WEBVTT - Fed Minutes Signal Officials on Hold Until Inflation Improves 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.640 --> 0:00:12.680 This is Bloomberg Business Week, insight from the reporters and 0:00:12.800 --> 0:00:16.800 editors that bring you America's most trusted business magazine, plus 0:00:17.000 --> 0:00:20.799 global business, finance and tech news. The Bloomberg Business Week 0:00:20.840 --> 0:00:26.240 Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. 0:00:26.840 --> 0:00:29.800 And a very good afternoon everybody live on radio, TV, YouTube, 0:00:29.800 --> 0:00:32.520 Bloomberg Originals. This is Bloomberg Business Week for this. Yeah, 0:00:32.560 --> 0:00:35.600 it's a FED Wednesday. It is Wednesday, February nineteenth, Carol 0:00:35.640 --> 0:00:37.800 Master Tim Stenevik. In just a moment, we're going to 0:00:37.840 --> 0:00:40.240 get the FED minutes from the meeting, the first meeting 0:00:40.280 --> 0:00:42.400 of twenty twenty five. It happened three weeks ago. We're 0:00:42.440 --> 0:00:45.160 going to head to Washington, DC. In just a moment, Tim. 0:00:44.920 --> 0:00:46.920 Yeah, we're also going inside the world of the world's 0:00:46.960 --> 0:00:48.640 biggest online dollar store. 0:00:48.680 --> 0:00:50.319 Off to DC we go, and that's where we find 0:00:50.360 --> 0:00:54.040 Bloomberg News International Economics and Policy correspondent Michael McKee. 0:00:54.080 --> 0:00:56.840 Mike, we've got some news from the minutes today as 0:00:56.840 --> 0:00:59.280 there was a lot of discussion apparently at the last 0:00:59.320 --> 0:01:03.920 meeting about TRAID, tariffs, banks and the balance sheet. Whilst 0:01:03.920 --> 0:01:07.399 officials saw a strong economy with a solid labor market 0:01:07.520 --> 0:01:11.399 and declining, if still too high inflation. They spent a 0:01:11.400 --> 0:01:15.200 lot of time talking about potential policy changes and financial 0:01:15.240 --> 0:01:19.319 market supervision. A number of participants suggested the recent rise 0:01:19.360 --> 0:01:23.959 in monthly inflation was likely due to seasonal factors, noting 0:01:24.160 --> 0:01:28.080 substantial progress before that, but potential changes to trade and 0:01:28.280 --> 0:01:32.960 immigration policy from the new administration had the quote potential 0:01:33.000 --> 0:01:38.720 to hinder the disinflation process. One concerning note business contacts 0:01:38.760 --> 0:01:42.000 in a number of districts, indicated that firms would attempt 0:01:42.080 --> 0:01:46.440 to pass on to consumers higher input costs arising from 0:01:46.520 --> 0:01:50.880 potential tariffs. Many said companies were reporting substantial optimism about 0:01:50.880 --> 0:01:55.640 the economic outlook given potential easing of regulations and tax cuts, 0:01:56.000 --> 0:02:01.040 but some participants reported increased uncertainty regarding putential changes in 0:02:01.120 --> 0:02:05.960 federal government policies. Altogether, FED officials generally pointing to upside 0:02:06.040 --> 0:02:11.480 risks to inflation from tariffs and immigration policies, geopolitical threats, 0:02:11.639 --> 0:02:15.560 and stronger than expected consumer spending. They worried it might 0:02:15.600 --> 0:02:19.960 be hard to distinguish persistent changes in inflation from temporary 0:02:20.000 --> 0:02:23.920 ones caused by policy changes. There was also discussion of 0:02:23.960 --> 0:02:28.920 financial market vulnerabilities, including bank's reliance on reciprocal deposits, the 0:02:29.200 --> 0:02:32.800 risk of unrealized losses at banks and non bank institutions 0:02:33.000 --> 0:02:38.320 from any potential rise in long term interest rates, asset valuations, 0:02:38.360 --> 0:02:43.120 and commercial real estate exposures. Several commented on concerns that 0:02:43.440 --> 0:02:47.799 primary dealers didn't have enough intermediation capacity, and the degree 0:02:47.800 --> 0:02:52.280 of levered presitions in the markets was concerning. Finally, on 0:02:52.400 --> 0:02:57.280 the balance sheet, many participants suggested structuring future purposes as 0:02:57.280 --> 0:02:59.600 they run off the balance sheet should be done in 0:02:59.639 --> 0:03:02.480 a way that move the maturity composition of the FEDS 0:03:02.600 --> 0:03:07.000 portfolio closer to that of the outstanding stock of treasury debt, 0:03:07.520 --> 0:03:11.120 and various participants that's a new adverb for the FED 0:03:11.560 --> 0:03:15.640 suggested it might be appropriate to consider pausing or slowing 0:03:16.040 --> 0:03:21.000 balance sheet runoff until the debt ceiling is resolved. They 0:03:21.080 --> 0:03:24.240 obviously made no decision on that and did not make 0:03:24.280 --> 0:03:27.440 any decisions on bank supervision, but it does show they 0:03:27.480 --> 0:03:31.200 were worried about more than just inflation at this last meeting. 0:03:31.560 --> 0:03:33.239 All right, Mike, I feel like that there is definitely 0:03:33.240 --> 0:03:35.840 a follow up to that various participants point that you made. 0:03:35.880 --> 0:03:38.120 But let me just quick check on the markets. Equity 0:03:38.120 --> 0:03:40.160 markets to S and P is up about four points. 0:03:40.320 --> 0:03:43.080 Nazek one hundreds down is up about six points, so 0:03:43.560 --> 0:03:46.200 a little bit of a more positive tilt, but call 0:03:46.240 --> 0:03:48.600 it really slightly more importantly, let's get to the US 0:03:48.600 --> 0:03:51.280 Treasury trade. We had a four to fifty five read 0:03:51.400 --> 0:03:54.880 on the ten year. It's at four fifty four. The 0:03:55.280 --> 0:03:56.800 five year, if I look at it was at four 0:03:56.880 --> 0:03:58.760 thirty eight. That's where we find it short end of 0:03:58.760 --> 0:04:01.200 the yell curve, most sensitive to what the FED may 0:04:01.360 --> 0:04:04.920 say or do. That's exactly at where it was prior 0:04:05.160 --> 0:04:06.960 to the FED minutes, and that's with the yield of 0:04:07.000 --> 0:04:10.480 four to twenty eight. Hey, Mike, anything in here that 0:04:10.720 --> 0:04:14.160 beyond the various participants or that included that would make 0:04:14.760 --> 0:04:19.039 investors traders think differently about what the FED might do 0:04:19.920 --> 0:04:22.039 differently from what we got at that FED meeting. 0:04:23.560 --> 0:04:26.400 Not necessarily a monetary policy, and many of the FED 0:04:26.440 --> 0:04:29.839 officials who've spoken since the meeting have talked about risks 0:04:29.839 --> 0:04:32.640 from trade policy and immigration and the fact that they 0:04:32.680 --> 0:04:35.799 don't know what they can be and they can't quantify 0:04:35.839 --> 0:04:39.840 them at this point. The Bank supervision stuff was interesting 0:04:39.880 --> 0:04:41.760 because there's been a lot of talk about how strong 0:04:41.800 --> 0:04:43.880 the banks are and there's not a lot of concern 0:04:43.920 --> 0:04:46.960 about that. At the press conference, Jay Powell talked about 0:04:47.000 --> 0:04:52.320 how SVP was an outlier when that bank failed, but 0:04:52.640 --> 0:04:56.120 apparently there's more concern about that. There's also been questions 0:04:56.160 --> 0:04:58.320 about whether the FED would change its rules on the 0:04:58.360 --> 0:05:03.120 supplementary leverage ratio. Obviously there are concerns about whether dealers 0:05:03.240 --> 0:05:07.080 have intermediation capacity. And then, of course, finally, the balance 0:05:07.080 --> 0:05:10.560 sheet stuff is really interesting. It's something that bond traders 0:05:10.680 --> 0:05:13.239 and bond analysts are going to have to follow closely 0:05:13.279 --> 0:05:15.880 because it's possible, I suppose at the next meeting, if 0:05:15.920 --> 0:05:18.920 we don't get progress on a debt ceiling from the 0:05:19.120 --> 0:05:23.640 administration and Congress, they might want to consider pausing the 0:05:23.720 --> 0:05:26.400 runoff of the balance sheet until that happens. 0:05:26.720 --> 0:05:30.200 Is it rare to get something Mike in Fed minutes 0:05:30.279 --> 0:05:35.000 that is so not necessarily targeted, but something that specifically 0:05:35.040 --> 0:05:38.320 calls out something that could be happening in Washington that 0:05:38.360 --> 0:05:39.359 Congress has control of. 0:05:41.080 --> 0:05:44.240 We don't see a lot of major policy changes from 0:05:44.279 --> 0:05:47.560 administration to administration that would affect the economy in the 0:05:47.600 --> 0:05:52.279 way that tariffs and immigration policy might. Tax cuts as well. 0:05:53.200 --> 0:05:56.480 So it is unusual, but it is not an unusual 0:05:56.560 --> 0:06:00.800 factor of Fed thinking over the last or five months, 0:06:00.839 --> 0:06:03.320 because they've been trying to parse out what might happen 0:06:03.520 --> 0:06:06.080 and how that might affect the economy, and we still 0:06:06.080 --> 0:06:08.880 don't have very many details about all that. I think 0:06:09.160 --> 0:06:12.800 we've got six different tariff announcements but only one in place, 0:06:12.839 --> 0:06:15.880 the rest postponed for a few weeks until this or 0:06:16.000 --> 0:06:18.839 that happens. So they really don't have an idea of 0:06:18.920 --> 0:06:21.120 what's going to happen, but they are putting it in 0:06:21.160 --> 0:06:22.760 the upside risks category. 0:06:22.880 --> 0:06:25.760 Hey, one last question, Mike, So if j. 0:06:25.920 --> 0:06:28.880 Powell was holding a press conference today off of these minutes, 0:06:28.880 --> 0:06:30.320 what would you ask him. 0:06:30.720 --> 0:06:34.680 Yeah, Well, since everybody else before me would probably ask 0:06:34.760 --> 0:06:37.560 about upside risks to inflation, I'd be interested to know 0:06:37.640 --> 0:06:40.880 more about the balance sheet and what they're really thinking there. Obviously, 0:06:40.920 --> 0:06:44.039 the Fed when it lets them as securities roll off 0:06:44.440 --> 0:06:47.320 up to a limit of thirty trillion thirty billion rather 0:06:47.360 --> 0:06:50.760 a month, then the rest of the rolling off money 0:06:50.800 --> 0:06:52.920 goes back into the treasury. And there's been a lot 0:06:52.960 --> 0:06:55.599 of talk about the maturity curve for the treasury because 0:06:55.640 --> 0:06:59.039 the Biden administration bought a lot of short term bills, 0:06:59.720 --> 0:07:04.000 short term bonds, and now we're looking at longer term 0:07:04.440 --> 0:07:07.080 perhaps losses because interest rates are going to go higher. 0:07:07.120 --> 0:07:09.080 But the Fed is now talking about maybe we want 0:07:09.080 --> 0:07:12.360 to go that direction. So a very interesting question ahead 0:07:12.640 --> 0:07:13.560 for the bond market. 0:07:13.640 --> 0:07:16.680 All right, Bloomberg News International Economics and Policy correspondent Michael 0:07:16.760 --> 0:07:20.480 McKee out there in Washington, DC. All right, let's get 0:07:20.480 --> 0:07:22.880 to any market reaction when it comes to the US 0:07:23.000 --> 0:07:24.440 rates trade. And we've got a great guest for that. 0:07:24.640 --> 0:07:27.800 Well, let's bring in Bloomberg Intelligence Chief US interest rates strategist, 0:07:27.840 --> 0:07:31.560 Ira Jersey. He's out there at Bloomberg Intelligence headquarters in Princeton, 0:07:31.640 --> 0:07:35.160 New Jersey. Ira, why the lack of reaction to this 0:07:35.760 --> 0:07:38.200 to the news in the minutes from the Federal Reserve. 0:07:38.720 --> 0:07:41.200 Because there's a lot of interesting details but nothing new. 0:07:41.880 --> 0:07:43.520 You know. One of the one of the issues that 0:07:43.560 --> 0:07:47.640 we get is with the chairs press conference after the 0:07:47.680 --> 0:07:50.600 meeting is we know, you know ninety plus percent of 0:07:50.640 --> 0:07:52.600 what's likely to be in the minute. So it's really 0:07:52.920 --> 0:07:55.120 around the edges that you look for things. So it 0:07:55.240 --> 0:07:57.640 is those adverbs that Mike was just talking about, So 0:07:57.680 --> 0:07:59.720 you look at you know, were there many members that 0:07:59.800 --> 0:08:02.480 thought something that was different than maybe what was expressed 0:08:02.480 --> 0:08:04.880 by Jay Powell or was it just a couple right, 0:08:04.920 --> 0:08:07.800 So that's a kind of the nuance that we get 0:08:07.840 --> 0:08:10.320 out of the out of the minutes, you know, I'm 0:08:10.360 --> 0:08:12.520 focusing on the minutes here looking at some of the 0:08:12.520 --> 0:08:16.400 statements done by the SOMA portfolio manager, who's that has 0:08:16.440 --> 0:08:19.360 to do with quantitative tightening and what they might end 0:08:19.440 --> 0:08:22.040 up doing with the balance sheet. So there is some 0:08:22.160 --> 0:08:25.440 interesting information in there that we didn't have before. And 0:08:25.800 --> 0:08:28.120 obviously the FED is you know, so maybe so a 0:08:28.120 --> 0:08:30.840 long time from stopping QT, but now we're getting a 0:08:30.880 --> 0:08:33.000 hint as to what they might do if they end 0:08:33.080 --> 0:08:35.360 their their asset runof quantitative tightening. 