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

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Speaker 2: Apple China iPhone sales dive nineteen percent in the worst

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Speaker 2: quarter since twenty twenty. And this is a big issue

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Speaker 2: because we know that China represents approximately twenty percent of

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Speaker 2: the sales for Apple. It's obviously critical to their supply chain.

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Speaker 2: So if there's one company that at least in my

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Speaker 2: mind that has quote unquote China risk associated with it,

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Speaker 2: it's it's Apple. Man Deep Singh joins us here. He's

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Speaker 2: a senior technolog channels for Bloomberg Intelligence. He joins us

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Speaker 2: here in our New York City studio. So mandeb Apple

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Speaker 2: China iPhone sales dive nineteen percent in the first quarter,

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Speaker 2: the worst twenty what's your takeaway there?

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Speaker 3: I mean, it's not new news, so we knew this

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Speaker 3: was coming. There was some counterpoint data I think last

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Speaker 3: month that their March sales were pretty bad, so expected,

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Speaker 3: but it kind of solid Desfies the point that you know,

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Speaker 3: the China weakness is playing out much worse than what

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Speaker 3: people expected, and the China revenue probably is gonna be

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Speaker 3: like this for the foreseeable future unless something changes at

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Speaker 3: the geopolitical level, or Apple launches a new device that

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Speaker 3: everyone wants, that latest iPhone that everyone would want. But

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Speaker 3: for now, Huawei and the domestic competitors seemed to be

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Speaker 3: catching up in terms of features, and that's enough to

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Speaker 3: take the share in the domestic market.

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Speaker 4: So this is a story then of consumer shifting to competitors,

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Speaker 4: or is it just that demand for phones is down

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Speaker 4: because there's some macro weakness in the Chinese consumer.

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Speaker 3: Think There is a policy element to it as well,

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Speaker 3: so obviously a lot is kind of driven by what

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Speaker 3: is done at the government level. First they banned the

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Speaker 3: use of iPhones, and now they're making sure that the

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Speaker 3: domestic vendors have a good chance of taking share. And

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Speaker 3: because the phone is comparable in features, then I guess

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Speaker 3: the Apple lock in that everyone thought was so strong

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Speaker 3: that you just can't get out of your iOS isn't

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Speaker 3: really helping or like in this case, and they are

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Speaker 3: able to kind of move out of the iOS ecosystem

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Speaker 3: and you start using this new phone.

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Speaker 2: What's Apple say about their position in China? What they

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Speaker 2: may need to do to regain momentum. Do they have

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Speaker 2: any strategy they've articulated.

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Speaker 3: I mean, look, they are having an event on May

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Speaker 3: seventh where they're launching a new iPad lineup. There will

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Speaker 3: be something very similar for the iPhone. They will launch

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Speaker 3: a new device with AI capabilities. So their play is,

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Speaker 3: we will launch a new phone, a new tablet with

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Speaker 3: AI capabilities that everyone is looking for, and hopefully that

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Speaker 3: drives the refreshed cycle.

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Speaker 4: And how does the slumping demand in China compare to

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Speaker 4: the US demand? Because I have to admit a lot

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Speaker 4: of people feel very pure pressure to stay with an

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Speaker 4: iPhone versus a different device, simply because if you're in

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Speaker 4: a group chat and you have blue text messages like

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Speaker 4: it seems like that's actually a really strong feature that

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Speaker 4: can ramp up demand, at least in the US. So

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Speaker 4: how does that compare it and how are you so?

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Speaker 3: I will say, I think Apple is still gaining share

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Speaker 3: in other markets US, India, other pockets as well outside

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Speaker 3: of China, but that China revenue is almost twenty percent

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Speaker 3: of their sales. And if it's going to be zero

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Speaker 3: a couple of years from now. Then you have to

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Speaker 3: ask yourself what makes for that revenue shortfall and for

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Speaker 3: a variety of reasons, as we talked about, you know,

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Speaker 3: related to China, But even if they are doing well

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Speaker 3: in other regions, it's just pressure in terms of unit

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Speaker 3: sales and what do you do. Do you keep raising

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Speaker 3: the prices of the phone, which they may have to

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Speaker 3: because they have to relocate the supply chains out of China.

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Speaker 3: That's the other aspect of the cost pressures when it

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Speaker 3: comes to making this phone. They will have a lot

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Speaker 3: of that because they have to relocate those supply chains

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Speaker 3: and it's not easy.

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Speaker 2: I'm surprised they haven't take any more aggressive approach in India,

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Speaker 2: like maybe a lower cost model to appeal to that marketplace.

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Speaker 2: What's their India strategy?

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Speaker 3: I mean, so far, I think they are catering to

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Speaker 3: that premium segment and they have had success, you know,

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Speaker 3: in terms of that one percent or two percent penetration

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Speaker 3: that they have had, you know, in terms of the region.

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Speaker 3: But a low cost phone it's hard in India simply

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Speaker 3: because how low can you go? And Apple has tried

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Speaker 3: that with different skews in the past, they haven't had

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Speaker 3: a ton of success with low CON's phones because again,

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Speaker 3: the competitors are quite fierce when it comes to you know,

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Speaker 3: the feature said and the quality of the phones that

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Speaker 3: they offer, and so it will be an interesting strategy

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Speaker 3: if they decide to pursue that. But for now, I

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Speaker 3: don't think anything can make up for that China revenue

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Speaker 3: shortfall because it's declining at a very rapid pace.

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Speaker 4: So their earnings aren't until May second. They have that

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Speaker 4: launch event on May seventh, but we do have some

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Speaker 4: other big tech earnings coming this week. Can you talk

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Speaker 4: about that?

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Speaker 3: Yeah, I mean, look, Meta, I think it's a company

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Speaker 3: that has had a great turnaround story, and we know

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Speaker 3: turnarounds are tough intech, but Meta has shown that, you know,

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Speaker 3: it's a remarkable story when it comes to laying off

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Speaker 3: twenty five percent people and then growing revenue twenty five

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Speaker 3: percent in subsequent quarters. I mean, it just speaks for

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Speaker 3: how well they have executed and now they are at

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Speaker 3: the top of the game and it comes to having

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Speaker 3: their own large a model, So that could make a

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Speaker 3: difference in terms of, you know, the new revenue stream

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Speaker 3: that everyone wants to see with meta and probably the

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Speaker 3: metaverse may become a side show. I think another company

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Speaker 3: that I feel is not very well understood and probably

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Speaker 3: everyone thinks they're going to get disrupted is Google Alphabet,

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Speaker 3: and that's where it would be interesting to see what

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Speaker 3: they do around search because all the survey work that

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Speaker 3: we have done, it shows that, you know, the new

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Speaker 3: companies chat GPT, Perplexity, they have taken some share when

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Speaker 3: it comes to the search queries. Now. Still, the counter

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Speaker 3: argument is everyone still needs to go to Google Maps

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Speaker 3: or Google Search to look at what chat GPT is

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Speaker 3: generating because they're not sourcing the links. So in the end,

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Speaker 3: Google is still getting the traffic, but obviously the search

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Speaker 3: is starting somewhere else, and that's the key risk that

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Speaker 3: they have to address.

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Speaker 2: All right, so does does Google have an AI play

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Speaker 2: per se?

