WEBVTT - 'Cheap' Banks Group Poised For 2021 Rebound: CFRA's Leon 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.560 along with essential market moving news. Kind the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.600 and on Bloomberg dot com. Let's bring in Ken Leon, 0:00:21.680 --> 0:00:24.520 Global Director of Industry and Equity Research at c f 0:00:24.760 --> 0:00:27.600 r A Research. Ken, we're pretty much through the bank 0:00:27.640 --> 0:00:31.240 earnings already. It's been quite the mixed result. Talked to 0:00:31.360 --> 0:00:34.519 us about your overall impression and how much these banks 0:00:34.640 --> 0:00:39.440 are differentiating one from the other these days. That's a 0:00:39.479 --> 0:00:42.440 great question. And the gloom and doom from March to 0:00:42.440 --> 0:00:45.920 to really the summer seems to be over, so the 0:00:46.000 --> 0:00:50.120 level of provision for loan loss and reserve seems to 0:00:50.200 --> 0:00:53.880 have been stabilized. The increases for it's much much smaller 0:00:54.200 --> 0:00:56.360 in the third quarter. But it's really a tale of 0:00:56.440 --> 0:00:59.920 two stories. We're excited about the capital markets for the 0:01:00.040 --> 0:01:03.560 pure plays like Goldman Sachs and Morgan Stowing Tomorrow. They're 0:01:03.600 --> 0:01:07.320 gaining wallets share and they're also disruptors in the traditional 0:01:07.360 --> 0:01:13.120 banking area for the main street type banks consumer and commercial, 0:01:13.200 --> 0:01:16.720 they're facing still risk as it relates to how do 0:01:16.760 --> 0:01:20.120 you get volume going again for credit card and for 0:01:20.240 --> 0:01:23.280 consumer lending um and it all seems to be a 0:01:23.319 --> 0:01:26.840 steph function of the COVID nineteen. Will there be a 0:01:26.920 --> 0:01:31.120 stimulus bill and will that sprinkle into the economy, you know, 0:01:31.240 --> 0:01:35.479 more activity, you know, US economy seventy consumer And that's 0:01:35.520 --> 0:01:39.640 why Bank America stocks down today as well as some pressure, yes, 0:01:39.680 --> 0:01:43.400 they with JP Morgan and City. How much are these 0:01:43.440 --> 0:01:46.680 banks chasing investors right now and how much are they 0:01:46.680 --> 0:01:49.240 just trying to stabilize themselves until perhaps they can give 0:01:49.240 --> 0:01:53.960 out dividends again or you know, earn some money some 0:01:54.120 --> 0:01:59.520 other way. Well, they have a dominant position. So looking 0:01:59.520 --> 0:02:02.960 at the u US banking industry, they are gaining deposits 0:02:03.000 --> 0:02:06.880 and the assets size, but they are learning their lessons 0:02:06.920 --> 0:02:11.520 from the last recession and crisis. You know, credit quality 0:02:11.560 --> 0:02:14.320 really matters, and they're letting on a lot of the 0:02:14.440 --> 0:02:19.320 lower qualified homeowners for for mortgages or other areas like 0:02:19.480 --> 0:02:22.760 or to go somewhere else in the shadow bank. You know, 0:02:22.840 --> 0:02:25.480 so there is a quality story and you know, I 0:02:25.520 --> 0:02:27.679 think for investors. When you look at these stocks, the 0:02:28.600 --> 0:02:31.960 broad bank stocks, the FED says, you can't raise dividends, 0:02:32.000 --> 0:02:34.480 you can't buy backstock. We're going to tell you where 0:02:34.560 --> 0:02:36.839 we are at the end of this year. So there's 0:02:37.000 --> 0:02:40.560 enormous capital being built up, which is why the return 0:02:40.600 --> 0:02:44.320 on equity ratios and regulatory ratios are so great. So 0:02:44.440 --> 0:02:47.560 next year it creates pent up return of capital to 0:02:47.680 --> 0:02:51.160 shareholders with an economy that's probably gonna be better at 0:02:51.200 --> 0:02:55.040 some point. In all of this means that this is 0:02:55.080 --> 0:02:58.160 a cheap group. You know, you know, got City trading 0:02:58.200 --> 0:03:01.640 at less than fift of that tangible book value, which 0:03:01.720 --> 0:03:06.880 is crazy. We also see that relative to the rest 0:03:06.919 --> 0:03:11.040 of the financial sector, investors are avoiding banks today, but 0:03:11.120 --> 0:03:13.600 don't forget what this could look like six to twelve 0:03:13.680 --> 0:03:17.359 months down down the line. And that's I think this 0:03:17.440 --> 0:03:20.080 quarter is a pivot from the dark days that we 0:03:20.120 --> 0:03:23.560 saw since March to trying to figure out what next 0:03:23.600 --> 0:03:26.560 year will be. Yeah, how much does that depend on 0:03:26.639 --> 0:03:31.679 stimulus and how soon it comes. I think stimulus is important. 