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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am.

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Speaker 1: He's done on Apple, Cocklay and Android Auto with the

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Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: What a time to be covering tech like you and

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Speaker 2: Ed Buglow do Carolin. Every day there are major news

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Speaker 2: items from major companies and just amazing amounts of dollars.

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Speaker 2: Today again, Anthropic commit's fifty billion dollars to build AI

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Speaker 2: data centers in the US.

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Speaker 3: How do you put it in context?

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Speaker 4: I mean, we become a bit numb, and then you

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Speaker 4: look to some of the other whopping numbers, like the

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Speaker 4: six hundred billion dollars that Mark Zuckerberg has said he's

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Speaker 4: spending in capital expenditure an AI data center. You go, oh, actually,

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Speaker 4: fifty billion doesn't feel that much.

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Speaker 3: Yeah.

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Speaker 4: But interestingly, Anthropic what's interesting about this one is, look,

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Speaker 4: they've been reliant on investment from Strategics.

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Speaker 5: For their access to cloud.

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Speaker 4: Google massive investor in Anthropic, and with that comes access

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Speaker 4: to cloud and to compute, So too has aws. Amazon

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Speaker 4: and AWS has been a real provider of chips and

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Speaker 4: particularly remember really Anthropic has been a strategic partner to

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Speaker 4: these cloud companies because they've been helping them build out

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Speaker 4: their chip offering and they've been helping training models on

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Speaker 4: the future generation of those vertically integrated companies. But now

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Speaker 4: they're saying, look, we think the US needs to continue

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Speaker 4: to build out AI infrastructure. As you've heard from Sam Altman,

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Speaker 4: who's already saying he's going to be spending trillions on

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Speaker 4: data centers and all the capital expenditure that goes with it.

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Speaker 4: Then of course we have the likes of Mark Zuckerberg

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Speaker 4: all in on it as well. So it feels as

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Speaker 4: though Darah Amadey, who was out of open Ai, came

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Speaker 4: over and set up Anthropic to do it in a

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Speaker 4: more cautious, humanity friendly way. He's now saying, look, us two,

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Speaker 4: we need to put some infrastructure out here.

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Speaker 6: Okay, So open ai is the chat GPT as Nthropic

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Speaker 6: is to cloud.

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Speaker 5: That's a chat they use. How widely usedes this clud

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Speaker 5: show they.

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Speaker 4: Are really nailing the enterprise space. This is where they've

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Speaker 4: managed to lead, in particular when it comes to coding.

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Speaker 4: So yes, they don't have eight hundred million weekly users

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Speaker 4: in the same way that chat to gpet does. But

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Speaker 4: people love it in the enterprise, and that really has

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Speaker 4: been their winning formula. They've been really rather profitable, thus

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Speaker 4: far more profitable at least or seeing more revenue growth

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Speaker 4: than open ai has been seeing because open ai has

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Speaker 4: been all about the spending, all about the reinvestment, and

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Speaker 4: in many ways, Anthropical have been seen as some sort

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Speaker 4: of more asset like version of this. Now that's kind

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Speaker 4: of casting that off a little bit. But they just

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Speaker 4: raised thirteen billion dollars. They are valued one hundred and

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Speaker 4: eighty three billion dollars. That was back in September, and

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Speaker 4: they have three hundred thousand business customers. Yeah, so they

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Speaker 4: have been managing to show that that the business model works.

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Speaker 2: Is there any expectation, Caroline that these companies may come

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Speaker 2: public at some point down the line, because I just

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Speaker 2: think about the money they're spending, and I know a

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Speaker 2: lot of people want to throw money at them, but

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Speaker 2: maybe even the public markets.

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Speaker 3: So are they talking about that?

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Speaker 4: Well, Sam Almond has been saying like it's not. I

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Speaker 4: can't give you a date, but clearly they are on

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Speaker 4: a path in the next couple of years to going public.

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Speaker 4: And that is the idea was many of these businesses,

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Speaker 4: These founders feel that it's there. It's their duty. It's

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Speaker 4: a duty to be able to allow the everyday retail

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Speaker 4: investor as well as these very deep pocketed venture capitalists

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Speaker 4: to benefit from their businesses and be able to take

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Speaker 4: a chunk in within that. So we're seeing that these

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Speaker 4: companies are talking about going public. We've heard it slightly

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Speaker 4: less from the anthropics of this world, but I think

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Speaker 4: certainly there's going to be a push that these companies

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Speaker 4: can't remain private for ever and these boatloads of cash

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Speaker 4: that they need can't keep on coming from the same

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Speaker 4: group of investors.

