WEBVTT - Fed Rate Hike and FPV Ventures 0:00:02.160 --> 0:00:05.560 From the heart of where innovation, money and power collide 0:00:06.280 --> 0:00:10.799 in Silicon Valley and beyond. This is Bloomberg Technology with 0:00:10.880 --> 0:00:26.360 Emily Jay. I'm Emily Chang in San Francisco, and this 0:00:26.400 --> 0:00:28.720 is Bloomberg Technology. Coming up in the next hour. The 0:00:28.760 --> 0:00:32.400 FED raises interest rates by seventy basis points, the biggest 0:00:32.479 --> 0:00:39.000 increase since stocks rally. What this could signal about a 0:00:39.080 --> 0:00:43.959 possible recession plus new funds still launching even in a downturn. 0:00:44.000 --> 0:00:46.280 We'll talk to the heavy hitters behind the four fifty 0:00:46.280 --> 0:00:52.040 million dollar fund, including a top Morgan Stanley alone and 0:00:52.240 --> 0:00:55.360 Elon Musk getting even more political as he reveals who 0:00:55.400 --> 0:00:59.080 he's backing from president in this as he prepares to 0:00:59.080 --> 0:01:02.520 address Twitter and boys at an all hands meeting, divided 0:01:02.680 --> 0:01:06.640 on whether he'll save the company or destroy it. We'll 0:01:06.640 --> 0:01:08.240 get to all of that in a moment, but first 0:01:08.480 --> 0:01:11.800 this day, we'll go down in history. The FED raising 0:01:11.880 --> 0:01:15.200 interest rates by seventy five basis points, the most in 0:01:15.280 --> 0:01:18.640 almost thirty years. Stocks jumped after a FED chair j 0:01:18.760 --> 0:01:20.360 Pal gave his view on the path four and in 0:01:20.440 --> 0:01:24.080 the fight against stubbornly high inflation are at ludlow. Here 0:01:24.080 --> 0:01:26.720 with more on the market moves and tech especially at Yeah, 0:01:26.760 --> 0:01:29.920 the FED really intensifying its efforts to cool prices. Let's 0:01:29.920 --> 0:01:32.400 look at the main takeaways from this historic day. Is 0:01:32.480 --> 0:01:35.960 seventy five basis points hike, taking the federal funds rate 0:01:36.040 --> 0:01:39.040 to one point five percent to one point seven five percent. 0:01:39.080 --> 0:01:41.640 The FED forecasting of the interest rates could rise to 0:01:41.800 --> 0:01:44.640 three point four percent by December of this year three 0:01:44.680 --> 0:01:47.360 point eight percent by the end of next year. They 0:01:47.520 --> 0:01:51.320 the committee saying it's strongly committed to return the inflation 0:01:51.360 --> 0:01:54.279 to its two percent objective. Inflation of two percent seems 0:01:54.280 --> 0:01:56.960 a long way from where we are the inflation developments 0:01:56.960 --> 0:01:59.160 of recent weeks. That hot print last week warranted the 0:01:59.160 --> 0:02:02.360 bigger height today wanting to power and there's no sign 0:02:02.440 --> 0:02:04.720 though in the economy of a broader slowdown in terms 0:02:04.760 --> 0:02:08.320 of how the markets reacted. Green on the screen, interesting 0:02:08.400 --> 0:02:10.840 because there's no one main takeaway. You look at the 0:02:10.919 --> 0:02:13.120 SMP five one and a half percent, and as that 0:02:13.200 --> 0:02:15.600 one hundred tech heavy index up two and a half percent, 0:02:15.800 --> 0:02:18.400 a pull back in yield, a drop in the dollar 0:02:18.480 --> 0:02:21.000 really interesting. Moving the dollar, the Bloomberg Dollar Index down 0:02:21.040 --> 0:02:23.600 nine tenths of one percent, biggest drop since May. At 0:02:23.600 --> 0:02:26.160 one point down one percent is biggest drop since the 0:02:26.200 --> 0:02:31.079 November election. No one takeaway the market looking at Pal's words, 0:02:31.160 --> 0:02:33.600 listening thinking what the path ahead is, and you get 0:02:33.639 --> 0:02:35.760 to listen as well. Here's j P Now, do not 0:02:35.880 --> 0:02:38.400 expect moves of this size to be common from the 0:02:38.440 --> 0:02:41.000 perspective of today. Either a fifty basis point or a 0:02:41.040 --> 0:02:44.360 seventy five basis point increase seems most likely at our 0:02:44.400 --> 0:02:47.520 next meeting. Look, you don't want to put too much 0:02:47.520 --> 0:02:49.360 stock in an intra day move. This is the nas 0:02:49.400 --> 0:02:51.720 That one