WEBVTT - Retail Sales, Fed Expectations, and TikTok on Trial 0:00:02.440 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.240 --> 0:00:12.120 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.200 --> 0:00:15.720 weekdays at ten am Eastern on affocarplaying Android Auto with 0:00:15.760 --> 0:00:18.800 the Bloomberg Business App. Listen on demand wherever you get 0:00:18.840 --> 0:00:22.320 your podcasts, or watch us live on YouTube. 0:00:23.480 --> 0:00:26.040 We had some economic data, of course today, Retail sales 0:00:26.320 --> 0:00:29.400 KIM in better than expected retail sales. The headline KIM 0:00:29.480 --> 0:00:32.760 at zero point one percent positive for the month of August. 0:00:32.840 --> 0:00:36.280 The expectation was negative zero point two percent, so better 0:00:36.320 --> 0:00:39.040 than expected. The prior period also revised up, So that 0:00:39.120 --> 0:00:41.400 kind of it's kind of a little bit different than 0:00:41.440 --> 0:00:43.280 what we hear from some of the retailers who kind 0:00:43.280 --> 0:00:45.440 of call out the weakness that they are seeing, particularly 0:00:45.440 --> 0:00:47.840 from the lower end of their consumers. But let's let's 0:00:47.840 --> 0:00:49.559 break down some of these numbers. We can do that 0:00:49.560 --> 0:00:54.720 with Joe Blanchard, President of Enterprise Client Solutions at Advantage Solutions. So, Jill, 0:00:55.000 --> 0:00:57.240 what did you make of the retail sales data we 0:00:57.280 --> 0:00:58.040 got this morning? 0:00:59.800 --> 0:01:03.040 So hello and thanks for having me back. It was 0:01:03.120 --> 0:01:07.560 a surprise, right, This could be indicative of many things, 0:01:07.600 --> 0:01:11.319 but the first thing that I'll point to is early 0:01:11.440 --> 0:01:15.560 holiday earlier holiday spending, and so retailers have been pulling 0:01:15.560 --> 0:01:18.679 holidays forward with good deals and it's kind of working. 0:01:18.840 --> 0:01:21.560 Sixty three percent of consumers that that they would buy 0:01:21.600 --> 0:01:25.840 products earlier if on sale. Holiday creep's always been a thing, 0:01:25.920 --> 0:01:29.440 but it's so exaggerated today that virtually every week of 0:01:29.480 --> 0:01:32.360 the year there's some sort of holiday in store. We 0:01:32.400 --> 0:01:35.399 saw that this summer with Summer ween, if you've heard 0:01:35.440 --> 0:01:39.199 that term before. So the back to school holiday shared 0:01:39.240 --> 0:01:41.720 shelf space with ghosts and skeletons, and a lot of 0:01:41.720 --> 0:01:46.640 orange and black TikTokers were making Jacko lanterns from watermelons. 0:01:46.880 --> 0:01:50.560 There were skeletons on pol floats. Starbucks brought the ever 0:01:50.640 --> 0:01:53.880 so popular Pumpkin spice latte out earlier than ever before, 0:01:54.200 --> 0:01:56.639 and home improvement stores jumped on the bad and wagon 0:01:56.680 --> 0:01:59.560 with halfway to Halloween in April in hopes of addressing 0:01:59.560 --> 0:02:01.720 their slugs sales as well as trying to deplete that 0:02:01.800 --> 0:02:04.559 inventory so they have less to discount come the first 0:02:04.600 --> 0:02:08.640 day of November. So that could also be you know, 0:02:09.000 --> 0:02:11.320 leaning in towards this increase spending. 0:02:12.160 --> 0:02:15.000 Well, Jill love of pumpkins spice Lotte, that's a good 0:02:15.240 --> 0:02:17.280 that's a good call out there. I wanted to know. 0:02:17.360 --> 0:02:17.440 So. 0:02:17.480 --> 0:02:20.120 Of course, when we're looking at retail sales, earnings and 0:02:20.160 --> 0:02:21.680 just all the data that's coming in, it can really 0:02:21.720 --> 0:02:24.120 feel like a slew. We can't really get a read 0:02:24.200 --> 0:02:27.040 on the consumer here. Has this offered us any more clarity? 