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Speaker 6: My guess is when they do go public, you know,

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Speaker 6: the founders will have a huge swath of the voting

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Speaker 6: sharers and everyone else won't.

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Speaker 5: Kind of like the Metas of the world.

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Speaker 3: Yes, exactly.

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Speaker 2: And what's interesting is we mentioned Meta they access the

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Speaker 2: bond market just a couple of weeks ago to fund

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Speaker 2: a certainly vision.

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Speaker 3: Yeah, just incredible.

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Speaker 4: But remember some mortment doesn't actually own any system significant

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Speaker 4: equity and opening ah okay, so how they would structure

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Speaker 4: him to have voting shares is another thing. Entirely, they

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Speaker 4: of course, are owned by the overall charitable not for

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Speaker 4: profit is in in control and some ways, but and

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Speaker 4: has shut stock of Open AI. But I don't know

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Speaker 4: what the breakdown of shareholding is by the good contract

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Speaker 4: the founders of Panthropic.

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Speaker 6: I'm looking at the markets overall, Caroline and for a

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Speaker 6: second day, the Dow is outperforming the NAZAC one hundred.

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Speaker 5: I don't know how many times you can say that

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Speaker 5: over the past couple of years. But the NASAC under pressure.

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Speaker 6: And again it's this idea that you know, the AI

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Speaker 6: boom is now.

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Speaker 5: A little bit more in doubt.

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Speaker 6: There's a little bit more skepticism, and people are asking

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Speaker 6: questions about you know, is there a clear financial model

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Speaker 6: for profitable AI.

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Speaker 5: There's a lot of NonStop investment.

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Speaker 6: But then how do the people see returns in the

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Speaker 6: next year or two years as opposed to ten years

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Speaker 6: down the road.

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Speaker 5: How has that conversation unfolded in the tech sector.

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Speaker 4: It's unfolding by having either side of the equation come

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Speaker 4: on the Michael Bowries of this world saying, no one's

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Speaker 4: factoring in depreciation of chips. We think that this is

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Speaker 4: ultimately overvalued in a bubble. But then we're going to

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Speaker 4: have thread needle come on and really start to say, look,

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Speaker 4: the proof will be in the fundamentals, the proof will

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Speaker 4: be in the earnings. We've just had a cracking set

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Speaker 4: of numbers from most of the Magnificent seven. We're still

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Speaker 4: waiting on Nvidia AMD coming out once again showing that

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Speaker 4: the total addressable market for they're AI accelerators and were

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Speaker 4: broadly the chips is going to be one trillion dollars.

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Speaker 4: They're showing that they're going to guide for not just

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Speaker 4: two years, three years, but up to five years. They

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Speaker 4: think that they can be tuning to about thirty five

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Speaker 4: percent revenue increases every single year. And we're seeing Keeger

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Speaker 4: numbers coming in an the eighty percent field for an

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Speaker 4: AI accelerator, offering that MII is really selling well. So

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Speaker 4: I think that every time you question it, and yes,

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Speaker 4: you can look at the worry about the circular financing,

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Speaker 4: the anxiety that a lot of these companies that were

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Speaker 4: very asset light, think Matter used to be very asset light,

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Speaker 4: and to your point, now we're starting to see them

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Speaker 4: laden on debt. These things do fill people with some uncertainty,

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Speaker 4: but if really the revenue taps got turned on if

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Speaker 4: AMD can prove out that they're building a clear line

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Speaker 4: of sight on tens of billions of dollars of revenue,

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Speaker 4: people will give them the benefit of the doubt.

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Speaker 6: I think everyone's grown very customed to seeing the cash

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Speaker 6: and short term investments line for all these big tech

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Speaker 6: companies at like hundreds of billions of dollars, and that's

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Speaker 6: not going to be the case if they're going to

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Speaker 6: continue investing this much and spending this much.

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Speaker 1: Yeah.

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Speaker 2: Even and we saw MetaStock get go down pretty precipitously

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Speaker 2: today when when Mark Zuckerberg said they're going to step

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Speaker 2: up their capex, yeah, by that degree.

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Speaker 3: So that was interesting to see too.

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Speaker 5: A little bit of caution there.

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Speaker 2: Morgan Stanley out with report recently I just saw today

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Speaker 2: saying basically, boy, a lot of things have to break

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Speaker 2: right to generate returns on these investments, just writ large

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Speaker 2: on the industry.

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Speaker 3: A lot of things really got to break right now.

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Speaker 5: We don't know what's going to happen tomorrow with airplanes.