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Speaker 3: Yeah? So their Gemini large anglid model. I mean, we

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Speaker 3: all know it wasn't a success initially, but now they

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Speaker 3: have caught up in terms of features and look, Google

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Speaker 3: doesn't want to integrate Gemini everywhere because that's going to

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Speaker 3: hurt their ad revenue. So they're very careful with how

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Speaker 3: they roll out and how they make those UI changes

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Speaker 3: because it's going to be disruptive to their incumbent position.

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Speaker 3: When it comes to digital.

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Speaker 2: Ads market, do you use Gemini?

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Speaker 3: I do, and I think for certain tasks like generating

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Speaker 3: summaries and you know, video editing, that kind of stuff,

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Speaker 3: image editing, it's great. But I don't use it for

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Speaker 3: my search yet because when it comes to the traditional

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Speaker 3: Google search, it's still the go to place. When I

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Speaker 3: think about you know certain things to do, and that's

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Speaker 3: the behavior I think.

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Speaker 2: All right, you're a guy, Men Deep sing Senior techounts

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Speaker 2: when you go. When you start using something, I'll start

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Speaker 2: using it when men and when Anna Rock tells me

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Speaker 2: to upgrade my phone, all upgrade my phone. That's how

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Speaker 2: I roll Men Deep Seeing Senior Tech outs or Bloomberg Intelligence.

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Speaker 2: Join us live here in our Bloomberg Interactive Brokers Studio

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Speaker 2: iPhone China Apple. It's a big, big challenge for them,

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Speaker 2: as many you've said, almost twenty percent of the revenue

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Speaker 2: comes out of China. They need to figure that out.

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

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Speaker 1: weekdays at ten am Eastern on applecar Play and Android

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Speaker 1: Auto with the Bloomberg Business app. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station.

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Speaker 1: Just say Alexa play Bloomberg eleven thirty.

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Speaker 2: Emily Grafao, Paul Swen, you're live here in the Bloomberg

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Speaker 2: INTERACTI Broker Studio or streaming live on YouTube as well.

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Speaker 2: Emily Grafao a proud graduate of the University of Richmond.

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Speaker 2: I'm sorry University of Virginia. Sorry slip slip. As is

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Speaker 2: our next guest, Garrett Nelson, Vice president and Senior equity

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Speaker 2: analyst at cfr A Research. Garrett, my notes here, say

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Speaker 2: you're in Richmond, Virginia. How'd you work that scam?

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Speaker 5: That's right, only only an hour from Charlottesville. So as

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Speaker 5: a as a proud who, very happy living so close

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Speaker 5: to the album.

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Speaker 2: Marler, all right, very good. I'm surrounded by UVA folks. Hey,

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Speaker 2: Garrett Elon Musk, let's talk Tesla. You're the auto dude

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Speaker 2: at CFRA. What does he have to do on the

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Speaker 2: conference call today? It seems like he's got to pull

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Speaker 2: a rabbit out of some kind of hat here to

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Speaker 2: reverse the bad mojo around the stock.

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Speaker 1: Yeah.

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Speaker 5: Look, there's no question the stakes are extremely high heading

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Speaker 5: into this earnings release. The stock is down more than

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Speaker 5: forty year to date, coming off a year in which

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Speaker 5: shares more than doubled. Tesla's earnings execution also hasn't been great.

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Speaker 5: They've missed on the bottom line each of the last

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Speaker 5: two quarters, you know, but we think the challenges they

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Speaker 5: face at this point are well understood by investors. They're

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Speaker 5: having issues with the ramp up of production of the

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Speaker 5: cyber truck. The TV market overall is oversaturated and growth

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Speaker 5: rates have slowed tremendously. And you know, there's some uncertainty

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Speaker 5: regarding the future product pipeline when they might bring to

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Speaker 5: market the mass market ev or ROBOTAXI. You know, that's

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Speaker 5: not really clear right now. So certainly a lot to

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Speaker 5: look for. There's always a lot on the line. Tesla

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Speaker 5: is one of the most anticipated earnings releases every quarter,

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Speaker 5: but even more so this quarter.

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Speaker 4: Yeah. Can you talk a little bit about Tesla's efforts

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Speaker 4: to cut prices on their vehicles and how that is

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Speaker 4: going to play into the earnings. I see a lot

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Speaker 4: of headlines about cutting costs. They recently slashed prices I

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Speaker 4: think two weeks ago on most of their models. Is

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Speaker 4: that something that investors should be watching for? Even more

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Speaker 4: today in the earnings.

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Speaker 1: Yeah.

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Speaker 5: So Tesla's been cutting prices steadily for over a year now.

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Speaker 5: Remember just after the New year twenty twenty three, they

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Speaker 5: announced a price cut, a series of price cuts, and

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Speaker 5: there have been, you know, several price cut announcements since then.

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Speaker 5: So it's going to impact both the top line and

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Speaker 5: the bottom line. You're really going to see it in

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Speaker 5: the gross margins that they report. So but you know,

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Speaker 5: also Tesla's at a point where they opened two new

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Speaker 5: factories just a couple of years ago, in Austin and

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Speaker 5: in Berlin, and they're still in the process of ramping

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Speaker 5: those plants up to full capacity. So you know, if

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Speaker 5: they can do that cut prices and drive sales higher,

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Speaker 5: they can drive down their unit costs by doing so.

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Speaker 5: Auto manufacturing is a very high fixed cost business, so

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Speaker 5: ultimately they want to run those plants at the highest

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Speaker 5: possible capacity utilization rate without surrendering too much margin.

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Speaker 2: So I guess to me, thank you blue Button, to me, Garrett,

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Speaker 2: I think the most fundamental issue here, and I'm not

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Speaker 2: sure Elon Musk can really address it, is what is

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Speaker 2: the overall fundamental long term demand for EV's. You know,

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Speaker 2: there's a lot of folks out there that are saying

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Speaker 2: it's it's it's not great, it's not what maybe the

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Speaker 2: industry once thought. What's your view on that.

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Speaker 5: Yeah, I think that's a big reason behind the sell

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Speaker 5: off in Tesla and other EV manufacturers. I mean, look

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Speaker 5: at the stock price of Ribby and Lucid Fisker. Is

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Speaker 5: that the growth rates have disappointed, you know, compared to

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Speaker 5: what investors thought growth would look like just two or

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Speaker 5: three years ago. So you know, it's been a disappointment.

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Speaker 5: And one thing you can point to is that governments

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Speaker 5: around the world are putting EV mandates in place, and so,

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Speaker 5: you know, we think that's a big positive for Tesla.

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Speaker 5: Obviously as an EV peer play. You're also seeing a

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Speaker 5: number of traditional auto manufacturers really pull back on their

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Speaker 5: planned EV investment. So over the longer term, there should

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Speaker 5: be a lot less competition in the EV market for Tesla,

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Speaker 5: which really opens up the market opportunity.

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Speaker 4: What else makes Tesla different than other pure play EV manufacturers.

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Speaker 4: If you read the Walter Isaacson biography of Elon Musk's,

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Speaker 4: you kind of get a sense that Musk never wanted

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Speaker 4: Tesla to just be an EV company, but thinks of

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Speaker 4: it more as an AI company, a battery company. How

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Speaker 4: much does that matter to investors right now when the

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Speaker 4: stock is down, you know, forty percent year to date.