0:03:31.680 --> 0:03:34.920 So going back to the traditional banks, the consumer bank, 0:03:35.000 --> 0:03:40.560 which is loans and credit cards. Unless we see the stimulus, 0:03:40.600 --> 0:03:43.520 it's not going to raise consumer confidence levels for those 0:03:43.520 --> 0:03:47.280 who work, and it's not going to add to relief 0:03:47.600 --> 0:03:50.760 for those who are forbearance on thaying their credit cards. 0:03:51.440 --> 0:03:54.560 It's a big problem. Twelve million out of work. I 0:03:54.600 --> 0:03:58.240 think the question the market is not sure is the 0:03:58.320 --> 0:04:03.160 election stimulus after the election or in January. This is 0:04:03.200 --> 0:04:06.080 the wild card. So that's why the banks box really 0:04:06.080 --> 0:04:10.640 aren't moving much this week. You know, can over the years, 0:04:10.680 --> 0:04:12.680 you've covered them all. You've covered the big banks, You've 0:04:12.720 --> 0:04:15.440 covered the boutique banks, you've covered the exchanges, you have 0:04:15.560 --> 0:04:18.680 covered you know, everything that I can and can think 0:04:18.720 --> 0:04:22.039 of when it comes to the financial sector. What is 0:04:22.040 --> 0:04:24.320 standing out to you as the most value right now? 0:04:24.360 --> 0:04:29.359 What's your your strongest by let's say so in our team. 0:04:29.440 --> 0:04:32.840 So I covered just the large banks right now. The 0:04:32.839 --> 0:04:36.280 rest of it, the rest of the team, names like Visa, 0:04:36.560 --> 0:04:40.480 master Card just beautifully positioned, you know, for that rebound 0:04:40.720 --> 0:04:44.280 in terms of consumer and credit card and their platforms 0:04:44.800 --> 0:04:47.240 um you know, so I think that's the area. You know, 0:04:47.279 --> 0:04:51.279 Acid Management is consolidating, we like black Stone, and that 0:04:51.360 --> 0:04:53.480 will continue, you know. Morgan Stanley, I thought it was 0:04:53.480 --> 0:04:57.400 a great deal. They paid a premium um, but you 0:04:57.440 --> 0:05:01.440 know what they got with eating dances that a global platform. 0:05:01.720 --> 0:05:05.200 So we're seeing consolidation and asset management, uh, and that 0:05:05.240 --> 0:05:09.920 will continue as well. Are the likes of Visa master Card, 0:05:10.040 --> 0:05:12.359 as you say, the perfectly positioned for the consumer. But 0:05:12.440 --> 0:05:15.480 are they under any threat at all from the more 0:05:16.040 --> 0:05:20.159 fintech E type companies out there? It's a good question. 0:05:20.680 --> 0:05:22.839 So for you and I as consumers, we think of 0:05:23.000 --> 0:05:25.719 Visa or master Card just the credit card in our wallet, 0:05:25.760 --> 0:05:30.360 but it's not. They really have a clearinghouse platform for 0:05:30.480 --> 0:05:34.880 transactions and they really have less risk in terms of 0:05:34.920 --> 0:05:37.360 some of the startups you know in the card area. 0:05:37.960 --> 0:05:42.240 You know. So it's a complex business, but where these 0:05:42.600 --> 0:05:46.400 Visa and master Card are situated is really in a 0:05:46.440 --> 0:05:49.320 great position. And of course American Express has some of 0:05:49.360 --> 0:05:52.680 that with their own private system, um, but you know, 0:05:52.720 --> 0:05:54.560 they have a big travel business and we know what 0:05:54.680 --> 0:05:58.960 Covid has done to that. Yeah for now, that's for sure. Ken. 0:05:58.960 --> 0:06:01.920 Are you dipping at all into these fin techs and 0:06:01.920 --> 0:06:05.480 and these different payment type companies and seeing which of 0:06:05.520 --> 0:06:08.760 them is likely to survive the longer term? So we 0:06:08.839 --> 