hundred though, and after j power uttered those 0:02:51.760 --> 0:02:55.840 words around the size of potential increases at an extra 0:02:55.919 --> 0:02:57.960 ly meeting going forward, you see what that has That 0:02:58.000 --> 0:03:01.560 one hundred does the market giving relief rally, almost saying okay, 0:03:01.639 --> 0:03:04.680 we understand where we stand. Now. This is very interesting, 0:03:05.080 --> 0:03:07.320 but there's a lot going on. It's all in the data, 0:03:07.400 --> 0:03:09.280 and it's always in the data. The federals are going 0:03:09.320 --> 0:03:12.040 to keep an all on inflation and make decisions meeting 0:03:12.080 --> 0:03:14.760 by meeting. All right, well, thanks for showing us that data, ed, 0:03:14.919 --> 0:03:16.600 Thank you. I want to get a look now at 0:03:16.639 --> 0:03:20.200 crypto bitcoin following at one point to just above twenty dollars, 0:03:20.200 --> 0:03:23.880 then pairing its losses, Blue Merctionale Bossi breaks it all down, 0:03:23.919 --> 0:03:26.480 and the bad news for crypto seems to keep coming 0:03:26.520 --> 0:03:29.200 shinale from all directions. Well, what's interesting, Emily is that 0:03:29.240 --> 0:03:31.920 even though you saw risk assets rise today in markets, 0:03:31.960 --> 0:03:34.120 you did not see Bitcoin rise. You did see a 0:03:34.200 --> 0:03:36.640 parents gains in relation to some of the movies you 0:03:36.680 --> 0:03:38.800 saw by the said, but when we're talking about digital 0:03:38.800 --> 0:03:42.600 money here, we are still seeing a decline, although it's slowing. Remember, 0:03:42.720 --> 0:03:46.120 market watchers are watching for the levels that they saw 0:03:46.200 --> 0:03:48.240 at the peak of the last cycle. So if it 0:03:48.320 --> 0:03:51.480 drops the low not just twenty k, but we're looking 0:03:51.480 --> 0:03:55.400 at nineteen five hundred eleven. Is that worry area that 0:03:55.480 --> 0:03:57.960 you started dipping into a bitcoin and we're not quite 0:03:58.000 --> 0:04:00.800 there yet. Let's flip up the board and got atherorium 0:04:00.840 --> 0:04:03.000 as well, and how it's doing. Interestingly, you saw that 0:04:03.200 --> 0:04:07.120 nearly one percent decline bitcoin over twenty four hours. Ethereum 0:04:07.200 --> 0:04:09.640 dropped less in that time frame. You only saw a 0:04:09.760 --> 0:04:12.720 drop about seven tenths of one percent, a little less 0:04:12.720 --> 0:04:15.120 than that. Actually interesting land Now, if you look at 0:04:15.160 --> 0:04:17.359 c r yp go, if you have a terminal, you 0:04:17.400 --> 0:04:20.000 see a lot of all coins rising. What else you 0:04:20.080 --> 0:04:23.440 see rising was coin based. Today you saw coin based 0:04:23.520 --> 0:04:26.520 rise more than six percent, about six point six percent 0:04:26.720 --> 0:04:30.880 or so. Interestingly, that comes as we've reported about the 0:04:30.920 --> 0:04:33.600 shock that so many coin based employees have been feeling 0:04:33.600 --> 0:04:36.400 with the discipline they're taking, the job cuts that are 0:04:36.520 --> 0:04:39.280 happening now across the industry and a coin base. Coin 0:04:39.360 --> 0:04:43.640 Base employees describe this to Bloomberg as impersonal and surprising. 0:04:44.000 --> 0:04:45.640 So I want to pull up a tweet. Actually, what 0:04:45.720 --> 0:04:47.960 a strange week it's been. You pull up a tweet 0:04:47.960 --> 0:04:50.120 here from Brian Armstrong just a couple of days ago. 0:04:50.400 --> 0:04:53.479 Remember this was responding to the idea on a y 0:04:53.560 --> 0:04:58.920 Combinator post saying that coin based employees had elected to 0:04:59.520 --> 0:05:02.520 out the executives here, and he had responded saying that 0:05:02.560 --> 0:05:05.280 if you have no confidence in executive company, why are 0:05:05.279 --> 0:05:07.360 you working there? Quit and find a company to work 0:05:07.360 --> 0:05:09.800 out that you believe in. And remember this post was 0:05:09.839 --> 0:05:13.200 on June tenth, just days before a lot of these 0:05:13.279 --> 0:05:16.960 job cut plans were put in place. All right, indeed, 0:05:17.040 --> 0:05:21.039 pretty interesting, sweet storm, they're