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Speaker 5: We argue it should matter. I mean, look, they have

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Speaker 5: an energy business, energy storage that if you look last year,

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Speaker 5: it's been growing faster than the auto business. They hardly

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Speaker 5: get any credit for that business, and so you know,

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Speaker 5: we think it should matter. But really, the big distinguishing

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Speaker 5: factor when you look at Tesla relative to to other

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Speaker 5: competitors is its balance sheet. You know, this, this isn't

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Speaker 5: the Tesla of three or four years ago that was

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Speaker 5: just barely getting by. Tesla had today has an investment

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Speaker 5: grade balance sheet. They're sitting on over twenty nine billion

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Speaker 5: dollars of cash, They have some of the highest gross

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Speaker 5: margins in the industry, and we think they have an

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Speaker 5: attractive development pipeline. So you know, that's really you've seen

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Speaker 5: a bifurcation in the market where you know, some of

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Speaker 5: the smaller, newer ed players like the ones I mentioned,

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Speaker 5: you know, some of them have either declared bankruptcy or

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Speaker 5: are flirting with bankruptcy. So you know, Tesla is really

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Speaker 5: in a much different position than those companies, and in fact,

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Speaker 5: a lot of traditional automnifact and manufacturers don't even have

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Speaker 5: investment grade balance sheets, so you know, they're in a

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Speaker 5: better position than those companies in our opinion.

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Speaker 2: Garrett has, do you have the confidence that Tesla can

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Speaker 2: profitably make an EV at a thirty thirty five thousand

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Speaker 2: dollars price point?

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Speaker 5: Going to be difficult. So you know, when Elon Musk

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Speaker 5: first started talking about this mass market EV years ago,

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Speaker 5: it you know, it was a twenty five thousand dollars

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Speaker 5: EV and that just isn't you know, with inflation that

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Speaker 5: we've experienced since then and the economy continues to experience,

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Speaker 5: we think, you know, if this happens, it's it's more

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Speaker 5: likely to have a price point somewhere north of thirty thousand,

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Speaker 5: maybe thirty or thirty five thousand, And that's really a

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Speaker 5: price point that they're that they're going to need to

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Speaker 5: produce it profitably in this environment.

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Speaker 4: I have two questions. One quick question we talked about

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Speaker 4: the balance sheet. Does Tesla still have bitcoin on their

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Speaker 4: balance sheet? Remember when that news came out like two

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Speaker 4: years ago?

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Speaker 5: They do, And you know, that was a drag on

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Speaker 5: on Tesla for a while. When bitcoin was falling. With

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Speaker 5: bitcoin having rebounded, you know, they've divested some of the bitcoin,

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Speaker 5: but they do have some amount on the balance sheet.

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Speaker 5: I would have to check the ten K for the

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Speaker 5: exact amount, but they do. They do still have some bitcoin.

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Speaker 4: The other question I had was just when the earnings

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Speaker 4: come out, you know, what are you looking for? Best

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Speaker 4: case scenario? You know, what kind of headline would you

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Speaker 4: have to see to you know, start buying more Tesla

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Speaker 4: after the earnings.

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Speaker 5: Really the biggest thing is we're looking for some certainty

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Speaker 5: regarding the cyber truck. From as far as we can tell,

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Speaker 5: from the time they made first deliveries of that vehicle

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Speaker 5: in November, you know, through the end of March, they've

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Speaker 5: only produced maybe a few thousand units of the cyber truck.

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Speaker 5: Now the reservation count for that model is somewhere north

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Speaker 5: of two million, So you have two million customers out

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Speaker 5: there who are waiting delivery of their cyber truck. They're

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Speaker 5: having difficulty ramping up production. There was a recall just announced,

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Speaker 5: and so you know, we're looking for some certainty regarding

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Speaker 5: when they might hit certain production milestones for the cyber truck,

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Speaker 5: which is going to have an impact on their full

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Speaker 5: year deliveries obviously, and then looking ahead into twenty twenty five.

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Speaker 5: But you know, if you look across the street, Earning's

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Speaker 5: estimates have come down massively for twenty twenty four, and

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Speaker 5: so we think they're at a level which are much

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Speaker 5: more achievable here, and so the really the story becomes

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Speaker 5: more of a twenty twenty five and beyond story, which

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Speaker 5: is what investors are looking for, you know, taking the

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Speaker 5: longer view, but also they want to see better execution

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Speaker 5: in the near term.

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Speaker 2: All right, Garet, thanks so much for joining us. Really

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Speaker 2: appreciate it. Garrett Nelson, Vice president's Senior Equity analytcfr A Research,

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Speaker 2: A proud Wahoo from the University of Virginia, somehow working

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Speaker 2: his scam from Richmond, Virginia, one of my favorite towns

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Speaker 2: anywhere my twins are born. There a great city, great

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Speaker 2: place to live. Garrett's got it figured out there doing

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Speaker 2: the Wall Street thing from Richmond, Regina. Good for him,

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Speaker 2: Tesla after the close, that's going to be big.

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

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Speaker 1: weekdays at ten am Eastern on Apple Car, playing Android

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Speaker 1: otto with the Bloomberg Business app listen on demand wherever

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

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Speaker 2: One of the big names reporting today is UPS, big

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Speaker 2: brown profit higher than analysts estimates, talking about headcount management,

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Speaker 2: restructuring of its delivery rats are beginning to bear some fruit.

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Speaker 2: Let's check in with the expert on all things transport

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Speaker 2: and that would be one lead classical. He's a senior

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Speaker 2: transportation's logistics analyst at Bloomberg Intelligence. He's safely a sconce

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Speaker 2: down in our Princeton office and he joins us there

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Speaker 2: via zoom. So, Lee, it looks like this UPS put

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Speaker 2: us some good numbers. What are really the drivers here?

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Speaker 6: Yeah, hey Paul, thanks for having me on.

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Speaker 1: Yeah.

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Speaker 6: I think it's really about what they're doing on the

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Speaker 6: cost side. I think that's really the driver of the

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Speaker 6: outperformance in EPs, because revenue did come in slightly lower

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Speaker 6: than expectations on lower volumes. You know, they're dealing with

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Speaker 6: lower volumes from last share last year when they you know,

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Speaker 6: were negotiating their labor contract and a lot of shippers

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Speaker 6: kind of try to find other alternatives in case there

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Speaker 6: was an issue with their network, you know, from a strike.

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Speaker 6: But obviously that didn't happen now they're being pretty busy

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Speaker 6: trying to win back that share, so, you know, I

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Speaker 6: think what they're all in all, it was a good quarter.

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Speaker 6: I think if UPS is you know, meeting or beating expectations,

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Speaker 6: that's a good thing. Because they've had a rough year,

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Speaker 6: driven a lot by that labor negotiation, which increased costs

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Speaker 6: considerably and resulted in a lost amount of volume, which

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Speaker 6: you know, for a company like UPS, the deleveraging effect

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Speaker 6: on margins is quite substantial. But there are definitely some

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Speaker 6: good news in the report today that you know, we

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Speaker 6: remain optimistic that they might be even looking to possibly increase,

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Speaker 6: you know, their full year guidance for twenty twenty four,

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Speaker 6: especially as the US postal service contract which they recently

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Speaker 6: won from FedEx starts hitting their.

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Speaker 1: P and L.