0:02:29.080 --> 0:02:34.760 Offers more clarity? You know? Probably not, because again, consumers 0:02:34.800 --> 0:02:38.000 are really shifting the way that they spend. The predictions 0:02:38.040 --> 0:02:40.160 for this holiday seas that are to be softer than 0:02:40.240 --> 0:02:44.120 last year, or two percent versus three percent. We we 0:02:44.120 --> 0:02:47.160 we do see consumers continuing to buy, but trying to 0:02:47.200 --> 0:02:50.480 buy lower cost alternatives. We saw that with back to school, 0:02:50.520 --> 0:02:52.919 where the volume was flat but the dollars were down, 0:02:53.320 --> 0:02:56.480 indicating that they're buying. They're just finding cheaper ways to 0:02:56.560 --> 0:02:58.720 buy things. And I think we're going to see that 0:02:58.760 --> 0:03:02.080 this holiday season too, especially with things like the deep 0:03:02.120 --> 0:03:06.000 discount Chinese shopping apps t MoU, Shine, TikTok. Two thirds 0:03:06.000 --> 0:03:08.640 of consumers have shot those apps, and that's a number 0:03:08.639 --> 0:03:10.799 that will likely see go up. And I bring those 0:03:10.880 --> 0:03:14.359 up at the examples to answer your question because it's 0:03:14.440 --> 0:03:16.800 blurry out there. Things happening in both. 0:03:16.639 --> 0:03:18.440 Directions, Jill. 0:03:18.960 --> 0:03:20.359 For this holiday season, here. 0:03:20.600 --> 0:03:23.600 How promotional do you think retailers are going to have 0:03:23.639 --> 0:03:27.040 to be to drive their top line. 0:03:27.320 --> 0:03:30.520 They're going to have to continue to be very promotional 0:03:30.560 --> 0:03:33.799 to drive their top line. Historically, pricing and promotions were 0:03:33.840 --> 0:03:36.520 used to boost near end sales, but now they're used 0:03:36.560 --> 0:03:40.120 to boost everyday sales. And it's really driven by how 0:03:40.200 --> 0:03:44.600 consumers are spending and potentially a permanent shift in how 0:03:44.600 --> 0:03:48.160 they spend. And so we see a lot of growth 0:03:48.280 --> 0:03:54.400 from discount retailers, private brand sales in general, and consumers 0:03:54.480 --> 0:03:58.480 are definitely leaning in towards those strategies. In some household 0:03:59.080 --> 0:04:02.760 are doing even more things, you know, like using alternative 0:04:02.960 --> 0:04:05.960 pay pay plans like a buy now, pay later, getting 0:04:05.960 --> 0:04:10.000 a second job, sharing groceries, leaning on social media. The 0:04:10.040 --> 0:04:12.800 hashtag back to school Halls was a huge help to 0:04:12.880 --> 0:04:14.400 parents during back to school season. 0:04:15.720 --> 0:04:17.200 I mean, I think when we're looking at this and 0:04:17.240 --> 0:04:20.000 the market has really been on edge with investors really 0:04:20.040 --> 0:04:22.560 worrying about the consumer and how it may hurt the 0:04:22.600 --> 0:04:25.960 economy and the labor market, I mean, does this really 0:04:26.000 --> 0:04:29.200 show that the consumer may be stronger than many people think? 0:04:30.760 --> 0:04:34.880 Oh my, I'm so hesitant to lean into that. All 0:04:34.920 --> 0:04:36.960 predictions for the back half of this year as well 0:04:36.960 --> 0:04:41.560 as a holiday season. You know, aren't incredibly positive. Economists 0:04:41.560 --> 0:04:44.159 think that consumers will rein in their spending in the 0:04:44.200 --> 0:04:46.720 back even though we didn't see that with the results 0:04:46.800 --> 0:04:49.000 this morning, will rain in their spending in the back 0:04:49.040 --> 0:04:52.719 half of this year due to depleted pandemic savings. Lower 0:04:52.720 --> 0:04:57.440 income households have record levels of credit card debt uncertainty, 0:04:57.760 --> 0:05:00.880 and those low income households, by the way, are proportionally 0:05:02.200 --> 0:05:04.840 affected with inflation. We saw that a few weeks ago 0:05:04.839 --> 0:05:07.599 when Dollar General said that the weekest three weeks of 0:05:07.640 --> 0:05:10.880 their quarter were the last weeks of each month, indicating 0:05:10.880 --> 0:05:14.120 that consumers are really struggling to stretch that budget. So 0:05:14.200 --> 0:05:18.200 for those reasons, I'm super hesitant to lean into overall 0:05:18.279 --> 0:05:21.160 growth in the back half of this year. We still 0:05:21.200 --> 0:05:22.600 think it's going to be depressed. 