Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 1: Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: We brought you a lot of earnings. The big one
Speaker 2: we want to focus on, though, of course, is Amazon's
Speaker 2: second quarter online stores net sales coming in above estimates.
Speaker 2: North American net sales for the second quarter come in
Speaker 2: above estimates, Physical store net sales come in above estimates,
Speaker 2: second quarter subscription service net sales come in in slightly
Speaker 2: above estimates, and operating income, that ever important one, coming
Speaker 2: in way above estimates. The estimates were for four point
Speaker 2: seven to two billion, and we're seeing results of seven
Speaker 2: point six to eight billion. Stock up more than six
Speaker 2: percent in the postmarket. Right now, I want to bring
Speaker 2: in senior US retail analysts for Bloomberg Intelligence, Punamguoyle, who
Speaker 2: has had exactly seven minutes to go through this tire report. Poonum,
Speaker 2: give us the big takeaways you have.
Speaker 3: Yeah, sure, so, just looking at the press release really quickly,
Speaker 3: it looks good on all fronts. I really can't find
Speaker 3: anything bad to say today, I think what caught us
Speaker 3: by surprise and in a good way is really AWS.
Speaker 3: You know, we were thinking that AWS sales would have
Speaker 3: slowed given just commentary we had heard from Microsoft, but
Speaker 3: those came in above expectations and they said the business stabilized. Also,
Speaker 3: guidance was ahead of consensus. So overall, really across the board,
Speaker 3: we're seeing pretty good momentum at Amazon.
Speaker 4: Well, talk to me about Amazon's retail business as well,
Speaker 4: because we know the analysts have been looking for signs
Speaker 4: that those margins are improving after their cost cutting measures.
Speaker 4: I know that you're just looking through all of this, poonam,
Speaker 4: but what do we know so far about that?
Speaker 3: Yeah, I think the cost cutting is definitely helping the
Speaker 3: keep in mind that they continue to invest in that
Speaker 3: fast and free shipping and really speeding up those timelines.
Speaker 3: So I think the margin story, more than on the
Speaker 3: retail side, is just ab after turning to growth and
Speaker 3: really driving up that profitability to allow for other areas
Speaker 3: of investment is key here. But we will continue to
Speaker 3: see them really, you know, remove costs where they're unnecessary
Speaker 3: or just not driving the ROI that we'd like to
Speaker 3: see from Amazon.
Speaker 2: I was kind of joking Punham a few minutes ago
Speaker 2: when I talked about, you know, having to take a
Speaker 2: drink when you saw a mention of AI, just because
Speaker 2: it's totally what investors want to see. And again, I
Speaker 2: know you're a retail analyst, senior retail analyst for Bloomberg Intelligence,
Speaker 2: but we can't talk about Amazon without talking about AWS.
Speaker 2: And a big portion of Andanty Jasse's statement is dedicated
Speaker 2: to what AWS has been doing when it comes to
Speaker 2: generative AI in the cloud. What do investors need to
Speaker 2: know about that?
Speaker 3: Yeah, I think AI is going to be in every
Speaker 3: single conversation we hear from here on for many years
Speaker 3: to come, whether it's retail or tech companies. And Amazon
Speaker 3: will continue to invest in AI and will continue to
Speaker 3: use it as a competitive edge, whether it's for AWS
Speaker 3: or even for its online business. Both on the cost
Speaker 3: side avolves on the marketing and sales side, where it
Speaker 3: can really tailor assortments to better meat customers demand and
Speaker 3: really drive up that conversion. So we don't see that
Speaker 3: conversation going away at all. It is going to take
Speaker 3: center stage. How we're going to determine the actual ROI
Speaker 3: from each of those initiatives within AI. It's probably going
Speaker 3: to be a little harder to really tell.
Speaker 4: One of the other things that I'm fascinated in because
Speaker 4: I'm such a participant in it is the Prime Day event.
Speaker 4: Looks like in the Internet's report, more than three hundred
Speaker 4: and seventy five million items purchased customers, saving more than
Speaker 4: two point five billion dollars poonam. I know that the
Speaker 4: market typically sloughs off Prime Day, but what does the
Speaker 4: earning statement tell you about both Prime Day and the
Speaker 4: future of Amazon as kind of a retailer that consumers
Speaker 4: are going to go to for these purchases.
Speaker 3: Yeah, I think Prime Day is an important event for Amazon.
Speaker 3: You know, they hold it twice a year, and they
Speaker 3: already spoke about it once right after the event where
Speaker 3: they that the first Prime Day was actually the biggest
Speaker 3: online sales day in their history, which means it's their
Speaker 3: past Cyber Monday last year as well. So that's encouraging,
Speaker 3: and it tells us that the consumer is seeking value
Speaker 3: and they go to Amazon to find that value. We're
Speaker 3: in a period of a time where the consumer is
Speaker 3: really stretched down their dollars. Discretionary spending has been mixed
Speaker 3: and slowing as we move into the back half of
Speaker 3: the year for the all important holiday season. Amazon needs
Speaker 3: to continue to stay on top of consumer's mind, show
Speaker 3: their value promise, and all still show that they can
Speaker 3: have a pretty broad assortment at a good price and
Speaker 3: can get it to you fast for no cost.
Speaker 2: If you're a prime number, Is Amazon where you find value?
Speaker 5: Though?
Speaker 2: Has it positioned itself as a value leader, especially in
Speaker 2: relation to and in comparison to Walmart and what Walmart's
Speaker 2: trying to do with its own prime competition.
Speaker 3: Absolutely, I think you know, when you think of value,
Speaker 3: Amazon definitely provides value, especially when you look across Amazon's
Speaker 3: owned brands, right, I think that's where they can press
Speaker 3: the pedal a little further. Amazon basic items are provided
Speaker 3: at a pretty good value to consumers. And then more
Speaker 3: than value, it's about convenience, right. It's the fact that
Speaker 3: you go to Amazon and you type in that you
Speaker 3: want the cell phone charger, and there you go. You
Speaker 3: have a laundry list of cell phone chargers that you
Speaker 3: could choose from, some branded, some non branded, and you
Speaker 3: can get them same day.
Speaker 2: Okay, you're making me, you're reminding me about advertising advertising revenue.
Speaker 2: What's Amazon doing. What are we seeing with the most
Speaker 2: recent quarter when it comes to ad revenue?
Speaker 3: Great, it was up twenty two percent in the quarter
Speaker 3: and continues to be a driving force or Amazon. They're
Speaker 3: doing really well on the advertising front. We continue to
Speaker 3: expect to see double digit gains there. And remember advertising
Speaker 3: that one business that probably could boast the highest profit margins,
Speaker 3: even better than AWS. So as Amazon scales that business,
Speaker 3: it's only going to continue to help drive its bottom line.
Speaker 4: They also mentioned in the report there are premieres of
Speaker 4: additional Amazon original films and series, of course, I mean
Speaker 4: when a marvelous Missus mazol on some other great performers
Speaker 4: for them. Is there anything of note to you when
Speaker 4: it comes to the Prime video story in this earning
Speaker 4: statement here?
Speaker 3: Yes, So you know, we just ran some data earlier
Speaker 3: this month or last month, I should say, in July.
