1 00:00:05,800 --> 00:00:08,360 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim 2 00:00:08,400 --> 00:00:11,440 Speaker 1: Fox along with my co host Lisa Bramowitz. Each day 3 00:00:11,480 --> 00:00:15,000 Speaker 1: we bring you the most important, noteworthy, and useful interviews 4 00:00:15,040 --> 00:00:17,520 Speaker 1: for you and your money, whether you're at the grocery 5 00:00:17,560 --> 00:00:20,560 Speaker 1: store or the trading floor. Find the Bloomberg p m 6 00:00:20,680 --> 00:00:31,960 Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Ouch. 7 00:00:32,000 --> 00:00:36,520 Speaker 1: I am looking right now at Tesla bonds. They are plummeting. 8 00:00:36,600 --> 00:00:39,640 Speaker 1: I want to bring in our own Joel Lovington, senior 9 00:00:39,680 --> 00:00:44,000 Speaker 1: credit analyst for Bloomberg Intelligence, who's been tracking this. Wow, 10 00:00:44,200 --> 00:00:47,760 Speaker 1: this has been a big swoon, not entirely unexpected considering 11 00:00:47,760 --> 00:00:50,760 Speaker 1: that these bonds were among the short most shorted they 12 00:00:50,760 --> 00:00:54,240 Speaker 1: could possibly be. What's going on today? Well, last night 13 00:00:54,320 --> 00:00:57,760 Speaker 1: Moody's downgraded then very much into the conversation that we 14 00:00:57,760 --> 00:01:01,000 Speaker 1: had last week. So very props to you, yeah for 15 00:01:01,160 --> 00:01:04,440 Speaker 1: for doing this for Bloomberg. UM and uh and the 16 00:01:04,480 --> 00:01:06,880 Speaker 1: bonds have lost about three three and a half points 17 00:01:07,200 --> 00:01:09,680 Speaker 1: UM or about sixty six five basis points at least 18 00:01:09,680 --> 00:01:12,320 Speaker 1: that's the last quote that I saw, So it looks 19 00:01:12,360 --> 00:01:15,240 Speaker 1: like we're in the about the eighties six dollar range. YEP, YEP, 20 00:01:15,280 --> 00:01:17,920 Speaker 1: we're still there's that means a yields maturity of about 21 00:01:18,360 --> 00:01:22,399 Speaker 1: UH seven point six six percent, give or take um. 22 00:01:22,640 --> 00:01:24,760 Speaker 1: Let's talk the broader picture here. Let's just sort of 23 00:01:24,800 --> 00:01:27,720 Speaker 1: paint a scene for this company. They have the controversy 24 00:01:27,800 --> 00:01:31,720 Speaker 1: going on that has certainly plummeted or sort of punctured 25 00:01:31,760 --> 00:01:35,280 Speaker 1: their stocks with a car crash that ended up with 26 00:01:35,319 --> 00:01:39,800 Speaker 1: the death of the driver of the car. Meanwhile, this 27 00:01:39,880 --> 00:01:43,160 Speaker 1: is a business model that really hinges on the company's 28 00:01:43,200 --> 00:01:46,880 Speaker 1: ability to access credit markets. How much does the downgrade 29 00:01:46,880 --> 00:01:51,120 Speaker 1: and subsequent plunge in bond prices affect Testla's ability to 30 00:01:51,280 --> 00:01:55,160 Speaker 1: finance it's penchant for burning through cash. That's a great question, Lisa, 31 00:01:55,280 --> 00:01:58,480 Speaker 1: and it really it's two ways. At one, there are 32 00:01:58,520 --> 00:02:01,440 Speaker 1: certain funds that can't buy ariple see paper uh and 33 00:02:01,480 --> 00:02:04,800 Speaker 1: so now you have a triple C B minus issue, 34 00:02:04,840 --> 00:02:07,920 Speaker 1: which makes it tougher in terms of financing. The second 35 00:02:07,960 --> 00:02:10,200 Speaker 1: thing is with a bond at eight six and UH 36 00:02:10,360 --> 00:02:14,880 Speaker 1: and yields in the upper sevens, issuing unsecured debt straight 37 00:02:14,960 --> 00:02:18,560 Speaker 1: unsecured debt, like what they did with the issue is 38 00:02:18,680 --> 00:02:21,600 Speaker 1: really not an option. It's too it's too costly. So 39 00:02:21,600 --> 00:02:23,760 Speaker 1: then they have to start thinking about what is the 40 00:02:23,840 --> 00:02:26,240 Speaker 1: right approach because everybody knows that they do have a 41 00:02:26,240 --> 00:02:29,280 Speaker 1: liquidity event in front of them. Will it be through 42 00:02:29,360 --> 00:02:32,680 Speaker 1: a structured issue or will it be through UH issuing 43 00:02:32,760 --> 00:02:35,520 Speaker 1: straight equity or some sort of convertible. Okay, so when 44 00:02:35,520 --> 00:02:38,440 Speaker 1: we spoke last time, you said that the leveraged loan 45 00:02:38,560 --> 00:02:42,280 Speaker 1: market might be most attractive for Tesla, and we did 46 00:02:42,360 --> 00:02:47,079 Speaker 1: see Uber managed to successfully upsize their loan offering. I'm 47 00:02:47,080 --> 00:02:50,200 Speaker 1: wondering at this point is even the loan market off 48 00:02:50,240 --> 00:02:52,880 Speaker 1: limits or is there enough of a bid coming from 49 00:02:52,960 --> 00:02:56,480 Speaker 1: the collateralized loan obligations these funds that have to buy 50 00:02:56,520 --> 00:02:58,640 Speaker 1: loans that it raised a lot of money that that 51 00:02:58,680 --> 00:03:01,120 Speaker 1: anyone can tell anything. Well, you know, I think that 52 00:03:01,240 --> 00:03:03,320 Speaker 1: I think the Uber deal is actually a pretty interesting 53 00:03:03,360 --> 00:03:04,960 Speaker 1: one because I think it went in live war plus 54 00:03:04,960 --> 00:03:06,799 Speaker 1: four hundred. So you're looking at a little over six 55 00:03:06,840 --> 00:03:10,600 Speaker 1: percent coupon on that UH and that is without a 56 00:03:10,600 --> 00:03:13,040 Speaker 1: credit rating on it. And so if you have a 57 00:03:13,080 --> 00:03:16,400 Speaker 1: public company that still has a forty plus billion dollar 58 00:03:16,440 --> 00:03:19,519 Speaker 1: market cap on it, one might say that they should 59 00:03:19,520 --> 00:03:22,360 Speaker 1: be able to do as well, if not better than 60 00:03:22,400 --> 00:03:24,760 Speaker 1: what Uber god And and maybe that kind of puts 61 00:03:24,760 --> 00:03:29,040 Speaker 1: into a framework what a unsecured deal versus a secure 62 00:03:29,080 --> 00:03:32,400 Speaker 1: deal might look like. Um, so, I guess maybe that 63 00:03:32,480 --> 00:03:34,800 Speaker 1: kind of paints the picture as is, if they went 64 00:03:34,840 --> 00:03:40,600 Speaker 1: down the road of issuing dead the unsecured market and 65 00:03:40,640 --> 00:03:43,800 Speaker 1: not being able to handle it, a secure deal maybe 66 00:03:43,880 --> 00:03:46,680 Speaker 1: in the six percent range might be a better option 67 00:03:46,720 --> 00:03:48,800 Speaker 1: if you're the treasurer. Right, let's sum out a little bit, 68 00:03:48,840 --> 00:03:51,640 Speaker 1: because there are sort of this existential question with Tesla 69 00:03:51,760 --> 00:03:55,280 Speaker 1: right now, which is, you know, as money gets increasingly 70 00:03:55,320 --> 00:03:59,000 Speaker 1: expensive for them, as they fail to prove that they 71 00:03:59,080 --> 00:04:02,600 Speaker 1: can come through on their promises, when do they run 72 00:04:02,680 --> 00:04:05,040 Speaker 1: out of leeway? So when do they run out of 73 00:04:05,040 --> 00:04:10,320 Speaker 1: liquidity and face some serious issue if financing markets close 74 00:04:10,400 --> 00:04:13,760 Speaker 1: up or at least become really onerously expensive. Sure, I 75 00:04:13,760 --> 00:04:17,320 Speaker 1: mean without doing any new issuance, I would say sometime 76 00:04:17,360 --> 00:04:21,200 Speaker 1: in the first half of they're gonna burn out of cash. 77 00:04:21,240 --> 00:04:23,320 Speaker 1: Our model last week we were talking about about a 78 00:04:23,360 --> 00:04:26,440 Speaker 1: two point three billion dollar cash usage this year. They 79 00:04:26,440 --> 00:04:29,159 Speaker 1: have a billion two of debt maturities into the first 80 00:04:29,240 --> 00:04:33,200 Speaker 1: quarter of so that's about equal to what the cash 81 00:04:33,360 --> 00:04:36,680 Speaker 1: was at at the end of the year. So they 82 00:04:36,720 --> 00:04:39,960 Speaker 1: need to raise more money by the first part of 83 00:04:40,200 --> 00:04:42,719 Speaker 1: next year or else they're out of business, right And 84 00:04:42,760 --> 00:04:45,200 Speaker 1: I would say for all stakeholders, they're probably better off 85 00:04:45,240 --> 00:04:47,880 Speaker 1: doing it sooner than later, and probably more than what 86 00:04:47,960 --> 00:04:53,360 Speaker 1: they need today to get the liquidity issue away from 87 00:04:53,400 --> 00:04:56,160 Speaker 1: you know, both the equity and the dead So let's 88 00:04:56,200 --> 00:05:00,080 Speaker 1: talk financing price. So if we end up with a 89 00:05:00,160 --> 00:05:03,040 Speaker 1: yield of say seven point seven and that is the 90 00:05:03,120 --> 00:05:06,800 Speaker 1: going yield for Tesla to borrow money, is that sustainable 91 00:05:06,839 --> 00:05:10,720 Speaker 1: for them? No? So okay, But this is this is 92 00:05:10,760 --> 00:05:12,800 Speaker 1: a really important point in other words, because if you're 93 00:05:12,800 --> 00:05:15,280 Speaker 1: seeing a seven point seven percent yield, which is effectively 94 00:05:15,400 --> 00:05:18,440 Speaker 1: what is being implied this is the bond that comes 95 00:05:18,480 --> 00:05:22,600 Speaker 1: due in less than ten years, that's not a viable 96 00:05:22,600 --> 00:05:25,320 Speaker 1: financing costs for them. No. I mean, when you're burning 97 00:05:25,320 --> 00:05:29,039 Speaker 1: through cash to create more liabilities that are have a 98 00:05:29,120 --> 00:05:32,600 Speaker 1: high coup a cash coupon on, it does only makes 99 00:05:32,640 --> 00:05:36,279 Speaker 1: the issue worse, which means that a best case scenario 100 00:05:36,320 --> 00:05:38,440 Speaker 1: would be that you issue a block of equity or 101 00:05:38,480 --> 00:05:42,039 Speaker 1: maybe equity with a secured debt package behind it to 102 00:05:42,279 --> 00:05:46,080 Speaker 1: reduce the cash costs as opposed to the coupon. Would 103 00:05:46,120 --> 00:05:48,840 Speaker 1: you say the time's running out here? I would say 104 00:05:48,880 --> 00:05:51,960 Speaker 1: that they need to do something. Uh, and again I 105 00:05:52,000 --> 00:05:54,479 Speaker 1: would if I was in the Treasury seed at TESLA, 106 00:05:54,520 --> 00:05:56,720 Speaker 1: I would be doing it sooner than later to get 107 00:05:56,720 --> 00:05:59,200 Speaker 1: this issue off the table, at least for as kicking 108 00:05:59,279 --> 00:06:00,640 Speaker 1: the can down the road, or as long as I could. 109 00:06:00,839 --> 00:06:03,520 Speaker 1: You would also be investing in some kind of anti 110 00:06:03,680 --> 00:06:06,360 Speaker 1: sweat measure because it seems like a pretty hot seat 111 00:06:06,400 --> 00:06:08,200 Speaker 1: to be on right now. Joel Levington, thank you so 112 00:06:08,279 --> 00:06:10,120 Speaker 1: much for being with us. And you did nail it. 113 00:06:10,240 --> 00:06:11,800 Speaker 1: Last time we spoke. You said that this is going 114 00:06:11,839 --> 00:06:15,560 Speaker 1: to likely be a company that is downgraded. It was downgraded, 115 00:06:15,680 --> 00:06:19,200 Speaker 1: and now the bonds are plunging. Joel Levington, Senior credit 116 00:06:19,200 --> 00:06:24,120 Speaker 1: analyst for Bloomberg Intelligence. Always insightful, always interesting. Thank you 117 00:06:24,160 --> 00:06:40,960 Speaker 1: for being with us. People on both sides of the 118 00:06:41,040 --> 00:06:45,040 Speaker 1: aisle agree that the US has some unfair trade relationships, 119 00:06:45,080 --> 00:06:48,160 Speaker 1: certainly with China, but also with the rest of the 120 00:06:48,200 --> 00:06:51,599 Speaker 1: world joining us now. Robert Lawrence Professor of International Trade 121 00:06:51,640 --> 00:06:54,799 Speaker 1: and Investment at the John F. Kennedy School of Government 122 00:06:54,800 --> 00:06:58,200 Speaker 1: at Harvard University. He's also a Senior Fellow at the 123 00:06:58,240 --> 00:07:02,599 Speaker 1: Peterson Institute for International Economics. Also former economic advisor to 124 00:07:02,920 --> 00:07:06,440 Speaker 1: President Bill Clinton. Robert Lawrence, Thank you so much for 125 00:07:06,480 --> 00:07:10,360 Speaker 1: being with us, A really important time to hear from you. So, 126 00:07:10,720 --> 00:07:13,800 Speaker 1: you know, since there is this sort of widely accepted 127 00:07:13,920 --> 00:07:17,040 Speaker 1: unfair trade relationship that the US has certainly with China, 128 00:07:17,520 --> 00:07:20,200 Speaker 1: what measure should we be looking at as a gauge 129 00:07:20,240 --> 00:07:26,760 Speaker 1: of whether things are becoming more fair? Well, ultimately, UM, 130 00:07:26,880 --> 00:07:28,680 Speaker 1: I think, by the