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Speaker 4: When you talk about average daily package volume down, your

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Speaker 4: over year revenue down year over year, how much of

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Speaker 4: the softer demand for UPS is related to macro economic

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Speaker 4: factors and maybe coming out of the pandemic consumers shipping less.

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Speaker 4: Is that a factor here?

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Speaker 6: Yeah, I think it's a you know, probably a trieffective things.

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Speaker 6: It's probably a softer great outlook all together that coupled

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Speaker 6: with tougher comparisons, and the fact that they are you know,

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Speaker 6: are still trying to win back the share that they

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Speaker 6: lost from their labor contract negotiation. So I think think

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Speaker 6: those three things are kind of weighing on their their volumes,

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Speaker 6: probably more than maybe their competitors like a FedEx or

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Speaker 6: a DHL Hayley.

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Speaker 2: I know, labor is a big deal with UPS and

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Speaker 2: these companies here. I know UPS they had a new

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Speaker 2: labor contract that really pushed up wages and benefits starting

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Speaker 2: I guess this year. But then on the other side,

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Speaker 2: they also cut twelve hundred or twelve thousand white collar jobs.

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Speaker 2: That's like fourteen percent of the workforce here. So talk

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Speaker 2: to us about the labor and component they're in the

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Speaker 2: cost structure.

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Speaker 6: Yeah, I mean that they're they're doing the right things.

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Speaker 6: You know, the contract might have a you know, with

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Speaker 6: the team serves, might have had a negative impact to margins,

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Speaker 6: but you know, we are going to anniversary those in

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Speaker 6: the second half of the year, so those comparisons won't

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Speaker 6: be as bad. And also, you know, does provide them

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Speaker 6: with a steady labor force, because you know, if your

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Speaker 6: labor is happy, you're gonna have less turnover. You have

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Speaker 6: less turnover, you probably have better service and better safety,

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Speaker 6: and that usually yields better profits. So I think, like

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Speaker 6: when you if you look longer term, beyond the initial

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Speaker 6: shock of that new contract, which is very front loaded,

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Speaker 6: you know, the increases aren't as bad. As we get

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Speaker 6: to year two, it's not going to be as bad.

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Speaker 6: And listen, you know UPS and FedEx and a lot of

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Speaker 6: these companies, you know they did get a little on

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Speaker 6: the fat side, if you will, on their corporate ranks,

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Speaker 6: and I think they're both doing the right things and

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Speaker 6: terming in terms of trimming it for the new normal

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Speaker 6: of what their operating environment is today.

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Speaker 4: How should investors be thinking about UPS? The stock is

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Speaker 4: up one point five percent right now, but it's down

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Speaker 4: about six percent year to date, underperforming the broader market.

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Speaker 6: Yeah, and if you even look even further over the

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Speaker 6: last twelve months, you know it's down almost twenty five percent,

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Speaker 6: underperforming not only the broader market, but you know it's

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Speaker 6: closest peer fed X, which is up around eighteen percent

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Speaker 6: over the last twelve months. So you know, I think

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Speaker 6: what they need to do is they need to execute.

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Speaker 6: They do not only to execute on their twenty twenty

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Speaker 6: four plans, but their twenty twenty six plans, and I

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Speaker 6: do as I said earlier, I think there is some

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Speaker 6: opportunity for some upside surprise. Given their US postal service contract.

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Speaker 6: It wasn't didn't really make that much money for FedEx.

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Speaker 6: But I think UPS's network is very different than fedexits.

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Speaker 6: It's more integrated, it's not a hub and spoke network,

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Speaker 6: and that will provide them with some profitability. And management

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Speaker 6: is pretty confident, at least it peers confident that this

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Speaker 6: business is going to be not only creative to earnings,

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Speaker 6: but a creative to margins. And that's kind of what

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Speaker 6: you know, we as we look at the company, really

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Speaker 6: want to see. We really want to see those domestic

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Speaker 6: margins start to improve.

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Speaker 2: Haylee, what are the companies saying about kind of normalized

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Speaker 2: growth rates in terms of I guess, unit volume. Where's

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Speaker 2: this US economy in terms of just packages? Is it

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Speaker 2: a GDP kind of number? Is that kind of the story.

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Speaker 6: Yeah, it's a GDP kind of number. But you know,

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Speaker 6: UPS wants to grow beyond GDP and and how they're

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Speaker 6: going to do that is they've made some pretty significant

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Speaker 6: uh not in size necessarily, but in terms of you know,

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Speaker 6: capabilities acquisitions. You know, they bought a company Roady, which

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Speaker 6: you know it's not a drink on the road, well,

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Speaker 6: but it's it's it is. What they do is they

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Speaker 6: deliver heavy stuff to people's doors, So think furniture, think

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Speaker 6: uh uh, workout equipment, fitness equipment, and that is done

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Speaker 6: through more or less an asset light model where you know,

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Speaker 6: they're arranging the delivery. So that's that's a very good business.

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Speaker 6: They're also invested or acquired a company that does returns

436
00:24:42,040 --> 00:24:44,680
Speaker 6: without box, without having it to box it, so it's

437
00:24:44,680 --> 00:24:48,960
Speaker 6: a lot easier for consumers to you know, either go

438
00:24:49,080 --> 00:24:50,960
Speaker 6: to a UPS store or one of the other drop

439
00:24:51,000 --> 00:24:54,800
Speaker 6: points that UPS provides, uh to to to return something.

440
00:24:54,800 --> 00:24:56,800
Speaker 6: And that's good for UPS because that stuff goes into

441
00:24:56,840 --> 00:24:59,600
Speaker 6: their system and it becomes a B two b uh

442
00:24:59,640 --> 00:25:02,800
Speaker 6: deliver where when we say B to B business business

443
00:25:03,040 --> 00:25:06,119
Speaker 6: and meaning that there's more density, so it's you know,

444
00:25:06,160 --> 00:25:10,879
Speaker 6: they're they're shipping, you know, they're consolidating and shipping twenty

445
00:25:10,920 --> 00:25:13,879
Speaker 6: boxes versus just one envelope, and that tends to be

446
00:25:13,960 --> 00:25:18,800
Speaker 6: more profitable. Uh. And then their investments in the healthcare space,

447
00:25:19,040 --> 00:25:21,359
Speaker 6: you know their goal is to be the largest healthcare

448
00:25:21,400 --> 00:25:26,480
Speaker 6: logistics provider. Healthcare has above average margins for transportation companies

449
00:25:26,840 --> 00:25:30,000
Speaker 6: given the high level of service that's involved there. I

450
00:25:30,119 --> 00:25:34,639
Speaker 6: think temperature control, think you know, uh, the fact that

451
00:25:34,680 --> 00:25:37,200
Speaker 6: it has to get get get somewhere at a very

452
00:25:37,240 --> 00:25:40,959
Speaker 6: specific time. So you know, those are higher, higher margin

453
00:25:41,040 --> 00:25:44,639
Speaker 6: business So you know, I think that those growth areas

454
00:25:44,720 --> 00:25:48,760
Speaker 6: I just mentioned will help them grow their overall volumes

455
00:25:48,800 --> 00:25:51,520
Speaker 6: beyond you know, just GDP numbers.