0:06:11.560 are watching them, and mostly what we cover are the 0:06:12.080 --> 0:06:16.239 large incontents, which are also heavily and dusting, and actually, Ken, 0:06:16.360 --> 0:06:19.000 I'm sorry we'll have to continue this another day, but 0:06:19.240 --> 0:06:22.360 an extraordinary conversation with Ken Leon there of c f 0:06:22.760 --> 0:06:25.120 R A, and we really appreciate his time. Now we 0:06:25.160 --> 0:06:27.760 want to go to the Economic Club of New York. 0:06:27.800 --> 0:06:32.880 President Trump is addressing the e C n Y excited 0:06:32.920 --> 0:06:35.919 to have with us. Now leading labor economist Danny Blanche Flower, 0:06:35.920 --> 0:06:38.800 pro pressor of economics at Dartmouth College, former Bank of 0:06:38.800 --> 0:06:42.360 England policymaker, and really, Danny, there are so many places 0:06:42.360 --> 0:06:45.840 where we could start. I definitely want Have we got 0:06:45.839 --> 0:06:48.720 an hour and a half, right, we need to make 0:06:48.760 --> 0:06:51.200 this extra long. Well, let's get straight to it then, 0:06:51.240 --> 0:06:53.960 because we will talk breaks it in Boris Johnson and 0:06:53.960 --> 0:06:57.279 coronavirus in Britain in a moment. But let's start with stimulus. 0:06:57.279 --> 0:07:00.320 There is a little bit of head scratching I think 0:07:00.960 --> 0:07:03.880 as to why how speaker Nancy Pelosi is holding firm 0:07:04.040 --> 0:07:06.839 and not accepting the one point a trillion dollars. And 0:07:06.880 --> 0:07:10.600 I want you to explain why it might be better 0:07:10.720 --> 0:07:14.440 for people who are suffering right now if Nancy Pelosi 0:07:14.480 --> 0:07:17.840 doesn't accept it. If that's what you believe, well, I mean, 0:07:17.840 --> 0:07:21.920 obviously there are There are arguments, strong arguments to suggest 0:07:22.040 --> 0:07:25.440 that the Republicans should have gone out for a stimulus 0:07:25.440 --> 0:07:30.320 expect especially in areas where their candidates are in trouble, 0:07:30.880 --> 0:07:35.040 to boost how well people are feeling. UM. Stimulus in 0:07:35.080 --> 0:07:41.320 this economy is needed because people are struggling. Um, they're furlowed. 0:07:41.560 --> 0:07:44.720 Even if they have jobs, many of them have less 0:07:44.760 --> 0:07:47.440 hours than they would like, so they have less spending 0:07:47.760 --> 0:07:50.520 and that feeds through to the economy as a whole 0:07:51.000 --> 0:07:54.160 and has a negative impact on the economy. So what 0:07:54.320 --> 0:07:57.400 happened in earlier in the year when the economy tank 0:07:57.480 --> 0:08:01.480 we went into lockdown, stimulus came that prevented things from 0:08:01.480 --> 0:08:04.800 being a lot worse. Now, obviously, I think everyone's playing 0:08:04.800 --> 0:08:09.320 political games um in a sense that if checks show 0:08:09.440 --> 0:08:13.800 up prior to the election, perhaps that will boost the Republicans. 0:08:13.840 --> 0:08:16.360 So this is in a sense, these of political games. 0:08:16.840 --> 0:08:20.120 In terms of the economy, we need to get stimulus 0:08:20.200 --> 0:08:21.840 in there, and we need to get it in there now, 0:08:22.880 --> 0:08:25.760 especially as we're starting to see slowing down of the 0:08:25.800 --> 0:08:29.680 economy and the virus spreading. So this is head scratching stuff. 0:08:29.720 --> 0:08:33.400 People are playing politics with people's lives, and it's time 0:08:33.440 --> 0:08:35.600 to go and get busy, as the old phrase said. 0:08:36.160 --> 0:08:38.360 But Danny, there's stimulus, and there's stimulus, and I know 0:08:38.440 --> 0:08:41.720 that there's an argument forgetting people, you know, cash immediately 0:08:41.760 --> 0:08:44.040 because there are so many suffering out there. And we'll 0:08:44.040 --> 0:08:46.680 talk about the labor market in a moment, But is 0:08:46.679 --> 0:08:48.680 it the right thing to do just to send out 0:08:49.920 --> 0:08:54.200 once again and maybe give some targeted aid to airlines 0:08:54.280 --> 0:08:56.839 or whatever? You know, you know what targeted dates an 0:08:56.840 --> 0:08:59.719 important thing. I mean, I mean, what