Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. Dr do A Dr Rene
Speaker 1: do A is founder and chief medical officer of a
Speaker 1: company called Hell h e a L. It provides on
Speaker 1: demand telemedicine as well as some in home dr house calls,
Speaker 1: and Dr do A joins US Now. Dr do A,
Speaker 1: how will your company and companies like a deal with
Speaker 1: the distribution of the vaccine? Do you have orders in?
Speaker 1: Do you expect to be contacted? How does it all
Speaker 1: work so so far? Thanks first of all for having
Speaker 1: me on this show. Uh, first of all, it's it's
Speaker 1: kind of been an interesting roll out. You know, about
Speaker 1: a week ago, I was concerned that the logistics and
Speaker 1: the routing of getting this vaccine around we're going to
Speaker 1: be there very difficult. It seems that piece by piece
Speaker 1: these items are falling into place. I was asked to
Speaker 1: fill out some paperwork on the CDCs website to apply
Speaker 1: for not just my medical teams, but also our patients
Speaker 1: that we serve um to to to try to acquire
Speaker 1: enough vaccine for those those members of the team in
Speaker 1: each and every one of our markets. I'm waiting to
Speaker 1: hear back, but I've been consistently following up as well
Speaker 1: to see what's going on. I've also been seeing that
Speaker 1: the hospitals on which I'm on staff are trying as
Speaker 1: well to have a rollout process, and there have been
Speaker 1: glitches with accessibility to you know, sign up forms and
Speaker 1: email addresses and so that that's also been a very
Speaker 1: interesting perspective as well. It's, of course, as expected, rushed,
Speaker 1: but certainly hopefully will happen this month. So DR do
Speaker 1: you know, it seems like what we're hearing in terms
Speaker 1: of the rollout is healthcare workers, folks in our retirement
Speaker 1: homes and so on, to get getting to those critical
Speaker 1: populations initially and then out to the broader populations over time.
Speaker 1: What is your best guess as to when the average
Speaker 1: American out there will have access uh to this vaccine.
Speaker 1: So the goal is to have a hundred million people
Speaker 1: vaccinated in the first part of so I think that
Speaker 1: by the end of summer, the average person will be vaccinated. Now,
Speaker 1: keep in mind this vaccine is for those folks sixteen
Speaker 1: and up, so we still have work to do for children.
Speaker 1: Is it fine to let children be are among the
Speaker 1: last to get this vaccine or should they be earlier?
Speaker 1: I think with children we see a very interesting infectivity.
Speaker 1: So you've of course read in the news and seen
Speaker 1: in the news that children have died because of COVID.
Speaker 1: They've certainly been infected, they're certainly carrying and transmitting. But
Speaker 1: I think what we've also seen is the population suffering
Speaker 1: the most are those that are elderly and immuno compromised.
Speaker 1: And of course my colleagues on front lines are being exposed,
Speaker 1: um in their efforts to keep people safe. So I
Speaker 1: would say those are definitely the right priorities. So Dr Derot,
Speaker 1: you know, in this country at least, uh, there is
Speaker 1: a sizeable percentage of the population that just doesn't feel
Speaker 1: comfortable with the old concept of receiving vaccines for you know,
Speaker 1: the measles amongst and other things. Um, how do we
Speaker 1: as a society, you know, get those people to accept
Speaker 1: this vaccine and take this vaccine. It's such a challenging question.
Speaker 1: We we deal with it in the routine vaccines such
Speaker 1: as MMR as you described. And so this concept of
Speaker 1: herd immunity, where enough people are vaccinated so that as
Speaker 1: a population we are all protected, is the most critical
Speaker 1: piece to our survivability. The amount of lives we have
Speaker 1: lost with COVID is tragic, is an understatement, right, So
Speaker 1: we all have to do our part, and even while
Speaker 1: we are being vaccinated piece by piece, you know, population
Speaker 1: type by population type, until we are all vaccinated effectively,
Speaker 1: we won't have herd immunity, which means we do need
Speaker 1: to wear masks, we do need to uh physically separate,
Speaker 1: and these measures will go on and on until we
Speaker 1: are safe literally from each other. At this point, Dr Dooan,
Speaker 1: would you feel comfortable if you had vaccine going out
Speaker 1: in company or would you still be worried that you
Speaker 1: might be able to pass it on? So I I
Speaker 1: plan if if I am able to get the vaccine,
Speaker 1: I plan to take the vaccine. I plan to vaccinate
Speaker 1: all of our medical teams and immunocompromised and elderly patients,
Speaker 1: and I will hope that as doing in doing so,
Speaker 1: we are doing our part to protect our communities, and
Speaker 1: that's exactly our plan forward. Sorry, should be a little
Speaker 1: more clear. What I meant was, would you be worried
Speaker 1: that you could still be passing on the virus? Well, well,
Speaker 1: so there are two vaccines that are required. The first
Speaker 1: dose is reportedly effective, but you want a second dose.
Speaker 1: But yes, I would continue to physically separate and wear
Speaker 1: a mask. Not so much because I am worried about
Speaker 1: me transmitting though of course every vaccine takes time, as
Speaker 1: you know, to ramp up and build the immunity, but
Speaker 1: additionally because others around me are not yet vaccinated, and
Speaker 1: if I am carrying during that period of of immunity building,
Speaker 1: I don't want to infect them. Dr Rene Do, thank
Speaker 1: you so much. We really appreciate your thoughts and your expertise.
