --> 00:44:21,480
Speaker 7: It's not really a strategy strategic ambiguity.

979
00:44:21,719 --> 00:44:24,880
Speaker 3: All right, Well, you can read a lot about all this,

980
00:44:25,080 --> 00:44:29,279
Speaker 3: the questions after that press conference and decision by the

981
00:44:29,360 --> 00:44:31,399
Speaker 3: FMC and really the new fedchair. All right, guys, thank

982
00:44:31,400 --> 00:44:33,520
Speaker 3: you so much, really appreciate it. As Alway Stewart, Paul

983
00:44:33,520 --> 00:44:37,560
Speaker 3: Bloomberg Economics US and Canada economist, Our Jersey Bloomberg Intelligence

984
00:44:37,680 --> 00:44:39,640
Speaker 3: Chief US interest rates strategist.

985
00:44:40,360 --> 00:44:45,719
Speaker 2: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,

986
00:44:45,840 --> 00:44:49,560
Speaker 2: and anywhere else you get your podcasts. Listen live weekday

987
00:44:49,600 --> 00:44:53,600
Speaker 2: afternoons from two to five pm Eastern on Bloomberg dot Com,

988
00:44:53,640 --> 00:44:57,560
Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business App.

989
00:44:57,800 --> 00:45:00,840
Speaker 2: You can also watch us live every weekday YouTube and

990
00:45:01,040 --> 00:45:02,920
Speaker 2: always on the Bloomberg terminal.

991
00:45:04,080 --> 00:45:10,400
Speaker 10: MHM