from Brian Armstrong, But also 0:05:21.080 --> 0:05:23.480 you think about the human faces behind these layoffs. Shanali, 0:05:23.680 --> 0:05:26.239 thank you. We'll get to you later for a deeper 0:05:26.279 --> 0:05:28.080 dive in our crypto report. I do want to get 0:05:28.080 --> 0:05:30.200 back to the market's response to the Fed's decision to 0:05:30.279 --> 0:05:33.479 raise rates by seventy five basis points. Victoria Green, chief 0:05:33.480 --> 0:05:37.920 investment officer for G Squared, joins us. Now, So, Victoria, 0:05:38.080 --> 0:05:39.400 what do you make of the fact of the market 0:05:39.480 --> 0:05:44.000 rally today after this historic rate hike and all of 0:05:44.040 --> 0:05:46.120 the turmoil we've seen over the last couple of days. 0:05:47.160 --> 0:05:49.240 I think they were happy it wasn't a hundred basis points, 0:05:49.279 --> 0:05:51.680 and there's a relief that Powell's doing something. But I 0:05:51.680 --> 0:05:54.440 think we're all gonna wake up tomorrow and realize nothing changed. 0:05:54.560 --> 0:05:57.479 The feeder stillhawkers. Rates are coming up, and the only 0:05:57.480 --> 0:06:00.280 way they tame inflation is by nipping unemploy him it. 0:06:00.400 --> 0:06:03.240 And so they're really to sacrifice the very low unemployment. 0:06:03.240 --> 0:06:05.520 They feel like they have wiggle room in the employement 0:06:05.560 --> 0:06:07.880 market and they've got its human inflation. And we look 0:06:07.880 --> 0:06:10.400 at this and say, the economy is still going to 0:06:10.440 --> 0:06:12.720 slow down. And I know we're talking about what kind 0:06:12.720 --> 0:06:14.800 of landing will have if it's crash and burn or 0:06:14.839 --> 0:06:16.640 a soft landing, and I think it's in a new 0:06:16.720 --> 0:06:20.040 or impossible situation. There's a lot of factors he doesn't control. 0:06:20.440 --> 0:06:22.960 But I have to take heart with what the CEOs 0:06:22.960 --> 0:06:25.719 are saying and what J. Powell himself said, which is 0:06:26.000 --> 0:06:28.960 we can basically have unemployment come up. We have wiggle 0:06:29.040 --> 0:06:31.680 room and still historically low. We can see that come 0:06:31.760 --> 0:06:35.159 up because we have the tame inflation. So when you 0:06:35.240 --> 0:06:38.360 say it's out of our control, what what do you 0:06:38.440 --> 0:06:40.880 think the scenario we're gonna be looking at over the 0:06:40.960 --> 0:06:42.640 next six months to a year is gonna be? Is 0:06:42.680 --> 0:06:45.279 this a recession? Is this a recession with a capital 0:06:45.400 --> 0:06:48.240 R or a small R? I think we like to 0:06:48.279 --> 0:06:50.039 call it bagel. Right, let's go go back to the 0:06:50.040 --> 0:06:53.240 old West Wing day since we're reliving the nineties right now. Um, 0:06:53.240 --> 0:06:54.919 but yeah, I think it's gonna be a recession. I 0:06:54.920 --> 0:06:57.000 don't think it's gonna be a two thousand and eight redo. 0:06:57.120 --> 0:06:59.159 But I think you're gonna have a lot of people 0:06:59.279 --> 0:07:03.400 looking around and seeing pressures unemployment. There's already seeing pressures 0:07:03.400 --> 0:07:06.080 on the consumer, the consumers changing their buying pattern. The 0:07:06.160 --> 0:07:09.360 U S economy lives and breeze and and will die 0:07:09.480 --> 0:07:12.000 if the consumer slows down because you need the spending. 0:07:12.040 --> 0:07:14.640 And look at what tal Walmart and Target and all 0:07:14.680 --> 0:07:17.160 the retailers are saying there is already a change in 0:07:17.200 --> 0:07:20.040 consumption patterns. We're not seeing the electronics in the home 0:07:20.040 --> 0:07:22.720 goods move. They're focused on buying food and gas and 0:07:22.800 --> 0:07:25.160 paying rent. And when that happens and we still see 0:07:25.240 --> 0:07:28.080 upward inflationary pressure, I mean, I don't think June's number 0:07:28.120 --> 0:07:30.320 is gonna look a whole lot better than than Maze 0:07:30.360 --> 0:07:33.120 because if you look at gas prices and rent prices, 0:07:33.160 --> 0:07:35.520 you really haven't seen the roll over. So as we 0:07:35.640 --> 0:07:38.360 keep climbing this mountain