0:08:35.400 --> 0:08:37.440 Well, are you, like Mike, that you would want if 0:08:37.480 --> 0:08:39.559 you were posing a question to j Powell if there 0:08:39.600 --> 0:08:41.760 was a press conference after the FED minutes like there 0:08:41.800 --> 0:08:44.560 is after the FED decision, would you ask about the 0:08:44.559 --> 0:08:46.280 balance sheet? Is there something else you'd want to know? 0:08:46.320 --> 0:08:47.959 Based on the headlines we've gotten. 0:08:49.280 --> 0:08:51.760 Probably mostly about the balance sheet at this point, because 0:08:51.800 --> 0:08:54.479 we know and some of the interesting statements in there, 0:08:54.520 --> 0:08:58.160 you know, did follow up is as you were talking 0:08:58.160 --> 0:08:59.960 about a moment ago. There have been a lot of 0:09:00.040 --> 0:09:02.160 speakers since the meeting, right so, and most of those 0:09:02.200 --> 0:09:04.400 speakers have said we can be patient, we can wait, 0:09:05.000 --> 0:09:07.880 you know, there's risks of the upside. There was one 0:09:07.960 --> 0:09:11.120 interesting headline that came over the terminal, and I have 0:09:11.160 --> 0:09:13.000 not yet read it in the minutes. Obviously, the minutes 0:09:13.000 --> 0:09:16.160 were like thirty pages long, so it's taken a little while. 0:09:16.520 --> 0:09:20.320 But they did say, like, you know, until inflation starts 0:09:20.360 --> 0:09:22.920 to move more toward their goal, they can be patient 0:09:22.920 --> 0:09:26.559 and wait. So I think, while not exactly new, I 0:09:26.600 --> 0:09:29.760 think that that was just a confirmation that members of 0:09:29.760 --> 0:09:32.600 the feder Reserve are happy with where rates are given 0:09:32.720 --> 0:09:36.640 the overall economic environment that we've been seeing in a 0:09:36.640 --> 0:09:38.720 lot of the data, particularly that inflation data. 0:09:38.800 --> 0:09:42.600 If we do indeed see policies from the Trump administration 0:09:42.640 --> 0:09:47.440 that are indeed inflationary tariffs, immigration policy, is it a 0:09:47.440 --> 0:09:50.199 realistic thing to say I read that the next move 0:09:50.200 --> 0:09:51.600 from the Fed could be a move higher. 0:09:53.320 --> 0:09:56.040 Well, I think that depends in what everything else is 0:09:56.040 --> 0:09:58.679 doing in the economy, right, because the Federal Reserve, unlike 0:09:58.760 --> 0:10:01.480 most other central banks, have their dual mandate, right so, 0:10:01.520 --> 0:10:03.640 I think there's two things. Is one they have been 0:10:03.679 --> 0:10:05.720 harping and some members have been harping on the on 0:10:05.760 --> 0:10:09.280 the idea that they're not near the neutral rate, that 0:10:09.400 --> 0:10:11.240 for some reason, a lot of members of the Federal 0:10:11.240 --> 0:10:13.440 Reserve think that the neutral rate is probably closer to 0:10:13.720 --> 0:10:16.000 two and a half or three percent instead of four percent. 0:10:16.280 --> 0:10:18.440 I actually think it's closer to three and three quarters 0:10:18.480 --> 0:10:20.679 or four So I think we're probably pretty close to that. 0:10:21.040 --> 0:10:23.080 But there's a difference of opinion, right because it's not 0:10:23.120 --> 0:10:25.640 something you can observe ex ante. You have to wait 0:10:25.720 --> 0:10:27.840 until events happen, and you only know if you were 0:10:27.840 --> 0:10:30.200 at the neutral rate, you know, at some time in 0:10:30.240 --> 0:10:33.719 the past when you look at history. So I do 0:10:33.760 --> 0:10:37.679 think that the Fed itself is going to have to 0:10:37.840 --> 0:10:41.720 think about you know, hey, you know, what does do 0:10:41.840 --> 0:10:45.079 tariffs mean for inflation in the long term and the 0:10:45.120 --> 0:10:48.000 short term? And if inflation does go up and inflation 0:10:48.080 --> 0:10:51.439 expectations rise, and the and the job market is still okay, 0:10:51.480 --> 0:10:53.520 then the Fed will sit on their hands and maybe 0:10:53.520 --> 0:10:56.000 they will hike. But it's more likely that you get 0:10:56.000 --> 0:10:58.440 tariffs and then you also have maybe some job losses, 0:10:58.720 --> 0:11:00.839 and that means that the Fed has decide, hey, are 0:11:00.840 --> 0:11:03.520 we going to ease a little bit to take back 0:11:03.840 --> 0:11:07.240 to ease monetary policy in order to try to support 0:11:07.240 --> 0:11:09.560 the job market, or do we just you know, try 0:11:09.559 --> 0:11:11.760 to push against these Tara fled inflation. 0:11:11.920 --> 0:11:14.559 Hey, just to wrap up, Ira, So you know, as 0:11:14.600 --> 0:11:17.600 your research that you guys that you put out today, 0:11:17.880 --> 0:11:20.480 you say you think there is a non trivial risk 0:11:20.960 --> 0:11:23.640 that the FED may need to increase rates to stema 0:11:23.679 --> 0:11:27.720 climbate inflation expectations market and traders not pricing that in 0:11:27.800 --> 0:11:28.320 yet in your. 0:11:28.280 --> 0:11:32.599 View, Yeah, so the market is not pricing it in. 0:11:32.679 --> 0:11:35.520 There's a very small chance and some options markets that 0:11:35.920 --> 0:11:39.240 the FED reserve might hike one time over the next year. 0:11:39.840 --> 0:11:42.000 I think that's probably too low. Like, it's still not 0:11:42.040 --> 0:11:43.959 our base case. Like our base case is that the 0:11:44.000 --> 0:11:46.840 Fed's on hold for the next twelve months. But I 0:11:46.880 --> 0:11:49.320 think that the market is underpricing the risk that the 0:11:49.360 --> 0:11:50.280 FED might have to hike. 0:11:50.559 --> 0:11:52.520 All right, Gonna leave it there. Hey, listen, Ira, thank 0:11:52.520 --> 0:11:55.320 you so much, so appreciate it reaction to what we saw. 0:11:55.360 --> 0:11:56.120 Of course, Ira. 0:11:56.080 --> 0:11:58.600 Jersey's chief US interest rate strategist. Here at our Bloomberg 0:11:58.640 --> 0:12:01.520 intelligence team out there at the headquarters in Princeton. 0:12:03.000 --> 0:12:06.560 You're listening to the Bloomberg Business Week Podcast. Catch us 0:12:06.640 --> 0:12:10.079 live weekday afternoons from two to five pm Eastern Listen 0:12:10.120 --> 0:12:13.640 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:12:13.800 --> 0:12:16.439 or watch us live on YouTube. 0:12:16.679 --> 0:12:19.400 We'll head to its homepage and you will be bombarded 0:12:19.800 --> 0:12:23.520 with random items Foux leather car seat covers, frog costumes 0:12:23.520 --> 0:12:24.120 for cats. 0:12:24.120 --> 0:12:24.520 I even know. 0:12:24.800 --> 0:12:25.880 I think Tim just bought some. 0:12:26.720 --> 0:12:28.840 I don't have the cat, but the frog costume. 0:12:28.520 --> 0:12:32.800 Sounds great, knock off handbag supplements, whatever, and also a 0:12:32.880 --> 0:12:36.360 flurry of banners, countdown timers and prize wheels, hawking deals, 0:12:37.160 --> 0:12:39.800 price drops and limited time offers. These are the words 0:12:39.840 --> 0:12:42.800 of our own Spencer so Far. I mean, this is Tim. 0:12:42.960 --> 0:12:44.200 The world of tea moves. 0:12:44.280 --> 0:12:44.439 Yeah. 0:12:44.440 --> 0:12:47.000 In just two years, it's become the world's biggest online 0:12:47.080 --> 0:12:49.960 dollar storys days Bloomberg Big Take. It's a deep dive 0:12:50.000 --> 0:12:52.680 into the company and how it got ensnared in President 0:12:52.720 --> 0:12:55.960 Trump's trade war with the tell. We welcome back Bloomberg 0:12:55.960 --> 0:12:58.280 News Tech and e commerce reporter Spencer Sofer. He joins 0:12:58.320 --> 0:13:01.679 us from our Seattle bureau. Spencer, I feel like I'm 0:13:01.679 --> 0:13:03.360 in the minority because I'm not like a big team 0:13:03.440 --> 0:13:06.800 of person I've never used TIMU. I had no idea 0:13:07.320 --> 0:13:10.000 that the growth of TIMO over the last couple of 0:13:10.040 --> 0:13:13.480 years is a direct result on what happened during Trump's 0:13:13.600 --> 0:13:14.360 first term. 0:13:14.559 --> 0:13:15.280 How did it happen? 0:13:17.200 --> 0:13:19.440 Yes, So during Trump's first term, if you remember, he 0:13:19.480 --> 0:13:24.880 imposed these big tariffs on China in particular, and so 0:13:25.920 --> 0:13:30.320 that basically made this demnimous loophole, which has been a 0:13:30.320 --> 0:13:33.320 thing for you know, for nearly a century now, But 0:13:33.520 --> 0:13:36.280 there's this tariff loophole that lets you ship in individual 0:13:36.360 --> 0:13:39.960 packages from China. As long as something a package is 0:13:39.960 --> 0:13:42.640 worth less than eight hundred dollars, it can come into 0:13:42.720 --> 0:13:45.240 the US for free. So all of a sudden, this 0:13:45.320 --> 0:13:49.920 shipping method is much more attractive as opposed to you know, traditionally, 0:13:49.960 --> 0:13:52.040 if you go to a store, you buy something on Amazon, 0:13:52.440 --> 0:13:56.079 it most likely came in a cargo container into a port, 0:13:56.640 --> 0:13:59.240 and you know, tariffs were set will be assessed on that. 0:13:59.679 --> 0:14:02.400 With team who's sending in an individual package to a 0:14:02.480 --> 0:14:05.480 US shopper kind of factory direct, it slides in below 0:14:05.480 --> 0:14:07.199 those tariffs. And that's one thing that gave him a 0:14:07.240 --> 0:14:09.000 big price advantage. 0:14:09.080 --> 0:14:12.600 And then during the Trump administration specifically like where because 0:14:12.800 --> 0:14:16.840 we're didn't Various presidents kind of keep raising the amount. 0:14:17.520 --> 0:14:20.160 Yeah, the dominimus has always been there. The loophole's always 0:14:20.200 --> 0:14:23.480 been there. Wish dot Com benefited from it years ago. 0:14:23.840 --> 0:14:26.760 What happened, though, was Trump didn't do anything about Dominimus. 0:14:27.080 --> 0:14:29.880 Trump imposed these new tariffs, so all of a sudden, 0:14:29.880 --> 0:14:32.360 that existing loophole became that much more valuable. 0:14:33.160 --> 0:14:36.200 Is that existing loophole at risk right now? There's a 0:14:36.240 --> 0:14:39.560 lot of confusion over what happens to this loophole in 0:14:39.600 --> 0:14:41.280 this latest round of tariffs. 0:14:42.200 --> 0:14:44.480 Yeah, so Trump said he was going to eliminate the loophole, 0:14:44.520 --> 0:14:46.560 but then he backtracked because you can't just do it 0:14:46.600 --> 0:14:49.360 with like a stroke of a pen. Realized that the agencies, 0:14:49.840 --> 0:14:54.080 particularly like Customs and Border Protection need time to figure 0:14:54.120 --> 0:14:55.560 out a plan and come up with a plan to 0:14:55.600 --> 0:14:57.840 how to handle this volume because we're talking about four 0:14:57.840 --> 0:14:59.200 million packages a day. 0:14:59.480 --> 0:15:02.880 And to the and to the US through this loophole. 0:15:03.680 --> 0:15:06.920 And so, yes, he he signaled that he wants to 0:15:06.960 --> 0:15:09.760 eliminate it, but exactly how that's going to be and 0:15:09.760 --> 0:15:13.400 whether there's still some loophole, maybe a smaller loophole or 0:15:13.680 --> 0:15:16.400 a different loophole, or just no loophole we don't really 0:15:16.400 --> 0:15:18.000 know until we see exactly how this is going to 0:15:18.000 --> 0:15:18.600 be implemented. 0:15:18.720 --> 0:15:21.600 Spencer, you mentioned this as part of a nearly century 0:15:21.640 --> 0:15:25.880 old tax loophole. The people who put this tax loophole 0:15:25.960 --> 0:15:30.840 into effect, they weren't thinking about cat costumes, including. 0:15:30.640 --> 0:15:32.520 Broad costumes, soames. 0:15:32.080 --> 0:15:35.520 Were maybe they were coming from China. What's the history here. 0:15:36.240 --> 0:15:39.239 Yeah, when you when you think about demonimous, what demonimous 0:15:39.320 --> 0:15:42.360 in Latin translates to something of such marginal value to 0:15:42.400 --> 0:15:46.000 be insignificant, Okay. And so when it generally applies to 0:15:46.040 --> 0:15:49.080 is someone returning and the origins of it someone returning 0:15:49.080 --> 0:15:52.440 from a vacation from another country. They've got, you know, 0:15:52.520 --> 0:15:54.760 loot in their suitcase. Maybe you got some T shirts, 0:15:54.800 --> 0:15:56.480 some gifts for your family, that kind of thing. 