Speaker 3: The summer I Turned Pretty was released on July thirteen,
Speaker 3: and that's season two, and we saw a huge uptick
Speaker 3: in downloads on Prime Video. So content is king for
Speaker 3: Prime Video. The more better the content that rolls out
Speaker 3: on Amazon, we think they'll definitely bring up interest in
Speaker 3: both getting new members onto Prime as well as just
Speaker 3: keeping members that are on it, still interested and really
Speaker 3: using the platform more and more in their daily lives.
Speaker 2: Puna, Before we let you go talk to us about
Speaker 2: how to read into the strength of the consumer. You
Speaker 2: said that the consumers stretched right now, they're looking for value.
Speaker 2: Where else can we look in Amazon report to give
Speaker 2: us an idea for just how the American consumer, how
Speaker 2: the American economy is doing.
Speaker 3: Yeah, I think the consumer is stretched, but the consumer
Speaker 3: is making trade off. So you're going to see an
Speaker 3: area of retail where some consumers will choose Amazon and
Speaker 3: some will choose to move away from some of the
Speaker 3: other retailers where they don't really have value, nor are
Speaker 3: they differentiated, and nor can they provide convenience. So we're
Speaker 3: going to see a mixed bag of earnings. We just
Speaker 3: had Revolve report last night, and you know, they were
Speaker 3: talking about the consumer being weaker, especially on the luxury end,
Speaker 3: which is interesting to hear. And then we've heard dollar
Speaker 3: stores and others talk about how the value consumer is stretched.
Speaker 3: So it's really about the consumer making trade offs and
Speaker 3: going to the retailer that has exactly what they want
Speaker 3: to meet their needs. And Amazon fits that bucket is
Speaker 3: what they.
Speaker 2: Dispersed Bloomberg Intelligence Senior US retail analyst Punamguayl.
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Speaker 4: Another piece of history being made today as former President
Speaker 4: Trump is entering the courtroom. He's inside the courtroom for
Speaker 4: his arraignment on those January sixth charges. This is his
Speaker 4: third indictment as former president, here again appearing in a
Speaker 4: federal courtroom in Washington to be arraigned on those charges
Speaker 4: that he conspired to remain in office despite the loss
Speaker 4: of the twenty twenty election. So we are going to
Speaker 4: dig into this story right now. We've got Bloomberg Law
Speaker 4: host and legal analyst June Grasso, and we've also got
Speaker 4: Bloomberg US Legal reporter David Veraicus. I hope I said
Speaker 4: that correctly. Day, Thank you so much. Okay, on the
Speaker 4: latest with the Trump indictment and that arrangement today, David,
Speaker 4: I want to start with you because we've gotten used
Speaker 4: to covering this type of event here when it comes
Speaker 4: to the former President. What is significant about today?
Speaker 6: What is different for you?
Speaker 4: What are you watching?
Speaker 7: Well, this is what's known as an initial appearance and
Speaker 7: an arraignment, where Trump will be formally notified of the
Speaker 7: charges and he's expected to enter a not guilty plea.
Speaker 7: The judge will also set bail terms, and it's expected
Speaker 7: that he would be released until his trial. We don't
Speaker 7: have a trial date yet. It's possible the judge would
Speaker 7: set a trial date, but probably not. This is a
Speaker 7: magistrate judge, and it's the district judge who would probably
Speaker 7: set the trial date and a schedule for pre trial
Speaker 7: hearings and motions.
Speaker 2: David, I want to stick with you for one more
Speaker 2: and then we'll bring in in June. But you know,
Speaker 2: with Maddy was alluding to this with President Trump in
Speaker 2: appearing before court, this is the third indictment, and I
Speaker 2: think there's a risk that people sort of think to themselves, Okay,
Speaker 2: well this is now normal. This is not normal. This
Speaker 2: is not normal in US history. Right now we're seeing
Speaker 2: a foecount indictment that accuses President Trump of conspiring to
Speaker 2: defraud the US, interfering with the counting votes in twenty twenty,
Speaker 2: obstructing conspiring to obstruct Congress's certification of the election results,
Speaker 2: and conspiring against the right to vote. I mean, these
Speaker 2: are some of these things that were in an indictment.
Speaker 2: Go back to the wake of the Civil Rights Act,
Speaker 2: was voting.
Speaker 7: This is an extraordinary moment in our nation's history. The
Speaker 7: Justice Department has accused him essentially of an assault on democracy,
Speaker 7: and you know, Trump and his supporters say that he
Speaker 7: had a free speech right to say what he said
Speaker 7: at the time, and that the prosecutors will not be
Speaker 7: able to show that he had criminal intent here. It's
Speaker 7: going to be a tremendous legal battle, and it's also
Speaker 7: going to be extraordinary over the next few months because
Speaker 7: of the need to set proper schedules between the three trials,
Speaker 7: and there's also the possibility of a fourth indictment. This
Speaker 7: is Georgia, right in Georgia and Atlanta, so we've never
Speaker 7: seen anything like this in our history. And all of
Speaker 7: this is bookending Trump's third run for the White House.
Speaker 4: I just quickly want to stick with you on the
Speaker 4: Justice Department because you mentioned that I'm curious about how
Speaker 4: much feedback we're going to see the Justice Department getting
Speaker 4: in terms of the criticism that it's been this is political,
Speaker 4: that this is a political move. How much do you
Speaker 4: anticipate that commentary coming to the Justice Department.
Speaker 7: I expect there's going to be a sustained political attack
Speaker 7: from the Republican Party, from Trump allies, from conservative media,
Speaker 7: and I also expect it's likely that the Justice Department
Speaker 7: won't respond except in court and so well. Trump can
Speaker 7: make a great deal of comments on social media and live,
Speaker 7: the Justice Department is greatly constrained in what they can say.
Speaker 2: I want to bring in June Grosso. She is the
Speaker 2: Bloomberg Law host and legal analyst here at Bloomberg June.
Speaker 2: Every time in the last forty eight hours that we've
Speaker 2: gone by your desk, you've been reading this indictment. I
Speaker 2: don't know how many times you've redered it. This really
Speaker 2: three times? Okay, so it's about forty five pages. Give
Speaker 2: us your takeaways as you've spent so much time in it,
Speaker 2: and really the gravity of it.
Speaker 8: Well, it's hard to overestimate or the gravity of this.
Speaker 8: And this is an attack on an alleged attack on
Speaker 8: American democracy, And what strikes me is the relentlessness with
Speaker 8: which former President Trump is alleged to have acted in
Speaker 8: this matter. He was told over and over again, and
Speaker 8: it's really set out carefully in this indictment. So they
Speaker 8: talk about how many times he was told and how
Speaker 8: many people he was told that the elections were fair,
Speaker 8: and they list, and that's why I think it's important
Speaker 8: for people to read this. They list, for example, the
Speaker 8: defendant's vice president, the senior leaders of the Justice Department,
Speaker 8: Director of National and Intelligence, Department of Homeland Securities, Cybersecurity
Speaker 8: and Infrastructure Security Agency, senior White House attorney, senior staffers
Speaker 8: on the defendants re election campaign, state legislators and officials,
Speaker 8: state and federal courts. All those people, in different ways
Speaker 8: told President drump that the election, there was no fraud
Speaker 8: in the election. And still he went forward and repeated
Speaker 8: the same things that they had told him were false.
Speaker 8: For example, he said more than ten thousand voters in
Speaker 8: Georgia were actually dead. He said that there were two
Speaker 8: hundred five thousand more votes than voters in Pennsylvania.
Speaker 2: On and on, all things demonstrably untrue.
Speaker 8: Yes, and suitcases of fake votes being counted.