way, it's a pleasure to be 131 00:07:28,760 --> 00:07:31,680 Speaker 1: with you this morning. UM. Ultimately, I think we just 132 00:07:32,080 --> 00:07:35,200 Speaker 1: we have to look at what kind of access our 133 00:07:35,320 --> 00:07:39,120 Speaker 1: firms have to their market, um, and what kind of 134 00:07:39,120 --> 00:07:41,720 Speaker 1: access their firms have two hours, and we have to 135 00:07:41,760 --> 00:07:45,440 Speaker 1: compare that. And I think there's no question that the 136 00:07:45,520 --> 00:07:49,320 Speaker 1: Chinese have been using their market as a way to 137 00:07:49,560 --> 00:07:53,840 Speaker 1: enforce a U S firms and other foreign firms to 138 00:07:54,000 --> 00:07:59,680 Speaker 1: transfer technology. They've also not been respecting intellectual property rights, 139 00:08:00,040 --> 00:08:05,160 Speaker 1: which are part of the rules of the World Trade Organization. So, 140 00:08:05,640 --> 00:08:08,880 Speaker 1: Professor Lawrence, since you advised former President Bill Clinton, I 141 00:08:08,960 --> 00:08:12,360 Speaker 1: assume you line up more on that side of the aisle, 142 00:08:12,640 --> 00:08:15,760 Speaker 1: although I could be wrong, and I'm wondering whether coming 143 00:08:15,880 --> 00:08:19,760 Speaker 1: from that vantage point, you can view anything that President 144 00:08:19,800 --> 00:08:25,760 Speaker 1: Trump has done as being positive on this on this count. Well, 145 00:08:25,800 --> 00:08:30,960 Speaker 1: I think, UM. Focusing on the question of our trade 146 00:08:31,000 --> 00:08:34,560 Speaker 1: relationship with China and trying to improve some of the 147 00:08:34,640 --> 00:08:38,240 Speaker 1: violations or deal with some of the violations, I think 148 00:08:38,320 --> 00:08:42,520 Speaker 1: is well worth well worth doing. I think at times 149 00:08:42,920 --> 00:08:46,839 Speaker 1: what the measures that they've actually taken are are pretty 150 00:08:46,920 --> 00:08:51,440 Speaker 1: high handed, and um, some of them actually contravene rules 151 00:08:51,480 --> 00:08:54,720 Speaker 1: that we've agreed to. So I think that's the part 152 00:08:54,760 --> 00:08:57,360 Speaker 1: of it where I would take take difference with him. 153 00:08:57,640 --> 00:08:59,800 Speaker 1: What do you mean that they contravene with rules that 154 00:08:59,800 --> 00:09:03,480 Speaker 1: we've agreed Well, Uh, you know, as a member of 155 00:09:03,520 --> 00:09:07,240 Speaker 1: the World Trade Organization, you're not allowed to simply raise 156 00:09:07,320 --> 00:09:12,479 Speaker 1: your tariffs against the products coming from other countries. Uh. 157 00:09:12,520 --> 00:09:15,480 Speaker 1: What you have to do is to go to that 158 00:09:15,559 --> 00:09:18,920 Speaker 1: body to prove that the other country is violating the 159 00:09:18,960 --> 00:09:24,120 Speaker 1: agreement and then get permission to take retaliatory measures. But 160 00:09:24,200 --> 00:09:27,480 Speaker 1: what President Trump did the other day was to simply 161 00:09:27,679 --> 00:09:31,600 Speaker 1: unilaterally announce that the United States is going to put 162 00:09:31,679 --> 00:09:37,360 Speaker 1: tariffs on up to sixty billion dollars worth of Chinese exports. 163 00:09:37,559 --> 00:09:41,000 Speaker 1: That clearly violates the rules of the World Trade Organization. 164 00:09:41,520 --> 00:09:43,920 Speaker 1: So if we want to have the moral high ground 165 00:09:44,640 --> 00:09:49,120 Speaker 1: and be persuasive in a sense that we're being wronged, 166 00:09:49,520 --> 00:09:51,600 Speaker 1: it seems to me we ought to be adhering to 167 00:09:51,640 --> 00:09:55,480 Speaker 1: the rules. Who who stands to lose more, the US 168 00:09:55,679 --> 00:10:02,160 Speaker 1: or China if the trade tensions do escalate, Well, I 169 00:10:02,200 --> 00:10:05,920 Speaker 1: I think we both lose a lot um and and 170 00:10:06,440 --> 00:10:08,960 Speaker 1: it's hard to say who loses more, but but the 171 00:10:09,040 --> 00:10:12,680 Speaker 1: point is it's damaging to both of us. You've seen 172 00:10:12,720 --> 00:10:15,240 Speaker 1: what the markets have done in the last two weeks, 173 00:10:15,400 --> 00:10:22,280 Speaker 1: and clearly that's in response partly to these aggressive trade actions. 174 00:10:23,120 --> 00:10:26,320 Speaker 1: A huge number of American firms are now integrated with 175 00:10:26,320 --> 00:10:29,280 Speaker 1: with Chinese firms. A lot of the parts we buy 176 00:10:30,000 --> 00:10:34,760 Speaker 1: come from China, and those supply chains are now being threatened, 177 00:10:35,320 --> 00:10:39,200 Speaker 1: and we're seeing the reflection of these threats uh in 178 00:10:39,800 --> 00:10:44,200 Speaker 1: in the stock evaluations of a lot of our firms. So, yes, 179 00:10:44,559 --> 00:10:49,400 Speaker 1: the Chinese will also lose by if we put tariffs 180 00:10:49,440 --> 00:10:53,199 Speaker 1: against their products, but our firms are also going to lose, 181 00:10:53,760 --> 00:10:56,720 Speaker 1: and I think it goes a threatened jobs of people 182 00:10:56,760 --> 00:10:59,600 Speaker 1: who work for those firms in the United States. So 183 00:11:00,000 --> 00:11:03,520 Speaker 1: to learn's you've been on the inside of these negotiations. 184 00:11:03,559 --> 00:11:06,240 Speaker 1: I'm sure you've dealt with China in particular, and I'm 185 00:11:06,240 --> 00:11:09,800 Speaker 1: sure that this issue was apparent to you back when 186 00:11:09,800 --> 00:11:13,440 Speaker 1: you are advising former President Bill Clinton. I'm wondering, is 187 00:11:13,440 --> 00:11:18,080 Speaker 1: there something about China's approach, what they would like, what 188 00:11:18,200 --> 00:11:22,240 Speaker 1: their priorities are with respect to trade, that is getting 189 00:11:22,280 --> 00:11:27,120 Speaker 1: lost in some of the some of the big talk. Well, 190 00:11:27,160 --> 00:11:32,640 Speaker 1: I think it's you know, China is has two features. First, 191 00:11:32,679 --> 00:11:36,079 Speaker 1: it's a very large and important economy, and that means 192 00:11:36,080 --> 00:11:39,319 Speaker 1: we have to take it seriously. But the Chinese a 193 00:11:39,360 --> 00:11:43,920 Speaker 1: s poor economy and they're only at about twenty five 194 00:11:44,559 --> 00:11:49,439 Speaker 1: level of American living standards, and poor countries typically use 195 00:11:49,520 --> 00:11:52,960 Speaker 1: their government to a much greater degree to enhance their 196 00:11:53,000 --> 00:11:58,480 Speaker 1: economic development. So uh so, there's basically attention in China. 