0:15:56.800 --> 0:15:57.080 You know. 0:15:57.440 --> 0:15:59.880 Without the deminimous loophole, you'd have to pay tariffs on 0:15:59.880 --> 0:16:02.400 that because you're bringing in a product of you know, 0:16:02.440 --> 0:16:05.120 from another country of origin, and the duties would apply. 0:16:05.400 --> 0:16:07.840 But they realized, look, we don't want customs agents bugging 0:16:07.880 --> 0:16:10.960 every person coming back into the country about what's in 0:16:11.000 --> 0:16:13.240 their suitcase. So they set this cap, which is currently 0:16:13.280 --> 0:16:16.200 eight hundred dollars, which is a fairly generous one. 0:16:16.520 --> 0:16:19.400 So that's what it was intended for. 0:16:19.480 --> 0:16:21.760 But then you enter the age of e commerce and 0:16:21.800 --> 0:16:25.120 crosswater e commerce, and suddenly you have this big loophole 0:16:25.160 --> 0:16:26.720 where the same rule applies. 0:16:26.880 --> 0:16:29.320 If if Tim orders that cat. 0:16:29.120 --> 0:16:32.480 Costume on Timu and it's only twenty dollars or whatever, 0:16:32.520 --> 0:16:34.920 it can come in under that loophole and it gives 0:16:34.960 --> 0:16:37.640 you a price advantage over say, brick and mortar stores 0:16:37.640 --> 0:16:39.080 that are bringing products in in bulk. 0:16:39.240 --> 0:16:41.640 I think he definitely has one under his desk. Hey, Spencer, 0:16:41.760 --> 0:16:43.480 you know, I got to be honestly, tried to put 0:16:43.480 --> 0:16:44.360 a costume on a cat. 0:16:45.280 --> 0:16:48.000 They're not dogs. I having a dog, Yeah, they're not dogs. 0:16:48.120 --> 0:16:50.480 Also slippery, Yeah, hey Spencer. 0:16:50.560 --> 0:16:53.160 I think what's interesting is I said to Tim, you know, 0:16:53.840 --> 0:16:55.800 as Timu has popped up and we were reading your story, 0:16:55.800 --> 0:16:57.200 I'm like, have you shot there? And He's like, no, 0:16:57.480 --> 0:17:01.080 I haven't shopped there. But it's massive, fifty million other 0:17:01.240 --> 0:17:04.720 US shoppers. Do remind everybody about the size and scope 0:17:04.760 --> 0:17:06.840 of this because I feel like, if we talk about Amazon, 0:17:06.840 --> 0:17:10.400 everybody knows who Amazon is, but Timo is pretty impressive 0:17:10.440 --> 0:17:13.400 and its growth is really impressive even versus Amazon. 0:17:14.840 --> 0:17:17.120 Yeah, so in just a few years. 0:17:17.840 --> 0:17:21.119 Timu this year is expected to surpass thirty billion in 0:17:22.720 --> 0:17:25.200 gross merchandise value, basically the value of all the goods 0:17:25.240 --> 0:17:26.320 they sell in the US. 0:17:26.520 --> 0:17:27.320 That's a milestone. 0:17:27.320 --> 0:17:30.320 It took Amazon more than a decade to make and 0:17:30.600 --> 0:17:32.320 team Who's going to do that in about three years? 0:17:32.520 --> 0:17:35.360 And the fifty million shoppers is you know, bigger than eBay, 0:17:35.560 --> 0:17:39.480 bigger than Walmart. So it's second, really second only to 0:17:39.560 --> 0:17:40.560 Amazon at this point. 0:17:42.240 --> 0:17:45.840 What are people buying there? Because it's not you know, 0:17:45.920 --> 0:17:49.280 in the sense of Amazon. Amazon's known for getting stuff 0:17:49.400 --> 0:17:52.959 quickly to your doorstep. That's really what they're priding themselves 0:17:53.000 --> 0:17:54.800 on when it comes to prime as you know, Spencer, 0:17:55.040 --> 0:17:56.600 what are people buying on Timu and how has it 0:17:56.680 --> 0:17:57.760 changed the way that people shop. 0:17:59.560 --> 0:18:02.520 It's a little bit of everything, but generally you can think, Okay, 0:18:02.520 --> 0:18:04.639 it's gonna be it's likely going to be something small, 0:18:04.760 --> 0:18:07.640 something light, even though you can find like a bulldozer 0:18:07.680 --> 0:18:10.719 on Team Move believe it or not. But generally, generally 0:18:10.760 --> 0:18:13.840 people are buying things that are small, maybe apparel, small 0:18:13.920 --> 0:18:18.000 kitchen appliances. I've shopped on there a bit. I do 0:18:18.040 --> 0:18:20.120 a lot of do it yourself projects. I bought some 0:18:20.160 --> 0:18:24.800 tools on there. It's generally smaller, smaller items. Arts and 0:18:24.840 --> 0:18:28.000 crafts are are popular on there. Things for like a party, 0:18:28.040 --> 0:18:30.360 if you're throwing a party, it's popular on there. I've 0:18:30.400 --> 0:18:32.359 heard of a lot of teachers who will maybe shop 0:18:32.400 --> 0:18:35.399 there as opposed to going to Dollar Tree or something 0:18:35.440 --> 0:18:38.080 to get you know, gifts for the for their students, 0:18:38.119 --> 0:18:41.119 to motivate them, that kind of thing. So there's a 0:18:41.160 --> 0:18:44.000 whole variety of reasons and a whole bunch of things 0:18:44.080 --> 0:18:45.880 you can you can buy on there, but it can 0:18:45.960 --> 0:18:46.879 be very, very random. 0:18:47.040 --> 0:18:49.199 Can trast the experience a little bit with Amazon, not 0:18:49.240 --> 0:18:52.160 the experience of actually using the website or using the app, 0:18:52.280 --> 0:18:55.160 more so the experience of how stuff gets to your 0:18:55.160 --> 0:18:59.280 doorstep because Amazon has built up this network of distribution 0:18:59.400 --> 0:19:01.960 centers that have employees throughout the country trying to get 0:19:01.960 --> 0:19:04.199 that product close to you very quickly. It's already in 0:19:04.240 --> 0:19:06.879 the US, even if it was made in China or 0:19:06.920 --> 0:19:09.720 in another country. How does something get to you from Timo. 0:19:11.119 --> 0:19:15.200 Yeah, so TIMU and they're shifting based on this tariff 0:19:15.359 --> 0:19:17.439 loophole being changed, and they could see that coming, but 0:19:17.520 --> 0:19:21.800 initially you know, generally it's coming from a factory in 0:19:21.920 --> 0:19:24.679 China to a warehouse in China, and then packed in 0:19:24.680 --> 0:19:27.119 that warehouse in China and then put on a plane 0:19:27.560 --> 0:19:31.399 into maybe JFK or LAX and then to your house. 0:19:31.800 --> 0:19:34.879 So it might take a week ten days. But that 0:19:35.400 --> 0:19:38.520 contrast with Amazon, where they call it like forward deployed. 0:19:38.920 --> 0:19:41.800 You know, the inventory is already in the United States 0:19:41.800 --> 0:19:43.800 before you even order it, and that's why they can 0:19:43.840 --> 0:19:46.040 get it to you so quickly. So what Tim Wu's 0:19:46.080 --> 0:19:49.560 proven is, you know, hey, Amazon, you're big on two 0:19:49.600 --> 0:19:52.520 day delivery, one day delivery, same day delivery. We're finding 0:19:52.520 --> 0:19:55.359 customers out there that are patient if you give them 0:19:55.400 --> 0:19:58.560 a good deal, and they really can beat Amazon and 0:19:58.560 --> 0:20:00.800 a lot of other retailers on their price and people 0:20:00.800 --> 0:20:02.520 are willing to wait for those discounts. 0:20:02.600 --> 0:20:04.359 Well, that's what I thought was also interesting in terms 0:20:04.400 --> 0:20:07.120 of this story that you did. You know, you talk 0:20:07.200 --> 0:20:10.520 about how they really tapped into i think one of 0:20:10.600 --> 0:20:13.439 the founders it was of Tim Wu's parent PDD, the 0:20:13.520 --> 0:20:16.600 rise of the budget conscious consumer, and so they really 0:20:16.600 --> 0:20:19.560 tapped into that and something that Amazon has definitely noticed 0:20:19.600 --> 0:20:21.720 as well. 0:20:21.920 --> 0:20:25.320 Yeah, I mean, if you think about the timing of it, right, 0:20:25.400 --> 0:20:28.680 they came right after the pandemic when people were just 0:20:28.880 --> 0:20:32.639 willing to shop virtually anywhere because people were so desperate 0:20:32.680 --> 0:20:35.000 to get things during the pandemic, so any hesitation about 0:20:35.000 --> 0:20:37.280 a new site kind of went away. That was the 0:20:37.359 --> 0:20:39.800 last thing change in habits. Then we got hit with inflation, 0:20:39.920 --> 0:20:41.320 so all of a sudden, people are like, hey, where 0:20:41.320 --> 0:20:44.160 can I find a deal? So TU struck that nerve 0:20:44.560 --> 0:20:48.840 and yeah, it's just they had the timing right. It 0:20:48.880 --> 0:20:50.440 was the right product at the right time. 0:20:51.720 --> 0:20:54.160 I'm interested in what happens in China, not just at 0:20:54.160 --> 0:20:56.640 these products, but not just when these products are made, 0:20:56.680 --> 0:20:59.680 but at a place like PDD. The story does dive 0:20:59.680 --> 0:21:00.680 into that a little bit. 0:21:03.000 --> 0:21:04.080 About PDD. 0:21:04.440 --> 0:21:08.000 Basically they had luck in China what they called the 0:21:08.040 --> 0:21:11.200 forgotten consumer. So you know, Ali Babo was long the 0:21:11.600 --> 0:21:16.840 leading e commerce company in China, and they, similar to Amazon, 0:21:16.880 --> 0:21:20.080 they really focused on urban areas and more affluent urban customers, 0:21:20.320 --> 0:21:22.800 and PDD said, look, let's let's focus on people the 0:21:22.840 --> 0:21:25.800 more rural areas that still want deals, and a lot 0:21:25.840 --> 0:21:28.400 of it was kind of a group on esque buying environment, 0:21:28.480 --> 0:21:31.119 like you would you you would buy collectively with a 0:21:31.119 --> 0:21:33.679 group of other people to get better, better discounts and 0:21:33.720 --> 0:21:36.120 so that's kind of the origins there, But then they 0:21:36.280 --> 0:21:39.680 they're applying that you know, similar philosophy in the US, 0:21:39.800 --> 0:21:42.919 looking for the folks, you know, things that maybe they 0:21:43.000 --> 0:21:45.080 want that they can't buy or at prices they can't find. 0:21:45.240 --> 0:21:47.920 Spencer, will they be able to deliver on this if 0:21:47.960 --> 0:21:49.320 that tax loophole goes away? 0:21:50.760 --> 0:21:52.840 That's a great question, and that's what everyone's wondering. 0:21:52.840 --> 0:21:57.080 They've already been preparing for it by by uh, you know, 0:21:57.119 --> 0:21:59.480 getting more warehouse space in the US and having more 0:21:59.480 --> 0:22:04.040 inventory in the US and even cultivating relationships with US 0:22:04.040 --> 0:22:06.560 based merchants. So it looks like they're already gearing up 0:22:06.560 --> 0:22:09.320 towards that. And then exactly how these terrorists play out. 0:22:09.480 --> 0:22:13.560 I mean, these things generally, aren't you know, one catastrophic 0:22:13.760 --> 0:22:17.000 ending to everybody. There's gonna be some people who navigate 0:22:17.040 --> 0:22:20.320 it and survive. We might see further delineation in the categories. 0:22:20.320 --> 0:22:22.960 Maybe some categories survive and others don't. But I don't 0:22:22.960 --> 0:22:25.120 think we've seen the last of Team moved here. 0:22:25.240 --> 0:22:26.640 Yeah, And I got to just say, just to wrap 0:22:26.720 --> 0:22:29.360 up just kind about a minute here, Spencer, is that 0:22:29.880 --> 0:22:33.160 you write about the culture of the company of PDD 0:22:33.480 --> 0:22:35.240 and Timu and. 0:22:35.440 --> 0:22:37.960 Sound like in there, that's all I'm saying. 0:22:38.200 --> 0:22:40.160 Sounds like there's some long working days and that they 0:22:40.400 --> 0:22:43.760 will not give up easily. Just some insight into the 0:22:43.760 --> 0:22:44.560 company's culture. 0:22:46.040 --> 0:22:46.960 Yeah, well they they. 0:22:48.440 --> 0:22:51.000 Say eleven eleven six, which is kind of a playoff 0:22:51.040 --> 0:22:53.480 of Ali Baba's nine to nine to six. Basically, people 0:22:53.480 --> 0:22:56.400 working eleven am to eleven pm, six days a week, 0:22:56.720 --> 0:22:58.280 you know, long ruling hours. 0:22:58.480 --> 0:23:00.560 It's hard to fall them for that. 0:23:00.640 --> 0:23:02.520 I mean, I'm sure you can find examples of that 0:23:02.560 --> 0:23:07.840 in the US, but yes, it's known for, you know, uh, 0:23:08.119 --> 0:23:11.480 hiring smart people and motivating them with money. But they're gonna, 0:23:11.480 --> 0:23:13.040 they're gonna earn it. They're gonna, they're gonna work their 0:23:13.040 --> 0:23:13.520 tails off. 0:23:13.800 --> 0:23:15.959 All Right, We're gonna leave it there. Hey, Spencer, thank 0:23:16.000 --> 0:23:17.520 you so much. Glad we could get some time with you. 0:23:17.520 --> 0:23:21.280 Spencer Soaper, technology and e commerce reporter here at Bloomberg News, 0:23:21.359 --> 0:23:24.040 joining us from our bureau in Seattle. This is the 0:23:24.080 --> 0:23:25.000 Bloomberg Big Take Today. 