0:05:24.040 --> 0:05:25.360 What is skimpflation. 0:05:27.640 --> 0:05:30.760 It's a great question. I'd say that this industry is 0:05:30.800 --> 0:05:32.920 not short of creativity, right, so we all know what 0:05:32.960 --> 0:05:36.520 shrinkflation is. We talked about upflation, which is that concept 0:05:36.520 --> 0:05:40.600 of fining a new use for an existing product. Skipflation 0:05:40.760 --> 0:05:44.239 is the concept of producing a product or a service 0:05:44.400 --> 0:05:48.799 with a lesser equality or not equality lesser price ingredient, 0:05:48.960 --> 0:05:51.520 So for a food product, or for a piece of 0:05:51.520 --> 0:05:55.800 clothing that could be a cheaper ingredient, or material for 0:05:55.880 --> 0:05:58.320 a service that could be something like a hotel's day 0:05:58.360 --> 0:05:59.360 with no cleaning service. 0:06:00.600 --> 0:06:02.719 Yeah, I've seen that more and more, but less and less. 0:06:02.760 --> 0:06:05.440 Night after the pandemic, pandemic was really prevalent. 0:06:05.480 --> 0:06:07.039 Now it's less, so definitely. 0:06:07.240 --> 0:06:09.600 I mean, we can't really look at any one data point, 0:06:09.600 --> 0:06:12.160 but as we're looking toward the Fed tomorrow, of course 0:06:12.200 --> 0:06:14.479 this will that's not necessarily play into this one, but 0:06:14.520 --> 0:06:17.279 we're looking toward the next job report. How is this 0:06:17.440 --> 0:06:19.839 just telling us about the strink of the economy more broadly. 0:06:22.320 --> 0:06:25.920 Yeah, so there's a lot of discussion around the rate 0:06:26.000 --> 0:06:28.560 cuts and what that might ultimately do to spending. Historically, 0:06:29.040 --> 0:06:31.040 spending goes up about a half percent in the year 0:06:31.160 --> 0:06:33.440 following a rate cut, but also goes down to to 0:06:33.520 --> 0:06:36.240 four percent in a recession. Where we are, you know, 0:06:36.440 --> 0:06:39.719 soft but not quite a recession. You know, we could 0:06:39.800 --> 0:06:42.760 see a slight decline in twenty twenty five, but overall, 0:06:42.800 --> 0:06:46.680 it's going to take a while to revitalize the economy 0:06:46.880 --> 0:06:49.560 via the rate cuts. 0:06:49.640 --> 0:06:53.719 Just real quick, Jill, how important is brand loyalty these days. 0:06:56.000 --> 0:06:58.600 Oh my gosh, I can't tell you how many times 0:06:58.600 --> 0:07:02.320 they say this. The new loyalty is disloyalty. Which, the 0:07:02.360 --> 0:07:06.880 new loyalty is disloyalty. We are training consumers to be disloyal. 0:07:06.960 --> 0:07:09.960 We are training them that there is always a deal 0:07:10.040 --> 0:07:12.880 to be had out there, whether it's at a different 0:07:12.960 --> 0:07:18.440 outlet or whether it's waiting. So loyalty has definitely declined 0:07:18.880 --> 0:07:22.080 and retailers are trying to get that back. So, for example, 0:07:22.200 --> 0:07:26.480 take retailers loyalty programs. It's a great way for retailers 0:07:26.480 --> 0:07:28.720 to pull that consumer into their store for that trip 0:07:28.720 --> 0:07:31.280 because it's the only place to get that price. But 0:07:31.440 --> 0:07:35.200 consumers beware. It often does have consumers buying things that 0:07:35.240 --> 0:07:38.480 they didn't need or more than they need. In fact, 0:07:38.720 --> 0:07:41.400 we just did a recent survey. We're eighty percent of 0:07:41.480 --> 0:07:44.560 consumers so that they're buying more product than they need 0:07:44.600 --> 0:07:45.920 because of a good deal. 0:07:46.240 --> 0:07:46.360 Ye. 0:07:46.600 --> 0:07:49.240 So it's a great strategy for retailers, but consumers aware. 