and we have these pressures build 0:07:38.400 --> 0:07:40.480 and build and build, I think you know, kind of 0:07:40.480 --> 0:07:42.680 seeing you guys at the San Francisco people, you know, 0:07:42.720 --> 0:07:44.280 if you don't have an earthquake in a while, you 0:07:44.360 --> 0:07:46.000 kind of get a little worried when the next one 0:07:46.040 --> 0:07:48.000 comes is gonna be the big one. And so we 0:07:48.120 --> 0:07:50.560 want to see some of these pressures come off the economy, 0:07:50.800 --> 0:07:54.200 but it's near impossible when you have the rent prices, 0:07:54.200 --> 0:07:57.240 housing prices, food prices, and gas prices where they are. 0:07:58.320 --> 0:08:00.200 What does this mean for big tech companies that have 0:08:00.240 --> 0:08:04.960 been riding high now for years, If they're not gonna die, 0:08:05.120 --> 0:08:07.080 they did need to read price a little bit lower. 0:08:07.160 --> 0:08:10.280 Um the problem is earnings growth looks a little susceptible, right, 0:08:10.400 --> 0:08:12.960 So that's the one question we have with the market 0:08:13.040 --> 0:08:14.960 right now. I see this more as a very short 0:08:15.000 --> 0:08:17.880 relief rally and a further leg down because where is 0:08:17.920 --> 0:08:20.240 our earnings growth going to come from? You're willing to 0:08:20.280 --> 0:08:23.560 pay a thirty forty plus multiple if you have confidence 0:08:23.600 --> 0:08:25.480 that they're gonna grow their earnings and you have a 0:08:26.160 --> 0:08:29.680 future trajectory. And I think right now everybody's putting pause. 0:08:29.840 --> 0:08:32.480 You're even seeing layoffs come from these tech companies, and 0:08:32.559 --> 0:08:35.160 you know, Microsoft coming out warning about their earnings growth 0:08:35.200 --> 0:08:38.040 and kind of doing walking that back a little bit. Um. 0:08:38.120 --> 0:08:39.840 You have to wonder how much should I really be 0:08:39.880 --> 0:08:41.959 paying for the stock right now? If they're not growing 0:08:42.000 --> 0:08:45.280 their earnings at the trajectory originally thought they were, how 0:08:45.360 --> 0:08:46.960 much should I pay for them? So I think big 0:08:46.960 --> 0:08:49.600 tech still gonna be under pressure, and the pressures are different. 0:08:49.640 --> 0:08:53.120 The pressure that Netflix is facing is increased competition, and 0:08:53.600 --> 0:08:56.160 you're seeing that bifurcation across streaming. That's a little bit 0:08:56.200 --> 0:08:58.959 different than say the pressure that the Amazon's facing, which 0:08:59.000 --> 0:09:01.360 they're facing issues with that now they've got too much 0:09:01.600 --> 0:09:04.040 uh labor and they have too much storage space, and 0:09:04.120 --> 0:09:06.680 they're working on all these price pressures with fuel and 0:09:06.760 --> 0:09:10.680 delivery costs, so it's not uniform across the board. UM. 0:09:10.720 --> 0:09:14.360 And also what these tech companies deliver, how essential are they? 0:09:14.679 --> 0:09:16.840 Uh and are they discretionary or are they something that 0:09:16.880 --> 0:09:18.920 people are willing to have to continue to use if 0:09:18.920 --> 0:09:21.920 the world slows down. Netflix is one that may still 0:09:21.920 --> 0:09:23.760 be at risk, even though it's priced more like a 0:09:23.840 --> 0:09:26.880 value stuff now, because if your pocketbooks hurting, you may 0:09:26.880 --> 0:09:29.480 start looking at cutting streaming and they're one of those 0:09:29.559 --> 0:09:31.840 right now that is facing the wrath of cord cutters. 