456
00:25:52,800 --> 00:25:55,919
Speaker 2: All right, just real quickly, Lea, I'm looking at the stock,

457
00:25:56,200 --> 00:25:59,520
Speaker 2: my god, Over the last five years, UPS and FedEx

458
00:26:00,119 --> 00:26:02,960
Speaker 2: both grew at a compounded annuer rate of eight point

459
00:26:03,000 --> 00:26:05,320
Speaker 2: eight percent, spot on below the S and P five

460
00:26:05,359 --> 00:26:09,399
Speaker 2: hundred and thirteen percent. But why do investors own these stock?

461
00:26:09,440 --> 00:26:14,000
Speaker 2: What's the call to own a fed X or UPS?

462
00:26:14,040 --> 00:26:16,760
Speaker 6: Well, Paul, as you know, we don't do a recommendation

463
00:26:16,840 --> 00:26:19,280
Speaker 6: to your bi but you know, it's a really it's

464
00:26:19,320 --> 00:26:22,879
Speaker 6: a play on e commerce. It's a play on the

465
00:26:22,920 --> 00:26:26,879
Speaker 6: global economy. And you know, it's more, it's more and

466
00:26:26,960 --> 00:26:30,199
Speaker 6: more becoming a play on near shoring. You know, the

467
00:26:30,320 --> 00:26:32,800
Speaker 6: ups is and the Fedexes and the dhls of the world,

468
00:26:32,880 --> 00:26:35,600
Speaker 6: even the freight forwarders like a kuninaugl You know, they're

469
00:26:35,640 --> 00:26:38,760
Speaker 6: all going to benefit from the changes and supply chains.

470
00:26:39,000 --> 00:26:41,680
Speaker 6: At supply chains, you know, change and shifts and get

471
00:26:41,720 --> 00:26:47,439
Speaker 6: more complicated. These companies really prove their worth during these times.

472
00:26:47,480 --> 00:26:49,800
Speaker 6: And you know, I think that if if you believe

473
00:26:49,880 --> 00:26:53,439
Speaker 6: in near shoring, if you believe in you know the

474
00:26:53,480 --> 00:26:56,560
Speaker 6: fact that we're going to be buying more online, not less. Uh,

475
00:26:56,920 --> 00:26:59,280
Speaker 6: these are places where you want to be. And it's

476
00:26:59,320 --> 00:27:02,240
Speaker 6: really about the management teams that are in place, whether

477
00:27:02,280 --> 00:27:06,919
Speaker 6: it's UPS or FedEx, can they change their organizations to

478
00:27:07,040 --> 00:27:09,760
Speaker 6: the new normal. It's and it looks like they're both

479
00:27:09,840 --> 00:27:12,560
Speaker 6: doing it. It's not going to be an overnight change.

480
00:27:13,160 --> 00:27:15,560
Speaker 6: It's going to take time because these are very you know,

481
00:27:16,080 --> 00:27:19,399
Speaker 6: huge networks and they and they're not as easy to

482
00:27:19,520 --> 00:27:22,600
Speaker 6: change as it would, you know, changing a menu at

483
00:27:22,640 --> 00:27:23,600
Speaker 6: a restaurant.

484
00:27:23,280 --> 00:27:25,480
Speaker 2: Right right, All right, A league, thanks as always for

485
00:27:25,560 --> 00:27:28,880
Speaker 2: joining us. Lee Lascal, senior transportation analysts of Bloomberg Intelligence,

486
00:27:28,960 --> 00:27:32,560
Speaker 2: joining us from the Princeton offices of Bloomberg.

487
00:27:32,600 --> 00:27:38,080
Speaker 1: Here you're listening to the Bloomberg Intelligence Podcast. Catch us

488
00:27:38,080 --> 00:27:41,480
Speaker 1: live weekdays at ten am Eastern on applecar Play and

489
00:27:41,480 --> 00:27:44,400
Speaker 1: Android Auto with the Bloomberg Business app. You can also

490
00:27:44,480 --> 00:27:48,000
Speaker 1: listen live on Amazon Alexa from our flagship New York station,

491
00:27:48,359 --> 00:27:52,760
Speaker 1: just say Alexa playing Bloomberg eleven thirty PM.

492
00:27:52,760 --> 00:27:57,560
Speaker 2: My data came out here from SMP generally below consensus.

493
00:27:57,600 --> 00:28:00,600
Speaker 2: I guess the composite came into fifty spot nine versus

494
00:28:00,640 --> 00:28:04,240
Speaker 2: fifty two. That was a consensus of fifty two point

495
00:28:04,240 --> 00:28:07,680
Speaker 2: one was for the last period as well. Chris Willimson

496
00:28:07,720 --> 00:28:10,960
Speaker 2: joins us. He's a chief business economist at SMP Global

497
00:28:11,080 --> 00:28:15,159
Speaker 2: Market Intelligence. Chris walk us through kind of what we

498
00:28:15,200 --> 00:28:17,919
Speaker 2: saw here with the pmis for the month of April.

499
00:28:19,800 --> 00:28:22,639
Speaker 7: Yeah, so there's two surveys really, one of manufacturing, one

500
00:28:22,640 --> 00:28:27,400
Speaker 7: of services. So the latter is private sector services. So

501
00:28:27,480 --> 00:28:32,040
Speaker 7: these are this ranges from consumer based services to business services.

502
00:28:32,080 --> 00:28:38,160
Speaker 7: It excludes retail importantly, and it excludes government. Now, both

503
00:28:38,200 --> 00:28:42,320
Speaker 7: of those surveys lost some momentum. Collectively over the first quarter,

504
00:28:42,400 --> 00:28:46,840
Speaker 7: they'd signal fairly decent growth around two percent annualized, with

505
00:28:46,960 --> 00:28:51,120
Speaker 7: that upturn becoming increasingly broad based services led, but manufacturing

506
00:28:51,160 --> 00:28:53,920
Speaker 7: also starting to pick up some momentum. But in April

507
00:28:53,920 --> 00:28:57,160
Speaker 7: we've seen both of those surveys lose some output. Growth pace.

508
00:28:58,160 --> 00:29:01,400
Speaker 7: It's still in expansion territory as far as output's concerned,

509
00:29:01,480 --> 00:29:04,880
Speaker 7: but with growth sort of slipping below the two percent

510
00:29:04,960 --> 00:29:09,720
Speaker 7: annualized GDP rate, that's the signal from it. So looks

511
00:29:09,760 --> 00:29:12,640
Speaker 7: like the second quarter could disappoint compared to the first

512
00:29:12,680 --> 00:29:17,480
Speaker 7: quarter based on these these survey data, as your previous

513
00:29:17,560 --> 00:29:21,320
Speaker 7: interview was referring to these these survey data have been

514
00:29:21,360 --> 00:29:24,560
Speaker 7: a bit softer than recent GDP numbers, so you know

515
00:29:24,600 --> 00:29:26,320
Speaker 7: that needs to be born in mind.

516
00:29:26,280 --> 00:29:28,880
Speaker 2: So any sense of what's driving there, Like, I'm not

517
00:29:28,920 --> 00:29:30,400
Speaker 2: sure how to think about this on a month a

518
00:29:30,440 --> 00:29:32,920
Speaker 2: month basis. Is it just kind of noise month a

519
00:29:32,920 --> 00:29:34,280
Speaker 2: month and I really want to look at it on

520
00:29:34,320 --> 00:29:37,880
Speaker 2: a longer trend or does the slowdown in April does

521
00:29:37,880 --> 00:29:40,520
Speaker 2: that kind of suggest something might be a foot?