we know at 0:08:59.720 --> 0:09:03.839 the moment is that people who are especially struggling need help. 0:09:04.000 --> 0:09:06.959 I mean, I'm a labor economist. I have never seen 0:09:07.600 --> 0:09:10.240 this phenomenon which I've seen in the last month or two, 0:09:10.640 --> 0:09:13.440 which is all of a sudden, wage growth in a 0:09:13.520 --> 0:09:17.040 recession has gone from two percent to seven percent. Well, 0:09:17.080 --> 0:09:20.200 why is that wage growth is rising? Well, actually the 0:09:20.240 --> 0:09:23.840 reason is at the bottom fifteen percent of so of 0:09:23.880 --> 0:09:26.760 the wage distribution has dropped out. So it's like a 0:09:26.760 --> 0:09:31.559 baseball team's average improves because the two worst players drop out. 0:09:31.640 --> 0:09:33.880 I don't mean sucess. These people are worse, but these 0:09:33.880 --> 0:09:36.080 are these are people at the lower end with low earning. 0:09:36.120 --> 0:09:39.760 So so these folks have dropped out of the wage distribution. 0:09:40.000 --> 0:09:42.839 They need help to the economy. The great thing about 0:09:42.880 --> 0:09:45.760 these folks is if you give them money, they spend 0:09:45.840 --> 0:09:49.720 it and that has a very positive effect. So what's 0:09:49.720 --> 0:09:52.559 happening in the labor market, what's happening to people's consumption 0:09:52.600 --> 0:09:54.920 is a really big deal. Yeah, down the road, you 0:09:55.000 --> 0:09:57.440 probably want to ensure that there are airlines out there. 0:09:57.520 --> 0:09:59.240 I mean, it's a great phrase, you want to ensure 0:09:59.280 --> 0:10:02.240 the commanding heights of the economy. But I think you're right, 0:10:02.320 --> 0:10:06.000 we need to target it to people who have limited income. 0:10:06.240 --> 0:10:08.160 It's not big and they're not working. They're not out 0:10:08.160 --> 0:10:10.960 of work because they're lazy. They're out of work because 0:10:10.960 --> 0:10:14.360 there isn't demand for people. And especially the evidence this 0:10:14.400 --> 0:10:17.920 week is actually the job losses and the labor force 0:10:18.040 --> 0:10:22.160 drops have actually disproportionately hit women because you know, it's 0:10:22.160 --> 0:10:25.280 in the industries that they particularly working in restaurants and 0:10:25.280 --> 0:10:27.320 and so on. So so I think this is a 0:10:27.360 --> 0:10:30.840 really big deal. And it's interesting as a labor economist 0:10:30.840 --> 0:10:34.920 to watch people dizzering when they should be acting, that's 0:10:34.960 --> 0:10:36.840 for sure. And Danny a story that just came out, 0:10:36.880 --> 0:10:39.360 and because it's in your wheelhouse most recently, I do 0:10:39.440 --> 0:10:42.240 want to mention it Here, we've found out that the 0:10:42.280 --> 0:10:45.120 number of Americans dying from drug overdoses hit a record 0:10:45.160 --> 0:10:48.400 in the twelve month period ending March seventy almost seventy 0:10:48.440 --> 0:10:52.080 four thousand drug overdose deaths reporting in the twelve months 0:10:52.200 --> 0:10:55.199 through March, and they increased significantly at the start of 0:10:55.240 --> 0:10:57.120 the pandemic. And I know that you've written a lot 0:10:57.160 --> 0:11:00.880 about this, Yes, so of say you know that there's 0:11:01.040 --> 0:11:03.560 I mean, we're not we know this. They're suffering out there, Danny. 0:11:03.600 --> 0:11:06.000 What happens with the labor market. Let's say that stimulus 0:11:06.040 --> 0:11:09.840 is stalled for now and right, well, I mean we've 0:11:09.840 --> 0:11:12.559 done a lot of work, and Case and Deaton have 0:11:12.640 --> 0:11:14.680 done all this work. And what they call death of despair, 0:11:15.280 --> 0:11:19.000 I've been writing about distress. Well, let's just connect all 0:11:19.040 --> 0:11:22.679 of this together. That the deaths of despair and overdose 0:11:22.760 --> 0:11:28.120 death disproportionately occur amongst prime age less educated white were 0:11:28.280 --> 0:11:32.120 more increasingly amongst minorities, but particularly amongst that group. So 0:11:32.280 --> 0:11:34.880 distress is that