0:07:49.720 --> 0:07:51.920 Entry load is what it's called. Jill Blanchard, thanks so 0:07:51.960 --> 0:07:54.920 much for joining us. Jill Blanchard. She's president of Enterprise 0:07:55.040 --> 0:07:58.640 Client Solutions. The firm name is Advantage Solutions. Joining us 0:07:58.720 --> 0:08:00.640 via zoom from California. 0:08:00.920 --> 0:08:07.000 Today, you're listening to the Bloomberg Intelligence Podcast. Catch us 0:08:07.040 --> 0:08:10.200 live weekdays at ten am Eastern on Apple car Play 0:08:10.240 --> 0:08:13.360 and Android Auto with the Bloomberg Business. You can also 0:08:13.400 --> 0:08:16.920 listen live on Amazon Alexa from our flagship New York station. 0:08:17.280 --> 0:08:20.040 Just say Alexa play Bloomberg eleven thirty. 0:08:21.640 --> 0:08:23.760 All right, it is time to get right to it. 0:08:23.840 --> 0:08:26.040 I'm going right to our guest, daniel De Martino, Booth 0:08:26.120 --> 0:08:29.440 CEO and chief strategist QI Research. You want to talk FED, 0:08:29.560 --> 0:08:32.880 this is the go to source. We're so glad to 0:08:32.880 --> 0:08:35.480 have her in our studio. She's based down on Dallas. 0:08:35.480 --> 0:08:37.679 She was a former FED person down there in the 0:08:37.720 --> 0:08:39.840 Dallas Fed, so she knows a thing or two about 0:08:39.840 --> 0:08:42.520 this Central bank. Here, Danielle, what do you think they 0:08:42.640 --> 0:08:44.439 should do tomorrow? 0:08:46.080 --> 0:08:48.560 I think they should have I mean, since we're doing 0:08:48.600 --> 0:08:50.400 shows right and by the way, by the way, I 0:08:50.440 --> 0:08:53.120 do analog. So it's my birthday today, so I'm just. 0:08:54.880 --> 0:08:57.240 I'm right there with you with them. Legal to drink 0:08:57.280 --> 0:09:01.360 now barely possibly. It's also lis In Saunders birthday. 0:09:01.400 --> 0:09:02.400 It is also lis In Saunders. 0:09:03.000 --> 0:09:04.079 We always are like that. 0:09:04.160 --> 0:09:05.599 The first ones to wish each other had we go 0:09:05.760 --> 0:09:09.719 down Constitution Day. Anyways, I think that they should have 0:09:09.760 --> 0:09:13.360 if we're doing shoulda kuda lowered in July? And I 0:09:13.360 --> 0:09:15.160 think that they know that, and I think that had 0:09:15.160 --> 0:09:17.800 they lowered in July, because they had a quote unquote 0:09:17.880 --> 0:09:21.480 real conversation about it, according to J. Powett, the podium 0:09:21.600 --> 0:09:24.560 that they would subsequently be lowering again twenty five basis 0:09:24.600 --> 0:09:27.240 points tomorrow, which is why I think fifty kind of 0:09:27.280 --> 0:09:31.120 makes sense because the level of interest rates fifty basis 0:09:31.120 --> 0:09:33.800 points lower than what it is right now is appropriate 0:09:33.880 --> 0:09:38.160 given Bloomberg's bankruptcies came in at eight in the last week, 0:09:38.200 --> 0:09:40.880 and we've seen another one since then, the second highest 0:09:40.920 --> 0:09:43.720 this year. I mean, obviously the lag effect is taking 0:09:43.800 --> 0:09:46.760 effect in the credit markets. It's much more difficult to 0:09:46.800 --> 0:09:50.560 find funding if you're a bad building or a bad business, 0:09:51.360 --> 0:09:53.839 so I think, And it's harder by a car, and 0:09:53.880 --> 0:09:57.600 it's harder to refinance your home, and it's a lot 0:09:57.640 --> 0:10:00.640 of things say that the level of interest rate is 0:10:00.679 --> 0:10:02.360 too high, and I think that that's what they should 0:10:02.360 --> 0:10:03.680 be focused on the level. 0:10:04.559 --> 0:10:06.600 So you said that you think that they should have 0:10:06.600 --> 0:10:09.400 cut back in July. So what are your expectations for tomorrow? 