Speaker 2: In Georgia, conspiracy theories.
Speaker 8: It's if you look at this, if you read it
Speaker 8: you'll see how the Special Council has laid out each
Speaker 8: and every detail, though I'm sure he is not given
Speaker 8: all the details out in this and it's overwhelming.
Speaker 7: I would also point out there's going to be a
Speaker 7: legal question of Trump really believe these claims that there
Speaker 7: was fraud in the election, and how do you prove
Speaker 7: that though, Well, they have a lot of people around
Speaker 7: Trump who said that he told me this, or he
Speaker 7: told me that. They can use direct statements from his aids.
Speaker 7: They can also use circumstantial evidence, and it may be
Speaker 7: that he was repeatedly told that your fraud claims are
Speaker 7: not true, and he believed it anyway, And so the
Speaker 7: burden is on the Justice Department and the prosecutors to
Speaker 7: prove what was in his mind.
Speaker 4: Well, and June, I know you know this so well.
Speaker 4: But on the second page, the indictment acknowledges that former
Speaker 4: President Trump had that First Amendment right to lie. Talk
Speaker 4: to me about the distinction that's made in the indictment
Speaker 4: about the difference between that right and what was done.
Speaker 8: So it's surprising to me that Donald Trump's luers are
Speaker 8: still advancing a First Amendment defense because obviously the Special
Speaker 8: Council has written this in a way to try to
Speaker 8: deflect any First Amendment claims. So there's a difference. First
Speaker 8: Amendment is speech. What they're alleging here is conduct, and
Speaker 8: that's there's a big difference in speech and conduct because
Speaker 8: with a conspiracy, with any conspiracy, they are going to
Speaker 8: be usually words spoken, and that doesn't make it a
Speaker 8: First Amendment claim. It's the conduct that is at issue here.
Speaker 8: So the way he's written this is to say, yes,
Speaker 8: you can say this, Yes you can even say that
Speaker 8: the election was false, but that doesn't make it a
Speaker 8: First Amendment claim. So it's kind of surprising that that
Speaker 8: seems to be the main thread of the defense here.
Speaker 4: What do we know about the co conspirators mentioned in
Speaker 4: the indictment to June, I know there's a lot of
Speaker 4: speculation about that, but having read it so many times,
Speaker 4: why can you tell us?
Speaker 8: Well, I think we have identified at least five out
Speaker 8: of the six, and it could be that we've identified
Speaker 8: the sixth one, but I don't want to say anything.
Speaker 6: At this point.
Speaker 8: But so it's Rudy Giuliani is very obviously consputer number one.
Speaker 8: John Eastman's attorney has said that he is conspirator number two.
Speaker 8: You have Sidney Powell, the lawyer who appeared on so
Speaker 8: many with so many wild theories, and Jeffrey Clark, who
Speaker 8: was a former assistant Attorney General, and then Kenneth Chessper
Speaker 8: who is an appellate attorney. Those are the unnamed co conspirators.
Speaker 8: And the question is is the special counsel going to
Speaker 8: name them at some point charge them, because if he
Speaker 8: names them, he's going to in an indictment he has
Speaker 8: to charge them.
Speaker 2: So that's where I want to bring David in because
Speaker 2: there's a chance David that you know, if you're Rudy
Speaker 2: Giuliani right now, maybe you're being advised to cooperate with
Speaker 2: Special Counsel Jack Smith, and yeah, talk to us about
Speaker 2: you know that process there.
Speaker 7: It's it's hard to tell for sure from the indictment
Speaker 7: whether any of the co conspirators are cooperating, although there
Speaker 7: is that possibility. There's one tactical reason that Jack Smith
Speaker 7: may have only charged Donald Trump, which is if you
Speaker 7: bring in more defendants, then that could prolong the trial
Speaker 7: and the proceedings. And it seems, as June suggested, that
Speaker 7: they want to make this as streamlined as possible to
Speaker 7: get in the trial before the.
Speaker 8: Election is I can tell you what I just want
Speaker 8: to say one thing. I am sure that co conspiritor
Speaker 8: number two, who is Johnny Smith, the attorney, is not
Speaker 8: cooperating because his attorney is said that he's going to
Speaker 8: send a brief to the Special Council next week setting
Speaker 8: forth all the reasons why he should not be charged.
Speaker 8: That he was acting as the council.
Speaker 2: We're getting a headline right now that the President Trump
Speaker 2: expectedly has pleaded not guilty to twenty twenty election charges.
Speaker 2: So no big surprise there.
Speaker 8: But he also said that just to finish at the
Speaker 8: thought that if he is charged, he will not cooperate,
Speaker 8: he will not take a plea. So at least he's
Speaker 8: out of the game.
Speaker 2: So, David, I guess it raises the question of one
Speaker 2: that wasn't able to answer when a colleague asked me
Speaker 2: earlier today when I was preparing for this interview with
Speaker 2: both of you and preparing for him to be at court.
Speaker 2: Is President Trump going to go to prison? I couldn't
Speaker 2: answer the question.
Speaker 7: That well, first of all, that suggests that he'll be convicted.
Speaker 7: He has to be convicted, and you know it's possible
Speaker 7: that he could. He faces up to twenty years on
Speaker 7: the most serious charge. That's just on one charge, right,
Speaker 7: But the way the federal sentencing works is usually white
Speaker 7: collar defendants would serve considerably less time. So I can't
Speaker 7: answer the question of whether he's going to prison for sure,
Speaker 7: but I could say that he can run for president
Speaker 7: under indictment. He can run for president if he's convicted,
Speaker 7: and even if he goes to prison, he could run
Speaker 7: for president. There's also the possibility that if he's elected,
Speaker 7: he could pardon himself. This is something that analysts legal
Speaker 7: nis have been talking about and it's kind of extraordinary
Speaker 7: and unprecedented. But we don't know quite how this will
Speaker 7: play out, but it seems to be a distinct possibility.
Speaker 8: I've talked to lawyers and they seem to be on
Speaker 8: whether or not he would be sent to prison. Some
Speaker 8: lawyers I've spoken to said, well, he could be sent
Speaker 8: to a country club prison like they have out west,
Speaker 8: and we've heard about those prisons right where, or he
Speaker 8: could be placed under some kind of house arrest arrangement
Speaker 8: at Mara Lago. Others have said that it might be
Speaker 8: that the president, who is in office at the time
Speaker 8: might do something like think that, okay, he's had enough
Speaker 8: right now he's been exposed, and might themselves, you know,
Speaker 8: grant him clemency of some kind. So I don't know
Speaker 8: if the judge would The judge here is a very
Speaker 8: tough sentencing judge, so I'm not sure she wouldn't send
Speaker 8: him to prison well convicted, Well, David.
Speaker 2: What about Georgia the potential fourth indictment, Correct me if
Speaker 2: I'm wrong, But that's one that he couldn't parton himself from.
Speaker 7: Right, The original indictment by the Manhattan DA Alvin Bragg,
Speaker 7: and any possible indictment by Fannie Willis in Atlanta, She's
Speaker 7: the Fulton County DA are not subject to pardons or
Speaker 7: clemencies under the federal system. So it seems that those
Speaker 7: are charges that present particular peril for Trump. But it
Speaker 7: also seems that it's almost certain that the Special Counsel
Speaker 7: would like to go first.
Speaker 4: Well, it's interesting in June, I know you know this.