which is the group that's crying out 0:11:34.920 --> 0:11:38.720 for help, um, the prime age less educate particularly you 0:11:38.720 --> 0:11:41.400 look who's going to Trump rallies. These folks are have 0:11:41.480 --> 0:11:44.640 been left behind and are hurting, and no other country 0:11:44.640 --> 0:11:48.000 in the world has an opioid epidemic like this. No 0:11:48.120 --> 0:11:53.040 other country has had this huge set of prescriptions from 0:11:53.120 --> 0:11:57.120 doctors of opioids that really haven't worked. And the crucial 0:11:57.160 --> 0:11:59.560 thing to look back and now at is that America 0:11:59.600 --> 0:12:03.280 has a crisis of pain. So even though these opioids 0:12:03.280 --> 0:12:06.000 have been prescribed, they don't work, they don't solve pain. 0:12:06.240 --> 0:12:09.079 So Americans are in pain. One in four visits to 0:12:09.120 --> 0:12:12.920 a doctor people report they're in chronic pain. And that's 0:12:13.040 --> 0:12:19.319 before the COVID virus hit. So there's vulnerable people, vulnerable communities, 0:12:19.840 --> 0:12:23.280 and we have issues of suicide and overdoses. What are 0:12:23.360 --> 0:12:25.959 people doing? I mean, we need money to help communities. 0:12:25.960 --> 0:12:28.360 And what's happened in the last decade with lots of 0:12:28.440 --> 0:12:31.480 spending cups in in in public spending cups, we made 0:12:31.920 --> 0:12:35.800 communities vulnerable and these folks have nowhere to turn. So 0:12:35.840 --> 0:12:38.400 I think this is really terrible. American needs to try 0:12:38.440 --> 0:12:41.360 and understand this in a state of where where Dartmouth is, 0:12:41.440 --> 0:12:44.240 New Hampshire is one of these states which has unbelievably 0:12:44.320 --> 0:12:47.959 high opioid death rates. So this is something I think 0:12:48.000 --> 0:12:50.600 that the American public needs to be aware of seventy 0:12:51.240 --> 0:12:55.040 people dying from opioid overdoses. I mean there's others dying 0:12:55.040 --> 0:12:58.040 from drug overdoses and suicides. So so this is a 0:12:58.080 --> 0:13:00.760 real crisis that we're doing nothing about, and a stimulus 0:13:00.760 --> 0:13:03.800 should focus on that, should focus on communities, to focus 0:13:03.840 --> 0:13:07.679 on trying to help mental health. And the idea that 0:13:07.679 --> 0:13:11.800 you would remove healthcare for people who are hurting not 0:13:11.880 --> 0:13:14.720 just physically, not just from COVID, but from from this 0:13:14.760 --> 0:13:18.440 deep mental health crisis is hard to understand. Well, there's 0:13:18.480 --> 0:13:21.240 a lot that's hard to understand about the current environment, Danny. 0:13:21.320 --> 0:13:23.360 Let me ask you in the just little literally thirty 0:13:23.360 --> 0:13:26.800 seconds that we've left. Unfortunately Boris Johnson, I mean, what's 0:13:26.840 --> 0:13:30.080 his plan? Does he have one? No, hasn't got a plan. 0:13:30.200 --> 0:13:33.080 I mean the cabinet is actually the cabinet of incompetence. 0:13:33.400 --> 0:13:36.120 They're actually there because they all have views about Brexit, 0:13:36.160 --> 0:13:40.520 but not not actually very competent. We're seeing disarray. I 0:13:40.559 --> 0:13:42.720 mean even before COVID, I think I said on to 0:13:42.800 --> 0:13:45.040 you and many times on Blumber, these guys don't know 0:13:45.040 --> 0:13:48.280 what they're doing. Continuously mug by reality. They're supposed to 0:13:48.280 --> 0:13:51.320 have a plan out there tomorrow, and the only I 0:13:51.320 --> 0:13:54.679 think the only question now is how big an impact 0:13:54.760 --> 0:13:56.200 is this going to be? And we had a poll 0:13:56.240 --> 0:13:59.719 out yesterday which now says that fifty eight percent of 0:14:00.000 --> 0:14:04.480 if the Scotts want independence, So it's splitting the community islands. 0:14:04.320 --> 0:14:08.520 It's upset. It's just a disaster. Danny, thank you again. 