197 00:11:58,960 --> 00:12:01,320 Speaker 1: It needs the risk of the world. It wants to 198 00:12:01,360 --> 00:12:03,640 Speaker 1: sell to the rest of the world and to export, 199 00:12:04,240 --> 00:12:06,360 Speaker 1: but at the same time it also wants to nurture 200 00:12:06,440 --> 00:12:10,600 Speaker 1: its own domestic economy and sometimes in a way that 201 00:12:10,640 --> 00:12:16,680 Speaker 1: discriminates against foreign firms. So China has a very complicated problem. 202 00:12:17,720 --> 00:12:21,040 Speaker 1: How does it engage with the world. On the one hand, 203 00:12:22,040 --> 00:12:25,120 Speaker 1: that means it ought to be more open, and on 204 00:12:25,160 --> 00:12:27,800 Speaker 1: the other hand, how does it develop its own economy? 205 00:12:27,880 --> 00:12:32,319 Speaker 1: And that leads it to want to encourage domestic development 206 00:12:32,360 --> 00:12:36,120 Speaker 1: of technology and foreign firms to bring their latest technology 207 00:12:36,200 --> 00:12:40,440 Speaker 1: to China. Professor Lawrence, there's a lot of focus on 208 00:12:40,600 --> 00:12:44,679 Speaker 1: which American companies stand to lose the most in a 209 00:12:44,840 --> 00:12:48,280 Speaker 1: possible trade war. People focus in on Boeing, for example, 210 00:12:48,400 --> 00:12:52,000 Speaker 1: or Caterpillar. Perhaps we ought to be asking the flip question, 211 00:12:52,040 --> 00:12:55,240 Speaker 1: which is which American companies stand to gain the most? 212 00:12:55,720 --> 00:12:59,840 Speaker 1: Should trade practices between the U S and China benefit 213 00:12:59,880 --> 00:13:05,000 Speaker 1: the most? Wait? Which companies will benefit the most from 214 00:13:05,000 --> 00:13:11,720 Speaker 1: fairer trade? Well, well, clearly our companies that produce intellectual property. 215 00:13:11,760 --> 00:13:14,160 Speaker 1: So if we took our I T firms, if you 216 00:13:14,240 --> 00:13:19,800 Speaker 1: took Microsoft as an example, Uh, their products are being 217 00:13:19,840 --> 00:13:24,800 Speaker 1: copied without the royalties being paid. So I would say 218 00:13:25,080 --> 00:13:29,920 Speaker 1: heavily U I T companies and and companies that that 219 00:13:30,080 --> 00:13:34,120 Speaker 1: have done a lot of research and development and basically 220 00:13:34,120 --> 00:13:38,199 Speaker 1: are being copied or ripped off by the Chinese. So 221 00:13:38,280 --> 00:13:40,560 Speaker 1: if we can level the playing field, if we can 222 00:13:40,640 --> 00:13:45,000 Speaker 1: ensure that they enforce intellectual property protection, it's those kinds 223 00:13:45,000 --> 00:13:50,280 Speaker 1: of companies that are going to benefit, not necessarily industrial companies. No. 224 00:13:50,640 --> 00:13:55,000 Speaker 1: In fact, that's what's interesting because the whole focus here 225 00:13:55,280 --> 00:13:58,840 Speaker 1: is of the policy has been very, very focused on 226 00:13:59,480 --> 00:14:02,080 Speaker 1: um or a heavy element of it has been on 227 00:14:02,160 --> 00:14:06,920 Speaker 1: intellectual property, but there could be some industrial companies, say 228 00:14:06,960 --> 00:14:10,760 Speaker 1: in the steel industry, for an aluminum, who are going 229 00:14:10,760 --> 00:14:15,840 Speaker 1: to get more protection and so uh those companies will gain. 230 00:14:16,520 --> 00:14:21,480 Speaker 1: There are solar panel uh producing companies who are now 231 00:14:21,520 --> 00:14:27,600 Speaker 1: getting more protection. So so so it's it's a complicated mix. Yes, 232 00:14:27,720 --> 00:14:30,520 Speaker 1: the steel industries are going to gain, but all of 233 00:14:30,520 --> 00:14:34,920 Speaker 1: the users of steel companies like Caterpillar and others could 234 00:14:34,920 --> 00:14:38,000 Speaker 1: well lose from those tariffs. Robert Lawrence, thank you so 235 00:14:38,120 --> 00:14:40,960 Speaker 1: much for being with us. Robert Lawrence, Professor of International 236 00:14:41,000 --> 00:14:44,080 Speaker 1: Trade and Investment at the John F. Kennedy School of 237 00:14:44,240 --> 00:14:48,600 Speaker 1: Government at Harvard University, also former economic advisor to the 238 00:14:48,720 --> 00:14:51,960 Speaker 1: former President Bill Clinton, and Senior Fellow at the Peterson 239 00:14:52,080 --> 00:15:11,720 Speaker 1: Institute for International Economics. Yesterday, as news emerged that Facebook 240 00:15:11,760 --> 00:15:15,320 Speaker 1: chief executive Mark Zuckerberg plan to head to Washington, d C. 241 00:15:15,560 --> 00:15:18,760 Speaker 1: To testify in front of Congress on April twelve, people 242 00:15:18,800 --> 00:15:22,760 Speaker 1: started talking about how he tends to sweat when he's nervous. 243 00:15:22,840 --> 00:15:24,880 Speaker 1: So with that image in mind, I want to bring 244 00:15:24,880 --> 00:15:28,120 Speaker 1: a Max Chafkin technology reporter from Bloomberg Business Week. Clearly 245 00:15:28,200 --> 00:15:30,920 Speaker 1: he's been sweating a lot over the past few weeks 246 00:15:31,000 --> 00:15:34,960 Speaker 1: and today they announced some measures that boosted their stock 247 00:15:35,720 --> 00:15:38,680 Speaker 1: a quarter of a percent. What are these measures? Yeah, 248 00:15:38,720 --> 00:15:41,480 Speaker 1: I I wouldn't get too excited about any of this, um, 249 00:15:41,520 --> 00:15:44,880 Speaker 1: but they said that they were redesigning the sort of 250 00:15:45,040 --> 00:15:48,840 Speaker 1: screen inside of the app where users can, um, you know, 251 00:15:48,920 --> 00:15:51,560 Speaker 1: update their privacy setting. So the idea is to make 252 00:15:51,600 --> 00:15:54,920 Speaker 1: it easier for people to say, you know, cut off 253 00:15:54,920 --> 00:15:57,600 Speaker 1: some of face weeks data access. Now, this is something 254 00:15:57,640 --> 00:15:59,920 Speaker 1: that Facebook. This is kind of Facebook's go to move 255 00:16:00,000 --> 00:16:03,200 Speaker 1: of sorry, I didn't I want to interrupt you, just 256 00:16:03,240 --> 00:16:05,720 Speaker 1: there for one second before you get on to sort 257 00:16:05,720 --> 00:16:09,600 Speaker 1: of the larger issue specifically, is this cutting off Facebook's 258 00:16:09,640 --> 00:16:13,480 Speaker 1: ability to sort of see what you do on other platforms, 259 00:16:13,480 --> 00:16:15,360 Speaker 1: in other words like Google or your you know, your 260 00:16:15,360 --> 00:16:18,160 Speaker 1: Google searches or your all the cookies that you incur. 