0:09:32.520 --> 0:09:34.800 But these big tech companies aren't falling just a bit. 0:09:34.840 --> 0:09:36.760 They're not just under a little bit of pressure. I 0:09:36.800 --> 0:09:39.959 mean they've already dropped significantly. We spoke to Cisco CEO 0:09:40.080 --> 0:09:43.640 Chuck Robbins yesterday UM, which reminded us that Cisco shares 0:09:43.679 --> 0:09:48.360 peaked in the dot com boom, then plunged and still 0:09:48.920 --> 0:09:51.360 still have not recovered. There. You're looking at a at 0:09:51.360 --> 0:09:54.160 a twenty plus year chart. Which of the big tech 0:09:54.200 --> 0:09:57.520 giants do you think could end up being the Ciscos 0:09:57.559 --> 0:10:00.720 of today? I mean, I hate, I hate to be 0:10:00.760 --> 0:10:03.360 a negative l A and root against me used against them. 0:10:03.400 --> 0:10:05.600 But again I'll point to Netflix. I think Netflix is 0:10:05.679 --> 0:10:09.160 facing such a changed landscape from where it was five 0:10:09.559 --> 0:10:12.040 years ago, ten years ago, even two years ago. If 0:10:12.040 --> 0:10:14.199 you think about the number of streaming services that have 0:10:14.280 --> 0:10:17.120 popped up in the competition now that they face uh, 0:10:17.280 --> 0:10:19.320 and they may have more backlash as well. They're trying 0:10:19.320 --> 0:10:22.240 to cut down on the password sharing, and they're facing 0:10:22.280 --> 0:10:24.960 the wrath of people that that don't like that this 0:10:25.040 --> 0:10:28.319 is now less friendly company. Uh, We're seen as a 0:10:28.360 --> 0:10:30.800 less friendly company to deal with. I think they could 0:10:30.800 --> 0:10:33.000 be at risk for for one that's lost. And then 0:10:33.000 --> 0:10:35.080 you can look at some of the pandemic darlings, you know, 0:10:35.120 --> 0:10:38.000 your zooms of the world, which did fantastic, But at 0:10:38.040 --> 0:10:40.720 the same point, you've got teams and everybody else has 0:10:40.760 --> 0:10:42.959 figured out how to tele conference a little bit better. 0:10:43.200 --> 0:10:44.960 So when I look at who's gonna be kind of 0:10:45.320 --> 0:10:48.800 a potential tech bubble dud, I think it's those that 0:10:48.840 --> 0:10:52.400 face competition and can't innovate. Interesting, how do you do 0:10:52.520 --> 0:10:54.800 the crypto meltdown? You know, what is? What is? How 0:10:54.800 --> 0:10:58.800 does crypto survive this? Uh? Krypto needs to figure out 0:10:58.840 --> 0:11:00.640 what it is? You know, we were told it was 0:11:00.720 --> 0:11:03.760 the heads against central bank spending and inflation, and I'm 0:11:03.800 --> 0:11:06.679 pretty sure we can decide it's not that um. It's 0:11:06.720 --> 0:11:09.320 certainly got to get through this regulation hurdle. I think 0:11:09.320 --> 0:11:11.319 as it discovers what it really is because right now 0:11:11.360 --> 0:11:13.600 it's trading and correlated like a growth or a tech stock, 0:11:13.760 --> 0:11:17.280 right uh. And because it's it's not really providing any 0:11:17.280 --> 0:11:20.920 diversification benefits or buffer, and it's definitely not providing an 0:11:20.920 --> 0:11:24.120 inflation offset. I think the blockchain and technology itself is 0:11:24.240 --> 0:11:26.640 very very important. I think this will turn out to 0:11:26.760 --> 0:11:29.920 be the start of a fintech revolution. I think you're 0:11:29.960 --> 0:11:32.400 still in the very very early innings of it, and 0:11:32.440 --> 0:11:34.800 people need to figure out how they're actually gonna use it, 0:11:34.840 --> 0:11:36.839 how they're gonna integrate it in their lives, and how 0:11:36.880 --> 0:11:39.280 it's regulated in tax. And I think the regulated in 0:11:39.360 --> 0:11:42.080 tax question, we might see some of that come out 0:11:42.120 --> 0:11:44.560 this year. But that's actually gonna also make it where 0:11:44.640 --> 0:11:46.680 where you may see some bigger players come into the 0:11:46.679 --> 0:11:49.240 market because they feel a little bit more comfortable they're 0:11:49.280 --> 0:11:50.959 not gonna have a blow up. You know, you look 0:11:50.960 --> 0:11:53.680 at some of the recent crypto blow ups and it 0:11:53.720 --> 0:11:55.600 has put a little bit of a check on people 0:11:55.640 --> 0:11:59.199 that this is not a safe, secure investment. There is 0:11:59.240 --> 0:12:02.080 a risk of a hunt to percent loss. And while 0:12:02.120 --> 0:12:05.160 the technology is a fantastic technology, and I think blockchain 0:12:05.280 --> 0:12:07.440 is a very innovative, we have to figure out how 0:12:07.440 --> 0:12:09.400 to use it. I'm you know, I'm not going around 0:12:09.440 --> 0:12:12.440 buying my Starbucks with bitcoint on my app. It's too volatile. 