0:14:08.840 --> 0:14:11.120 We'll have you on again soon to talk more about this. 0:14:11.200 --> 0:14:13.400 Dannie Blanche for our leading neighbor economist of course at 0:14:13.480 --> 0:14:20.400 Dartmouth College, professor and former bo E policymaker. Let's get 0:14:20.400 --> 0:14:23.440 an opinion now on some retail with Sarah Holzag, numer 0:14:23.640 --> 0:14:27.440 Opinion consumer columnist. Sarah, we're in the middle of Amazon 0:14:27.720 --> 0:14:31.440 Primes festivities. Let's put it that way. It started as 0:14:31.480 --> 0:14:35.200 Prime Day and now it really is Prime Days. So 0:14:35.480 --> 0:14:39.160 over several days, Amazon gives out deals. How is it 0:14:39.200 --> 0:14:43.280 going this year? So we don't have any information from 0:14:43.320 --> 0:14:45.720 Amazon yet on how is this on how it's going, 0:14:45.840 --> 0:14:50.400 but indications are people are participating in large numbers. Some 0:14:50.560 --> 0:14:54.320 third party data suggest that the hit items so far 0:14:54.440 --> 0:14:58.840 are Amazon's own items, So it's Echo Dot smart speaker, 0:14:59.240 --> 0:15:03.520 fire TV sticks, and Amazon gift cards. Yeah, no surprise 0:15:03.600 --> 0:15:06.480 because those seem to be the products that Amazon pushes 0:15:06.560 --> 0:15:08.560 all the time. You know, I spend a little bit 0:15:08.560 --> 0:15:11.360 of time every now and then on Amazon's website, and 0:15:11.440 --> 0:15:14.880 even when you watch a Prime video, the ads in 0:15:14.920 --> 0:15:17.800 the video are for Amazon products. I guess it's it's 0:15:17.840 --> 0:15:20.360 not illegal, and why wouldn't Amazon do it? But does 0:15:20.360 --> 0:15:24.000 it to suggest that customers are just being pushed towards 0:15:24.240 --> 0:15:27.400 certain items that you know, they're not chopping maybe as 0:15:27.440 --> 0:15:31.320 discerning lee as they would otherwise. I mean, Amazon does 0:15:31.360 --> 0:15:34.440 certainly give really permanent play to these devices on its 0:15:34.480 --> 0:15:36.880 home page, and you can see the reasons why they 0:15:36.920 --> 0:15:39.720 would do that. It's all part of creating this very 0:15:39.760 --> 0:15:43.760 sticky ecosystem where consumers have Amazon in all different parts 0:15:43.760 --> 0:15:46.040 of their lives. So perhaps if you buy a Fire 0:15:46.160 --> 0:15:50.640 TV stick, you're more likely to watch Amazon's video streaming programming. 0:15:51.000 --> 0:15:53.480 Then your Prime membership feels more valuable to you, and 0:15:53.520 --> 0:15:55.720 you're likely to redo it next year, and the fly 0:15:55.800 --> 0:15:58.400 wheel kind of keeps going in that way. Um So 0:15:58.480 --> 0:16:01.080 that's clearly a big reason I Amazon is pushing those 0:16:01.080 --> 0:16:03.320 products today and will continue to do so throughout the 0:16:03.400 --> 0:16:06.640 holiday season. It doesn't even seem that long ago when 0:16:06.680 --> 0:16:10.080 analysts were speculating if Amazon would start its own sort 0:16:10.080 --> 0:16:13.440 of in house brand, remember, and now suddenly it's all Amazon. 0:16:14.040 --> 0:16:17.080 The other thing is that many of these products are 0:16:17.120 --> 0:16:20.400 fulfilled by Do we know what kind of margin Amazon 0:16:20.520 --> 0:16:23.360 gets on the products that are fulfilled by other merchants. 0:16:25.080 --> 0:16:28.800 I think some of that is not terribly clear, but 0:16:28.840 --> 0:16:31.760 I think that you know, marketplace orders are clearly a 0:16:31.800 --> 0:16:34.360 big part of this as well. Uh. They really tried 0:16:34.400 --> 0:16:36.120 to make a big push this year in their press 0:16:36.200 --> 0:16:39.840 release and such, emphasizing that small businesses we're going to 0:16:40.080 --> 0:16:43.240 be uh you know, part of Amazon Prime Day, and 0:16:43.240 --> 0:16:45.240 that they were going to try to create certain incentives. 