0:10:09.440 --> 0:10:11.400 I mean, are you in the more ambitious camp, are 0:10:11.400 --> 0:10:13.960 you looking for fifty basis point cut or so? 0:10:14.160 --> 0:10:17.200 I mean, I have Look, I've been around the Fed 0:10:17.360 --> 0:10:21.480 for a very long time, and to say, and Bloomberg 0:10:21.760 --> 0:10:25.120 does a great job of tracking the volatility in the 0:10:25.280 --> 0:10:28.839 uncertainty of the wagers on whether it's going to be 0:10:28.880 --> 0:10:31.559 twenty five or fifty, we haven't seen uncertainty this high 0:10:31.640 --> 0:10:35.320 since two thousand and seven, wow, in terms of the 0:10:35.360 --> 0:10:41.000 WORP WRP GO. So it's so difficult to say. And 0:10:41.480 --> 0:10:43.760 Bank of America came out and drew the lines hard 0:10:43.760 --> 0:10:46.320 this morning and they're like, it should only be twenty five, 0:10:46.600 --> 0:10:48.560 And Michael Furley at JP Morgan Chase is like, it 0:10:48.640 --> 0:10:52.080 absolutely should be fifty. My buddy, George Goncalvez at MUFG, 0:10:52.360 --> 0:10:55.120 kudos to him. He's been saying fifty the whole time 0:10:55.160 --> 0:10:59.280 because he's looking at the level. So I think that 0:10:59.280 --> 0:11:03.679 they've done enough broadcasting and moved markets to a great 0:11:03.800 --> 0:11:06.720 enough extent to break the seventy five percent rule. 0:11:06.559 --> 0:11:07.040 If need be. 0:11:07.320 --> 0:11:08.680 But that's what it would come down to, It would 0:11:08.679 --> 0:11:10.880 be breaking the seventy five percent probability role. 0:11:11.240 --> 0:11:15.040 So once the FED does begin tomorrow, what's the cadence 0:11:15.360 --> 0:11:17.800 after that, Like, when would they like to be done? 0:11:17.840 --> 0:11:19.240 Where would I mean, how does that all work? 0:11:19.960 --> 0:11:24.640 So I think it from my experience on the inside, 0:11:25.240 --> 0:11:30.360 you sort of know it's time to ease off on 0:11:30.040 --> 0:11:33.640 on easing, yep, when you start to see the lag 0:11:33.640 --> 0:11:37.280 effect from tightening dissipate. Okay, And those are things that 0:11:37.320 --> 0:11:40.079 are visible right because BC, why go you can track 0:11:40.160 --> 0:11:42.120 the level of bankruptcy, you can track the level of 0:11:42.320 --> 0:11:44.920 distress in the system. When that starts to ebb off, 0:11:45.320 --> 0:11:50.120 then obviously financing is opening up enough to provide adequate 0:11:50.160 --> 0:11:53.480 liquidity to the system, adequate liquidity to the credit markets. 0:11:53.760 --> 0:11:56.439 And so that's kind of when you know yep. 0:11:56.960 --> 0:11:59.800 And I think J Powell at AL, I think it's 0:11:59.600 --> 0:12:02.040 what's unique right now is we've got a FED that 0:12:02.080 --> 0:12:05.199 wants to stop with a two or three percent handle. 0:12:05.760 --> 0:12:08.520 They're like, you know, we can put three percentage points 0:12:08.559 --> 0:12:11.240 of cuts out there and still not have to worry 0:12:11.240 --> 0:12:13.600 about going back to the zero bound, which they know 0:12:13.720 --> 0:12:18.240 is a failed experiment and encouraged too much speculation. 0:12:18.800 --> 0:12:20.800 And going off of that, I mean, markets are pricing 0:12:20.840 --> 0:12:23.640 north of one hundred basis plantes of cuts through the 0:12:23.720 --> 0:12:26.040 end of this year. If that holds, does that mean 0:12:26.120 --> 0:12:29.240 that the later meetings would all be fifty basis? How 0:12:29.280 --> 0:12:30.360 would that work exactly? 0:12:30.520 --> 0:12:35.120 You know, I look, j Powell is the least political 0:12:36.400 --> 0:12:41.480 FED chair since Paul Volker wondered the buildings and gave 0:12:41.640 --> 0:12:45.240 the staff and you know, seminars on on why the 0:12:45.280 --> 0:12:47.640 tailor rode was broken just for fun and did not 0:12:47.720 --> 0:12:50.240 care what Wall Street thought. Jay Powell is very a 0:12:50.400 --> 0:12:54.560 political So if it needs to be fifty, it'll be fifty. 0:12:54.600 --> 0:12:57.840 Because he's when he says I'm data dependent, he's dated dependent. 