0:12:12.679 --> 0:12:16.480 You know, it's really not necessarily cash substitute. So what 0:12:16.640 --> 0:12:18.240 will it be? I think this year we're going to 0:12:18.360 --> 0:12:21.280 really figure out what is bitcoint as an investment. Is 0:12:21.280 --> 0:12:25.280 a digital gold We'll see. Victoria Green, chief investment officer 0:12:25.360 --> 0:12:28.680 for g Squared love the metaphors. Thank you for joining 0:12:28.760 --> 0:12:39.000 us on this week's Bloomberg Studio. At one point on 0:12:39.160 --> 0:12:42.920 my exclusive conversation with Amazon CEO Andy Jassy about how 0:12:42.960 --> 0:12:46.880 the company is handling inflation, global supply chain shortages and 0:12:46.960 --> 0:12:50.240 customers that are getting squeezed by higher prices of everything 0:12:50.320 --> 0:12:53.920 from gas to groceries. We spoke at our Bloomberg Technology Summit. 0:12:54.120 --> 0:12:59.800 Take a listen for investors of financially, I'd say it's mixed. You. 0:13:00.080 --> 0:13:03.360 I think we have some businesses are growing really strongly. 0:13:03.400 --> 0:13:07.040 If you look at aws, you know in grew thirty 0:13:07.080 --> 0:13:10.240 seven year every year. You know, it's not a seventy 0:13:10.240 --> 0:13:13.240 four billion dollar revenue run right business, which pretty unusual growth. 0:13:13.280 --> 0:13:15.760 And we grew with fifty percent year every year in 0:13:15.760 --> 0:13:18.400 our advertising business. You know, it's the thirty two billion 0:13:18.440 --> 0:13:21.400 dollar revenue run right business. So some business has grown 0:13:21.440 --> 0:13:24.480 really strongly, and you know, we've continued to grow in 0:13:24.559 --> 0:13:29.440 our retail business despite pretty crazy comparables during But I 0:13:29.480 --> 0:13:31.880 think the real challenge for us there is on the 0:13:31.920 --> 0:13:34.160 cost side. And there have been several things that have 0:13:34.240 --> 0:13:37.440 happened um, some of which are more controllable than others, 0:13:37.520 --> 0:13:39.960 you know. I think the part that's less controllable is 0:13:39.960 --> 0:13:42.679 really around inflation. And I think we thought that inflation 0:13:42.679 --> 0:13:46.640 would start to attenuate in two and with war in Ukraine, 0:13:46.679 --> 0:13:49.200 it just went the other way and has significantly accelerated. 0:13:49.240 --> 0:13:52.280 So the cost of trucking and line hall and ocean 0:13:52.320 --> 0:13:56.040 and air and fuel has just substantially gone up, and 0:13:56.440 --> 0:13:58.360 I think that will attenuate at some point. No one 0:13:58.400 --> 0:14:01.040 knows how long that will take. I think the more 0:14:01.040 --> 0:14:05.400 controllable areas for US are really around fulfillment center capacity 0:14:05.400 --> 0:14:08.120 and productivity. It was taking about twenty four months to 0:14:08.120 --> 0:14:11.480 build new filment centers during the pandemic, and so we 0:14:11.520 --> 0:14:13.760 had to make decisions, you know, in mid two thousand 0:14:13.840 --> 0:14:16.960 twenty in early one, on how much demand we're going 0:14:17.000 --> 0:14:19.960 to plan for, and so you know, we we end 0:14:20.040 --> 0:14:22.080 up with more capacity and we need right now. And 0:14:22.320 --> 0:14:24.200 there's a number of things that we're working on. We 0:14:24.280 --> 0:14:26.480 when we've stopped building on properties where we don't need 0:14:26.520 --> 0:14:28.960 it yet, and we've let a number of leases laps 0:14:29.040 --> 0:14:31.720 and not a small number, you know, of both those things. 0:14:31.720 --> 0:14:33.920 We've had a lot of occasions in our history where 0:14:33.960 --> 0:14:36.520 we've worked on productivity and made improvements, and we have 0:14:36.600 --> 0:14:39.400 a lot of clearly defined niches and I'm confident we'renna 0:14:39.400 --> 0:14:41.080 get back to the right level of profitability. You are 0:14:41.080 --> 0:14:43.720 going to sub lease thirty million square feet of space? 