522
00:29:41,720 --> 00:29:44,880
Speaker 7: Yeah, it does look like there's been some adjustment to demand,

523
00:29:45,040 --> 00:29:47,800
Speaker 7: so new order inflows, the amount of work flowing into

524
00:29:48,120 --> 00:29:50,400
Speaker 7: manufacturers and service providers that fell for the first time

525
00:29:50,400 --> 00:29:53,640
Speaker 7: in six months in April only. Just it is a

526
00:29:53,680 --> 00:29:56,400
Speaker 7: small decline, but this contrasts with growth of demand that

527
00:29:56,400 --> 00:29:59,200
Speaker 7: we've seen over prior periods, and it looks like you're

528
00:29:59,200 --> 00:30:02,880
Speaker 7: getting some adjust meant here to the financial conditions that

529
00:30:02,920 --> 00:30:08,280
Speaker 7: businesses are facing. So previously we've seen, you know, companies

530
00:30:08,320 --> 00:30:11,840
Speaker 7: look forward to rate cuts and that stimulating demand those

531
00:30:11,880 --> 00:30:15,760
Speaker 7: loosening of financial conditions out and over the course of

532
00:30:15,760 --> 00:30:20,040
Speaker 7: the last few weeks, we've seen further signs that you're

533
00:30:20,080 --> 00:30:22,040
Speaker 7: not going to get all those rate cuts that you hope,

534
00:30:22,200 --> 00:30:25,520
Speaker 7: and indeed market starting to price in now more possibility

535
00:30:25,520 --> 00:30:29,120
Speaker 7: of a rate hike. That's feeding through to markets. It's

536
00:30:29,200 --> 00:30:33,440
Speaker 7: increasing borrowing costs and it looks like that's feeding through

537
00:30:33,520 --> 00:30:37,080
Speaker 7: to the business environment. We've seen. We've seen this creep

538
00:30:37,120 --> 00:30:40,400
Speaker 7: in before in terms of how those financial conditions really

539
00:30:40,440 --> 00:30:43,440
Speaker 7: do seem to quickly affect the demand environment, and it

540
00:30:43,480 --> 00:30:46,040
Speaker 7: looks like that's what we've got here in April, a

541
00:30:46,080 --> 00:30:49,560
Speaker 7: bit of a sort of reality check. Whether this persists

542
00:30:49,600 --> 00:30:51,200
Speaker 7: in coming months is going to be the key thing

543
00:30:51,240 --> 00:30:53,680
Speaker 7: to look out for, but it does look like that,

544
00:30:53,800 --> 00:30:56,880
Speaker 7: certainly going into the second quarter, you're seeing the demand

545
00:30:56,960 --> 00:30:59,680
Speaker 7: environment soften compared to what we've seen previously.

546
00:31:00,000 --> 00:31:02,040
Speaker 2: All right, Chris, thanks so much for joining us. Chris Williamson,

547
00:31:02,120 --> 00:31:05,520
Speaker 2: chief Business Economists at SMP Global Markets, joining us from

548
00:31:05,560 --> 00:31:09,240
Speaker 2: London via zoom and again the SMP Global manufacturing PMI

549
00:31:09,520 --> 00:31:11,000
Speaker 2: for the month of April comme in at forty nine

550
00:31:11,000 --> 00:31:15,000
Speaker 2: point nine. Consensus was fifty two. On the services side,

551
00:31:15,040 --> 00:31:17,960
Speaker 2: it came in at fifty point nine, still expansionary, but

552
00:31:18,040 --> 00:31:21,240
Speaker 2: below the consensus of fifty two, and both of those

553
00:31:21,280 --> 00:31:24,200
Speaker 2: were down from last month, which we're both close to

554
00:31:24,240 --> 00:31:26,320
Speaker 2: fifty two, so again at deceleration there. So when you

555
00:31:26,320 --> 00:31:28,920
Speaker 2: put them all together, the services and manufacturing on a

556
00:31:28,920 --> 00:31:32,760
Speaker 2: composite basis came into fifty point nine versus fifty two.

557
00:31:32,840 --> 00:31:34,920
Speaker 2: So we'll keep an eye on out a slowdown in

558
00:31:35,000 --> 00:31:39,160
Speaker 2: the SMP. It's a survey of manufacturing and service activity

559
00:31:39,160 --> 00:31:42,080
Speaker 2: out there in economy. Economists kind of take a look

560
00:31:42,080 --> 00:31:44,960
Speaker 2: at that to see about the outlook for services and

561
00:31:45,040 --> 00:31:46,040
Speaker 2: for manufacturing.

562
00:31:48,560 --> 00:31:52,440
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

563
00:31:52,520 --> 00:31:56,440
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto

564
00:31:56,480 --> 00:31:59,240
Speaker 1: with the Bloomberg Business app. You can also listen live

565
00:31:59,320 --> 00:32:02,520
Speaker 1: on Amazon Alexa from our flagship New York station Just

566
00:32:02,560 --> 00:32:04,800
Speaker 1: Say Alexa playing Bloomberg eleven.

567
00:32:06,560 --> 00:32:08,920
Speaker 2: Emily Rafe is sitting in for Alex Steele and Paul Sweeney.

568
00:32:08,920 --> 00:32:11,040
Speaker 2: We're live here in our Bloomberg Interactive Broker studio. We're

569
00:32:11,040 --> 00:32:15,040
Speaker 2: also streaming live on YouTube dot com, so head over

570
00:32:15,040 --> 00:32:17,840
Speaker 2: there and search Bloomberg Podcast. I'm in the process thanks

571
00:32:17,880 --> 00:32:22,959
Speaker 2: to Emily's tip. I'm in the process of logging into

572
00:32:23,000 --> 00:32:26,000
Speaker 2: and loading clear Space onto my phone the app, and

573
00:32:26,040 --> 00:32:29,960
Speaker 2: that is to limit self, limit my use of certain

574
00:32:30,000 --> 00:32:32,640
Speaker 2: social media things that I feel like are wasting my time.

575
00:32:32,760 --> 00:32:36,320
Speaker 4: Yes, it blocks your access to the apps, and it

576
00:32:36,360 --> 00:32:38,040
Speaker 4: actually makes you do a breathing.

577
00:32:37,720 --> 00:32:39,320
Speaker 7: Exercise, of course, and.

578
00:32:39,280 --> 00:32:43,120
Speaker 4: It gives you a quote and an inspirational quote before

579
00:32:43,240 --> 00:32:45,000
Speaker 4: you log on. So you really have to question, do

580
00:32:45,080 --> 00:32:47,000
Speaker 4: I really want to open social media right now?

581
00:32:47,080 --> 00:32:50,560
Speaker 1: Good? This is like the lock on the liquor cabinet.

582
00:32:50,680 --> 00:32:54,440
Speaker 2: Yes, yes, that's the analogy that from our generation that

583
00:32:54,480 --> 00:32:57,960
Speaker 2: brings us to TikTok, because that's a lot of what

584
00:32:58,200 --> 00:33:02,200
Speaker 2: people are concerned about in TikTok. You know, it looks

585
00:33:02,240 --> 00:33:05,080
Speaker 2: like they might be banned here or forced of a divesture.