0:12:58.360 --> 0:13:02.280 If we see that, you know, there's enough gig workers 0:13:02.280 --> 0:13:05.000 out there that have been absorbed and ergo, they're finally 0:13:05.080 --> 0:13:08.200 starting to apply for unemployment because we're seeing a massive 0:13:08.320 --> 0:13:11.480 runoff from the million full time jobs we've lost in 0:13:11.480 --> 0:13:14.480 the last twelve months into the part time for economic reasons. 0:13:14.520 --> 0:13:14.800 Pool. 0:13:15.480 --> 0:13:18.679 I had an uber driver yesterday, first drive of his 0:13:18.880 --> 0:13:19.520 Uber life. 0:13:19.640 --> 0:13:20.199 Wow. 0:13:20.600 --> 0:13:22.760 But you get that a lot because people are like, Okay, 0:13:22.880 --> 0:13:25.400 the state's gonna get wherever I live, stay x y. Heck, 0:13:25.400 --> 0:13:27.880 if it's tennessee twelve whole weeks, that's their max for 0:13:27.960 --> 0:13:30.560 unemployment benefits. I can maybe get two hundred and ninety 0:13:30.559 --> 0:13:32.360 five from the state, or I can get at least 0:13:32.360 --> 0:13:37.040 five seven one thousand dollars five hundred and seven driving Uber, 0:13:37.440 --> 0:13:40.240 delivering door dash, whatever it is. But at some point 0:13:40.400 --> 0:13:44.240 you're going to saturate that market in terms of I mean, 0:13:44.280 --> 0:13:46.240 it's a lot quicker to get an Uber today than 0:13:46.240 --> 0:13:48.120 it was nine months ago. 0:13:48.600 --> 0:13:52.480 So just real quick, what's the labor number that gets 0:13:52.520 --> 0:13:55.400 you spooked, whether it's an unemployment rate or just what's 0:13:55.440 --> 0:13:56.840 the labor number that gets you spooked? 0:13:56.840 --> 0:13:58.160 To maybe art you might already be there. 0:13:58.400 --> 0:13:58.800 I don't know. 0:13:58.840 --> 0:14:01.720 Well, I'm kind of are yeah, spoop. I really am. 0:14:01.840 --> 0:14:06.120 To see the rise in part time employment. To see 0:14:06.120 --> 0:14:10.800 the economic depopulation ratio already dive down into recessionary territory 0:14:10.880 --> 0:14:13.760 that's on par with that of the two thousand and 0:14:13.800 --> 0:14:16.400 seven two thousand and nine Great Recession. To see in 0:14:16.520 --> 0:14:20.240 University of Michigan bad news heard on unemployment go spiking. 0:14:20.280 --> 0:14:23.360 To see people's expectations for their income go down for 0:14:23.440 --> 0:14:25.600 six months in a row. That's a data series that 0:14:25.800 --> 0:14:28.040 goes back to nineteen eighty. We've never seen six months 0:14:28.080 --> 0:14:31.360 in a row of people saying my income is going 0:14:31.400 --> 0:14:33.560 to decline in the coming twelve months. Why is that 0:14:33.600 --> 0:14:35.800 because they're going from full time to part time. They 0:14:35.880 --> 0:14:37.840 know that what they're we have three hundred and seventy 0:14:37.920 --> 0:14:41.040 nine thousand and fifty five year old plus rejoin the 0:14:41.040 --> 0:14:43.360 workforce in August. Hey, I'm going to go back to 0:14:43.440 --> 0:14:45.800 work to help my kid who doesn't have a full 0:14:45.800 --> 0:14:47.400 time job anymore. We've got to put food on the 0:14:47.400 --> 0:14:48.359 table for the grandkids. 0:14:48.400 --> 0:14:51.200 And I just saw that Sam's Club they're raising the 0:14:51.600 --> 0:14:54.200 base rates starting wages in the US from fifteen to 0:14:54.240 --> 0:14:56.000 sixteen dollars. And I keep an eye on that because 0:14:56.000 --> 0:14:58.600 my last job will be as a greader at walmart 0:15:00.040 --> 0:15:04.040 Danielle Dee martinmo Booth CEO, Chief Strategist QI Research during 0:15:04.120 --> 0:15:06.240 US Live here in a Bloomerg interrector Broker studio, which 0:15:06.280 --> 0:15:08.960 is an absolutely perfect guest to have the day before 0:15:09.000 --> 0:15:09.360 the FED. 0:15:11.600 --> 0:15:15.480 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:15.560 --> 0:15:18.280 weekdays at ten am Eastern on Apple car Playing and 0:15:18.400 --> 0:15:21.280 broud Otto with the Bloomberg Business app. Listen on demand 0:15:21.320 --> 0:15:25.640 wherever you get your podcasts, or watch us live on YouTube. 