0:23:25.080 --> 0:23:27.520 Everybody check it out at a Bloomberg dot com slash 0:23:27.560 --> 0:23:30.119 a Big Take and also at Bloomberg dot com slash 0:23:30.160 --> 0:23:30.920 and BusinessWeek. 0:23:32.720 --> 0:23:36.480 This is the Bloomberg Business Week podcast. Listen live each 0:23:36.520 --> 0:23:39.840 weekday starting at two pm Eastern on Applecarplay and the 0:23:39.880 --> 0:23:42.720 Android Auto with the Bloomberg Business app. You can also 0:23:42.880 --> 0:23:46.200 listen live on Amazon Alexa from our flagship New York station, 0:23:46.680 --> 0:23:49.280 Just Say Alexa played Bloomberg eleven thirty. 0:23:50.600 --> 0:23:50.760 Well. 0:23:50.800 --> 0:23:54.000 More than one hundred million people are facing frigid conditions 0:23:54.040 --> 0:23:56.640 across the eastern and central United States, and that includes 0:23:56.680 --> 0:24:00.520 the entire state of Texas as an Arctic black threatens 0:24:00.520 --> 0:24:04.040 to break low temperature records. The Electric Reliability Council of 0:24:04.080 --> 0:24:07.239 Texas that's the state's grid operator, said electricity demand will 0:24:07.280 --> 0:24:10.159 jump in the coming days, but it expects to be 0:24:10.240 --> 0:24:12.320 able to meet the spike in consumption. 0:24:12.840 --> 0:24:13.040 Now. 0:24:13.080 --> 0:24:15.960 Regulators and lawmakers have moved to bolster the state's power 0:24:16.000 --> 0:24:18.840 system after the grid collapsed during a series of winter 0:24:18.880 --> 0:24:21.600 storms back in twenty twenty one, killing hundreds of people 0:24:21.880 --> 0:24:23.840 as homes and businesses were left in the dark. 0:24:24.119 --> 0:24:27.280 Someone who knows a lot about the grid system. 0:24:27.000 --> 0:24:29.280 Overall in the United States, but in particular the Texas 0:24:29.320 --> 0:24:31.959 State grid, is our next guest. Zach Dell is co 0:24:32.000 --> 0:24:34.320 founder and CEO based power company. He joins us from 0:24:34.400 --> 0:24:36.719 the Bloomberg News Bureau in Houston, Zach. Great to have 0:24:36.800 --> 0:24:41.680 you here with us. Let's start with Texas. So known 0:24:41.760 --> 0:24:44.359 of course for oil and drilling, it's a leader to 0:24:44.520 --> 0:24:47.320 though in renewables like wind and solar. Tell us first 0:24:47.359 --> 0:24:49.600 of all about the power mix in the Lone Star 0:24:49.640 --> 0:24:52.440 state and the economic models for selling electricity. What should 0:24:52.520 --> 0:24:55.639 kind of the investing audience understand about the state of 0:24:55.640 --> 0:24:56.720 Texas well. 0:24:56.840 --> 0:25:00.720 Texas is the energy capital of the country, the country 0:25:00.720 --> 0:25:04.760 in renewable generation. We have more wind and more so 0:25:04.960 --> 0:25:07.600 or than almost anywhere in the country, and that's because 0:25:07.640 --> 0:25:09.480 Texas is the middle of the wind corridor, it's in 0:25:09.520 --> 0:25:11.240 the middle of the sun Belt, and it's a great 0:25:11.240 --> 0:25:15.000 place to develop energy infrastructure. It's a free market, it's 0:25:15.040 --> 0:25:17.679 a deregulated energy market for the most part. Or COT 0:25:18.560 --> 0:25:21.400 is one of the largest electricity markets in the country, 0:25:21.560 --> 0:25:23.960 and so it's a great place to build energy technology. 0:25:24.119 --> 0:25:25.320 That's why we've decided. 0:25:25.040 --> 0:25:27.840 To start the company here in Texas. But it's also 0:25:28.160 --> 0:25:30.720 a part of the country that's seen incredible population growth, 0:25:30.960 --> 0:25:34.280 it's seen incredible growth in heavy industry, and that's put 0:25:34.320 --> 0:25:36.760 a lot of stress on the grid, and so we 0:25:36.800 --> 0:25:40.480 started the company to increase our capacity for energy consumption 0:25:40.560 --> 0:25:42.640 and add resources to the power grid in the form 0:25:42.720 --> 0:25:46.439 of distributed battery storage to help absorb some of that growth, 0:25:46.680 --> 0:25:50.840 absorb from that demand, and set us up for a 0:25:50.880 --> 0:25:53.880 future of energy abundance and human prosperity here in the state. 0:25:54.119 --> 0:25:56.960 Zach explain where exactly the company lives on the grid 0:25:56.960 --> 0:25:59.920 in the sense of Okay, it's not necessarily a utility, 0:26:00.040 --> 0:26:03.800 it's not necessarily an energy provider. How do you define 0:26:03.800 --> 0:26:05.359 it exactly? 0:26:05.400 --> 0:26:08.240 So we are a distributed energy technology company, So we 0:26:08.320 --> 0:26:11.840 deploy our storage assets on the grid edge on site 0:26:11.960 --> 0:26:15.680 with our customers. So we install batteries on homes today, 0:26:16.560 --> 0:26:19.080 customers sign up for base power, we go install our 0:26:19.119 --> 0:26:21.159 battery on their home. When the grid is up and running. 0:26:21.160 --> 0:26:23.000 We use that battery to support the power grid in 0:26:23.040 --> 0:26:25.240 times of high demand. When the grid goes down. The 0:26:25.240 --> 0:26:27.720 customer gets that battery to protect their home from power averages. 0:26:28.520 --> 0:26:30.159 Well and tell us about it. Like a customer that 0:26:30.240 --> 0:26:33.479 signs up sack exactly what are they getting. They're getting batteries, right, 0:26:33.480 --> 0:26:36.720 and there's installation that's involved. I'm curious about how it works. 0:26:36.800 --> 0:26:38.800 What they get. My understanding is the batteries are big. 0:26:38.880 --> 0:26:40.760 What it costs give me, give us an idea. 0:26:41.600 --> 0:26:44.320 Yes, So customers sign up and pay four ninety five 0:26:44.400 --> 0:26:47.439 upfront and sixteen dollars a month and get all the 0:26:47.480 --> 0:26:50.280 benefits of home backup protection without the high upfront cost 0:26:50.359 --> 0:26:54.080 of buying a large generator or buying a traditional home battery. 0:26:54.119 --> 0:26:57.000 So we install a battery that's twenty five kilod hours 0:26:57.000 --> 0:26:58.880 for one system, and you can you can get two 0:26:58.880 --> 0:27:01.160 systems installed which get you to fifty kilo at hours, 0:27:01.359 --> 0:27:03.720 which will protect your home for up to one to 0:27:03.760 --> 0:27:05.600 two days, depending on the size of the home and 0:27:05.680 --> 0:27:07.639 the event of a power out. So you get a 0:27:07.680 --> 0:27:10.760 really large battery for really low upfront cost and a 0:27:10.800 --> 0:27:13.119 low monthly fee, cheaper than a gym membership, cheaper than 0:27:13.119 --> 0:27:16.879 a Netflix subscription, cheaper than Amazon Prime. And when the 0:27:16.920 --> 0:27:20.760 grid's up and running, you're buying your electricity from us, 0:27:20.880 --> 0:27:22.560 We're able to save you ten to twenty percent a 0:27:22.560 --> 0:27:24.520 month on power, and when the grid goes down, you 0:27:24.520 --> 0:27:27.160 get to protect your home, keep that fridge going, keep 0:27:27.160 --> 0:27:29.760 your AC running, keep your lights on, and keep your 0:27:29.760 --> 0:27:30.359 family safe. 0:27:30.560 --> 0:27:32.600 Zach, we're talking about this in the context of Texas, 0:27:32.600 --> 0:27:34.000 of course, and a lot of focus has been on 0:27:34.000 --> 0:27:38.320 Texas's grid also California's grid another state that comes into focus. 0:27:38.320 --> 0:27:40.960 Any plans to expand to California. 0:27:41.000 --> 0:27:41.480 Absolutely. 0:27:41.800 --> 0:27:43.639 We hope to be in all fifty states over the 0:27:43.640 --> 0:27:46.280 next couple of years, and we're working to partner with 0:27:46.320 --> 0:27:49.320 some of the regulated utilities in states like California that 0:27:49.359 --> 0:27:52.040 don't have a deregulated energy market. Texas is an amazing 0:27:52.040 --> 0:27:54.440 place to start the business because the vast majority of 0:27:54.440 --> 0:27:57.840 the state, about eighty percent, is deregulated. So we are 0:27:57.880 --> 0:28:00.320 actually a retail actor provider and a battery develop heloper. 0:28:00.480 --> 0:28:02.399 So we sell power directly to the homeowner and then 0:28:02.400 --> 0:28:04.399 we own and operate the batteries on site. In a 0:28:04.440 --> 0:28:09.320 state like California, you have regulator utilities like LEDWP and 0:28:09.440 --> 0:28:13.639 PGNE that have kind of geographic monopolies over certain areas, 0:28:13.680 --> 0:28:16.560 and so we'll partner directly with those regulated utilities provide 0:28:16.560 --> 0:28:19.640 our hardware and software to them to enter those markets. 0:28:19.800 --> 0:28:21.880 And from what I understand too, Zach, that the success 0:28:21.920 --> 0:28:24.160 of the company's contingent on more and more people right 0:28:24.280 --> 0:28:26.960 signing up, Right, you need to kind of have a network. 0:28:28.400 --> 0:28:32.439 Well, not necessarily, we're able to operate our batteries at 0:28:32.480 --> 0:28:35.280 the individual level, so we don't necessarily there's not like 0:28:35.320 --> 0:28:37.920 traditional network effect benefits to more people signing up, but 0:28:37.960 --> 0:28:41.320 obviously benefit businesses benefit from scale, and we benefit from 0:28:41.320 --> 0:28:43.800 scale in the same ways. But it's not like the 0:28:43.840 --> 0:28:45.880 system doesn't work well if a couple people in the 0:28:45.880 --> 0:28:49.280 neighborhood have it. There's really no meaningful difference if you're 0:28:49.320 --> 0:28:51.040 the only one in your neighborhood or everyone in your 0:28:51.040 --> 0:28:53.520 neighborhood has based power all right. 0:28:53.360 --> 0:28:55.840 So if you're as an individual, there's no difference. But 0:28:56.720 --> 0:28:59.360 what do you get out of building that scale? 0:29:00.680 --> 0:29:03.360 Well, we benefit from scale, just like most businesses benefit 0:29:03.360 --> 0:29:05.200 from scale. So we have economies of scale on the 0:29:05.200 --> 0:29:08.719 supply chain side, on the engineering side, building out our 0:29:08.720 --> 0:29:12.280 team our resources. The larger we get, the lower the 0:29:12.280 --> 0:29:14.440 cost that we can provide to the customer. So our 0:29:14.440 --> 0:29:17.280 goals and businesses to develop a compounding cost advantage to 0:29:17.360 --> 0:29:20.200 vertical integration. So we develop our own batteries, we develop 0:29:20.200 --> 0:29:22.440 our own software, we manage the insulation, we sell power 0:29:22.440 --> 0:29:24.560 directly with the homeowner, and by doing all those things, 0:29:24.600 --> 0:29:26.880 we can drive the cost down for the customer and 0:29:26.920 --> 0:29:29.360 deliver the most affordable and most reliable power. 0:29:29.440 --> 0:29:31.560 Right Because from what I understand too you're monitoring what 0:29:31.680 --> 0:29:34.040 the prices of energy, and so when it goes down, 0:29:34.120 --> 0:29:35.520 you guys are filling up the batteries. 0:29:35.520 --> 0:29:38.200 Correct, that's right, hey, Zach. 0:29:39.160 --> 0:29:41.600 If a power company sees what you're doing right now 0:29:41.640 --> 0:29:43.520 and says, wait a second, that's a really good idea. 0:29:43.560 --> 0:29:46.880 What's to stop con ED or PGNE on California from 0:29:47.000 --> 0:29:49.080 basically replicating what you're doing, but they already have the 0:29:49.120 --> 0:29:50.280 relationship with the customer. 0:29:51.360 --> 0:29:53.640 Well, it's very hard. You have to become an expert 0:29:53.800 --> 0:29:59.120 in battery hardware engineering, power electronics, supply chain operations. You 0:29:59.160 --> 0:30:00.880 have to deploy these batter on site, you have to 0:30:00.880 --> 0:30:02.560 interface directly with the customers, you have to build a 0:30:02.600 --> 0:30:06.280 consumer brand. There's a lot of interesting and challenging distributed 0:30:06.320 --> 0:30:08.320 systems software problems that you have to solve to deploy 0:30:08.320 --> 0:30:10.880 this technology. So we're really excited to partner with those 0:30:10.960 --> 0:30:14.680 utilities and help them deploy battery technology in their service territories. 0:30:15.040 --> 0:30:17.320 As you guys know, these investor owned utilities are not 0:30:17.560 --> 0:30:19.800 incentivized to invest money in op X in R and 0:30:19.880 --> 0:30:22.400 D their capecks driven businesses. They earn a regulated way 0:30:22.400 --> 0:30:24.680 to return on their capex, and so their incentive is 0:30:24.720 --> 0:30:28.320 really to deploy capex and their service territory, and you know, 0:30:28.360 --> 0:30:31.000 they add that into their rate base and that kind 0:30:31.000 --> 0:30:33.480 of influences what they end up charging the end consumer. 