0:14:44.040 --> 0:14:46.840 Is there a mistake in the execution there because of 0:14:46.840 --> 0:14:50.000 the OVERBA Again, because you have to make these decisions 0:14:50.040 --> 0:14:52.920 two years in advance, and again, if you put yourself 0:14:53.000 --> 0:14:56.000 back in twenty where we were growing thirty nine percent 0:14:56.280 --> 0:14:59.080 year over year on a two billion dollar revenue run rate, 0:14:59.680 --> 0:15:02.320 it's very hard to know what's the right amount to 0:15:02.320 --> 0:15:04.440 build and you have to make a decision. And we 0:15:04.560 --> 0:15:07.000 made the decision to air on the side of our 0:15:07.040 --> 0:15:09.720 consumers and sellers. Ela Must just came out saying he 0:15:09.800 --> 0:15:13.320 has a super bad feeling about the economy, Tesla laying 0:15:13.360 --> 0:15:16.680 off ten percent of his staff. Jamie Diamond says he's 0:15:16.680 --> 0:15:20.080 preparing for an economic hurricane. The World Bank just slashed 0:15:20.080 --> 0:15:23.520 its forecast for global growth. How do you feel about 0:15:23.520 --> 0:15:26.920 the economic climate? Well, I wasn't planning on giving any 0:15:26.960 --> 0:15:32.960 guidance to please, but super bad or super super bad, 0:15:37.360 --> 0:15:40.840 I think, uh, there's some things that relates to Amazon 0:15:40.960 --> 0:15:44.720 that are useful to remember, you know. I think the 0:15:44.840 --> 0:15:50.040 first pieces Remember the five of the of the worldwide 0:15:50.200 --> 0:15:54.360 retail market segment share is offline. And if you believe 0:15:54.520 --> 0:15:56.840 that that equation is going to flip at some point, 0:15:56.840 --> 0:15:58.840 which we do, I think it will. Who will flip 0:15:58.880 --> 0:16:01.200 over a long period of time. If you look at 0:16:01.280 --> 0:16:04.200 different town turns, um you know, should we have one 0:16:04.240 --> 0:16:06.200 at some point? We've been through a few obviously in 0:16:06.240 --> 0:16:09.760 the twenty five years that I've been at Amazon. Customers 0:16:09.840 --> 0:16:12.640 change their habits, and so, you know, I also think 0:16:12.680 --> 0:16:16.480 there's those two reasons. Those two factors give me some 0:16:16.560 --> 0:16:18.720 optimism that even if we have a downturn, that we 0:16:18.800 --> 0:16:21.720 have the potential to still grow. We have a roadmap 0:16:21.840 --> 0:16:24.480 that's you know, probably three to five years long, and 0:16:24.480 --> 0:16:26.480 we're going to continue to invent. We're going to continue 0:16:26.480 --> 0:16:28.880 to be insurgent, and we have a lot of work 0:16:28.880 --> 0:16:30.600 to do to get to where we think we ultimately 0:16:30.640 --> 0:16:35.320 can get for customers. You can catch my entire exclusive 0:16:35.320 --> 0:16:38.400 interview with Andy Jase Wednesday, nine d pm Eastern on 0:16:38.920 --> 0:16:42.560 Bloomberg Studio one point. Well, it is the end of 0:16:42.600 --> 0:16:48.440 the Internet Explore. Microsoft has officially retired it's once dominant browser, 0:16:48.560 --> 0:16:51.280 and while Internet Explorer has less than one percent of 0:16:51.280 --> 0:16:54.360 worldwide market share according to stat Counter, it is still 0:16:54.400 --> 0:16:59.000 causing some panic among businesses and governments. Japan in particular 0:16:59.120 --> 0:17:01.320 might be the hardest it. A survey earlier this year 0:17:01.360 --> 0:17:06.160 found that of companies still use Internet Explorer coming up 0:17:06.200 --> 0:17:09.680 as the market scrapple with intensifying inflation, employees are facing 0:17:09.720 --> 0:17:11.760 the brunt of it as more and more companies look 0:17:11.840 --> 0:17:14.640 to layoffs to help save some cash. We'll have more 0:17:14.680 --> 0:17:32.520 on that next well. As they watched the FED issue 0:17:32.560 --> 0:17:36.399 it's biggest rate increase for all in an effort to 0:17:36.400 --> 0:17:39.439 restrain rampant inflation, it might be too late for the 0:17:39.520 --> 0:17:43.520 tens of thousands of employees facing layoffs in a slowing economy. 