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Speaker 3: Exactly, you know, exactly, So getting to the airport.

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Speaker 4: Aucture and all the things that actually need to work

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Speaker 4: for us to be able to get the data centers

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Speaker 4: up and running.

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Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 5: Circle Internet group.

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Speaker 6: It's the issuer of the second biggest stable coin, USDC,

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Speaker 6: and the shares are tumbling today, down about eight percent.

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Speaker 6: And this is on kind of what feels like a

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Speaker 6: pretty pedestrian reason. Concerned that lower interest rates will slow profits.

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Speaker 6: I mean, that's kind of unusual if you think, you

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Speaker 6: know cryptocurrency or crypto linked company with lower interest rates.

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Speaker 6: Let's bring in Emily Mason. She is a Bloomberg News

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Speaker 6: fintech and crypto reporter, as she joins us now, so

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Speaker 6: Emily just explained to us the dynamic here why lower

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Speaker 6: interest rates from the Federal Reserve would be a concern

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Speaker 6: for a company like Circle. Yeah.

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Speaker 7: So Circle issues USDC, and they that's a staple coin

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Speaker 7: peg to the US dollar, and they maintain that peg

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Speaker 7: by holding reserves in cash and short term treasuries.

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Speaker 5: They keep the yield.

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Speaker 7: From the treasuries and that's kind of how they make

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Speaker 7: money and that's where most of their revenue comes from.

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Speaker 7: So if interest rates go down, you know that shows

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Speaker 7: up in earnings and that causes some concern for investors

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Speaker 7: and analysts.

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Speaker 3: So what have their recent results been.

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Speaker 7: Like, I mean, this is their second time reporting since

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Speaker 7: going public. They benefited heavily from all the hype around

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Speaker 7: stable coin, especially before the Genius Act was passed, and

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Speaker 7: their stock performed really well.

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Speaker 5: It's kind of.

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Speaker 7: Been down since their summer highs, and that's kind of

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Speaker 7: because of the concern from the interest revenue, but also

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Speaker 7: because of some of the distribution partners that they have

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Speaker 7: they pay. They have revenue sharing agreements with coinbase, for example,

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Speaker 7: who helps distribute their coin.

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Speaker 6: So if this company for now is kind of a

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Speaker 6: proxy for a money market fund because it's earning's track

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Speaker 6: short term treasury yields, it must need to do more

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Speaker 6: to diversify its revenue streams.

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Speaker 5: What is it looking at? Yeah, that's what they're doing.

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Speaker 7: And then if you talk to Jeremy A. Lair who's

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Speaker 7: the CEO, he'll kind of say that lower interest rates

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Speaker 7: are actually good for the company because it means that

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Speaker 7: there's higher velocity of money, there's more investment, and then

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Speaker 7: people want faster move money like stable coins, and they

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Speaker 7: also might want to use products like their Circle Payments network,

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Speaker 7: which recently is experimenting with like a stable coin payouts

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Speaker 7: product which like helps people can helps people to pay

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Speaker 7: out globally with USDC, and they're trying to move more

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Speaker 7: USDC volume onto their own platform instead of working with

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Speaker 7: distribution partners like Coinbase, and that kind of could help

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Speaker 7: them as well. But they see the lower interest rates

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Speaker 7: as a positive thing. And also the USD circulating supply

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Speaker 7: is increasing very heavily as they add new partners, so

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Speaker 7: that also kind of could potentially offset the lower interest rates.

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Speaker 2: Emily, your beat is fintech and crypto reporter, two things

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Speaker 2: that didn't exist even just a handfull of years ago.

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Speaker 2: Talk to us about broadly the kind of the intersection

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Speaker 2: of the growing crypto market and applications like fintech.

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Speaker 7: Yeah, I mean, I think what's kind of the most

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Speaker 7: interesting right now is like fintech when it came onto

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Speaker 7: the scene was sort of like building very interfaces on

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Speaker 7: top of his existing financial infrastructure, and then crypto's pitch

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Speaker 7: is much more sort of like rebuilding the financial infrastructure

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Speaker 7: with things like blockchains, and now the conversation is kind

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Speaker 7: of about bringing the traditional world and the traditional financial

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Speaker 7: institute infrastructure together with crypto rails and Circles really kind

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Speaker 7: of sitting at the center of that and trying to

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Speaker 7: bring stave a coin and like integrate that with how

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Speaker 7: traditional markets work, and that's involves a coming together on

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Speaker 7: both sides, Like traditional firms kind of have to upgrade

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Speaker 7: and make their systems interoperable with cryptotechnology, and then crypto

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Speaker 7: firms also have to kind of move into a regulated environment.