0:30:33.760 --> 0:30:35.200 Our business is a little bit different. We're an R 0:30:35.200 --> 0:30:37.880 and D driven business. We develop technology and we bet 0:30:37.880 --> 0:30:39.720 that technology is going to benefit the customer and we 0:30:39.800 --> 0:30:42.760 benefit downstream of that. And so we think that we're 0:30:42.960 --> 0:30:45.200 an obvious partner or some of these regulated utilities as 0:30:45.280 --> 0:30:47.520 kind of an R and D partner where we can 0:30:47.560 --> 0:30:49.720 develop technology and then we can go deploy that technology 0:30:49.720 --> 0:30:52.280 in their service territory. They benefit, we benefit, and the 0:30:52.320 --> 0:30:53.440 homeowner benefits as well. 0:30:53.440 --> 0:30:55.600 I am also curious are you profitable or how many 0:30:55.600 --> 0:30:57.040 states do you think you have to build, you know, 0:30:57.120 --> 0:30:59.960 reach out to or expand to before you are profitable. 0:31:01.080 --> 0:31:03.720 I don't think about it as a number of states number. 0:31:03.760 --> 0:31:06.240 It's really about building the fleet and getting to scale. 0:31:06.360 --> 0:31:08.360 And so, you know, we started the company a little 0:31:08.440 --> 0:31:10.800 under two years ago. We launched a product in May. 0:31:10.840 --> 0:31:12.840 We've been scaling rapidly. We're doing on the order of 0:31:12.840 --> 0:31:15.400 twenty battery installation of the day. We'll continue to scale 0:31:15.480 --> 0:31:18.479 up at a faster and faster rate and move outside 0:31:18.480 --> 0:31:21.160 of Texas, in states like California and other states across 0:31:21.160 --> 0:31:23.560 the country, and you know, we think there's a really 0:31:23.560 --> 0:31:27.040 attractive kind of economic proposition for the business going forward. 0:31:27.080 --> 0:31:29.560 Hey, Zach, we'd be remiss. Your dad, Michael dal iconic 0:31:29.640 --> 0:31:32.040 in the tech world. This isn't the first company you've founded. 0:31:32.080 --> 0:31:35.000 You've worked at pe Giant Blackstone, also an investor at 0:31:35.000 --> 0:31:39.560 Thrive Capital. They of course founded by Josh Kushner. They've 0:31:39.640 --> 0:31:43.000 invested in your company. I am curious about growing up, 0:31:43.160 --> 0:31:45.120 you know, with your dad. How did your dad influence you? 0:31:47.120 --> 0:31:48.960 Well, I think, you know, I'm the luckiest guy in 0:31:49.000 --> 0:31:51.640 the world. I've got the most incredible CEO coaches as 0:31:51.640 --> 0:31:55.080 my dad. We're extremely close. We talk all the time. 0:31:55.680 --> 0:31:57.920 He's not an investor in the business, but he's a 0:31:58.000 --> 0:32:02.000 very close advisor and confidant and and friend. And you know, 0:32:02.040 --> 0:32:03.800 I think people always ask me, like, oh, why do 0:32:03.800 --> 0:32:05.440 you want to start a company? And I think it's 0:32:05.520 --> 0:32:07.360 kind of a silly question because I got to see 0:32:07.360 --> 0:32:09.200 my dad, you know, live his dream and continue to 0:32:09.200 --> 0:32:11.560 live his dreams. He's still a CEO of Dell. He 0:32:11.600 --> 0:32:14.400 gets to play the most interesting game at the highest level. 0:32:15.240 --> 0:32:17.040 And you know, I aspire to do that too. So 0:32:17.560 --> 0:32:19.880 he's an inspiration. He's he's a hero, he's a role model. 0:32:20.280 --> 0:32:22.360 And people like Josh and some of the folks at 0:32:22.360 --> 0:32:23.960 Blackstone that I've gotten a chance to work with in 0:32:24.000 --> 0:32:27.600 my career have have been kind of similarly inspiring to me. 0:32:27.720 --> 0:32:31.160 So I'm really excited to follow in his footsteps and 0:32:31.440 --> 0:32:35.040 you know, try to build something really important for the world. 0:32:35.320 --> 0:32:37.280 You said he's not an investor in the company, Zachy, 0:32:37.400 --> 0:32:40.120 yet we could say, yeah, are you out there planning 0:32:40.120 --> 0:32:40.920 to raise more money? 0:32:42.120 --> 0:32:44.640 We will raise more capital as the business skills. Yes, 0:32:44.720 --> 0:32:46.440 for sure. I joke with him that, you know, he's 0:32:46.440 --> 0:32:48.080 a late stage investor, so if he wants to invest, 0:32:48.120 --> 0:32:49.280 he's gonna have to pay a high price. 0:32:50.400 --> 0:32:53.800 Well done, You've learned well, as they would say, Hey, listen, 0:32:54.040 --> 0:32:55.840 stay in touch. Let us know I as you continue 0:32:55.880 --> 0:32:58.280 to expand and build out, stay in touch and love 0:32:58.320 --> 0:33:01.240 to get some updates. Sechedal Co found under and CEO 0:33:01.280 --> 0:33:03.560 based power company. Joining us from our Houston bureau. 0:33:04.520 --> 0:33:07.880 You are listening to the Bloomberg Business Week podcast. Catch 0:33:07.960 --> 0:33:11.200 us live weekday afternoons from two to five pm Eastern 0:33:11.320 --> 0:33:13.840 Listen on Apple CarPlay and the Android auto with the 0:33:13.840 --> 0:33:17.520 Bloomberg Business app or watch us live on YouTube. 0:33:18.240 --> 0:33:21.240 Taryl Investor's still focused on what's the com regarding tariffs. 0:33:21.280 --> 0:33:24.080 President Trump mentioned the possibility of tariffs of twenty five 0:33:24.120 --> 0:33:27.760 percent on autos and pharmaceuticals just yesterday. 0:33:28.120 --> 0:33:31.320 Some of the biggest companies in the world, and because 0:33:31.360 --> 0:33:34.360 of what we're doing economically and through tariffs and taxas 0:33:34.360 --> 0:33:38.360 and incentives, they want to come back into the United States. 0:33:38.440 --> 0:33:42.000 Have you decided specifically what the auto tariff rain should be. 0:33:42.200 --> 0:33:45.920 Yeah, I probably will tell you that on April second, 0:33:46.400 --> 0:33:48.600 but it'll be in the neighborhood of twenty five percent. 0:33:48.720 --> 0:33:50.760 We want to give them time to come in because, 0:33:50.800 --> 0:33:52.800 as you know, when they come into the United States 0:33:52.840 --> 0:33:55.520 and they have their plant or factory here, there is 0:33:55.520 --> 0:33:58.360 no tariffs. So we want to give them a little 0:33:58.360 --> 0:33:58.960 bit of a chance. 0:33:59.280 --> 0:34:01.400 Well, they have the press in just yesterday at mar 0:34:01.480 --> 0:34:04.200 Lago talking the latest on tariffs. We continue our talk 0:34:04.200 --> 0:34:08.440 on tariffs and macro affecting the business and financial market environment, 0:34:08.880 --> 0:34:11.040 this time with the head of Ignite. It makes software 0:34:11.080 --> 0:34:14.239 for enterprise companies to secure and manage massive amounts of data. 0:34:14.280 --> 0:34:16.560 The companies raised one hundred and forty million dollars in 0:34:16.600 --> 0:34:20.319 metric capital from Google Ventures, Kleiner Perkins, Goldman Sachs and 0:34:20.360 --> 0:34:23.760 others and accounts companies such as Red Bull, Steve Madden 0:34:24.120 --> 0:34:26.480 and Beyontech as customers. 0:34:27.000 --> 0:34:28.719 Great to have you here with us, Fanied. You know, 0:34:28.880 --> 0:34:31.239 let's let's get to it in terms of what we 0:34:31.320 --> 0:34:34.280 continue to get from President Trump and the White House 0:34:34.320 --> 0:34:37.040 regarding tariffs, and again a lot to be known in 0:34:37.120 --> 0:34:41.279 terms of the actuality of what gets imposed and for 0:34:41.360 --> 0:34:45.120 how long. How do you see it as what might 0:34:45.160 --> 0:34:47.680 be the reality of tariffs in your world. 0:34:49.120 --> 0:34:51.439 Hey, Carol Love in my world, you know, I'm talking 0:34:51.480 --> 0:34:54.440 about We are a software as a service provider. So 0:34:54.520 --> 0:34:58.200 anything that impacts IP systems, whether it's servers, networking gear, 0:34:58.400 --> 0:35:01.840 data center components, those would be the ones that I 0:35:01.880 --> 0:35:05.360 would be most interested in, not the autos or pharaceuticals, 0:35:05.440 --> 0:35:09.240 although there's always a cascading impact if there's a general inflation. 0:35:10.920 --> 0:35:14.040 Now I know the numbers on the tariff side keep 0:35:14.080 --> 0:35:17.480 ratcheting up. New announcements are coming out regularly. So a 0:35:17.520 --> 0:35:19.279 couple of tuesdays back, I think there was a ten 0:35:19.320 --> 0:35:24.360 percent tariff announced for this class of hardware. So the 0:35:24.480 --> 0:35:29.960 question is if the underlying data center equipment becomes more expensive, 0:35:29.960 --> 0:35:32.160 and keep in mind a lot of a lot of 0:35:32.200 --> 0:35:35.560 it is made in China. Will that have an impact 0:35:35.640 --> 0:35:39.480 on the ultimate end user solutions that companies like ourselves provide. 0:35:39.640 --> 0:35:45.640 I don't think so, because these costing preases can be 0:35:45.680 --> 0:35:49.600 absorbed by the providers, including companies like ourselves, with some 0:35:49.719 --> 0:35:53.120 impact to the gross margin, but it's not significant yet 0:35:53.680 --> 0:35:56.440 unless these numbers start crossing into twenty five percent or 0:35:56.480 --> 0:36:00.000 higher territory. Until then, I would say I'm pretty sang 0:36:00.080 --> 0:36:01.680 whine about it. 0:36:01.840 --> 0:36:06.560 Is the concern, though, compounded when you think about your customers. 0:36:06.560 --> 0:36:09.200 I mentioned Red Bull, Steve Madden, BEYONCEK just a few 0:36:09.200 --> 0:36:12.560 of your customers. Steve Madden a company that I would 0:36:12.600 --> 0:36:17.200 imagine makes products in China. If they're hit with bigger tariffs, 0:36:17.960 --> 0:36:19.680 then what happens to the amount that they're able to 0:36:19.719 --> 0:36:21.200 spend on services such as yours? 0:36:22.320 --> 0:36:22.440 Oh? 0:36:22.480 --> 0:36:25.719 Absolutely, I think you actually use the right word compounding, 0:36:25.760 --> 0:36:31.560 because ultimately any cost increases for our own customers. Steve 0:36:31.560 --> 0:36:34.200 Madden is a great example. I mean, the fact remains 0:36:34.239 --> 0:36:37.239 that despite all the effort to move manufacturing out of 0:36:37.320 --> 0:36:40.719 China to countries like Vietnam, to Malaysia and even to 0:36:40.760 --> 0:36:44.080 some in India. China is still the factory of the world. 0:36:44.760 --> 0:36:48.640 So it's absolutely normal to assume that if they are 0:36:48.680 --> 0:36:52.560 going to experience cost increases, they being the companies that 0:36:52.600 --> 0:36:55.919 you mentioned, Steve Madden or whoever else, they will pass 0:36:55.920 --> 0:36:58.160 it down to the customers. If they can't, it eats 0:36:58.200 --> 0:37:01.279 up in the gross margin. If they don't want to 0:37:01.320 --> 0:37:04.160 pass the cost down, then they'll squeez supplies like ourselves. 0:37:04.239 --> 0:37:07.320 So there is absolutely a trickle down or rather compounding effect, 0:37:07.320 --> 0:37:08.440 as you eloquently put it. 0:37:09.200 --> 0:37:11.279 We are talking with finiche and co founder and CEO 0:37:11.320 --> 0:37:15.319 of Ignite. He's joining us from Mountain View, California. What 0:37:15.400 --> 0:37:18.120 about global supply chains? Do you think that they will 0:37:18.120 --> 0:37:22.359 be potentially changed forever? Again, devil in the details when 0:37:22.360 --> 0:37:25.600 it comes to the particulars around tariffs, what they are on, 0:37:26.000 --> 0:37:27.920 how large they are, and how long they last. But 0:37:28.040 --> 0:37:31.319 having said that, I do wonder about the psyche that's 0:37:31.400 --> 0:37:34.600 changing within the business environment, thinking we need to get 0:37:34.640 --> 0:37:37.680 out of this mess. Who knows, whether it's this administration 0:37:37.840 --> 0:37:39.960 or what's to come, that maybe we need to have 0:37:40.000 --> 0:37:42.880 our global supply chains or our supply chain in the 0:37:42.920 --> 0:37:45.800 same market that we're selling and is that even possible. 