Speaker 4: So while the Special Council is going to focus on
Speaker 4: the idea that mister Trump was not delusional at the time,
Speaker 4: is there any chance of that changing because it would
Speaker 4: save him from prison time.
Speaker 8: I don't think so. I think that, you know, in
Speaker 8: order to prove his case, he's going to have to
Speaker 8: prove that Donald Trump had intent, as David was saying,
Speaker 8: and you know that's true of any crime, that you
Speaker 8: have to prove intent. And I think that there's no
Speaker 8: way that the Special Council would would deviate from that
Speaker 8: or in any way say that Donald Trump was not
Speaker 8: of sound mind in his defense. May try that, but no, no, seriously,
Speaker 8: I just don't think that that. I mean, some of
Speaker 8: the defenses that they've put out are what you said,
Speaker 8: first Amendment, advice of counsel. You know, there are different
Speaker 8: ways that they'll approach it. They also have sort of
Speaker 8: as Donald Trump has said over and over and over
Speaker 8: again from years and years, that it's a witch hunt
Speaker 8: and that he's being prosecuted, that there's a you know,
Speaker 8: favoritism in the prosecution. So that may be another one,
Speaker 8: but he is upsound mind.
Speaker 4: And then timeline, I feel like is the next big
Speaker 4: important question because we do want to know whether or
Speaker 4: not there's a chance that he could be back in
Speaker 4: the Oval office by the time that this case has decided.
Speaker 4: What do we know about the timeline?
Speaker 7: Well, I'll give you a live update. Trump has pleaded
Speaker 7: not guilty in federal court in DC. The judge is
Speaker 7: releasing him without bail, and he's agreeing to various conditions
Speaker 7: of release, but there is no trial set yet in
Speaker 7: this case. The Manhattan DA's cases scheduled for March, and
Speaker 7: the mar Alago documents cases scheduled for May.
Speaker 8: The New York Attorney General's suit is also is going
Speaker 8: in October, and then Jean Carrol in January.
Speaker 4: Sorry, guys, we're going to wrap because we've got to
Speaker 4: break the Apple earnings. But June we're going to have
Speaker 4: you back in a bit.
Speaker 2: I do want to thank both of you. That's Jean Grasso.
Speaker 2: She is Bloomberg Law host and legal analysts, and also,
Speaker 2: of course, Bloomberg US Legal reporter David Doriakis on the
Speaker 2: latest with the Trump indictment.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: All right, well, plenty of news to get you. Fortunately,
Speaker 2: we go from Amazon earnings to the latest with President
Speaker 2: Trump's indictment, to Apple earnings, and we've got great guests
Speaker 2: for all of them, including our next one, Thomas Thornton,
Speaker 2: President and founder of hedge Fund Telemetry, on the latest
Speaker 2: Apple earnings joining us. You have Tom had only you know, wow,
Speaker 2: look at this thirty three three minutes to go through
Speaker 2: these numbers. But give us your gut reaction here.
Speaker 5: You know, it looks like it's pretty much in line.
Speaker 5: I think everybody was expecting services to offset the weaker hardware,
Speaker 5: and that's generally what we got. Mac was a little better,
Speaker 5: I've had a little lighter. EPs was better, and revenues
Speaker 5: were sort of inline. I think I'm a buysider, so
Speaker 5: I think that the buyside had a little higher expectation
Speaker 5: for revenues. But you know, I think it's it's pretty
Speaker 5: much in line, and now we want to see what
Speaker 5: we're going to get for the next quarter.
Speaker 2: How do you think they did that with EPs? How
Speaker 2: did they get EPs to come in above estimates when
Speaker 2: revenue was just in line? What did they do on
Speaker 2: the inside their last quarter?
Speaker 5: You know they could I think I noticed some of
Speaker 5: their operating expenses were lower, and you know they've got
Speaker 5: the mass buy back, and that guy that does the
Speaker 5: buyback should be getting the biggest bonus.
Speaker 7: A good point.
Speaker 5: With his elbow on the button all day, that's.
Speaker 7: A good point.
Speaker 4: That was such a great question, Tim of how they
Speaker 4: got there that I love that question. I'm stealing that
Speaker 4: for the rest of earnings, for the rest of my
Speaker 4: life covering them.
Speaker 8: Tom.
Speaker 4: I want to go to you on the iPhone revenue
Speaker 4: missing estimates. I know that we kind of anticipated that,
Speaker 4: particularly because of the sluggish sales of the iPhone and
Speaker 4: some of those other devices there, But talk to me
Speaker 4: about how critical it's going to be moving forward for
Speaker 4: Apple to really dig deep into those iPhone sales figuring
Speaker 4: out ways to get consumers to either upgrade or get
Speaker 4: new products.
Speaker 5: Well, I'm a little surprised that the iPhone sales were light.
Speaker 5: They were expected to be up one year over year,
Speaker 5: which isn't so great, but it's light. And now they
Speaker 5: have the iPhone fifteen that it's coming out. I don't
Speaker 5: think it's it's stably going to be a big event.
Speaker 5: From a new feature standpoint, It's going to look pretty
Speaker 5: much the same a little better camera. And you know,
Speaker 5: the one reason I thought that they would have a
Speaker 5: little bit better iPhone sales was they cleared out a
Speaker 5: lot of inventory in June and in China especially, So
Speaker 5: it's it'll be interesting to see what the management says
Speaker 5: on the calls regarding that.
Speaker 2: I'm really glad you brought up China because I want
Speaker 2: to talk about the Greater China story. Third quarter Greater
Speaker 2: China revenue was a bright spot for the company, fifteen
Speaker 2: point seven to six billion. Estimates were for fourteen point
Speaker 2: five to nine billion. Dig deeper there, though. The China
Speaker 2: story is so important to Apple, and it's got a
Speaker 2: very complicated relationship with the country when it comes to
Speaker 2: how it stores its data, where its products are made,
Speaker 2: and increasingly where its products are not going to be
Speaker 2: made in the future as it transitions at least some
Speaker 2: of them to suppliers and to manufacturers who are building
Speaker 2: plants in India. Talk to us about the China story.
Speaker 5: Well, First of all, Tim Cook is the best CEO
Speaker 5: because he knows how to play the political game very
Speaker 5: very well. He does it all the time in China
Speaker 5: and he does it in the US as well. But
Speaker 5: I think that. The one thing about China that I'm
Speaker 5: a little concerned about going forward is they just announced
Speaker 5: that they're going to put limitations on children and their
Speaker 5: handsets their phones, So that could be a little bit
Speaker 5: of a problem going forward because they did see a
Speaker 5: pickup in services and services. That's interesting because the game
Speaker 5: there were a lot of games released in the second
Speaker 5: quarter in China and China approved them, So this could
Speaker 5: be a little bit of a headwind going forward.
Speaker 2: So let me get this straight. If a kid is
Speaker 2: not staying up late after ten pm in their room
Speaker 2: playing on their iPad or their iPhone games and not
Speaker 2: buying those games, or not not buying products within the games,
Speaker 2: if they're in at purchases in China because China is
Speaker 2: cracking down on that, you see that as a real
Speaker 2: headwind for the company.
Speaker 5: Yeah, it's it's a risk. I mean, I think that
Speaker 5: they had a lot of momentum coming out of Q
Speaker 5: two and it could be a little bit of a
Speaker 5: headwind for them. Look, I think kids are going to
Speaker 5: try and figure out a way to download games and
Speaker 5: play games as much as they possibly can, maybe more
Speaker 5: now I don't know.