0:15:26.680 --> 0:15:28.000 Nor are you a TikToker? 0:15:28.120 --> 0:15:30.040 I am. I'm excited for this segment. 0:15:30.160 --> 0:15:31.960 All right, Well good, I mean, I'm not even going 0:15:32.000 --> 0:15:34.000 to ask John Tucker he's a TikToker. I know where 0:15:34.000 --> 0:15:34.600 that's going to stay. 0:15:34.680 --> 0:15:37.120 Do you know what that is? What's that? 0:15:37.440 --> 0:15:37.680 You go? 0:15:38.160 --> 0:15:38.600 All right? 0:15:38.680 --> 0:15:42.280 Apparently yesterday the hearing went poorly for TikTok and it's 0:15:42.320 --> 0:15:46.000 legal fight against a US law enforcing servers and app 0:15:46.000 --> 0:15:49.560 stores stop hosting the video sharing app in January. That's 0:15:49.600 --> 0:15:52.600 not bueno for them. Matt Sheltonham, he follows all of 0:15:52.600 --> 0:15:56.240 this stuff media litigation. He's down in Washington, d C. 0:15:56.440 --> 0:15:57.600 For Bloomberg Intelligence. 0:15:58.000 --> 0:15:58.200 MAC. 0:15:58.240 --> 0:16:02.120 You summarize what the case was before the court and 0:16:02.160 --> 0:16:04.040 what their ruling was. Are we gonna be able to 0:16:04.080 --> 0:16:05.760 still have TikTok come January? 0:16:07.240 --> 0:16:07.480 Well? 0:16:07.720 --> 0:16:13.040 I think if TikTok wasn't concerned about a potential ban 0:16:13.280 --> 0:16:17.520 before yesterday's hearing, it should be concerned after that hearing. 0:16:17.640 --> 0:16:18.840 Yesterday it did not go. 0:16:18.920 --> 0:16:22.920 Well for the company. What's an issue here is in April, 0:16:23.520 --> 0:16:28.280 Congress passed a law that said unless TikTok is divested 0:16:28.360 --> 0:16:31.520 to a company that doesn't have its parent in China, 0:16:32.280 --> 0:16:35.680 that companies in the US can no longer carry the app. 0:16:35.880 --> 0:16:39.720 In app stores. Companies can no longer host it in 0:16:39.760 --> 0:16:42.800 a way that the app can be distributed, updated, or 0:16:42.840 --> 0:16:47.479 maintained in the United States, all of as of January nineteenth, 0:16:47.800 --> 0:16:51.400 and TikTok is said, look, we can't do a divestiture. 0:16:51.680 --> 0:16:54.720 It's certainly not on that timeline. And so TikTok's only 0:16:54.880 --> 0:16:59.400 chance to survive in the United States after January nineteenth 0:16:59.520 --> 0:17:03.200 is to win this legal case. And yesterday's hearing was 0:17:03.320 --> 0:17:07.600 the big, big hearing on the case, and the three 0:17:07.720 --> 0:17:11.880 judges on the case, in my view, were not very 0:17:11.920 --> 0:17:14.600 sympathetic to the company's First Amendment case. 0:17:15.280 --> 0:17:17.560 And so is this isolated to the United States? Are 0:17:17.560 --> 0:17:20.480 there any other you know, countries that are also trying 0:17:20.520 --> 0:17:22.200 to crack down on TikTok and its influence. 0:17:23.240 --> 0:17:27.560 I think different countries are taking different approaches. The EU 0:17:27.960 --> 0:17:33.320 has taken a harder approach to tech regulation generally and 0:17:34.440 --> 0:17:39.880 likely would apply that to TikTok without a specific ban 0:17:40.240 --> 0:17:43.000 in the same way. According to our analyst Hamlin Basin. 0:17:43.200 --> 0:17:47.720 There so this law is US specific. It was passed 0:17:47.720 --> 0:17:53.520 by Congress specifically to target the company, and so it's 0:17:53.560 --> 0:17:56.439 a different remedy here in the US. But there's a 0:17:56.480 --> 0:17:58.480 tendency I think to think, you know, nothing's going to 0:17:58.520 --> 0:18:01.200 happen in Congress. Nothing ever gets done there, just a 0:18:01.240 --> 0:18:04.280 lot of talk. Well, here, Congress did it. It's done. 0:18:04.400 --> 0:18:09.359 It's law, and TikTok's only chance to overcome it is 0:18:09.400 --> 0:18:10.560 to win this legal case. 0:18:11.000 --> 0:18:13.480 So the parent company for TikTok is Byte Dance, a 0:18:13.560 --> 0:18:16.919 Chinese controlled company. If I've misstated that, let me know 0:18:18.200 --> 0:18:21.719 what has Bite Dance said about their options, what they 0:18:21.840 --> 0:18:23.600 plan to do scenarios. 