0:37:46.600 --> 0:37:48.840 Carol, That's a very interesting thing. One is the aspiration 0:37:48.920 --> 0:37:51.719 and there is the ground reality. The fact is, for 0:37:51.760 --> 0:37:54.799 decades and decades we have been relying no matter what 0:37:54.800 --> 0:37:57.960 the industry is, whether it's furniture or pharmaceutical or bulgrugs, 0:37:58.400 --> 0:38:00.560 China is, as I said, the factory of the world, 0:38:01.200 --> 0:38:04.000 and to try to shift out of China will take 0:38:04.560 --> 0:38:08.640 a lot longer than what we might assume. Now, there's 0:38:08.680 --> 0:38:11.120 certain things which are fairly fungible that you can switch 0:38:11.120 --> 0:38:14.080 out quite quickly, but the entire supply chain, all the 0:38:14.120 --> 0:38:17.600 way from component suppliers if I'm talking about manufacturing to 0:38:17.680 --> 0:38:21.720 subassembly makers to the final product makers, they're all in China, 0:38:22.440 --> 0:38:25.359 and you can take piece meals of that out over time. 0:38:25.400 --> 0:38:28.840 But we are looking at a multi decade effort across 0:38:28.840 --> 0:38:31.439 the board, across all industries, if I were to generalize. 0:38:31.800 --> 0:38:34.160 So we'll have to live with the fact that our 0:38:34.239 --> 0:38:39.360 dependence in China is not getting diluted or reduced in 0:38:39.440 --> 0:38:41.920 the foreseable future. And when I say forcable future, I'm 0:38:41.920 --> 0:38:43.799 talking about at least for the next five years. 0:38:44.960 --> 0:38:49.719 So, given given your experience running this company, the other 0:38:49.800 --> 0:38:54.440 experience that you've had in Silicon Valley and understanding supply 0:38:54.600 --> 0:38:58.520 chains of hardware. Do we have as a country the 0:38:58.640 --> 0:39:03.040 United States, what it takes to to compel companies to 0:39:03.160 --> 0:39:05.840 build these products in the United States? Do we have 0:39:05.920 --> 0:39:08.000 that technology? Do we have that ability? 0:39:09.680 --> 0:39:11.799 You know, you ask a very difficult question because it 0:39:11.840 --> 0:39:13.840 depends on what are you referring to. So, for instance, 0:39:13.880 --> 0:39:16.560 are we trying to replicate a TSMC here, and you know, 0:39:16.560 --> 0:39:21.200 all the efforts underway. In fact, there's a lot more noise, 0:39:21.239 --> 0:39:24.400 especially around with the news of Intel yesterday, with Broadcom 0:39:24.440 --> 0:39:28.000 TSMC looking at them. But the honest answer is the 0:39:28.040 --> 0:39:30.920 intellectual capital is still ours. We are the ones who 0:39:31.520 --> 0:39:33.000 owned the R and D. We are the ones who 0:39:33.080 --> 0:39:36.200 owned the design. Now, if you are a Cisco or 0:39:36.239 --> 0:39:39.600 an Arista, you are getting the manufacturing done by your 0:39:39.600 --> 0:39:46.959 contract manufacturers like JABL Filextronix, Selectron. Bringing those manufacturing capabilities 0:39:47.000 --> 0:39:51.439 in house is non trivial. But given it's our own 0:39:51.760 --> 0:39:56.080 intellectual capital, manufacturing prowess is still within our hands. It's 0:39:56.120 --> 0:39:59.680 the investment and the will and the most important thing 0:39:59.680 --> 0:40:02.280 that people don't talk about finding the talent or grooming 0:40:02.360 --> 0:40:04.680 the talent with vocational skills is going to be critical, 0:40:05.000 --> 0:40:07.279 but it can be done. But I would say you're 0:40:07.320 --> 0:40:10.120 talking about a decade or so where art depends on 0:40:10.239 --> 0:40:12.759 China becomes less and less. It won't be any time 0:40:12.760 --> 0:40:13.320 in the future. 0:40:14.360 --> 0:40:17.080 Hey, you know, while we have you Vanit, you guys 0:40:17.320 --> 0:40:21.600 are all about data. You have been invested, You've received 0:40:21.680 --> 0:40:25.719 venture capital from Google Ventures, Kleana Perkins, Goldman Sachs, kind 0:40:25.719 --> 0:40:28.440 of a who's who when it comes to tech investing, 0:40:28.480 --> 0:40:32.799 certainly impressive investors. The AI craze that we are in 0:40:32.920 --> 0:40:38.640 year two in counting, Chatchipt, deep Seek. You know, everyone's 0:40:38.640 --> 0:40:41.080 still talking about AI, but it is also kind of 0:40:41.080 --> 0:40:45.720 interesting how deep seek has maybe disrupted the conversation around AI. 0:40:45.840 --> 0:40:47.920 If you will tell us about the. 0:40:47.880 --> 0:40:51.640 Demands for your services and what insight you have in 0:40:51.680 --> 0:40:56.680 this kind of build out to ll MS and AI, 0:40:56.840 --> 0:40:59.000 this next way that's been you know, as I said 0:40:59.000 --> 0:41:00.279 two years in counting. 0:41:01.480 --> 0:41:04.360 My first statement would be is a little radical. I 0:41:04.400 --> 0:41:08.480 would promply say that the hype cycle on AI is 0:41:08.520 --> 0:41:11.439 the highest of any tech trend that I've ever seen. 0:41:11.480 --> 0:41:13.320 And just to remind you, I've been in the valley 0:41:13.360 --> 0:41:14.640 for thirty two years. 0:41:15.040 --> 0:41:16.160 I've seen fads. 0:41:15.880 --> 0:41:19.319 Come and go crypto web three. Oh you name it right, 0:41:19.880 --> 0:41:22.560 but right now the crescendo in the news, and in fact, 0:41:22.600 --> 0:41:25.240 the joke is, you know, we get these daily newsletters 0:41:25.280 --> 0:41:28.239 about investments. Today I was looking at one and I 0:41:28.280 --> 0:41:33.080 saw eleven investments or fundraises announced, sorry, eleven fourteen. Each 0:41:33.120 --> 0:41:36.239 of them led AI driven, this, AI driven that, AI 0:41:36.320 --> 0:41:38.719 driven something. So you clearly know that we are the 0:41:38.719 --> 0:41:41.120 peak of the hype cycle. But if you leave aside 0:41:41.480 --> 0:41:45.760 the hiphe aspect of it, the reality is customers. In fact, 0:41:46.160 --> 0:41:47.879 as I speak, right next to me is a big 0:41:47.880 --> 0:41:50.799 conference room. We have one of our largest customers. There's 0:41:50.800 --> 0:41:53.600 CIO sitting with fourteen members of my team, and this 0:41:53.680 --> 0:41:56.279 is one of the largest advertising companies in the world. 0:41:56.360 --> 0:41:59.120 I can't name them. And the whole conversation is about 0:41:59.160 --> 0:42:01.080 AI and of course all the things we are doing 0:42:01.120 --> 0:42:04.520 along with other providers, they're leveraging. So the challenge is 0:42:04.800 --> 0:42:07.520 to be very simple. There is a huge value to 0:42:07.520 --> 0:42:10.680 be delivered with a slew of these generative AI capabilities. 0:42:10.760 --> 0:42:13.439 Open Eyes just one of the providers. But the big 0:42:13.480 --> 0:42:16.720 problem is the value expectation that your customers have today 0:42:17.560 --> 0:42:20.640 versus the value delivery i e. The capabilities we are providing. 0:42:20.920 --> 0:42:24.960 There's a big gap, and therefore people are wanting that 0:42:25.040 --> 0:42:27.959 gap to diminish before it becomes commonplace. But I still 0:42:28.000 --> 0:42:31.240 maintain all the AI capabilities that we are talking about 0:42:31.280 --> 0:42:33.480 that are being invented as we speak, or will be 0:42:33.560 --> 0:42:35.960 rolled out in the next two years. Take my word 0:42:36.000 --> 0:42:38.640 for it, they'll become commoditized. People would expect that to 0:42:38.680 --> 0:42:42.640 be included in your product. Over time. What differentiates you 0:42:42.800 --> 0:42:44.560 or the premium they're willing to pay, will be a 0:42:44.640 --> 0:42:47.640 much higher value stack of services. But it's a journey 0:42:47.840 --> 0:42:50.279 and we are on that. So the problem is real, 0:42:50.560 --> 0:42:53.279 the solutions are real, but the hype cycle is absolutely 0:42:53.320 --> 0:42:55.360 at the zenith, more than anything I've seen before. 0:42:55.520 --> 0:42:58.279 It sounds like, though, this time is different words I 0:42:58.280 --> 0:43:02.239 should never say, so trying to get you to say them. Yes, 0:43:02.320 --> 0:43:04.640 it's time to learn it than the dot com bubble. 0:43:05.640 --> 0:43:08.359 Yeah, I would not say that. You know you've heard 0:43:08.400 --> 0:43:13.080 that phrase before. This time is different. No, it's just 0:43:13.160 --> 0:43:16.120 like you know, you hear about companies being formed in 0:43:16.160 --> 0:43:18.680 the last week or so with illustrious names. They don't 0:43:18.719 --> 0:43:21.360 have a business model defined yet, but people are planking 0:43:22.040 --> 0:43:24.200 billions of dollars in their fundraise just because of the 0:43:24.239 --> 0:43:26.919 pedigree of some of these individuals, and not to take 0:43:26.960 --> 0:43:30.800 anything away from them, this is a classical hype cycle 0:43:30.960 --> 0:43:35.160 where anything ai especially when you're talking about llms, if 0:43:35.200 --> 0:43:38.799 you're talking about big data centers. The amount of money 0:43:38.840 --> 0:43:42.160 being poured into this is crazy. Now, will it have 0:43:42.239 --> 0:43:44.640 its value, of course it will, but it will not 0:43:44.719 --> 0:43:47.879 be commensurate with the expectations that are being created right now. 0:43:49.520 --> 0:43:54.200 Wait, so, okay, is it just because it's not there 0:43:54.360 --> 0:43:57.520 yet and that the hype will become a reality in 0:43:57.800 --> 0:43:59.399 maybe two years or. 0:43:59.320 --> 0:44:02.480 Is it that the high just hype and you are 0:44:02.600 --> 0:44:03.600 the two factors. 0:44:03.880 --> 0:44:07.160 Yeah, so it's a very good question. I still maintain 0:44:07.239 --> 0:44:12.160 that the value that these technologies will provide are absolutely insane, 0:44:12.920 --> 0:44:14.920 even for the things our own engineers build. When I 0:44:14.920 --> 0:44:18.279 get to play with them, I'm like, holy whatever, this 0:44:18.520 --> 0:44:21.280 is great. Sorry for that. 0:44:21.280 --> 0:44:21.480 That's it. 0:44:21.600 --> 0:44:24.920 But my belief is that a lot of these technologies 0:44:25.000 --> 0:44:29.040 will become commonplace. They'll become commoditized, So expecting people to 0:44:29.080 --> 0:44:32.719 pay premium prices is going to be a chimera. People 0:44:32.760 --> 0:44:34.920 will say, hey, I get it from this vendor and 0:44:34.920 --> 0:44:36.879 that vendor, so why are you charging me extra? Four 0:44:36.920 --> 0:44:38.879 dollars six dollars eight dollars by use it per month. 0:44:39.320 --> 0:44:43.880 That will go away. But also the expectation that customers 0:44:43.920 --> 0:44:47.120 are having about AI delivering and being a panacea for 0:44:47.280 --> 0:44:50.160 all the problems they're dealing with without human interaction or 0:44:50.200 --> 0:44:53.359 the classical word is AGI. We are years and years 0:44:53.360 --> 0:44:55.800 away from that. So that is where the hype cycle 0:44:56.120 --> 0:44:58.440 and the gap between what we deliver is very high. 0:44:58.480 --> 0:45:02.839 Ist what I'm alluding to. But I think this technology 0:45:03.080 --> 0:45:05.160 is here to stay. I mean, Web three oh has 0:45:05.200 --> 0:45:07.960 its renaissance. You can see the cryptos back again with 0:45:08.000 --> 0:45:10.960 the vengeance. So I'm saying that AI will be there 0:45:11.080 --> 0:45:15.840 generated AI, but the value hype versus the value delivery, 0:45:15.920 --> 0:45:20.319 that gap will diminish. And also the price expectation we 0:45:20.400 --> 0:45:22.640 have as vendors that you'll pay me this much. We'll 0:45:22.640 --> 0:45:25.520 have to get grounded into reality that people will pay 0:45:25.880 --> 0:45:28.400 but not as what we're expecting. So all the investments 0:45:28.440 --> 0:45:31.080 we are making right now in order to get the return, 0:45:31.440 --> 0:45:34.040 there'll be some let's say, realignment. 0:45:34.560 --> 0:45:39.879 What makes you say that we're so far from AGI. 0:45:40.640 --> 0:45:48.399 You know, expecting very simply stated, having technology today which 0:45:48.440 --> 0:45:52.360 can reduce the human interaction for low level task in 0:45:52.440 --> 0:45:56.759 accounting or generating memos or creating a media brief or 0:45:56.760 --> 0:46:01.040 even an advertisement that's there, but having it to the 0:46:01.080 --> 0:46:04.480 point where no human curation is needed or human interaction 0:46:04.560 --> 0:46:07.759 is needed, and have the faith and belief between you 0:46:07.840 --> 0:46:10.840 as a provider to say I can just let the 0:46:10.920 --> 0:46:15.920 machine or the GENAI capability deliver the end product that 0:46:16.080 --> 0:46:18.120 is not going to be there. It's not there today, 0:46:18.200 --> 0:46:20.360 it won't be there for a long time. So lights 0:46:20.400 --> 0:46:23.680 out automation is possible in certain industries, but for the 0:46:23.760 --> 0:46:26.560 kind of things I'm talking about, where can you invent 0:46:27.320 --> 0:46:32.200 or have a protein marker for some disease, run through 0:46:32.320 --> 0:46:34.919 a complete AI related pipeline and not have a human 0:46:34.960 --> 0:46:38.160 intervened impossible. Of course, there'll be clinical trials for that. 0:46:38.480 --> 0:46:41.120 But even in our world of software, I don't think 0:46:41.120 --> 0:46:43.000 our software is at a point today or two years 0:46:43.040 --> 0:46:45.200 from now where somebody could say, let's use the soft 0:46:45.320 --> 0:46:48.280 software and let it solve the problem the complete workflow 0:46:48.480 --> 0:46:51.000 with no human looking into it. So that's my reference 0:46:51.000 --> 0:46:51.600 about AGI. 0:46:51.680 --> 0:46:54.080 To be honest, Hey, listen, I really appreciate this, We 0:46:54.160 --> 0:46:54.960 really appreciate this. 0:46:55.040 --> 0:46:57.640 I'm getting your perspective. And one last question, then. 0:46:57.520 --> 0:47:01.919 So if everything may take a few years to work 0:47:01.960 --> 0:47:05.080 out in terms of the investments that have gone into 0:47:05.640 --> 0:47:10.120 an Nvidia and others. Is it a case that that 0:47:10.200 --> 0:47:12.640 may not make sense or that will make sense because 0:47:12.680 --> 0:47:15.400 that's part of the infrastructure build that will still be 0:47:15.480 --> 0:47:18.280 there in years to come. But whether it's an open 0:47:18.320 --> 0:47:21.799 AI or someone else who leads in this what you 0:47:21.840 --> 0:47:25.960 say might be a commoditized business going forward, that's TBD 0:47:26.200 --> 0:47:27.040 to be determined. 