0:16:45.240 --> 0:16:47.160 I think some sort of like ten dollar credit or 0:16:47.160 --> 0:16:50.040 something if he spent with a small business on Amazon 0:16:50.120 --> 0:16:54.040 Prime Day. So trying to make this a rewarding day 0:16:54.360 --> 0:16:56.640 in some ways for folks who use their film, that 0:16:56.760 --> 0:17:00.440 services and such too. You point out a great insight 0:17:00.600 --> 0:17:03.040 in today's column. Prime Day is a bigger threat than 0:17:03.040 --> 0:17:05.720 ever for rivals, and I'd urge everybody to read it 0:17:06.320 --> 0:17:09.640 that this year, you know, well we usually see Prime 0:17:09.720 --> 0:17:11.879 Day in July. This year Amazon is using it as 0:17:11.880 --> 0:17:16.040 a sort of a holiday kickoff retail extravaganza. I mean, 0:17:16.080 --> 0:17:18.840 we're pretty much passed back to school, or maybe we're 0:17:18.920 --> 0:17:20.560 right in the middle of it. But Amazon certainly trying 0:17:20.560 --> 0:17:23.960 to take advantage of the calendar this year too, Yes, 0:17:24.000 --> 0:17:27.080 they are, and that could have really big implications for 0:17:27.160 --> 0:17:30.480 its competitors. So estimates are that Amazon is going to 0:17:30.640 --> 0:17:34.359 have about six billion in online sales take place on 0:17:34.359 --> 0:17:38.159 its website during Prime Day. For context, last year, on 0:17:38.200 --> 0:17:41.720 Black Friday, the entire retail industry so a seven point 0:17:41.800 --> 0:17:45.200 four billion dollars in online sales, and in a typical 0:17:45.280 --> 0:17:48.280 day during the holiday season, the entire retail industry sees 0:17:48.320 --> 0:17:51.960 about two point three billion dollars in online sales. So 0:17:52.040 --> 0:17:55.880 if Amazon rakes in six billion dollars in sales during 0:17:55.920 --> 0:17:59.080 this period, that certainly would seem to be changing the 0:17:59.200 --> 0:18:02.400 entire rhythm of the holiday season this year and pulling 0:18:02.480 --> 0:18:04.919 forwards some of those sales that would have happened on 0:18:05.000 --> 0:18:08.480 marquee days like Black Friday and Cyber Monday. You know, 0:18:08.520 --> 0:18:15.639 it's particularly sort of um something to see when you 0:18:15.680 --> 0:18:17.919 see on the other side of the ocean a sauce 0:18:17.960 --> 0:18:20.280 which started out a little bit like Amazon. It was 0:18:20.320 --> 0:18:22.200 as seen on screen, and it was where you went 0:18:22.320 --> 0:18:24.560 sort of to get your mail order a quick fix 0:18:24.680 --> 0:18:28.639 of clothing and other items. It could face a twenty 0:18:28.680 --> 0:18:31.080 five million pound hit from taras in the event of 0:18:31.119 --> 0:18:33.760 an odeal brexit. So obviously a sauce is not really 0:18:34.000 --> 0:18:36.479 a competitor to Amazon right now. It has other problems 0:18:36.480 --> 0:18:39.760 to worry about. What are the main competitors to Amazon? 0:18:41.359 --> 0:18:44.280 So Walmart and Target I think are the key ones. 0:18:44.359 --> 0:18:47.800 Both of them have really made major investments in their 0:18:47.840 --> 0:18:52.520 online infrastructure, expanding their assortment online and expanding their ability 0:18:52.560 --> 0:18:54.440 to get things to you quickly. I think that two 0:18:54.480 --> 0:18:58.800 days shipping promise used to be Amazon's key differentiator, and 0:18:59.080 --> 0:19:01.560 now a lot of items they're premising one day shipping. 0:19:01.680 --> 0:19:04.359 Walmart and Target are really racing to keep up with that. 0:19:04.960 --> 0:19:08.000 Um Also, Walmart and Target are really going big on 0:19:08.240 --> 0:19:11.520 curbside pickup, which Amazon crewy does not have as many 0:19:11.560 --> 0:19:14.359 outposts to be able to offer that, and a lot 0:19:14.400 --> 0:19:17.400 of shoppers really like curbside pickup and they can get 0:19:17.440 --> 0:19:20.879 the items same day and they in that way, you 0:19:20.880 --> 0:19:22.600 can get it more quickly than if they waited for 0:19:22.640 --> 0:19:25.000 it to come to their doorstep. So those are the 0:19:25.040 --> 0:19:27.960 folks that are going to be really trying to duke 0:19:28.040 --> 0:19:30.680 it out with the Amazon this holiday season most directly. Yeah, 0:19:30.720 --> 0:19:32.720 that data is proving a real eye opener, the curb 0:19:32.760 --> 0:19:35.560 side pick up part of things. I you know, not 0:19:35.680 --> 0:19:37.640 that I know anything, but I probably would have thought 0:19:37.680 --> 0:19:39.760 that it wouldn't be as popular as it is. But 0:19:39.800 --> 0:19:41.800 I guess for all the