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Speaker 7: And that's been something that Jeremy Alair has talked about

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Speaker 7: for a long time, like he really thinks that crypto

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Speaker 7: needs to be regulated and Circle that's been a big

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Speaker 7: part of their narrative is like we are kind of

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Speaker 7: like the suits in the room, and we're going to

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Speaker 7: be regulated and that's how we're going to go about

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Speaker 7: doing business.

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Speaker 5: You're kind of the most tradfy of the DeFi world.

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Speaker 6: In other words, if we want to get technical, this

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Speaker 6: is going to be a dumb question, Emily, but we've

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Speaker 6: seen how Bigcoin and the rest of the cryptocurrencies had

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Speaker 6: a pretty rough October. They're struggling to regain momentum. All

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Speaker 6: these digital coins are not the same as stable coins.

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Speaker 6: But is that shift in sentiment and conviction on bigcoin

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Speaker 6: and all coins, especially from institutions, affecting demand it off

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Speaker 6: for stable coins or are those two just not linked.

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Speaker 5: I mean stable coin.

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Speaker 7: Has used a lot of the times, like anytime there's

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Speaker 7: a lot of trading happening in crypto like and in

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Speaker 7: crypto tokens like stable coins kind of benefit because they're

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Speaker 7: used to like move in and out of those markets.

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Speaker 7: The stable coin the whole point is that it's like

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Speaker 7: a stable currency. It's peged to the dollar, it's one

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Speaker 7: for one, so the price of it really shouldn't be

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Speaker 7: impacted at all by like crypto market movements.

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Speaker 6: But does it does demand affect it or does sorry

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Speaker 6: does the spillover involve like demand waning for sable corn

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Speaker 6: or increasing for stable coin.

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Speaker 7: I think where like the demand growth for stable coin

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Speaker 7: is going to come from is like it moving out

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Speaker 7: of a tool for just for crypto trading. It's going

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Speaker 7: to be like people in countries where the local currency

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Speaker 7: is volatile wanting to hold stable coin, or people wanting

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Speaker 7: to actually use it for payments or like stable cooin payouts.

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Speaker 7: Like if you're a US based company and you're employing

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Speaker 7: a bunch of people around the world who want to

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Speaker 7: hold a stable currency like the dollar, the stablecoin is

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Speaker 7: the best way to access it, then you can pay

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Speaker 7: them that way. Like that's where growth from. That's where

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Speaker 7: demand for stable coin is going to come from. I

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Speaker 7: don't think it's like super tied to the trading necessarily,

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Speaker 7: Like people use stablecoin to get in and out of

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Speaker 7: crypto markets, so you know, they might see more volume

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Speaker 7: of trading activity is high, but their journeys are kind

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Speaker 7: of becoming less linked.

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Speaker 3: Stay with us or from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live

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Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto

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Speaker 1: with the Bloomberg Business app. Listen on demand wherever you

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Speaker 3: I metube all right, whether we like it or not.

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Speaker 3: The holidays are up, Honest, scarlet Ful and Paul.

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Speaker 2: Sweeney live here in our Bloomberg and Director Broker Studio,

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Speaker 2: streaming live on YouTube and with the Holidays of honas

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Speaker 2: that means shopping and for retailers. It is obviously the

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Speaker 2: most important time of the year kind of right now

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Speaker 2: through a year end, so we want to get a

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Speaker 2: sense of how that's shaping up for the retailers out there.

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Speaker 2: Mary Ross Gilbert, senior equity analyt. She covers the retail

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Speaker 2: space for Bloomberg Intelligence. She's based in our Los Angeles office. Mary,

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Speaker 2: thanks so much for joining us here. We're, you know,

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Speaker 2: kind of right into November, getting into the thick of

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Speaker 2: it here.

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Speaker 3: How's the holiday shopping season shaping up? What are your

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Speaker 3: companies saying?

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Speaker 7: Thank you, Paul.

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Speaker 8: So, if you look at how the holiday shopping is

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Speaker 8: is shaping up, I think it looks I think it

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Speaker 8: looks very positive. So I think we are going to

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Speaker 8: see an increase and particularly for apparel retailers, that's usually

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Speaker 8: like the largest category that consumers. If you look at

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Speaker 8: those that have been pulled by all the holiday service

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Speaker 8: surveys that have been conducted, including the National Retail Federation,

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Speaker 8: and they have over eight hundred over eight eighty two

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Speaker 8: hundred respondents in their surveys, and the other ones are

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Speaker 8: pretty sizable, you know, relatively speaking, around five thousand. So

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Speaker 8: they're showing that there's definitely a higher percentage of shoppers

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Speaker 8: wanting at peril and accessories for gifts, So that should

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Speaker 8: be good news for apparel. But gen Z is planning

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Speaker 8: to cut back on their overall holidays spending by that,

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Speaker 8: you know, by twenty three percent. Millennials just one percent.