261 00:16:18,280 --> 00:16:20,000 Speaker 1: Is this what we're talking about here? No, no, no, no, 262 00:16:20,280 --> 00:16:23,400 Speaker 1: This is just making it easier for you to sort 263 00:16:23,400 --> 00:16:25,600 Speaker 1: of toggle like whether or not you know you're sharing 264 00:16:25,600 --> 00:16:27,960 Speaker 1: your phone number with your Facebook friends or or things 265 00:16:28,000 --> 00:16:32,560 Speaker 1: like that. This is a very much an incremental step, UM, 266 00:16:32,840 --> 00:16:35,640 Speaker 1: and it kind of kind of continues what the position 267 00:16:35,640 --> 00:16:38,800 Speaker 1: that Facebook has historically taken, which is if you're upset 268 00:16:38,880 --> 00:16:41,680 Speaker 1: about the amount of data that's out there about you 269 00:16:41,720 --> 00:16:44,000 Speaker 1: on the internet, you know it's your job to sort 270 00:16:44,000 --> 00:16:46,120 Speaker 1: of fix it. And I think that is the sort 271 00:16:46,120 --> 00:16:49,800 Speaker 1: of philosophical debate that's been happening for a while in Europe, 272 00:16:49,840 --> 00:16:52,000 Speaker 1: and that is starting to move here. The question is 273 00:16:52,120 --> 00:16:57,320 Speaker 1: should Facebook proactively be doing more to keep users data safe? 274 00:16:57,440 --> 00:16:59,920 Speaker 1: And and right now, even with this um sort of 275 00:17:00,040 --> 00:17:02,120 Speaker 1: modest tweak that they've made, that's that sent the stock 276 00:17:02,160 --> 00:17:05,600 Speaker 1: price up just a tiny bit. Uh, It's like I said, 277 00:17:05,640 --> 00:17:08,040 Speaker 1: it's it's still saying you know, you still have to 278 00:17:08,080 --> 00:17:11,960 Speaker 1: do this. There's a difference between a lot of people 279 00:17:12,000 --> 00:17:16,040 Speaker 1: seeing information that you voluntarily put out there for a 280 00:17:16,080 --> 00:17:19,400 Speaker 1: pretty big network of people, right. I mean, on one hand, 281 00:17:19,440 --> 00:17:22,000 Speaker 1: you could say buy or beware. You agreed to let 282 00:17:22,000 --> 00:17:24,160 Speaker 1: people see it when you posted it there for everybody 283 00:17:24,160 --> 00:17:26,840 Speaker 1: to see. I mean, it's sort of tautology. There's a 284 00:17:26,920 --> 00:17:30,480 Speaker 1: difference with selling the data of all of your clicks 285 00:17:30,560 --> 00:17:33,160 Speaker 1: on that platform, of what links you click on, of 286 00:17:33,440 --> 00:17:36,240 Speaker 1: you know, who you follow, of you know the cookies 287 00:17:36,240 --> 00:17:39,560 Speaker 1: that you incur from other websites that allow advertisers to 288 00:17:39,680 --> 00:17:45,080 Speaker 1: target messages to you. Have they addressed that aspect they're 289 00:17:45,080 --> 00:17:48,720 Speaker 1: starting to UM. Last week, uh, sort of amid this 290 00:17:48,920 --> 00:17:52,600 Speaker 1: fear of the around Cambridge Analytica, this um, you know, 291 00:17:52,680 --> 00:17:57,760 Speaker 1: British consultancy that had basically improperly acquired some user user data, 292 00:17:57,920 --> 00:18:00,440 Speaker 1: Facebook sort of said they're gonna they're gonna do try 293 00:18:00,480 --> 00:18:03,480 Speaker 1: to do a better job cutting these third party apps 294 00:18:03,560 --> 00:18:06,160 Speaker 1: off if they're not using your data, and making it 295 00:18:06,240 --> 00:18:09,280 Speaker 1: easier for you to tell which apps have access to 296 00:18:09,320 --> 00:18:11,480 Speaker 1: your data. They've also sort of said they're going to 297 00:18:11,600 --> 00:18:15,879 Speaker 1: do audits of basically anyone who had access to this 298 00:18:15,960 --> 00:18:18,639 Speaker 1: kind of data to make sure that a sort of 299 00:18:18,680 --> 00:18:23,520 Speaker 1: Cambridge Analytica situation didn't happen someplace else. But the problem 300 00:18:24,040 --> 00:18:26,880 Speaker 1: is there's just so much of this sort of washing 301 00:18:26,880 --> 00:18:29,520 Speaker 1: around out there. It's it's also not clear like how 302 00:18:29,640 --> 00:18:32,240 Speaker 1: the audits would work or how they would um be 303 00:18:32,320 --> 00:18:35,240 Speaker 1: able to really know um from what we know of 304 00:18:35,320 --> 00:18:38,080 Speaker 1: this Cambridge Analytical situation. Facebook was aware of this for 305 00:18:38,119 --> 00:18:41,560 Speaker 1: a long time. Cambridge Analytica had said they had deleted 306 00:18:41,600 --> 00:18:44,399 Speaker 1: the data UM, and then it came out through the 307 00:18:44,440 --> 00:18:48,040 Speaker 1: New York Times is reporting that through whistleblower that they 308 00:18:48,080 --> 00:18:50,719 Speaker 1: in fact hadn't. So, so it's this kind of thing 309 00:18:50,720 --> 00:18:52,640 Speaker 1: where it's it's it's pretty hard to see how Facebook 310 00:18:52,640 --> 00:18:55,600 Speaker 1: addresses this in an easy way, and that's why, you 311 00:18:55,640 --> 00:18:58,480 Speaker 1: know the stock price is so depressed, uh over the 312 00:18:58,520 --> 00:19:01,040 Speaker 1: past two weeks. I'm just wondering, you know, how many 313 00:19:01,080 --> 00:19:03,880 Speaker 1: band aids could Facebook really throw on this or does 314 00:19:03,960 --> 00:19:10,200 Speaker 1: this problem really puncture something fundamentally about Facebook's business model. 