Speaker 2: Yeah, but I don't know what the you know, I
Speaker 2: don't know how that looks in China. How do you
Speaker 2: control for that? I truly don't know.
Speaker 5: Well, you know, China can do a lot of different things.
Speaker 5: Went with Apple and to shut down some of the
Speaker 5: the access that people can have to their phones.
Speaker 2: Well, let's I just want it for contact, Maddie. I
Speaker 2: just want to repeat sort of the how important of
Speaker 2: a segment Greater China is as a reportable segment. In
Speaker 2: the most recent quarter, the three months that ended July
Speaker 2: first three, it was the third biggest reportable net sales
Speaker 2: by reportable segment coming after year up with twenty billion
Speaker 2: dollars in the Americas with a thirty five point three
Speaker 2: billion Greater China coming in Maddie at fifteen point seven
Speaker 2: five eight billion dollars.
Speaker 4: Yeah, and it's just interesting. I mean, looking at the
Speaker 4: headline here, it kind of says it all from Markum
Speaker 4: and Apple meeting estimates after services help offset that hardware slump.
Speaker 4: I wonder how the China story plays into that from
Speaker 4: your perspective, Tom, is there a world in which that
Speaker 4: hardware slump is saved because of the China story For Apple?
Speaker 5: Well, there were a couple sell side notes that I
Speaker 5: read it said that, you know, we had a big
Speaker 5: iPhone cell through in June. It was a big, big,
Speaker 5: big month, a lot of inventory cleared, but they saw
Speaker 5: some China deceleration in July. So those are the early
Speaker 5: checks that we're what we're seeing right now. So it's
Speaker 5: it's gonna be tough too with the new phone. I
Speaker 5: just can't really get too excited about it. There's been
Speaker 5: some talk about delays. Yeah, there's also that going around.
Speaker 2: Okay, so Tom, you give me the opportunity to kind
Speaker 2: of like, you know, you read my mind here. I
Speaker 2: was thinking as we went into this report today, I
Speaker 2: think I forgot I used to cover this company so closely.
Speaker 2: I used to get every new iPhone as a review model.
Speaker 2: I don't even know which iPhone I have anymore. It
Speaker 2: takes great pictures, it runs fast, It does everything I
Speaker 2: needed to do, and I don't see myself upgrading at
Speaker 2: the same rate that I used to upgrade. This is
Speaker 2: a story I've been saying for five years.
Speaker 1: At this point, that's true.
Speaker 5: You can go back and look at the past three iPhones,
Speaker 5: and you've heard the bulls say we're going to see
Speaker 5: this giant refresh upgrade cycle it's going to happen. I
Speaker 5: think this one's going to be a little tougher too,
Speaker 5: because they are planning on raising the prices of the phones.
Speaker 5: And one thing that's probably smart for them is they're
Speaker 5: going to focus on the high priced bone to push
Speaker 5: out a little harder out there into the market. But look,
Speaker 5: if the economy slows, if you have the college student
Speaker 5: loan repayments start to happen, I think that's going to
Speaker 5: be a little bit tough. And the other thing is
Speaker 5: people are sort of throwing away this next quarter and
Speaker 5: they're looking more towards the December quarter. So I think
Speaker 5: that's why the stock's moved higher in anticipation for the
Speaker 5: wide release of the iPhone fifteen. So I think that's
Speaker 5: kind of what's happening. The market isn't really punishing the
Speaker 5: stock too much right now. It looks like it's pretty
Speaker 5: much in line.
Speaker 4: We pause for me. On the student loan story, you're
Speaker 4: saying that the unpositing of student loan repayments in the
Speaker 4: fall is potentially a sizeable headwind for Apple sales.
Speaker 9: Yeah.
Speaker 5: Absolutely. The average repayment is four hundred dollars a month.
Speaker 5: I think that's gonna change a lot of consumers spending plans,
Speaker 5: and certainly, again, as Tim said, if your phone is
Speaker 5: working just fine, why do you really need to upgrade
Speaker 5: to a phone that is basically the same as what
Speaker 5: you have right now? There's nothing really that exciting in
Speaker 5: the phone. The next phone that's gonna have wines around
Speaker 5: the block and people waiting for the next great thing.
Speaker 2: Well, I think that's exactly why you saw the release
Speaker 2: of Apple's Vision Pro the unveiling. I don't want to
Speaker 2: say the release. That's why we saw the unveiling in
Speaker 2: the last few months of Apple Vision Pro tom because
Speaker 2: that is where Apple sees a growth area. It's just
Speaker 2: so different than anything Apple has ever released in the past,
Speaker 2: not just because of price, not just because of product category,
Speaker 2: but because of availability and how they're not making it
Speaker 2: available to so many people. What's your read on it.
Speaker 5: Well, look, I think that Apple is flexing its muscles
Speaker 5: as far as a technology company again, and that's really
Speaker 5: nice to see. We've all been enamored with all the
Speaker 5: great technology that Apple's released over the years, and this
Speaker 5: is certainly something that is really really stunning. The technology
Speaker 5: is just mind blowing. I haven't seen one on obviously
Speaker 5: nobody's really seen it, but I just think the price
Speaker 5: point is going to be difficult, and they're not going
Speaker 5: to have this in wide release until the first quarter
Speaker 5: next year, so this is really something that they're going
Speaker 5: to I mean, it's kind of a bad thing that
Speaker 5: they're going to miss the holiday seasonal shopping for this
Speaker 5: new product.
Speaker 4: Oh that's funny. I would really not want that under
Speaker 4: my Christmas street, but I can imagine a lot of
Speaker 4: people would, so I understand it. I'm sorry, I'm really
Speaker 4: headsets like I can't I'm not the market for it,
Speaker 4: and I also feel like women don't want to wear headsets,
Speaker 4: but that's a separate story that we're going to cover.
Speaker 4: I also want to talk to you about the earnings
Speaker 4: call because I anticipate that there are going to be
Speaker 4: a lot of questions about the headset, a lot of
Speaker 4: other questions about iPhone sales, how they're planning to deal
Speaker 4: with that. What would your single biggest question.
Speaker 5: Be, Well, there's there's there's three things that I think
Speaker 5: they're going to talk about, and let's just start right
Speaker 5: with the obvious AI. What are they going to say
Speaker 5: about AI? And then there's India, Then the headset. They'll
Speaker 5: talk about that, and then obviously they'll talk about the
Speaker 5: iPhone fifteen and how wonderful it's going to be. But
Speaker 5: AI is what people are going to be listening for.
Speaker 5: If they have something that's meaningful that they're going to
Speaker 5: release for the consumer, maybe this order or next quarter,
Speaker 5: what would that look like. It's probably going to be
Speaker 5: something like Siri, something in a very advanced type of
Speaker 5: search product, huh, that they'll have. I don't know. I
Speaker 5: just think it'll be interesting to see if they can
Speaker 5: come up with something that's different and unique and something
Speaker 5: that people can use on their phones seamlessly like every
Speaker 5: other Apple product.
Speaker 2: Tom, we really appreciate you taking the time in joining
Speaker 2: us this afternoon, especially only having three minutes to actually
Speaker 2: go through these numbers. You gave us a lot of
Speaker 2: really good stuff. That's Thomas Thornton, president and founder of
Speaker 2: the Hedge Fund Telemetry, joining us to talk about the
Speaker 2: latest Apple learnings.
Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim sten Of from Bloomberg Radio.
Speaker 6: We're gonna go.
Speaker 4: Back to DC here because former President Trump is expected
Speaker 4: to leave the courthouse soon. The hearing has wrapped up,
Speaker 4: and we're getting some reports in about potential next steps
Speaker 4: when it comes to trial dates. So we're gonna jump
Speaker 4: right into it with our guests here. We've got Bloomberg
Speaker 4: Law host and legal analyst June Grasso. We've also got
Speaker 4: a fantastic guest to talk about this, Robert mens. He
Speaker 4: is a former former federal prosecutor and partner at Macarter
Speaker 4: and English to talk with us about this as well.
Speaker 2: June, I a household name to you, June, I feel like.
Speaker 8: Okay, I have been Yes, I've known him for decades. Bob,
Speaker 8: I don't know, for years and years.
Speaker 2: In as soon as Maddie said, introduced you, Robert, she said, Bobby.
Speaker 4: I mean you too, should just talk.
Speaker 6: Just go Jim and.
Speaker 4: I don't need to be here.
Speaker 2: Go ahead, Maddy. I jumped on you.
Speaker 8: No, no, no, June, you know what I what I wanted
Speaker 8: to say and get Bob's opinion on this. So the judge,
Speaker 8: the magistrate judge who told Trump that she's consulted with
Speaker 8: the trial judge has set August twenty eighth as the
Speaker 8: next hearing date in Judge Chuckins Court, and also in
Speaker 8: seven days wants briefings about how long the case is
Speaker 8: going to take. So does that indicate to you that
Speaker 8: they're going to try to move this quickly?
Speaker 6: I think they will try to move it quickly.
Speaker 10: I think the judge here wants to get her hands
Speaker 10: around the issues in this case as soon as possible.
Speaker 10: She wants to put the defense on the record as
Speaker 10: to what they think they're going to need in terms
Speaker 10: of timing to be ready to go to trial. I'm
Speaker 10: sure the prosecution is going to say they'll be ready
Speaker 10: to go as quickly as possible, as quickly as.
Speaker 6: They can get a trial date from the judge.
Speaker 10: So it's really going to be up to the defense
Speaker 10: to try to explain what time they need. They're going
Speaker 10: to want discovery, obviously from the prosecution. The extent of
Speaker 10: that discovery is going to drive the timing of this trial.
Speaker 10: How many documents kind of discovery are we talking about?
Speaker 10: Unlike the mar Lago case, where there are all kinds
Speaker 10: of issues about national security, because of the nature of
Speaker 10: that case, we really don't have that here so much
Speaker 10: if we have it at all, and so this case
Speaker 10: could be fairly streamlined. And I do think that this
Speaker 10: judge is going to try to move this case along
Speaker 10: as quickly as you can.
Speaker 4: Well, as you mentioned, though, Trump's lawyers will do whatever
Speaker 4: they can to delay it. Robert, as a former federal
Speaker 4: prosecutor here, what do you anticipate that they could do
Speaker 4: that would be effective in their efforts to delay the trial?
Speaker 10: Well, I think they're going to tell the judge they
Speaker 10: need a certain amount of time to absorb all the information. Again,
Speaker 10: I think it will depend on the volume of discovery
Speaker 10: that prosecutors are going to provide to them. We just
Speaker 10: don't really know what that is at this point, but
Speaker 10: there could be literally hundreds of interviews. Those may or
Speaker 10: may not be memorialized in grand jury testimony, for example,
Speaker 10: they could be memorialized in what's called the three to
Speaker 10: zero two, which is an FBI memorandum that memorializes the interview.
Speaker 6: All that stuff has to be provided to.
Speaker 10: The defense, and the defense does have to have a
Speaker 10: reasonable amount of time to absorb that information to prepare
Speaker 10: for trial, and.
Speaker 6: The judge will be sensitive to that.
Speaker 10: I mean, she's gonna want to move this case along,
Speaker 10: but she also is going to be very aware that
Speaker 10: the defense does have to have a reasonable amount of
Speaker 10: time to get ready here, because if she moves too quickly,
Speaker 10: that creates some kind of an issue. Even if there's
Speaker 10: a trial, even if there's a conviction, it could be
Speaker 10: overturned on appeal if the defense can say, we were
Speaker 10: just simply not ready to defend this case.
Speaker 6: So we're gonna have.
Speaker 10: To see what the discovery looks like. That will ultimately
Speaker 10: drive the scheduling.
Speaker 2: Here, excuse me, I got to turn my microphone. If
Speaker 2: you're watching us on YouTube, you can see on the
Speaker 2: right side of the screen President Trump has left court
Speaker 2: after pleading not guilties, now making his way to Reagan
Speaker 2: National Airport to board his jet. June I want to
Speaker 2: know about timing here, and we did just here from
Speaker 2: Robert about you know, the delicate balance that the judge
Speaker 2: has to to sort of walk to make certain that
Speaker 2: the defense has enough time to prepare, but also that
Speaker 2: it's not something that's delayed, especially their political implications here too.
Speaker 8: Absolutely, he's going to be campaigning. And you know one
Speaker 8: of the dates that they set was that they were
Speaker 8: considering was near one of the debates, which he said
Speaker 8: he hasn't going to be in, and a lot of
Speaker 8: these hearings the defendant doesn't have to be there for
Speaker 8: the hearings themselves. But I think what's really interesting, and
Speaker 8: I mentioned this before, is that da Alvin Bragg, who
Speaker 8: has a firm trial date of March twenty fifth of
Speaker 8: next year, has said that in the interests of justice,
Speaker 8: he would consider, you know, moving that trial date. And
Speaker 8: let's all face it, this case is considered the most
Speaker 8: important of the case is because of what allegedly happened here,
Speaker 8: and so I would think that this is the case
Speaker 8: and it'd be interesting to see whether the prosecution is
Speaker 8: going to try to move this case faster than the
Speaker 8: classified documents case, which, as Bob and I have discussed
Speaker 8: just recently, the classified documents case seems like it's more straightforward,
Speaker 8: but you have all those classified documents that have to
Speaker 8: be dealt with. And another thing is John Laura, who
Speaker 8: is one of Trump's attorneys, was on I think it
Speaker 8: was CNN the other night and he was saying that
Speaker 8: this case, this trial could take nine months or year. Bob,
Speaker 8: obviously that seems a little bit long.
Speaker 6: Well, you know, it isn't It isn't.
Speaker 10: I mean, I've tried lots of cases in federal court
Speaker 10: and defended them, and it's not that unusual to have
Speaker 10: a trial that ultimately goes to trial, you know, a
Speaker 10: year or more after the indictment. But again, that depends
Speaker 10: on a lot of other factors, you know, like the
Speaker 10: volume of documents that the defense has to review and analyze,
Speaker 10: you know, where they need to engage experts. For example,
Speaker 10: in a financial fraud case, the defense is going to say,
Speaker 10: don't judge me to hire an accountant, a forensic account
Speaker 10: to go through all this. Then you've got issues about
Speaker 10: scheduling with the with the lawyer's other schedules, and of
Speaker 10: course you have the judges schedule. But this is a
Speaker 10: case that is so important that clearly the judge is
Speaker 10: going to clear her schedule to try this as soon
Speaker 10: as possible, and I think she's going to expect the
Speaker 10: same from the defense lawyers. She's not going to say, well,
Speaker 10: we're going to bump this trial because the defense lawyer
Speaker 10: has got a conflict with some other trial.