586
00:33:05,120 --> 00:33:07,160
Speaker 2: I don't know what's going on, since I'm not a TikToker,

587
00:33:07,160 --> 00:33:10,280
Speaker 2: but I know it's huge because most people are on TikTok.

588
00:33:10,560 --> 00:33:12,720
Speaker 2: Matt Schuttenhelm, I don't know if he's on TikTok. I'm

589
00:33:12,760 --> 00:33:15,240
Speaker 2: gonna guess no, but I don't know. He's a media

590
00:33:15,360 --> 00:33:18,560
Speaker 2: litigation analyst to Bloomberg Intelligence. Yeah, he's a lawyer, but

591
00:33:18,560 --> 00:33:21,600
Speaker 2: we talked to him anyway because he's really really smart. Matt,

592
00:33:21,640 --> 00:33:23,719
Speaker 2: can you tell us what's going on with our good

593
00:33:23,760 --> 00:33:26,920
Speaker 2: friends at TikTok is what is Congress looking to do?

594
00:33:27,880 --> 00:33:31,320
Speaker 8: Yeah, so this bill is really advancing in Congress faster

595
00:33:31,560 --> 00:33:33,480
Speaker 8: than I think many of us expected.

596
00:33:33,560 --> 00:33:33,960
Speaker 1: That.

597
00:33:34,040 --> 00:33:38,280
Speaker 8: The aim of this bill is that to force a

598
00:33:38,320 --> 00:33:42,640
Speaker 8: divestiture of TikTok from byte Edance, which is based in

599
00:33:43,160 --> 00:33:47,040
Speaker 8: China and is the parent company here. And basically the

600
00:33:47,120 --> 00:33:52,680
Speaker 8: bill operates by saying, if that divestiture doesn't happen within

601
00:33:52,800 --> 00:33:56,400
Speaker 8: two hundred and seventy days or maybe there's a potential

602
00:33:56,480 --> 00:33:59,960
Speaker 8: ninety day extension of that, if that divestiture doesn't happen,

603
00:34:00,080 --> 00:34:04,560
Speaker 8: and then TikTok can't be hosted in app stores, or

604
00:34:04,600 --> 00:34:07,959
Speaker 8: it can't be there can be no web hosting of

605
00:34:08,120 --> 00:34:12,440
Speaker 8: the app. So it's effectively a ban if that divestiture

606
00:34:12,480 --> 00:34:14,520
Speaker 8: doesn't happen. And so this has cleared the House of

607
00:34:14,560 --> 00:34:18,400
Speaker 8: Representatives on Saturday. That was their second vote by an

608
00:34:18,480 --> 00:34:23,000
Speaker 8: overwhelming bipartisan majority. Today it's tied up in the Senate,

609
00:34:23,160 --> 00:34:27,160
Speaker 8: and this is tied to the Ukraine Foreign aid package,

610
00:34:27,200 --> 00:34:29,759
Speaker 8: and so it's going to be very unlikely for the

611
00:34:29,800 --> 00:34:33,319
Speaker 8: Senate to resist it, so very likely that this becomes law.

612
00:34:33,400 --> 00:34:36,600
Speaker 8: President Biden has said he'll sign it, and so I

613
00:34:36,640 --> 00:34:39,000
Speaker 8: think we're you know, we're off to the courts now

614
00:34:39,040 --> 00:34:39,720
Speaker 8: on this question.

615
00:34:40,560 --> 00:34:44,800
Speaker 4: What is Congress most concerned about when it comes to TikTok?

616
00:34:44,960 --> 00:34:48,239
Speaker 4: Why have they introduced this legislation?

617
00:34:48,920 --> 00:34:53,560
Speaker 8: Yeah, I think it's it's really motivated by by two concerns. One,

618
00:34:53,880 --> 00:34:57,760
Speaker 8: it's a concern about access to all of this data.

619
00:34:57,840 --> 00:34:59,600
Speaker 8: We have one hundred and fifty one hundred and seventy

620
00:34:59,640 --> 00:35:04,160
Speaker 8: million Americans on this TikTok is collecting all of their

621
00:35:04,239 --> 00:35:08,280
Speaker 8: data about what they're clicking on, and potentially China has

622
00:35:08,520 --> 00:35:13,359
Speaker 8: access to that since byte Dance is located UH with

623
00:35:13,360 --> 00:35:18,720
Speaker 8: within within China. And the other concern is a propaganda concern.

624
00:35:18,920 --> 00:35:23,719
Speaker 8: How much can can China play a role in in

625
00:35:23,719 --> 00:35:29,160
Speaker 8: in dictating the messages that that that TikTok prioritizes and

626
00:35:29,160 --> 00:35:33,440
Speaker 8: and what the messages that it's that it's UH declaring

627
00:35:33,440 --> 00:35:35,560
Speaker 8: to our youth you know that are that are using

628
00:35:35,600 --> 00:35:37,880
Speaker 8: this so so often, so it's sort of those dual

629
00:35:38,000 --> 00:35:40,799
Speaker 8: concerns that that have really driven this.

630
00:35:41,400 --> 00:35:43,640
Speaker 2: And Matt, what have we heard from Bite Dance, if anything,

631
00:35:43,640 --> 00:35:46,120
Speaker 2: what do they intend to do if Congress passes this?

632
00:35:46,760 --> 00:35:49,400
Speaker 8: Yeah, I think I think they've signaled pretty clearly that

633
00:35:49,480 --> 00:35:52,880
Speaker 8: there will be a lawsuit to challenge this, and so

634
00:35:53,080 --> 00:35:56,120
Speaker 8: I think that's going to be the next stage. So

635
00:35:56,160 --> 00:35:59,240
Speaker 8: we saw this when President Trump, before he was against

636
00:35:59,280 --> 00:36:04,000
Speaker 8: a band hetally tried to ban TikTok in twenty twenty,

637
00:36:04,440 --> 00:36:08,560
Speaker 8: and there was litigation about this, brought both by TikTok

638
00:36:08,600 --> 00:36:12,560
Speaker 8: and by TikTok's users. And here the bill itself tells

639
00:36:12,600 --> 00:36:14,840
Speaker 8: us what court that's going to go to. It's the

640
00:36:14,920 --> 00:36:18,520
Speaker 8: d C Circuit here here in Washington. And so I

641
00:36:18,560 --> 00:36:23,399
Speaker 8: think Byte Dance and TikTok are very likely to very

642
00:36:23,520 --> 00:36:27,879
Speaker 8: soon bring this lawsuit challenging Congress's action.

643
00:36:28,680 --> 00:36:33,040
Speaker 4: I think everyone who's on TikTok wants to know, is

644
00:36:33,160 --> 00:36:38,080
Speaker 4: TikTok going to be banned? What is the likelihood right

645
00:36:38,160 --> 00:36:41,480
Speaker 4: now that in a couple months people in the US

646
00:36:41,600 --> 00:36:43,560
Speaker 4: won't be able to use.

647
00:36:43,400 --> 00:36:44,799
Speaker 1: The app YEP.