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Speaker 2: Wow, So the gen Z these are the younger folks,

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Speaker 2: maybe tougher time finding a job. Maybe, you know, student

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Speaker 2: debt is that kind of the driver there.

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Speaker 8: Yeah, I think I think that could be part of it. Yeah,

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Speaker 8: it could be the job market situation that might be

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Speaker 8: happening there because these are really like the seventeen to

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Speaker 8: twenty eight year olds. So we I've been hearing some

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Speaker 8: you know, talk about some of these latest graduates, you know,

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Speaker 8: having a difficulty finding a job. I think it's just

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Speaker 8: probably going to take longer because generally unemployment is still

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Speaker 8: very low and soon we'll be getting you know, more

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Speaker 8: data on that. But we're seeing resilience if you look

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Speaker 8: at the data so far with Bloomberg second measure for

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Speaker 8: apparel retailers and department stores and off price, we're seeing

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Speaker 8: good sales coming in for the third quarter, and they'll

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Speaker 8: start reporting their numbers in the next few weeks. So

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Speaker 8: I think we're off to a good start, and I

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Speaker 8: think Black Friday sales are already happening. Macy's is out

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Speaker 8: today with fifty percent off on their private label brand

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Speaker 8: product and they expect to have other drops every week. Wow,

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Speaker 8: So everyone's focused on starting now yep with promotions.

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Speaker 2: So Mary, you know, economists talk about a K shaped

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Speaker 2: economy out there, some consumers, maybe the ones that own

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Speaker 2: assets like stocks and bonds in real estate, doing more

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Speaker 2: than good and kind of everybody else struggling a little bit,

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Speaker 2: particularly with inflation.

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Speaker 3: How does that get reflected in retail sales?

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Speaker 2: Does it mean you just kind of if you're an investor,

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Speaker 2: look at on Amazon Target where I can get some

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Speaker 2: some some deals.

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Speaker 8: Yeah, and that's actually what's happening, and that's why you see,

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Speaker 8: let's say, pretty robust sales overall coming out of off price.

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Speaker 8: You know, so think of TJ Max, Ross Stores and

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Speaker 8: Burlington stores, and Burlington's at the very low end if

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Speaker 8: you look at credit card delinquencies or you know, those rates,

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Speaker 8: and a lot of these companies that we're tracking represent

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Speaker 8: the credit cardholders for like department stores and for some

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Speaker 8: select apparel brands such as gap, et cetera. And when

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Speaker 8: you look at that data, delinquencies are actually lower this

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Speaker 8: year versus a year ago, but not for the very

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Speaker 8: low income, which kind of speaks to what you're talking

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Speaker 8: about and inflation. Actually, those are up in the teams,

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Speaker 8: you know, for the very low income consumer, So think

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Speaker 8: like under fifty.

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Speaker 3: K yep, yep.

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Speaker 2: How about e commerce, Mary, I know the pandemic folks

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Speaker 2: are saying, kind of pulled forward maybe four or five

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Speaker 2: years of share shift from bricks and mortar to a

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Speaker 2: digital what's the e commerce growth story look like these days?

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Speaker 8: You know, e com growth is looking strong when we

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Speaker 8: look at the data, like I said, for the third

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Speaker 8: quarter that we're seeing from Bloomberg second measure, it's showing

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Speaker 8: actually online sales were stronger at the department stores except

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Speaker 8: for Coals Coals online businesses, I mean not their online business,

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Speaker 8: but actually their credit customer is shopping less, like in

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Speaker 8: the double digits less, so that's kind of an issue

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Speaker 8: for them. But generally we're seeing stronger pool with online

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Speaker 8: sales there. Now. There is also a delineation between the

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Speaker 8: type of consumer. If it's gen Z, they tend to

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Speaker 8: prefer shopping more in store and we see that with

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Speaker 8: Abercrombie and Fitch's Hollister brand, so they are about seventy

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Speaker 8: percent of their sales are generated online. And then it's

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Speaker 8: the inverse when you look at their namesake brand, Abercromby,

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Speaker 8: because that consumer is those are millennials, and millennials prefer

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Speaker 8: to shop online, so sixty percent of their sales are

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Speaker 8: being generated online versus in store.

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