315 00:19:11,960 --> 00:19:14,560 Speaker 1: We don't know yet, and but I do think there's 316 00:19:14,680 --> 00:19:17,320 Speaker 1: a chance and a non zero chance that this could 317 00:19:17,359 --> 00:19:21,360 Speaker 1: seriously impact Facebook's business model. The there is this sort, 318 00:19:21,480 --> 00:19:23,959 Speaker 1: like I said, there's this sort of philosophical question, do 319 00:19:24,040 --> 00:19:26,040 Speaker 1: you do you have to opt out or do you 320 00:19:26,080 --> 00:19:29,240 Speaker 1: have to opt in? You could imagine, uh, the FTC 321 00:19:29,359 --> 00:19:32,560 Speaker 1: is looking into Facebook once again. European regulators have been 322 00:19:32,600 --> 00:19:35,600 Speaker 1: pushing in this direction. Uh. You could imagine a rule 323 00:19:35,680 --> 00:19:38,640 Speaker 1: that sort of says that users have to check a box, 324 00:19:38,720 --> 00:19:40,720 Speaker 1: or check a bunch of boxes, or go through a 325 00:19:40,720 --> 00:19:44,639 Speaker 1: bunch of different screens to allow Facebook to use the 326 00:19:44,720 --> 00:19:47,480 Speaker 1: kind of data that they're using now in advertising. And 327 00:19:47,520 --> 00:19:49,600 Speaker 1: if users have to go through a bunch of steps, 328 00:19:49,640 --> 00:19:52,520 Speaker 1: that could cause many many of them to stop doing that, 329 00:19:52,600 --> 00:19:56,760 Speaker 1: which could in essence break Facebook's amazing business model right 330 00:19:56,760 --> 00:19:59,520 Speaker 1: now now I think, on the other hand, I think 331 00:19:59,680 --> 00:20:02,440 Speaker 1: that is probably not the most likely outcome. I think 332 00:20:02,440 --> 00:20:05,600 Speaker 1: the most likely outcome is Facebook makes some small fixes 333 00:20:05,760 --> 00:20:08,399 Speaker 1: and and we all get outraged for a while, and 334 00:20:08,600 --> 00:20:12,240 Speaker 1: people probably go back to to using this exceedingly popular app. 335 00:20:12,440 --> 00:20:17,320 Speaker 1: What about April twelve, what are you expecting to hear Zuckerberg? 336 00:20:17,320 --> 00:20:21,000 Speaker 1: Has you mentioned the sweating he has, Well, that's such 337 00:20:21,040 --> 00:20:24,600 Speaker 1: a visceral image. I mean, he's gotten better. Um. I 338 00:20:24,600 --> 00:20:27,280 Speaker 1: think people who sweat with with Yeah, sure, with his 339 00:20:27,280 --> 00:20:31,879 Speaker 1: temperature control and also with his with his poise. I 340 00:20:31,920 --> 00:20:35,480 Speaker 1: think if if you watch the CNN UM interview that 341 00:20:35,480 --> 00:20:38,280 Speaker 1: that that happened last week, I would say it was 342 00:20:38,400 --> 00:20:42,359 Speaker 1: maybe above average for him, probably below average for you know, 343 00:20:42,440 --> 00:20:47,040 Speaker 1: your average chief executive, but definitely definitely an improvement. I 344 00:20:47,080 --> 00:20:51,399 Speaker 1: think that where Facebook has struggled is that this is 345 00:20:51,440 --> 00:20:56,320 Speaker 1: a company that is super cerebral, and Zuckerberg has sort 346 00:20:56,320 --> 00:20:59,960 Speaker 1: of not been willing to engage on a kind of 347 00:21:00,080 --> 00:21:04,800 Speaker 1: normal emotional level. He hasn't really apologized, um, and I 348 00:21:04,840 --> 00:21:08,240 Speaker 1: think you know, he would do well to to just 349 00:21:08,560 --> 00:21:11,600 Speaker 1: to stop with the pretense of of trying to sort of, 350 00:21:12,200 --> 00:21:14,600 Speaker 1: you know, come up with like a zillion technical reasons 351 00:21:14,600 --> 00:21:17,800 Speaker 1: why Facebook did nothing wrong. Uh, and just say hey, 352 00:21:17,880 --> 00:21:20,760 Speaker 1: you know, we're sorry, We're trying to fix this. UM. 353 00:21:20,800 --> 00:21:22,440 Speaker 1: I think I think if we get something like that 354 00:21:22,440 --> 00:21:24,760 Speaker 1: that that will probably move things in a positive direction 355 00:21:24,800 --> 00:21:27,320 Speaker 1: for the company. So he has about two weeks to 356 00:21:27,400 --> 00:21:29,440 Speaker 1: learn how to eat crow. Max Chaffin, thank you so 357 00:21:29,520 --> 00:21:33,000 Speaker 1: much for joining me. Always love speaking with you. Max Chaffin, 358 00:21:33,080 --> 00:21:37,240 Speaker 1: Technology reporter for Bloomberg Business Week. It has been a 359 00:21:37,280 --> 00:21:42,159 Speaker 1: really difficult week for Max between Facebook, Uber and the like. 360 00:21:42,280 --> 00:21:44,320 Speaker 1: We'll be talking more with him, I'm sure in the 361 00:21:44,400 --> 00:22:02,880 Speaker 1: upcoming weeks. We talk about alternative assets. Sometimes, I want 362 00:22:02,920 --> 00:22:05,600 Speaker 1: to talk about an asset that has a happens to 363 00:22:05,640 --> 00:22:07,879 Speaker 1: have an additional benefit of being able to make you 364 00:22:07,920 --> 00:22:11,160 Speaker 1: feel pretty good and actually tastes good too. I'm talking 365 00:22:11,160 --> 00:22:14,000 Speaker 1: about wine, and we're talking with Steven Ronically, if he 366 00:22:14,040 --> 00:22:17,520 Speaker 1: has global beverage strategist at Robbo Bank International, he did 367 00:22:17,560 --> 00:22:20,600 Speaker 1: not bring a bottle of wine with him. Apologies, well, 368 00:22:20,720 --> 00:22:23,640 Speaker 1: but we'll let that slide. Steven, I want to talk 369 00:22:23,680 --> 00:22:27,240 Speaker 1: with you about wine in the context of what we've 370 00:22:27,280 --> 00:22:30,479 Speaker 1: seen in high end art markets over the past few years. 371 00:22:30,760 --> 00:22:35,439 Speaker 1: We've seen huge auctions, record prices being paid as a 372 00:22:35,480 --> 00:22:39,200 Speaker 1: lot of very wealthy families and individuals seek some kind 373 00:22:39,320 --> 00:22:43,000 Speaker 1: of uncorrelated asset. To what degree are you seeing the 374 00:22:43,080 --> 00:22:47,080 Speaker 1: same type of activity in high end wine markets? Yeah, 375 00:22:47,080 --> 00:22:50,080 Speaker 1: it's certainly become a very interesting asset class. People looking 376 00:22:50,119 --> 00:22:53,200 Speaker 1: at wine as an alternative investment, and and it does 377 00:22:53,280 --> 00:22:56,680 Speaker 1: perform well overall. I think the returns it's not something 378 00:22:56,680 --> 00:22:58,240 Speaker 1: that I that I kind of track on a day 379 00:22:58,240 --> 00:23:00,240 Speaker 1: to day basis, but the returns that I've seen have 380 00:23:00,280 --> 00:23:03,360 Speaker 1: been have been very, very attractive. It's it's it's been 381 00:23:03,400 --> 00:23:06,800 Speaker 1: something that people have looked at as an alternative investment, 382 00:23:06,800 --> 00:23:09,879 Speaker 1: and as you say, worst case scenario, you can drown 383 00:23:09,920 --> 00:23:13,720 Speaker 1: your