0:18:24.760 --> 0:18:28.320 Yeah, so that's right, that Byte Dance is the parent 0:18:28.440 --> 0:18:33.040 company of TikTok. Now, TikTok is a is a US subsidiary, 0:18:33.040 --> 0:18:36.560 It's a US company. TikTok is a privately owned company, 0:18:36.600 --> 0:18:39.679 but it happens to have its headquarters in China, and 0:18:39.720 --> 0:18:44.080 that's the concern. And you know, TikTok and Byte Dance 0:18:44.119 --> 0:18:48.160 in this legal case have basically said, look, a divestiture 0:18:48.320 --> 0:18:52.359 is just not technically or legally feasible. And so there's 0:18:52.400 --> 0:18:57.280 really no indication that they're pursuing a divestiture at this point, 0:18:57.640 --> 0:19:00.280 and at least that's their indication to the court. The 0:19:00.359 --> 0:19:03.399 law allows a ninety day extension if the president sees 0:19:03.440 --> 0:19:07.480 their making progress on a sale, but the company, they've 0:19:07.480 --> 0:19:10.199 made no indication they're pursuing that route. They say this 0:19:10.359 --> 0:19:13.440 is a blatant violation of the constitution, and so they 0:19:13.440 --> 0:19:15.560 think they can win in court. But I'm not so 0:19:15.680 --> 0:19:17.280 sure after yesterday's hearing. 0:19:17.880 --> 0:19:20.440 I mean, so what do analysts think are the brought 0:19:20.520 --> 0:19:23.080 would be the broader readout for the corporate side of things. 0:19:23.119 --> 0:19:25.360 I mean, of course, we know so many companies actually 0:19:25.520 --> 0:19:28.679 promote their products and their companies on TikTok. I mean, 0:19:28.680 --> 0:19:31.160 when I'm scrolling through, I'm always seeing a new pitch. 0:19:31.200 --> 0:19:33.360 So what does that look like in terms of advertisement 0:19:33.400 --> 0:19:34.520 and the ripple effects there? 0:19:35.320 --> 0:19:38.320 Yeah, that's right, And part of the litigation yesterday was 0:19:38.400 --> 0:19:41.600 brought by users of TikTok that say, look, there isn't 0:19:41.640 --> 0:19:42.720 a good substitute. 0:19:42.800 --> 0:19:43.600 Yeah, there are other. 0:19:43.520 --> 0:19:47.800 Social media companies, but we've built our businesses here. We 0:19:47.840 --> 0:19:51.040 are expressing ourselves as a first Amendment matter on TikTok, 0:19:51.320 --> 0:19:55.440 and the government can't take that away. And there's also 0:19:55.480 --> 0:20:00.399 a big business impact in terms of TikTok's competitors. Is 0:20:01.240 --> 0:20:03.640 one of the leading social media apps in the country, 0:20:03.680 --> 0:20:07.680 so if it goes away, it's a great opportunity for 0:20:07.840 --> 0:20:12.120 the competitors for Google, for Meta and so there are 0:20:12.240 --> 0:20:17.240 serious business implications by forcing a divestiture that isn't going 0:20:17.320 --> 0:20:18.960 to happen in effectively forcing a ban. 0:20:20.119 --> 0:20:22.160 Is this something that could get to the Supreme Court. 0:20:23.400 --> 0:20:27.439 Yes, So if TikTok loses in the DC Circuit, I 0:20:27.440 --> 0:20:31.320 expect we'll see a decision by early December from the 0:20:31.400 --> 0:20:34.320 DC Circuit. As I said, the key deadline is January 0:20:34.440 --> 0:20:36.960 nineteenth here, so there's not a lot of time. If 0:20:36.960 --> 0:20:39.400 we see a decision in December from the DC Circuit, 0:20:39.920 --> 0:20:44.000 TikTok's realistic only chance at that point is going to 0:20:44.040 --> 0:20:46.639 be a last ditch plea to the Supreme Court to 0:20:46.720 --> 0:20:49.600 hit pause on this, to say, look, nothing should move 0:20:49.640 --> 0:20:52.960 this fast when you have such a major restriction under 0:20:53.000 --> 0:20:55.879 the First Amendment. The Supreme Court should issue a stay 0:20:56.119 --> 0:20:58.439 and take up this case. That's going to be the 0:20:58.760 --> 0:21:02.080