0:47:28.320 --> 0:47:29.920 Yeah, you know, this is a little bit about my 0:47:29.960 --> 0:47:32.480 pay grade because you're bringing into the fix and shovel 0:47:32.520 --> 0:47:35.520 business of Nvidia versus you know, the gold yeah from 0:47:35.560 --> 0:47:39.840 the other guy. The relevance of Nvidia, I don't see diminishing, 0:47:39.880 --> 0:47:42.080 except that they will be more competitors. It's a nature 0:47:42.120 --> 0:47:44.040 of the beast, right, they cannot have this market all 0:47:44.080 --> 0:47:48.040 to themselves. But also the providers, whether it's you say, 0:47:48.040 --> 0:47:51.080 open AI or Anthropic or Mistral or so many of 0:47:51.200 --> 0:47:55.640 their Google Gemini, they will of course keep up leveling 0:47:55.719 --> 0:47:59.319 the value delivery of what they're providing or the value 0:47:59.360 --> 0:48:02.440 chain of what they're doing livering. But a lot of 0:48:02.560 --> 0:48:06.920 technology that they are investing in today compared to what 0:48:06.960 --> 0:48:09.320 the other party is developing, they'll become almost similar and 0:48:09.320 --> 0:48:13.160 therefore commoditized. So the arms raised to be the best 0:48:13.160 --> 0:48:17.080 of providing the best LLM. That's going to be very expensive, 0:48:17.560 --> 0:48:20.800 and at some point there'll be some I keep scrambling 0:48:20.800 --> 0:48:23.360 for the right word, there'll be some realignment or readjustment 0:48:23.400 --> 0:48:25.719 on expectations, even from the investor perspective. 0:48:26.719 --> 0:48:29.480 Hey, Carol said it was the last question. But I 0:48:29.560 --> 0:48:31.040 can't come on our air and I can't ask you 0:48:31.040 --> 0:48:32.720 this question. When's the IPO happening? 0:48:33.880 --> 0:48:39.480 I can go there, I can't, Well, you could. One 0:48:39.480 --> 0:48:42.160 thing I can say is I've done this company very 0:48:42.160 --> 0:48:45.279 differently coming from the valley. So you mentioned I've raised 0:48:45.280 --> 0:48:47.440 one hundred and forty two million, but also I would 0:48:47.480 --> 0:48:50.600 like to add the last round came in twenty eighteen. 0:48:50.920 --> 0:48:55.319 Any raised, Yeah, and we don't plan to raise any 0:48:56.000 --> 0:48:58.440 private financing in that way because we have been cash 0:48:58.480 --> 0:49:01.640 flow positive with improving EBIT margins. But at the same time, 0:49:02.360 --> 0:49:05.080 I take a lot of pride in saying that I've 0:49:05.120 --> 0:49:08.600 never built a company which is insanely high growth with 0:49:08.719 --> 0:49:11.920 insanely high losses. The very high losses, it's predictable, durable 0:49:11.960 --> 0:49:16.640 growth with improving cash flow mechanics, improving even the margin, 0:49:16.719 --> 0:49:20.640 so more sustainable and hopefully the markets will reward us 0:49:21.040 --> 0:49:23.919 in whatever the outcome is, IPO being one of them. 0:49:24.239 --> 0:49:28.200 Well, we certainly appreciate your time and the expertise and 0:49:28.640 --> 0:49:31.279 kind of industry knowledge that comes with thirty years in 0:49:31.320 --> 0:49:32.040 Silicon Valley. 0:49:32.440 --> 0:49:33.160 Thank you so much. 0:49:33.239 --> 0:49:36.640 Vanite Jane, co founder and CEO of Ignite, joining us 0:49:36.680 --> 0:49:38.000 there from Mountain View, California. 0:49:38.040 --> 0:49:38.640 In the thick of it. 0:49:38.960 --> 0:49:40.560 Hey, we're in the thick of it when it comes 0:49:40.560 --> 0:49:42.439 to the trade. Today, we got about twenty minutes until 0:49:42.480 --> 0:49:45.040 the closed. The Nasdaq flat right now, so we're off 0:49:45.040 --> 0:49:47.680 our best sessions, best levels of the day during this session. 0:49:47.719 --> 0:49:50.239 The S and P five hundred of about two tenths 0:49:50.239 --> 0:49:52.880 of one percent as we speak, while the Dow is 0:49:52.960 --> 0:49:54.680 up one tenth of one percent. 0:49:54.840 --> 0:49:56.680 All right, I am curious to see what our next 0:49:56.680 --> 0:49:58.440 guest has to say, especially when it comes to the 0:49:58.440 --> 0:50:01.000 semi space. Take a name like Tell was up sixteen 0:50:01.000 --> 0:50:04.600 percent yesterday, down six percent today. It's an area he 0:50:04.640 --> 0:50:07.040 certainly has been looking at. JJ Kinahan is back with 0:50:07.080 --> 0:50:10.640 the CEO of Tasty Trade at IG, joining us from Chicago. 0:50:11.120 --> 0:50:11.400 JJ. 0:50:11.520 --> 0:50:14.479 Good to have you here, well, great to have you here. 0:50:14.760 --> 0:50:18.960 Let's start big broad and macro in terms of the environment. 0:50:19.760 --> 0:50:20.879 How do you see it right now? 0:50:22.360 --> 0:50:24.600 Well, you know, obviously when you're at all time highs, 0:50:24.680 --> 0:50:27.799 it's something that it continues to be a market that 0:50:27.840 --> 0:50:30.200 people look for bad news and you can get it 0:50:30.280 --> 0:50:33.240 pointed out all day long. Yet the market just seems 0:50:33.280 --> 0:50:37.040 to be resilient and continues to just go higher and hire. 0:50:37.440 --> 0:50:40.400 I thought it was a real maybe breath of fresh 0:50:40.400 --> 0:50:44.360 air and encouraging for retail investors today when in the 0:50:44.400 --> 0:50:46.560 FED notes they said, well, we're really not sure what's 0:50:46.600 --> 0:50:48.920 going to happen with the tariffs and what effect that 0:50:48.960 --> 0:50:51.600 will have on the economy, And I think that it's like, 0:50:51.719 --> 0:50:55.200 while you're just expressing what really everybody else seems to 0:50:55.200 --> 0:50:57.680 be saying. But in the meantime, you know, I look 0:50:57.719 --> 0:51:00.840 at our clients, they continue to just buy the market. 0:51:00.920 --> 0:51:04.240 It's interesting. One of the stocks that they've come back 0:51:04.280 --> 0:51:07.319 to after sort of maybe not being a bit out 0:51:07.360 --> 0:51:10.000 of favor, if you will, until the last couple of 0:51:10.000 --> 0:51:12.440 weeks where we've seen you know, almost eighty percent of 0:51:12.440 --> 0:51:15.840 the activity be bullish is actually Apple not quite a semiconductor, 0:51:16.200 --> 0:51:19.760 but of course one that's been a lot of people's portfolios, 0:51:20.160 --> 0:51:22.400 not maybe as much of a traded stock as it 0:51:22.440 --> 0:51:25.399 is just an investing stock. And it's really interesting how 0:51:25.440 --> 0:51:29.360 the buying there has picked up pretty significantly over the 0:51:29.440 --> 0:51:31.919 last few weeks, when some of the other Magnificent seven 0:51:31.960 --> 0:51:33.040 haven't been quite as interesting. 0:51:33.200 --> 0:51:36.840 Okay, we're talking in Nvidia, we talked meta platforms. You 0:51:36.920 --> 0:51:41.520 mentioned Apple JJ. Caterpillar is an interesting name on your list. 0:51:41.600 --> 0:51:43.520 Your clients are bullish on cat. What's going on? 0:51:43.800 --> 0:51:47.040 Yeah, that's really not a name we talk about very often, 0:51:47.160 --> 0:51:48.880 is it. So you know, a stock that's had a 0:51:48.880 --> 0:51:52.160 little bit of trouble and kind of turning things back 0:51:52.200 --> 0:51:56.040 around the other way. And so with that one again, 0:51:56.160 --> 0:52:01.200 maybe a bit also of a vote that we're going 0:52:01.280 --> 0:52:05.520 to continue with a lot of these infrastructure plays with 0:52:04.440 --> 0:52:08.879 the new president, et cetera. So all that I think 0:52:08.960 --> 0:52:11.040 is adding up to this. Again, when I see a 0:52:11.120 --> 0:52:15.320 name like Caterpillar on our list of most bullish stocks, 0:52:15.520 --> 0:52:18.319 the one thing that does make me happy about that 0:52:18.840 --> 0:52:22.319 is it shows that we're continuing to spread out from 0:52:22.600 --> 0:52:24.680 just the mag seven. If you think about a year 0:52:24.680 --> 0:52:26.640 ago when we were talking about these rallies, we were 0:52:26.680 --> 0:52:29.880 talking about primarily the mag seven stocks. Now you're talking 0:52:29.920 --> 0:52:33.200 about a lot more stocks being involved, and let's face it, 0:52:33.239 --> 0:52:37.840 the average retail trader, not necessarily Caterpillar making the list 0:52:37.960 --> 0:52:41.120 of good volumes and people having a high interest in it. 0:52:42.239 --> 0:52:46.560 All right, so names another name you don't like Starbucks, 0:52:46.600 --> 0:52:48.520 which we know who has a new CEO. 0:52:48.840 --> 0:52:50.200 I don't know if he doesn't like them. 0:52:52.000 --> 0:52:53.800 Do you buy coffee from Starbucks? 0:52:53.840 --> 0:52:56.760 I'm drinking, I have a cup here as we speak. 0:52:56.840 --> 0:52:58.160 Okay, all right, just check it out. 0:52:58.200 --> 0:53:00.440 Wait, so do as I say, not as I do? 0:53:00.640 --> 0:53:01.439 Is that kind of a thing. 0:53:01.840 --> 0:53:05.920 So Starbucks, we know, high profile CEO came from Chipotle, 0:53:06.400 --> 0:53:09.000 Brian Nicol. We've talked to him a lot, was really 0:53:09.040 --> 0:53:12.439 instrumental in terms of driving growth, getting them focused on 0:53:13.000 --> 0:53:17.920 the digital side of the business at Chipotle, now at Starbucks, 0:53:17.960 --> 0:53:20.799 and he's making some changes. But you don't, you're not 0:53:20.920 --> 0:53:21.600 so keen on it. 0:53:21.640 --> 0:53:22.040 How come? 0:53:22.800 --> 0:53:24.880 Well, I think we've seen an incredible run up in 0:53:24.880 --> 0:53:27.239 the stock since he's been named CEO. Let's face it, 0:53:27.280 --> 0:53:30.880 and you know, give credit where it's due. The anticipation 0:53:31.000 --> 0:53:33.000 of what he was going to do, followed by you 0:53:33.080 --> 0:53:36.560 know who doesn't love the ac DC thunderstruck as their 0:53:36.640 --> 0:53:41.720 commercials and the brand new commercial. It's very catchy and narrowing. 0:53:41.760 --> 0:53:45.319 The menu fantastic. But I think that there was this, 0:53:45.880 --> 0:53:49.239 you know, sense as he took over people immediately. It 0:53:49.280 --> 0:53:52.480 took a few weeks, but once some of the employee 0:53:52.520 --> 0:53:56.040 issues that settled down, the stock pretty quickly followed suit. 0:53:56.080 --> 0:53:59.040 In anticipation of this. Now it's a matter of okay, 0:53:59.239 --> 0:54:02.920 will the execution all the way down the line follow 0:54:03.280 --> 0:54:06.279 what's going to happen with the announcements and with them 0:54:06.280 --> 0:54:10.719 trying to do this obviously incredibly successful ceo where he's 0:54:10.760 --> 0:54:13.480 been in the past, can he take that magic again? 0:54:13.800 --> 0:54:17.239 We saw them talking about opening five hundred news stores yesterday, 0:54:17.600 --> 0:54:20.520 so again there is a lot perhaps to like there. 0:54:20.800 --> 0:54:24.279 But I also think that when you have this kind 0:54:24.280 --> 0:54:27.160 of run, you're at an all time high in the market, 0:54:27.360 --> 0:54:29.960 what people start to look for is, okay, those that 0:54:30.000 --> 0:54:32.960 have run, maybe time to let lighten up, or even 0:54:33.000 --> 0:54:35.480 to take the other side of and look for some 0:54:35.520 --> 0:54:37.799 of the more beaten down stocks or stocks that have 0:54:37.880 --> 0:54:41.719 had trouble participating in this upward move. And again, Starbucks 0:54:41.760 --> 0:54:43.520 has had a pretty good run for the last four 0:54:43.560 --> 0:54:44.160 or five months. 