0:17:43.800 --> 0:17:46.760 In the last month, we've watched companies across different sectors 0:17:46.800 --> 0:17:51.439 announced layoffs crypto, fintech, even real estate. Tuesday, both Compass 0:17:51.560 --> 0:17:54.800 and Redfinn announced they were cutting more than nine jobs 0:17:54.840 --> 0:17:57.800 combine for more not only these layoffs, but the broader 0:17:57.880 --> 0:18:00.960 real estate market during this downturn. I'm joined by bloom 0:18:00.960 --> 0:18:03.680 Brigs Patrick Clark, who covers all of this for us. 0:18:04.000 --> 0:18:06.159 Was it surprising to see these kind of layoffs in 0:18:06.160 --> 0:18:10.040 the real estate tech business given just how um much 0:18:10.119 --> 0:18:13.560 the real estate market was booming. I don't really well. 0:18:13.640 --> 0:18:16.760 I think in January it might have been surprising. By 0:18:16.800 --> 0:18:20.160 you know, March or April, as maury trade started going 0:18:20.240 --> 0:18:25.159 higher and sales started slowing, less surprising. And by the 0:18:25.160 --> 0:18:28.919 time these companies reported earnings I think in May, you 0:18:28.960 --> 0:18:33.840 know it, it almost felt inevitable that, um that they 0:18:33.840 --> 0:18:35.679 were going to need to downsize. I mean, Compass in 0:18:35.680 --> 0:18:40.000 Redfin somewhat different businesses, but um you know, one one 0:18:40.320 --> 0:18:44.240 employees agents as independent contractors. That's Compass, and all their 0:18:44.240 --> 0:18:48.439 employees are either you know, developers making software for the 0:18:48.480 --> 0:18:52.159 agents or you know, various types of support staff readfin 0:18:52.200 --> 0:18:56.359 actually employees UM its own agents, and there's a different 0:18:56.359 --> 0:19:00.320 compensation structure and so forth. But um, the at a 0:19:00.359 --> 0:19:02.920 point when there are a lot fewer home sales and 0:19:03.040 --> 0:19:07.359 this um a lot less commission revenue coming into the brokerage, 0:19:07.560 --> 0:19:11.399 it feels inevitable that they're going to have to cut staff. 0:19:12.080 --> 0:19:14.920 So we're seeing a number of companies, tech companies announcing layoffs. 0:19:15.040 --> 0:19:19.240 Robin Hood, coin Base, UM, you know read it just 0:19:19.280 --> 0:19:21.800 announced more layoffs today. But what are these real estate 0:19:21.800 --> 0:19:25.720 technology companies in particular them announcing layoffs. What does it 0:19:25.760 --> 0:19:30.440 have to say about the housing market. Yeah, there's just um, 0:19:30.480 --> 0:19:34.480 it's the housing market is slow and and and and 0:19:34.880 --> 0:19:36.880 we don't know exactly how long it's going to take. 0:19:37.040 --> 0:19:41.240 Red Fan CEO Glenn Coleman said in the memo announcing 0:19:41.240 --> 0:19:47.640 the layoffs on Tuesday that sales were volume was sevent 0:19:47.680 --> 0:19:51.919 lower in May first company and that it would be 0:19:52.119 --> 0:19:57.119 year likely be years and not months um before you know, 0:19:57.160 --> 0:20:02.639 before the situation resolved itself. So you know, given um, 0:20:03.560 --> 0:20:07.680 given that it's it's it's these companies have a long 0:20:07.760 --> 0:20:11.200 road ahead. You know, they enjoyed during COVID. Uh probably 0:20:11.240 --> 0:20:15.560 the best possible conditions for themselves. And that's not just 0:20:16.040 --> 0:20:19.600 red vanden Compass, but also Zelo or open Door, you know, 0:20:19.640 --> 0:20:22.400 any number of others. Many of these companies couldn't make 0:20:22.440 --> 0:20:27.280 money in the best housing market pretty much ever, so um, 0:20:27.320 --> 0:20:29.800 they're going to be in for you know, a pretty 0:20:29.840 --> 0:20:33.479 new scenario now interesting, And I wonder about commercial real 0:20:33.560 --> 0:20:36.120 estate as well. We just heard from Amazon CEO Andy 0:20:36.200 --> 0:20:41.080 Jazzy talking about letting leases run out, Amazon subleasing thirty 0:20:41.119 --> 0:20:44.480 million square feet of its own space. Is this something 0:20:44.480 --> 0:20:47.000 We're going to see a lot of companies grapple with 0:20:47.160 --> 0:20:49.680 what to do with real estate that they picked up 0:20:49.800 --> 0:20:52.760 or perhaps not because in the pandemics some folks pulled 0:20:52.760 --> 0:20:56.680 back on real estate. So far, it seems like there's 0:20:56.720 --> 0:20:59.560 demand for the industrial real estate that you know that 0:20:59.560 --> 0:21:04.600 that at Amazon either owns or leases the you know. Um. 0:21:04.640 --> 0:21:07.840