Speaker 8: You know. Laura was saying that the case, the trial itself,
Speaker 8: could take nine months to a year you know the trial, right,
Speaker 8: not getting to trial. I mean, do you think that's
Speaker 8: an overestimate?
Speaker 10: Yeah, I mean it certainly is, because you know the
Speaker 10: length of the trial is going to be largely driven
Speaker 10: by the prosecution.
Speaker 6: Right.
Speaker 10: I mean, in any case, what typically happens is, you know,
Speaker 10: most of the witnesses, and many times all of the
Speaker 10: witnesses are prosecution witnesses. The defense usually does not put
Speaker 10: on many witnesses at all. Now that's not to say
Speaker 10: that in this case they may not call some witnesses,
Speaker 10: but the government bears the burden of proof. Obviously, the
Speaker 10: government has to prove each and every element of the
Speaker 10: case beyond a reasonable doubt, and so the burden is
Speaker 10: on them to put the case on.
Speaker 6: It's their case.
Speaker 10: They can streamline this case as much as they see
Speaker 10: it is necessary or to move it along. I see
Speaker 10: no way this case would last a year to try.
Speaker 10: That's just hyperbole. That's never going to happen, Robert, depending
Speaker 10: on I.
Speaker 2: Want to jump in because I don't have a ton
Speaker 2: of time, and I want and given that you're a
Speaker 2: former federal prosecutor, you're now a partner at the macarter
Speaker 2: in English as well, how strong is the government's case.
Speaker 10: Well, I think it's a pretty strong case, but I
Speaker 10: do think there are some defenses here, and you know,
Speaker 10: the defense here has already alluded to that.
Speaker 6: You know, this is a case that's going to be tried.
Speaker 10: In the court of public opinion long before it ever
Speaker 10: gets to the court room. That's clearly the defense strategy here.
Speaker 10: You know, they're looking for some type of jury nullification,
Speaker 10: which means they have to convince just one juror to
Speaker 10: not vote to vict regardless of what the evidence is,
Speaker 10: if they believe that the entire process has been rigged.
Speaker 6: I think that's what.
Speaker 10: They're shooting for here. But they are going to raise
Speaker 10: the First Amendment issue, that this is really a free
Speaker 10: speech case, and they're also going to raise this advice
Speaker 10: on lawyers. They're going to say that President Trump relied
Speaker 10: on the advice of these counsel and as such, she's
Speaker 10: allowed to rely on that, and.
Speaker 6: That's a defense. If those lawyers were wrong, it's not
Speaker 6: his fault. He hasn't committed a crime.
Speaker 4: Well, I also want to ask about the point that
Speaker 4: you made earlier June about the timelines of the different
Speaker 4: cases here. Yeah, Bob, I'm curious from your perspective, what's
Speaker 4: the right strategy for that?
Speaker 10: Well, first of all, you know, they can't really control
Speaker 10: Alvin Bragg, as June said, but he's already agreed to
Speaker 10: step back, which makes a lot of sense. So we
Speaker 10: really have these two federal cases at this point, unless
Speaker 10: the DA in Atlanta also jumps into the fray here.
Speaker 10: I think if I'm the special counsel I'm looking at
Speaker 10: that case at mar A Lago, I do think they're
Speaker 10: strong facts, but it's not as compelling a case, and
Speaker 10: the defense frankly does have a better argument given the
Speaker 10: classified documents, that this case is going to take a
Speaker 10: long time. So I think we're going to see the
Speaker 10: government double down on this case and try to push
Speaker 10: it as forward as quickly as they can.
Speaker 8: Especially because in Florida they now they had a superseding
Speaker 8: indictment adding another defendant, which makes it a little more complicated.
Speaker 8: They have now three three code defendants, So that's another
Speaker 8: reason why that case may lang.
Speaker 4: Robert, if you are Special counsel Jack Smith right now,
Speaker 4: how confident are you feeling about this?
Speaker 10: I think he's pretty confident. I think there's obviously a
Speaker 10: lot of evidence out there. His indictment was incredibly detailed.
Speaker 10: It showed a lot of work that the Special Council's
Speaker 10: Office had done. They've done a lot of interviews, They've
Speaker 10: got statements obviously from Vice President Pence, you know, former.
Speaker 6: US Attorney General Bill Barr.
Speaker 10: I mean, there's all kinds of people there who obviously
Speaker 10: we're giving advice to foreign President Trump that the election
Speaker 10: was not stolen, that he didn't win the election, and
Speaker 10: he went on to make these statements. Anyway, they also
Speaker 10: have his state and I also think to think the
Speaker 10: prosecutors are holding back some of that evidence. They're not
Speaker 10: going to show their entire hand in this indictment. So
Speaker 10: I think there's more to come when this case actually
Speaker 10: goes to trial.
Speaker 8: Yeah, Mark Meadows just mentioned as chief of staff in
Speaker 8: passing a couple of times. Now you got to wonder
Speaker 8: if he's not a co conspirator, is he cooperating?
Speaker 2: Does he seem you're not gonna you already went through
Speaker 2: the co conspirators June.
Speaker 8: No, he's no, he's not. No, he's not he's not
Speaker 8: one of the co conspirators that are unnamed. So you're saying,
Speaker 8: I'm speculating that since he's not and he was so
Speaker 8: involved in what Trump was doing, and he was on
Speaker 8: the phone call with the Georgia Secretary of State, remember that.
Speaker 8: And I'm just one. I'm speculating. Is he then cooperating
Speaker 8: and that's why he's not listed at all?
Speaker 2: Right, We're gonna have to leave it there. Guys, really
Speaker 2: appreciate both of you joining us this afternoon. A special
Speaker 2: thanks to our guest Bloomberg Law host and legal analyst
Speaker 2: Drian Grosso and also Robert Vin's former federal prosecutor and
Speaker 2: partner at the law firm, Macarter and English, join us
Speaker 2: to talk the latest with President Trump.
Speaker 5: A brother mac a journal. Now about you? Let me drive?
Speaker 6: Oh no, no, no, no, Honry please, I'll do the gravels.
Speaker 6: Excuse me, I want to drive.
Speaker 3: It's good question.
Speaker 1: This is the drive to the clothes on Bloomberg Radio.
Speaker 2: All right, Well, we got fewer than seventeen minutes on
Speaker 2: the way to close right now, and despite some of
Speaker 2: the selling yesterday, we're seeing a bit of stability in
Speaker 2: the broader markets. Is wait to hear results from Apple
Speaker 2: and Amazon. Taking a look at what's going on on
Speaker 2: the S and P five hundred, We're down two tenths
Speaker 2: of one percent, the down down one tenth of one percent,
Speaker 2: an Astec down one tenth of one percent. Here to
Speaker 2: discuss the big picture as well as today's trade is
Speaker 2: Beata Ker, chief Impact Officer at the Kopia Group. It's
Speaker 2: a private equity firm. Biatta was though formerly cohead of
Speaker 2: Investment in Well Strategies at Burns in private wealth Management,
Speaker 2: so we know that even though she's at a PE
Speaker 2: firm now, she does not ignore the public markets. Piata,
Speaker 2: good to have you with us this afternoon. First of all,
Speaker 2: what's a chief impact officer do?