reasons you said, it is 0:19:41.840 --> 0:19:45.800 actually more popular than you might expect. Now, will Amazon 0:19:45.920 --> 0:19:50.840 ever upgrade it's consumer facing experience? I was looking to 0:19:50.880 --> 0:19:52.920 perhaps buy a gift card on Amazon the other day, 0:19:52.920 --> 0:19:55.240 and honestly, it was just it was really difficult to 0:19:55.240 --> 0:19:58.040 find how to how to do that. Now, maybe I'm 0:19:58.080 --> 0:20:01.359 just not computer savvy. It does seem that Amazon is 0:20:01.359 --> 0:20:06.919 not putting much into its consumer experience. I completely agree 0:20:06.920 --> 0:20:09.440 with that, Vonnie. To me, it's just such a strange 0:20:09.480 --> 0:20:11.760 thing that Amazon is the online drug or not that 0:20:11.840 --> 0:20:13.800 it is, and that its website is as hard to 0:20:13.840 --> 0:20:16.639 sort through as it is. I think what Amazon is 0:20:16.680 --> 0:20:19.080 really good at is when you know exactly what you want, 0:20:19.280 --> 0:20:21.960 when you just want to refill the same laundry detergent 0:20:22.040 --> 0:20:24.320 you always buy, or buy the same pack of diapers 0:20:24.320 --> 0:20:26.960 you always buy. Amazon makes it very easy to run 0:20:27.000 --> 0:20:30.160 an errand on the Internet. What Amazon is not good 0:20:30.160 --> 0:20:33.840 at is discovery type purchasing. So when you know you 0:20:33.880 --> 0:20:36.159 want addressed, but you don't know exactly which one do 0:20:36.160 --> 0:20:37.640 you want things? Do you want blue? Do you want long? 0:20:37.680 --> 0:20:40.000 Do you want short? It's not very good at that. 0:20:40.720 --> 0:20:44.560 You know you want earrings, but none exactly which ones. 0:20:44.680 --> 0:20:46.880 It's very very difficult place to that, and I think 0:20:46.880 --> 0:20:48.480 they have a lot of work to do to fix 0:20:48.520 --> 0:20:51.240 that experience. Sarah hol Zac always spot on our consumer 0:20:51.480 --> 0:20:56.919 reck opinion columnists, Thank you. President Trump. Speaking to the 0:20:56.960 --> 0:20:59.760 Economic Club of New York and various economic clubs across 0:20:59.760 --> 0:21:02.040 the dream, he had questioning from Cindy O'Connell of the 0:21:02.080 --> 0:21:05.320 Economic Club of Florida, David Rubinstein of d C, and 0:21:05.400 --> 0:21:08.600 Mike O'Neill of New York. We have Michael McKee with 0:21:08.680 --> 0:21:12.120 us now are chief correspondent for all things economic, both 0:21:12.200 --> 0:21:16.160 national and international, and Michael a very serious conversation here. 0:21:16.200 --> 0:21:20.720 The President putting out some ideas, a couple of inflammatory statements, 0:21:20.800 --> 0:21:23.040 like how a Joe Biden presidency would be a socialist 0:21:23.080 --> 0:21:25.280 dream in American nightmare. But at the end he was 0:21:25.280 --> 0:21:29.159 asked about things like infrastructure, stimulus, national debt. Did we 0:21:29.200 --> 0:21:32.040 hear anything new from the President? No, but we haven't 0:21:32.040 --> 0:21:35.320 been hearing much new from him throughout this campaign. It's 0:21:35.359 --> 0:21:39.280 he mostly talks about what happened in the previous three 0:21:39.359 --> 0:21:41.760 or four years, and he talks a lot about, of course, 0:21:41.960 --> 0:21:46.359 what happened out of the Obama administration. UM the questions 0:21:46.400 --> 0:21:52.159 he was asked about infrastructure spending, he didn't answer. He 0:21:52.240 --> 0:21:54.560 said what he always says about many different things, that 0:21:54.640 --> 0:21:57.520 he has a plan, but there's never any plan. They 0:21:57.560 --> 0:22:01.840 were coming close to a deal on infrastructure, at least 0:22:01.840 --> 0:22:05.360 Democrats in the House and the President when the President 0:22:05.400 --> 0:22:08.480 got upset with Nancy Pelosi and broke off the talks. 0:22:08.560 --> 0:22:10.960 And that was two years ago, and nothing's been done 0:22:10.960 --> 0:22:14.720 on infrastructure since. The House and Senate have a very 0:22:14.720 --> 0:22:18.159 big differences about how you would pay for infrastructure and 0:22:18.200 --> 0:22:21.240