sorrows if things go bad. I guess the reason 384 00:23:13,720 --> 00:23:16,159 Speaker 1: why I start there is I'm trying to understand to 385 00:23:16,320 --> 00:23:19,000 Speaker 1: what degree the wine market I'm talking to high end 386 00:23:19,000 --> 00:23:24,080 Speaker 1: wine market is uh composed of connoisseurs, and to what 387 00:23:24,200 --> 00:23:28,040 Speaker 1: degree is it does it include a lot of speculators? Uh, 388 00:23:28,440 --> 00:23:31,960 Speaker 1: there's certainly a mix. I think investors are certainly getting 389 00:23:32,000 --> 00:23:34,359 Speaker 1: into it looking at it as you know, kind of 390 00:23:34,400 --> 00:23:39,720 Speaker 1: looking and seeing the the uh, the improvement of value 391 00:23:39,720 --> 00:23:42,720 Speaker 1: that you've seen in wine as an asset class. It's 392 00:23:42,720 --> 00:23:46,280 Speaker 1: performed very well. But then there's also a whole different 393 00:23:46,320 --> 00:23:48,920 Speaker 1: set of folks that that kind of get into collecting 394 00:23:48,960 --> 00:23:51,879 Speaker 1: one because they're passionate about it and and try to 395 00:23:51,920 --> 00:23:55,560 Speaker 1: find unique vintages and you know, building up their wine 396 00:23:55,560 --> 00:23:58,800 Speaker 1: cellar and having something to entertain and so forth. How 397 00:23:58,880 --> 00:24:02,920 Speaker 1: much have some end prices increased? You know, it's really 398 00:24:02,960 --> 00:24:06,000 Speaker 1: interesting when when you look at wine prices, it's it's 399 00:24:06,560 --> 00:24:10,359 Speaker 1: it's been um at the retail level. It's been the 400 00:24:10,440 --> 00:24:12,040 Speaker 1: high end and the very low end that have been 401 00:24:12,080 --> 00:24:14,440 Speaker 1: able to take price increases. The middle kind of that 402 00:24:14,600 --> 00:24:17,560 Speaker 1: kind of ten to twenty dollars or seven to twenty 403 00:24:17,640 --> 00:24:21,600 Speaker 1: dollars that there's a lot of there's a lot of competition, 404 00:24:21,640 --> 00:24:24,600 Speaker 1: a lot of new players coming in, new brands being introduced, 405 00:24:24,840 --> 00:24:27,399 Speaker 1: a lot of there's some pricing pressure in that segment 406 00:24:27,680 --> 00:24:31,639 Speaker 1: at retail. But the low end, because uh, they've been 407 00:24:31,680 --> 00:24:34,240 Speaker 1: able to take price increases, supply is kind of dried 408 00:24:34,320 --> 00:24:37,080 Speaker 1: up globally. And then at the high end there there 409 00:24:37,119 --> 00:24:42,840 Speaker 1: seems to be appetite from uh, from from fine wine 410 00:24:42,880 --> 00:24:45,679 Speaker 1: buyers to to accept price increases. And part of it 411 00:24:45,680 --> 00:24:50,120 Speaker 1: is because you have limited limited growth in places like Napa, 412 00:24:50,720 --> 00:24:53,439 Speaker 1: you can't plant any more grapes. People understand that that 413 00:24:53,480 --> 00:24:56,359 Speaker 1: there's more and more demand for some of these wines. Uh, 414 00:24:56,520 --> 00:24:58,880 Speaker 1: and you can't and supply is constrained. Can you give 415 00:24:58,920 --> 00:25:01,120 Speaker 1: us a sense of just how much some things have 416 00:25:01,119 --> 00:25:03,679 Speaker 1: have increased on the high end in cost? Well, you know, 417 00:25:03,720 --> 00:25:05,280 Speaker 1: we one of the things that we look at a 418 00:25:05,280 --> 00:25:09,040 Speaker 1: lot is great pricing in Napa uh. And that's just 419 00:25:09,119 --> 00:25:13,280 Speaker 1: been growing astronomically lately. I think, you know, just a 420 00:25:13,320 --> 00:25:16,320 Speaker 1: few years ago, it was i would say around four 421 00:25:16,400 --> 00:25:19,199 Speaker 1: or five thousand dollars. Now we're up to you know, 422 00:25:19,200 --> 00:25:21,720 Speaker 1: we're hitting closer to eight thousand dollars a ton. And 423 00:25:22,080 --> 00:25:24,600 Speaker 1: when you look at how it's spread out, there used 424 00:25:24,640 --> 00:25:26,800 Speaker 1: to be a very good chunk of wine grapes the 425 00:25:26,880 --> 00:25:30,200 Speaker 1: Napa Valley Cabernet sauvignon that would sell for about ten 426 00:25:30,200 --> 00:25:35,040 Speaker 1: percent of the crop would sell for under Now there's 427 00:25:35,560 --> 00:25:37,560 Speaker 1: almost none of that left. All of that is getting 428 00:25:37,560 --> 00:25:39,440 Speaker 1: bit up into higher things. And when you look out, 429 00:25:39,480 --> 00:25:42,200 Speaker 1: you see, you know, lots and lots of a good 430 00:25:42,280 --> 00:25:45,159 Speaker 1: chunk maybe five or ten percent, selling for fifteen thousand 431 00:25:45,240 --> 00:25:48,280 Speaker 1: dollars a ton, and that's that's just an astronomical price. 432 00:25:48,359 --> 00:25:51,440 Speaker 1: And by global standards. When somebody who spends a couple 433 00:25:51,440 --> 00:25:54,320 Speaker 1: of thousand dollars on a bottle of wine be worried 434 00:25:54,400 --> 00:25:57,159 Speaker 1: about opening it and finding out it's a vinegar, I 435 00:25:57,160 --> 00:26:00,200 Speaker 1: think if you're spending yeah, I mean really used, got 436 00:26:00,240 --> 00:26:02,400 Speaker 1: a serious concern and maybe they're not planning to ever 437 00:26:02,760 --> 00:26:05,639 Speaker 1: open it. I don't know. I think if you're I 438 00:26:05,640 --> 00:26:08,680 Speaker 1: think it is a concern. But I think if if 439 00:26:08,680 --> 00:26:11,160 Speaker 1: you're spending thousands of dollars on a bottle of wine, 440 00:26:11,200 --> 00:26:14,200 Speaker 1: you can you can absorb that cost. Let's talk about 441 00:26:14,320 --> 00:26:17,960 Speaker 1: the method of sales. I know, certainly the way that 442 00:26:18,040 --> 00:26:21,119 Speaker 1: people are buying clothes and food has changed and moved 443 00:26:21,160 --> 00:26:24,600 Speaker 1: more online. What about wine, Yeah, that's that's been the 444 00:26:24,600 --> 00:26:26,720 Speaker 1: subject of a study that we've just put out looking 445 00:26:26,720 --> 00:26:29,520 Speaker 1: at the growth and online in in e commerce and 446 00:26:29,560 --> 00:26:32,760 Speaker 1: online wine sales, and and it's been it's been exploding 447 00:26:32,840 --> 00:26:35,119 Speaker 1: through a number of different channels. You know, you have 448 00:26:35,320 --> 