Speaker 9: Well? Thanks for the question and thanks for having me
Speaker 9: in your right. Public markets and private markets are very correlated,
Speaker 9: and impact is very correlated to investment. In the Kopia Group,
Speaker 9: we are focused on providing capital to lower middle market
Speaker 9: companies and particular diverse owned businesses, and as an impact officer,
Speaker 9: I'm focused on measuring the impact of our capital, which
Speaker 9: ultimately we think will help narrow the wealth gap for
Speaker 9: underrepresented communities in the US.
Speaker 2: When you say providing capital, do you mean you're investing
Speaker 2: in these companies as a private equity partner, as a
Speaker 2: venture capital partner, or using private credit.
Speaker 9: Well, it is the latter. It is private credit, and
Speaker 9: that is where we are squarely focused as a capital provider.
Speaker 9: And one of the great benefits of private credit is
Speaker 9: that it's non emotive capital. And we know equity in
Speaker 9: businesses is in fact the greatest asset to forming wealth
Speaker 9: in this country. So providing capital for growth that is
Speaker 9: not diluted gets the owner to retain their equity yet
Speaker 9: accelerate growth is really the vehicle of investment that we've chosen.
Speaker 2: So why does a company come to you instead of
Speaker 2: a bank for money?
Speaker 9: Well, first of all, the banks used to be seventy
Speaker 9: percent of the capital provider for lower middle market companies.
Speaker 9: At last count, post Silicon Valley it is ten percent,
Speaker 9: so we know post GFC there was a huge retrenchment
Speaker 9: of banks from a regulatory perspective, and this year's events
Speaker 9: have only continued that trend. So frankly, the banks have
Speaker 9: been there for them for shorter term financing accounts, receivable revolvers,
Speaker 9: but growth capital, acquisition capital with an average tenor four
Speaker 9: to five years, private credit organizations have really stepped up
Speaker 9: to be the primary providers for this really important segment
Speaker 9: of our economy.
Speaker 4: Can I ask you about private credit, because I'm curious
Speaker 4: about what happens to our economy when private credit stops
Speaker 4: being able to kind of save us. Am I right
Speaker 4: to be worried about that?
Speaker 9: I think it's a great question. I think it's always
Speaker 9: great to worry about the next thing. I think what's
Speaker 9: interesting about private credit it's actually been around for over
Speaker 9: thirty years. It's just been part of banking institutions, and
Speaker 9: I think the leading private credit lenders in today's market
Speaker 9: many ways have been former bankers, if you will. So
Speaker 9: private credit capital has been around, just in various functions
Speaker 9: and different types of organizations. And I think the other
Speaker 9: thing that's reassuring is that lately there is no evidence
Speaker 9: of private credit going away. In fact, it's really an
Speaker 9: exploding ask the class from the positive sense in terms
Speaker 9: of many capital providers such as ourselves, launching to really
Speaker 9: be there for those organizations.
Speaker 4: Yeah, and you mentioned kind of always wanting to look
Speaker 4: ahead to the next shoe to drop and the next
Speaker 4: negative thing that could be coming. It makes me think
Speaker 4: about the jobs report that we're going to be getting
Speaker 4: in tomorrow, likely to be positive as it has been,
Speaker 4: But what are you anticipating and what are you thinking
Speaker 4: that the market reaction could look like tomorrow.
Speaker 9: Well, at the Kopia Group, I'm going to center my
Speaker 9: answer more around how that affects the lower middle market
Speaker 9: businesses that were in particular focused on, and one of
Speaker 9: the key statistics sell shares that in fact, lower middle
Speaker 9: market businesses are the fastest growing segment of the middle market,
Speaker 9: and in fact they've been hiring aggressively. So statistics show
Speaker 9: that these businesses continue to be revenue positive, and while
Speaker 9: wages are going up and they're managing margins and that's
Speaker 9: an area of pressure, job growth is actually something that
Speaker 9: we see as a positive trend in the private markets.
Speaker 9: And as you know, in the broader public and private
Speaker 9: market picture, this economy has appeared to be very resilient.
Speaker 9: So I thought the Fitch downgrading this week was it
Speaker 9: st timing, because obviously jobs and wages have remained quite robust,
Speaker 9: and the US economy has not appeared to be struggling.
Speaker 9: So I would just add that broader perspective on recent macro.
Speaker 2: Events economy is surveyed by Bloomberg, are expecting the payrolls
Speaker 2: report to show wow, look at that two hundred thousand
Speaker 2: tomorrow and last months would be two hundred nine thousand
Speaker 2: by last month. I mean June, because we're do in
Speaker 2: July tomorrow. So beyond payrolls tomorrow, let's talk broader about
Speaker 2: the equity markets. And again, I know you're in private equity. Now,
Speaker 2: you're focused on private credit, but you do not ignore
Speaker 2: what's going on in the equity markets. We're up on
Speaker 2: the S and P five hundred more than fifteen percent
Speaker 2: so far this year, more than seventeen percent, even with
Speaker 2: the pullback that we've seen this week. Are we in
Speaker 2: over our skis?
Speaker 9: Well, I'm not sure we're in over our skis. We
Speaker 9: might be the beginning of a new bowl market. Frankly,
Speaker 9: there's a lot of robust nature to the economy. I
Speaker 9: think we should just watch valuations relative to earnings. As
Speaker 9: you know, earnings and multiples do tell the story of
Speaker 9: the equity markets, and I think you could see some
Speaker 9: pullback given how robust this rally has been. But another
Speaker 9: thing to point out about the rally is, remember how
Speaker 9: narrow it has been. It's reminiscent of prior equity rallies
Speaker 9: where you had a couple of key names note in
Speaker 9: the technology space really driving most of the return. So
Speaker 9: I think, kind of bringing it back to private credit,
Speaker 9: I think what we're seeing is a lot of enthusiasm
Speaker 9: from allocators that might be long term optimistic about equities,
Speaker 9: but feel really great about investing with companies with our
Speaker 9: cash flowing businesses and yield in the meantime, while there
Speaker 9: might be some ongoing volatility in the equity markets.
Speaker 4: How much do you think about big earnings like Apple
Speaker 4: on Amazon today in your kind of overview on your work.
Speaker 6: Not that much.
Speaker 9: You know, what effects our earnings and what happens to
Speaker 9: our companies is ultimately fortune five hundred. Growth does affect
Speaker 9: the types of companies we're looking at, because we're looking
Speaker 9: at investing in healthcare and business services and logistics, in
Speaker 9: distribution and in food. So of course the supply chain
Speaker 9: is going to flow through to lower middle market businesses,
Speaker 9: and in particular, what we would know is commitments to
Speaker 9: invest with diverse suppliers. Is that benefit to the opportunity
Speaker 9: set that we see here at the Coopia Group. So
Speaker 9: of course, the overall economy matters day by day earnings,
Speaker 9: especially as say for the tech companies, a little bit
Speaker 9: less of an area of focus for the sectors that
Speaker 9: we're king in.
Speaker 2: On be out of just ten seconds. What's your recession
Speaker 2: outlook for the next twelve months.
Speaker 9: I think we're in a soft landing scenario. I think
Speaker 9: I'm optimistic and constructive about the overall economy.
Speaker 2: All right, there it is. I have to end on
Speaker 2: some soul asylum. Sarah, great choice, nice job.
Speaker 4: We love the music.
Speaker 2: We do love the music. Here Biata Kerr, chief Impact
Speaker 2: Officer at the Kopia Group, who really thank you for
Speaker 2: taking the time today.
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