0:54:44.239 --> 0:54:46.840 Hey JJ, a member of the Bloomberg Business week audience 0:54:46.840 --> 0:54:49.759 getting in touch. He wants to know about a view 0:54:49.920 --> 0:54:54.359 on equities moving forward. Given we're likely going to see 0:54:54.440 --> 0:54:58.200 government layoffs, Inflation, as the Federal Reserve has said, is 0:54:58.400 --> 0:55:01.400 sticky consumer that is weakening. 0:55:01.680 --> 0:55:05.239 What do you see. I still see US equities as 0:55:05.280 --> 0:55:08.719 the best game in the world, so to speak. So 0:55:08.920 --> 0:55:10.960 people are going to have to put their money somewhere 0:55:11.000 --> 0:55:13.520 and they're always going to be looking for return. So, 0:55:13.719 --> 0:55:17.960 you know, I've just returned from some overseas trips and 0:55:18.000 --> 0:55:22.080 it really is amazing to me how everyone is looking 0:55:22.120 --> 0:55:25.080 to get their money into the US to be part 0:55:25.160 --> 0:55:28.680 of the US markets. Right now, we see inflation all 0:55:28.719 --> 0:55:32.600 of you know, in different spots of the world, creeping up, 0:55:32.640 --> 0:55:35.120 if you will. I think the part that is going 0:55:35.160 --> 0:55:37.239 to be the most interesting is going to be the 0:55:37.400 --> 0:55:39.600 terrific side of this and what's going to be the 0:55:39.640 --> 0:55:41.920 longer term effect in terms of costs. You know, you 0:55:42.000 --> 0:55:44.520 had some of the housing stocks released this morning and 0:55:44.520 --> 0:55:47.640 some of their fears around what this could mean for 0:55:48.440 --> 0:55:51.520 the cost of housing, particularly brand new housing, and how 0:55:51.560 --> 0:55:54.799 so many of them had to give away already incentives 0:55:54.840 --> 0:55:57.120 to get the houses sold. What does that mean at 0:55:57.120 --> 0:56:00.160 the price of lumber and steal, and even things like 0:56:00.239 --> 0:56:02.839 insulation goes up in the future, that's going to make 0:56:02.880 --> 0:56:06.319 it much more difficult. But with all that said, when 0:56:06.320 --> 0:56:08.600 I look around the rest of the world and the competition, 0:56:09.080 --> 0:56:11.440 there isn't much else that is competing with that on 0:56:11.560 --> 0:56:14.319 a worldwide scale, So it still seems to be the 0:56:14.360 --> 0:56:17.479 best best bet in town, if you will. 0:56:17.600 --> 0:56:17.799 Well. 0:56:17.800 --> 0:56:21.319 But just to the point that our listener sent in 0:56:21.760 --> 0:56:24.120 his question, I mean, if you look at the MSCI 0:56:24.400 --> 0:56:27.759 World x US Index, so take out the United States, 0:56:27.920 --> 0:56:31.040 it's up more than seven percent, seven point four. If 0:56:31.080 --> 0:56:34.279 I look at MSCI World INDECKS, which includes the US, 0:56:34.360 --> 0:56:36.640 it's up about five percent s and p's up about 0:56:36.640 --> 0:56:39.360 four percent. So we know, we've all been talking about 0:56:39.360 --> 0:56:41.440 the start to the year where markets outside of the 0:56:41.520 --> 0:56:44.319 United States are outperforming, and maybe it's a case of 0:56:44.360 --> 0:56:46.799 just they've been so beaten down, so undervalued. But you 0:56:46.840 --> 0:56:50.440 don't think that trade continues, that outperformance continues. 0:56:51.400 --> 0:56:53.720 I think it's the more we start to see tariffs 0:56:53.800 --> 0:56:56.479 come up, the more we start to see inflationary pressures rise, 0:56:56.760 --> 0:56:58.520 the harder it gets on the rest of the world. 0:56:58.520 --> 0:57:03.280 In my opinion, because of the you know, to your point, 0:57:03.560 --> 0:57:05.960 some of This, I think is people who are like, Okay, 0:57:06.200 --> 0:57:08.840 where can I go next? Just as I talked about 0:57:09.320 --> 0:57:13.200 the US market expanding out from the Magnificent seven. To me, 0:57:13.320 --> 0:57:17.520 the natural derivative of that is to say, what other 0:57:17.600 --> 0:57:20.080 markets can I go to that have been beaten up? 0:57:20.520 --> 0:57:24.520 But in my experience what happens is those markets that 0:57:24.680 --> 0:57:28.120 tend to go up very quickly, especially if you believe 0:57:28.200 --> 0:57:31.480 that you know, the rally may be pausing for a 0:57:31.520 --> 0:57:34.280 while or correcting for a while, they tend to go 0:57:34.360 --> 0:57:37.120 the other way very quickly. Also in our perform on 0:57:37.160 --> 0:57:39.840 the downside as well as the upside. That's not to 0:57:39.880 --> 0:57:42.360 say that you can't get better returned, but I do 0:57:42.400 --> 0:57:44.960 think you have to take into the account. What's the 0:57:45.080 --> 0:57:48.760 volatility you're going to take in by doing that, in 0:57:48.800 --> 0:57:51.360 my opinion's much higher almost everywhere else in the world 0:57:51.400 --> 0:57:52.520 than it is in the US right now. 0:57:52.560 --> 0:57:55.760 What's the biggest risk that the market faces right now? 0:57:55.760 --> 0:57:57.479 I mean, we're I don't want to say we price 0:57:57.520 --> 0:57:59.440 for perfection, because who knows if that's the case, but 0:57:59.520 --> 0:58:02.800 we are hovering around records. What's what what could derail 0:58:02.840 --> 0:58:03.400 this rally? 0:58:04.240 --> 0:58:04.479 Well? 0:58:04.520 --> 0:58:08.720 I think the you know, the fear of the fear 0:58:08.760 --> 0:58:11.920 of the unknown is always out there. Of course, it 0:58:12.040 --> 0:58:17.000 really does seem amazing that we've been able to quell 0:58:17.160 --> 0:58:22.280 some of the uh you know, countries having issues, which 0:58:22.320 --> 0:58:25.640 makes me think that inflation is going to be the 0:58:25.800 --> 0:58:28.720 number one thing that we're going to have a problem 0:58:28.760 --> 0:58:32.240 with because as you also mentioned, yes, there does appear 0:58:32.280 --> 0:58:35.920 to be not only government uh employment maybe in question. 0:58:36.200 --> 0:58:38.560 But let's face it, I think that what you're starting 0:58:38.560 --> 0:58:42.640 to see from starting with technology companies is do we 0:58:42.720 --> 0:58:45.560 need as many people as we used to, particularly as 0:58:45.640 --> 0:58:48.920 AI comes into use. And I'm not ripping AI is 0:58:49.040 --> 0:58:53.280 taking away jobs, but every time we've seen new technology 0:58:53.400 --> 0:58:55.800 in the short term it does take away jobs and 0:58:55.840 --> 0:58:59.720 in the long term it expands jobs significantly, but where 0:58:59.720 --> 0:59:02.000 at a point where we may see higher costs for 0:59:02.080 --> 0:59:04.880 things at the same time some job being eliminated, and 0:59:04.920 --> 0:59:10.320 so that combination I think does have an opportunity to 0:59:10.400 --> 0:59:14.240 slow the economy down pretty significantly. And as we all know, 0:59:14.360 --> 0:59:17.080 you know the Mike Tyson line, the thing that knocks 0:59:17.200 --> 0:59:18.960 the punch of knocks you out is the one you 0:59:19.040 --> 0:59:21.919 don't see. So who knows what else could be out there? 0:59:22.920 --> 0:59:24.680 Hey, one name that we often spend a lot of 0:59:24.680 --> 0:59:27.040 time talking about and I just want to go back 0:59:27.040 --> 0:59:30.120 to we know we talked about the mag seven Apple 0:59:30.160 --> 0:59:32.360 and I'm just looking at it's just a little changed 0:59:32.440 --> 0:59:35.440 on the day new phone that came out today. It's 0:59:35.440 --> 0:59:38.280 down about two percent for the year overall. But when 0:59:38.320 --> 0:59:41.800 it comes to Apple, you're bullish on Apple. What in 0:59:41.800 --> 0:59:44.560 particular are the catalysts or is it just a continuation 0:59:45.360 --> 0:59:48.400 of what they're known for, or is there something in particular. 0:59:48.440 --> 0:59:49.480 The iPhone sixteen E. 0:59:49.640 --> 0:59:52.800 Available in white and black starting at five ninety nine, 0:59:53.600 --> 0:59:55.080 available starting February twenty eight. 0:59:55.120 --> 0:59:58.640 That's the headlines. I mean, our Mark Herman hasn't very thanks, Okay, 0:59:58.840 --> 0:59:59.880 I thought I was hearing a. 1:00:01.440 --> 1:00:03.760 Brought to you by anyway, but no, we've been waiting 1:00:03.800 --> 1:00:05.640 for this and our Mark German has been talking about 1:00:05.680 --> 1:00:07.000 it a lot. And so that was just some of 1:00:07.040 --> 1:00:10.520 the headlines that came out late morning. What is it 1:00:10.520 --> 1:00:11.120 about Apple? 1:00:11.880 --> 1:00:14.000 So you know what's really interesting if I look at Apple. 1:00:14.680 --> 1:00:16.360 Let's back up a little bit. Let's talk about Apple 1:00:16.400 --> 1:00:17.680 over the last two years for a second, if you 1:00:17.720 --> 1:00:20.480 don't mind, so think about it, maybe even more maybe 1:00:20.520 --> 1:00:22.720 spears think about that whole by the dip mentality that 1:00:22.760 --> 1:00:25.200 we all experienced for a year and a half or so. 1:00:25.720 --> 1:00:28.080 Apple was the first stock that by the dip started 1:00:28.120 --> 1:00:31.560 with and everybody's like Apple, Apple, Apple. What happened over 1:00:31.560 --> 1:00:35.280 the last six to nine months, Apple kind of fell 1:00:35.280 --> 1:00:37.120 out of favor a lot more with the retail investor, 1:00:37.160 --> 1:00:39.320 which is really interesting, and it had never experienced anything 1:00:39.360 --> 1:00:41.320 like that, since it's become more of a you know, 1:00:41.400 --> 1:00:44.680 quote unquote major stock, and so that had switched over 1:00:44.720 --> 1:00:47.880 to Microsoft as the company people bought first whenever there 1:00:47.960 --> 1:00:51.000 was times of trouble. Now we're seeing a lot of 1:00:51.000 --> 1:00:53.040 different stocks. You know, when Tesla had the big sell 1:00:53.080 --> 1:00:56.000 off a few weeks ago, Netflix, we're seeing that the 1:00:56.120 --> 1:00:59.360 times that retail investors will step in and buy stocks 1:00:59.440 --> 1:01:01.800 like that, that or trusted. I think what's happened to 1:01:01.840 --> 1:01:04.960 Apple over the last four months is kind of where 1:01:05.000 --> 1:01:07.120 we started the segment. Okay, we're right in your all 1:01:07.160 --> 1:01:10.440 time highs. What could upset us overall? And so I 1:01:10.440 --> 1:01:12.880 think one of the reasons that people have become more 1:01:12.920 --> 1:01:16.200 attracted to Apple overall is exactly what you said, you 1:01:16.320 --> 1:01:18.360 know what the products are. I don't think there's anything 1:01:18.680 --> 1:01:23.560 that's so brand new, you know, yes, Ai, it's great 1:01:23.760 --> 1:01:26.160 to have on there, et cetera. But I don't think 1:01:26.160 --> 1:01:29.360 that's the primary reason people are buying their phones. They're 1:01:29.360 --> 1:01:31.960 buying their phones because they know the reliability. They're buying 1:01:32.000 --> 1:01:34.960 them because they know what they're getting overall, and when 1:01:35.000 --> 1:01:38.520 people are unsure, they go to products they know, they 1:01:38.520 --> 1:01:41.080 go to names they know. Apple is still a very 1:01:41.160 --> 1:01:44.200 very trusted name by most people, and so there has 1:01:44.360 --> 1:01:48.280 been I won't say that people have gotten more socious overall, 1:01:48.400 --> 1:01:49.800 but toward that they have got. 1:01:49.600 --> 1:01:51.520 Over or if they live in the master household and 1:01:51.600 --> 1:01:54.040 their child of the master household, they don't have a 1:01:54.120 --> 1:01:58.919 choice because it's an Apple household. If I found mine, 1:01:58.960 --> 1:02:01.680 I found mine, but again it would be Apple. Yeah, 1:02:03.200 --> 1:02:05.240 just saying this is what kind of happens you get 1:02:05.360 --> 1:02:06.760 entrenched to within the network. 1:02:06.960 --> 1:02:07.240 JJ. 1:02:07.320 --> 1:02:11.360 Thanks Jjkinahan, Chief executive Officer, Tasty Trade and IG joining 1:02:11.440 --> 1:02:12.600 us from Chicago. 1:02:13.480 --> 1:02:18.320 This is the Bloomberg Business Week podcast, available on Apple, Spotify, 1:02:18.440 --> 1:02:22.120 and anywhere else you get your podcasts. Listen live weekday 1:02:22.200 --> 1:02:26.200 afternoons from two to five pm Eastern on Bloomberg dot Com, 1:02:26.240 --> 1:02:30.160 the iHeartRadio app, tune In, and the Bloomberg Business App. 1:02:30.360 --> 1:02:33.200 You can also watch us live every weekday on YouTube 1:02:33.360 --> 1:02:35.520 and always on the Bloomberg Terminal