00:26:37,879 Speaker 1: kind of the the drizzlies of the world, people buying 449 00:26:37,960 --> 00:26:42,240 Speaker 1: for for immediate delivery. You have specialty wine retailers like 450 00:26:42,359 --> 00:26:45,800 Speaker 1: wine dot Com and others, and you have kind of 451 00:26:45,880 --> 00:26:48,879 Speaker 1: e commerce, and then there's online grocery, and you know, 452 00:26:48,920 --> 00:26:51,800 Speaker 1: the grocers have been kind of lagging behind the rest 453 00:26:52,040 --> 00:26:56,719 Speaker 1: of of retailers. The obviously, the the acquisition of of 454 00:26:56,960 --> 00:26:59,240 Speaker 1: Whole Foods by Amazon is kind of lit a fire 455 00:26:59,359 --> 00:27:02,960 Speaker 1: under every And you know, that's where we see enormous 456 00:27:03,000 --> 00:27:05,800 Speaker 1: potential for growth, particularly for one So who is the 457 00:27:05,800 --> 00:27:09,000 Speaker 1: biggest beneficiary from that try and accelerating and who is 458 00:27:09,040 --> 00:27:11,800 Speaker 1: potentially the biggest loser. Well, you know, this is something 459 00:27:11,800 --> 00:27:13,760 Speaker 1: that we talk about a lot. I think there there's 460 00:27:13,800 --> 00:27:17,880 Speaker 1: opportunities for everyone. I think there's great opportunities for retailers 461 00:27:17,960 --> 00:27:20,800 Speaker 1: to build this up. They still have some pieces to 462 00:27:20,880 --> 00:27:23,080 Speaker 1: figure out. Some of them are a bit behind in 463 00:27:23,119 --> 00:27:25,160 Speaker 1: the development of their website. They have to figure out 464 00:27:25,240 --> 00:27:28,560 Speaker 1: last mild deliveries, etcetera. But I think the you know, 465 00:27:28,600 --> 00:27:31,720 Speaker 1: in terms of brand owners, we see big opportunities for 466 00:27:31,880 --> 00:27:35,919 Speaker 1: large brand owners to continue shifting sales online. Uh. Small 467 00:27:35,960 --> 00:27:38,000 Speaker 1: brand owners can look at this and say, hey, you know, 468 00:27:38,240 --> 00:27:41,600 Speaker 1: there's virtually limitless shelf space online. We have a chance 469 00:27:41,640 --> 00:27:44,320 Speaker 1: to gain share. But then the other one that we 470 00:27:44,400 --> 00:27:46,119 Speaker 1: kind of look at, and if you pull up some 471 00:27:46,160 --> 00:27:50,280 Speaker 1: of these websites from retailers is private label. Private label 472 00:27:50,320 --> 00:27:53,000 Speaker 1: has a great chance to grow share because the retailer 473 00:27:53,040 --> 00:27:55,680 Speaker 1: can position them on that first page. So it's it's 474 00:27:55,760 --> 00:27:58,280 Speaker 1: it's gonna be for brand owners. It's going to be 475 00:27:58,320 --> 00:28:00,919 Speaker 1: who figures out how to how to really build brands 476 00:28:00,960 --> 00:28:05,160 Speaker 1: online and who invests in search engine optimization and all 477 00:28:05,160 --> 00:28:07,720 Speaker 1: of those things to be successful. You want to make 478 00:28:07,720 --> 00:28:10,159 Speaker 1: sure that you get that first sale because then you 479 00:28:10,240 --> 00:28:14,040 Speaker 1: pop up. So who's the biggest brick and mortar wine seller. 480 00:28:15,040 --> 00:28:18,040 Speaker 1: Believe it's still Costco Total Wine and more has been 481 00:28:18,119 --> 00:28:21,920 Speaker 1: has been growing very aggressively. Both both do a great 482 00:28:22,000 --> 00:28:26,560 Speaker 1: job and and then you have your your traditional retailers 483 00:28:26,600 --> 00:28:29,440 Speaker 1: like Krogers and safe Ways that that sell a fair 484 00:28:29,440 --> 00:28:31,840 Speaker 1: amount of wine as well. Do you order one online? 485 00:28:32,680 --> 00:28:35,439 Speaker 1: I have? It's it's challenging, and this is something that 486 00:28:35,480 --> 00:28:37,080 Speaker 1: we talk about a lot. You know, if you want 487 00:28:37,080 --> 00:28:39,800 Speaker 1: to get uh kind of a media delivery, if you 488 00:28:39,800 --> 00:28:43,600 Speaker 1: want to shop online, like when you're buying groceries where 489 00:28:43,600 --> 00:28:46,120 Speaker 1: I live in in Westchester, it's it's harder to get 490 00:28:46,120 --> 00:28:49,120 Speaker 1: it delivered. And that's the problem. That's the challenge that 491 00:28:49,120 --> 00:28:51,560 Speaker 1: that online has because you have to have somebody there 492 00:28:51,600 --> 00:28:54,320 Speaker 1: to sign for it, and then it creates a logistical 493 00:28:54,360 --> 00:28:57,000 Speaker 1: problem for delivery of the entire package. If you have 494 00:28:57,120 --> 00:28:59,920 Speaker 1: wine in that right. And also if you're going to 495 00:29:00,000 --> 00:29:02,040 Speaker 1: somebody's dinner party and you realize that the last minute 496 00:29:02,080 --> 00:29:04,040 Speaker 1: you need a bottle of wine, it doesn't work to 497 00:29:04,080 --> 00:29:06,480 Speaker 1: suddenly just go and press a button and then wait 498 00:29:06,520 --> 00:29:08,760 Speaker 1: for a couple of days. No, but that's what the 499 00:29:08,840 --> 00:29:11,840 Speaker 1: Drizzly and many bars do really well. Right. They can 500 00:29:11,880 --> 00:29:14,200 Speaker 1: do that because they're they're local if you have access 501 00:29:14,280 --> 00:29:16,520 Speaker 1: to them. Steven Ronic Cleve, thank you so much for 502 00:29:16,560 --> 00:29:20,000 Speaker 1: being with us. Steven Roni Cleve is global beverages strategist. 503 00:29:20,440 --> 00:29:22,600 Speaker 1: Fabulous job. By the way, I can only begin to 504 00:29:22,680 --> 00:29:26,680 Speaker 1: imagine what your tours include. Oh no, no, life is hard. 505 00:29:27,000 --> 00:29:30,320 Speaker 1: Oh life seems brutal for you. Steven Ronic, Global Beverages 506 00:29:30,360 --> 00:29:36,520 Speaker 1: Strategists at Rabobank International. Thanks for listening to the Bloomberg 507 00:29:36,560 --> 00:29:39,200 Speaker 1: P and L podcast. You can subscribe and listen to 508 00:29:39,240 --> 00:29:43,800 Speaker 1: interviews at Apple Podcasts, SoundCloud or whatever podcast platform you prefer. 509 00:29:44,200 --> 00:29:47,760 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 510 00:29:47,800 --> 00:29:51,080 Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast. 511 00:29:51,120 --> 00:30:01,360 Speaker 1: You can always catch us worldwide on Bloomberg Radio.