648
00:36:45,160 --> 00:36:49,000
Speaker 8: So right now there's three moving pieces here. So one

649
00:36:49,040 --> 00:36:52,240
Speaker 8: will Congress pass this, and I think there. The answer

650
00:36:52,520 --> 00:36:55,840
Speaker 8: is very likely yes, and that's likely to happen today

651
00:36:55,920 --> 00:36:58,319
Speaker 8: or tomorrow. President Biden will sign it. Then there are

652
00:36:58,400 --> 00:37:01,680
Speaker 8: two other moving parts. One can TikTok win in the

653
00:37:01,760 --> 00:37:05,279
Speaker 8: courts and stop this with the First Amendment challenge. I

654
00:37:06,120 --> 00:37:08,120
Speaker 8: don't give them very good odds to do that. I

655
00:37:08,160 --> 00:37:11,320
Speaker 8: give them only about a thirty percent chance to succeed

656
00:37:11,920 --> 00:37:15,600
Speaker 8: with the court challenge. Then the last moving pieces can

657
00:37:15,680 --> 00:37:19,480
Speaker 8: there be a divestiture of the app. And that one's

658
00:37:19,520 --> 00:37:23,760
Speaker 8: sort of the big wild card, because what we don't

659
00:37:23,800 --> 00:37:28,880
Speaker 8: know is whether China will permit a divestiture or not.

660
00:37:29,080 --> 00:37:31,839
Speaker 8: It has signaled that it won't approve something like that.

661
00:37:31,880 --> 00:37:33,839
Speaker 8: So even if you put that at a toss up

662
00:37:34,000 --> 00:37:37,000
Speaker 8: fifty percent and you say it's you know, TikTok has

663
00:37:37,040 --> 00:37:40,960
Speaker 8: a thirty percent chance in the courts, you know, there's

664
00:37:41,000 --> 00:37:45,960
Speaker 8: a fairly good chance that the app does disappear in

665
00:37:46,400 --> 00:37:47,040
Speaker 8: the next year.

666
00:37:48,080 --> 00:37:49,240
Speaker 3: How do you ban an app?

667
00:37:51,320 --> 00:37:55,040
Speaker 8: How do you ban technically? Yeah, so, technically the approach

668
00:37:55,080 --> 00:38:00,720
Speaker 8: here is to prevent it from being carried in app stores.

669
00:38:00,840 --> 00:38:06,160
Speaker 8: It can't be updated and made accessible to users in

670
00:38:06,200 --> 00:38:08,680
Speaker 8: the United States, both in the app stores, and then

671
00:38:08,719 --> 00:38:11,480
Speaker 8: it can't be hosted. So this app has to sit

672
00:38:11,520 --> 00:38:14,080
Speaker 8: on a server somewhere that in a way that makes

673
00:38:14,080 --> 00:38:17,440
Speaker 8: it accessible. And the the approach in this legislation is

674
00:38:17,440 --> 00:38:21,200
Speaker 8: that if any company makes it accessible through web hosting

675
00:38:21,400 --> 00:38:25,120
Speaker 8: or through app store access, that they are subject to

676
00:38:25,239 --> 00:38:30,000
Speaker 8: significant penalties and fines in a case brought by the FTC.

677
00:38:30,719 --> 00:38:33,880
Speaker 8: So that's the enforcement mechanism here. It's not directly against

678
00:38:33,960 --> 00:38:37,239
Speaker 8: bytenance or TikTok, it's against those that would would make

679
00:38:37,280 --> 00:38:38,239
Speaker 8: the app available.

680
00:38:38,280 --> 00:38:41,040
Speaker 2: Well, can I just have some server in China or

681
00:38:41,120 --> 00:38:43,839
Speaker 2: somewhere else, you know, overseas do it?

682
00:38:45,320 --> 00:38:48,640
Speaker 8: That might be the workaround. Maybe they'll they'll try to

683
00:38:48,680 --> 00:38:50,440
Speaker 8: do something like that, and then then you have a

684
00:38:50,520 --> 00:38:53,000
Speaker 8: question of how how how well the US could it

685
00:38:53,000 --> 00:38:58,560
Speaker 8: could enforce enforce that. But I guess that that would

686
00:38:58,640 --> 00:39:02,680
Speaker 8: be maybe the next move if if everything else is

687
00:39:03,040 --> 00:39:04,040
Speaker 8: failing for TikTok.

688
00:39:04,200 --> 00:39:06,400
Speaker 2: All right, So, but the bottom line is for you

689
00:39:06,480 --> 00:39:08,200
Speaker 2: lawyer types, you think this is going to go to

690
00:39:08,200 --> 00:39:09,239
Speaker 2: the Supreme Court.

691
00:39:10,239 --> 00:39:13,080
Speaker 8: Well, the d C Circuit gets it first, and I

692
00:39:13,120 --> 00:39:17,880
Speaker 8: think there's a decent chance that the DC Circuit is

693
00:39:17,960 --> 00:39:20,920
Speaker 8: the final word. I think if the d C Circuit

694
00:39:21,000 --> 00:39:23,640
Speaker 8: were to rule for TikTok. And to say that there

695
00:39:23,680 --> 00:39:26,280
Speaker 8: is a First Amendment challenge that's really going to interest

696
00:39:26,320 --> 00:39:28,920
Speaker 8: the Supreme Court. I think that would motivate the Supreme

697
00:39:28,920 --> 00:39:31,040
Speaker 8: Court to take take a look at it. If the

698
00:39:31,160 --> 00:39:35,560
Speaker 8: d C Circuit issues a definitive ruling upholding Congress's law here,

699
00:39:36,160 --> 00:39:38,319
Speaker 8: maybe the Supreme Court says, you know, look, the d

700
00:39:38,400 --> 00:39:40,200
Speaker 8: C Circuit got it right, we don't need to take

701
00:39:40,200 --> 00:39:40,520
Speaker 8: that up.

702
00:39:40,600 --> 00:39:42,640
Speaker 2: Okay, all right, good stuff. That's what we like talking

703
00:39:42,680 --> 00:39:44,920
Speaker 2: to you. We get it straight, the straight poop and

704
00:39:44,960 --> 00:39:46,799
Speaker 2: all the legal stuff. He gives you, like percentages of

705
00:39:46,800 --> 00:39:47,600
Speaker 2: what can actually happen.

706
00:39:47,680 --> 00:39:47,880
Speaker 6: We love.

707
00:39:47,960 --> 00:39:50,520
Speaker 2: That's why we love talking to Matt schelling Helme. He's

708
00:39:50,560 --> 00:39:53,479
Speaker 2: one of those people that doesn't carry cash. That's the big,

709
00:39:53,520 --> 00:39:55,879
Speaker 2: big mark against met schell helm Otherwise he's a great

710
00:39:55,880 --> 00:39:58,960
Speaker 2: attorney and a great litigation analyst for Bloomberg Intelligence. But

711
00:39:58,960 --> 00:40:00,960
Speaker 2: he's like the kids, they don't carry cash.

712
00:40:01,040 --> 00:40:02,680
Speaker 4: You know, we don't need How do you buy how

713
00:40:02,719 --> 00:40:05,640
Speaker 4: do you buy a truck outside the office. They took

714
00:40:05,640 --> 00:40:06,160
Speaker 4: Apple pay.

715
00:40:06,239 --> 00:40:07,000
Speaker 2: They took applepay.

716
00:40:07,000 --> 00:40:11,040
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717
00:40:11,200 --> 00:40:15,160
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718
00:40:15,360 --> 00:40:18,400
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719
00:40:18,480 --> 00:40:21,960
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720
00:40:22,000 --> 00:40:25,240
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721
00:40:25,239 --> 00:40:28,440
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