Speaker 1: Dr Rene Do a founder and chief medical officer of
Speaker 1: Hell joining us on the phone from Los Angeles, giving
Speaker 1: us the latest on these vaccines which are just beginning
Speaker 1: to roll out across the US. We're waiting for modarren
Speaker 1: and later this week to receive it's FDA approval UH
Speaker 1: and that can join the Visor vaccine in the marketplace.
Speaker 1: As we build this vaccination population well, we got some
Speaker 1: weaker than expected retail sales this morning, suggesting once again
Speaker 1: that there is a lot of stress in the economy,
Speaker 1: particularly with the consumer of the question is what can
Speaker 1: the folks in Congress do? What can the Federal Reserve?
Speaker 1: Dude kind of ease the pain. Danielle di Martino Booth
Speaker 1: CEO and Director of Intelligence at Quill Intelligence, also a
Speaker 1: former advisor at the Dallas Federal Reserve, any Bloomberg opinion contributor.
Speaker 1: Also she's the author of a book entitled fed Up,
Speaker 1: an insiders take on why the Federal Reserve is bad
Speaker 1: for America? What do you expect, Danielle, thank you so
Speaker 1: much for joining us. What do you expect this Federal
Speaker 1: Reserve which is bad for America? As per your book?
Speaker 1: What do you expect to hear from the Fed chairman
Speaker 1: of this afternoon? Well, it'll be interesting to see what
Speaker 1: he has to say. I think he's finally going to
Speaker 1: get the stimulus that he wants. I I I suspect
Speaker 1: that it's not near the price tag that he was
Speaker 1: hoping for. Uh. You know that the Fed wants to
Speaker 1: commit to capping longer maturity treasury yield, and it wants
Speaker 1: to buy longer maturity treasuries to hold those prices down,
Speaker 1: but those those yields won't seem to come up enough
Speaker 1: for them to to launch yield curve control um. So
Speaker 1: Bloomberg's I I Red Jersey did some fantastic work. I
Speaker 1: hope everybody thought on what some of the possibilities would
Speaker 1: be in terms of just the numb the amount of
Speaker 1: bonds that that the FED can buy if they were to,
Speaker 1: if they were to buy the entire Tips market, which
Speaker 1: would be crazy, it would destroy the structure of the
Speaker 1: kIPS market. There's nearly seven hundred billion more that they
Speaker 1: could buy there. You know that that would continue to
Speaker 1: pump up the inflation narrative. Or they could go from
Speaker 1: you know the seven to twenty area on the yield
Speaker 1: curve in terms of treasury maturities, and that there's another
Speaker 1: seven hundred billions they can buy there. But again, I
Speaker 1: think what the Fed wants more than anything else, And
Speaker 1: we'll be looking to Janet yell and to see if
Speaker 1: she doesn't push this is is the supply of longer
Speaker 1: maturity treasuries itself to increase because those buckets are relatively small.
Speaker 1: What happens if we get stimulus, but it's nine billion
Speaker 1: or below, so less than the you know, the trillions
Speaker 1: that Democrats wanted, but also you know, not enough for
Speaker 1: states to to get some of the pie. Well, and
Speaker 1: I think I think you hit the nail on the head.
Speaker 1: They're vunny because you've seen all of these job cut
Speaker 1: announcement announcements come out of whether it's Washington, d C.
Speaker 1: Or San Francisco or New York around their transportation authorities. Uh.
Speaker 1: And that's just going to make a bad problem worse
Speaker 1: if you think about it, because so many of the
Speaker 1: lower income workers who can't work from home are going
Speaker 1: to have the means by which they transport themselves to work,
Speaker 1: uh cut that much more. So. You know, the Republicans
Speaker 1: have been very articulate in saying this is not a
Speaker 1: stimulus package. We anticipate that the economy is going to
Speaker 1: accelerate because of the vaccine being distributed throughout throughout the country.
Speaker 1: So this is not stimulus, this is just pure relief. Well,
Speaker 1: you know, this is also a foot race between now
Speaker 1: and then and the damage that's going to be inflicted
Speaker 1: on the economy because of this spike in hospitalizations and fatality.
Speaker 1: The question becomes one of is their stimulus necessary the
Speaker 1: minute Joe Biden takes office. Yeah, that's kind of where
Speaker 1: I wanted to go, Danielle. What do you think it's
Speaker 1: got to be presumably on the top of us to
Speaker 1: do to do list for those first one days. What
Speaker 1: do we know about Joe Biden his administration kind of
Speaker 1: what they're thinking about in terms of fiscal stimulus. Well,
Speaker 1: I certainly think that they would be huge advocates for
Speaker 1: getting as much aid to states and locality as possible.
Speaker 1: And you know, if I'm an a Biden administration, it's
Speaker 1: difficult to do any planning, just as if just as
Speaker 1: it's difficult for most of us to plan out whether
Speaker 1: or not inflation or is coming or not because of
Speaker 1: these two senatorial runoff elections in Georgia. And that's how
Speaker 1: critical they've become. They will be the determinant of the
Speaker 1: size of the next stimulus package and it's composition and
Speaker 1: how aggressive it can be. Yeah, it's a it's it's
Speaker 1: going to be a difficult winter, Danniel. What do you
Speaker 1: think is priced into this market given that we've only
Speaker 1: gone up or sideways, we've barely gone down since mart Well,
Speaker 1: I think the market is is certainly pricing in a
Speaker 1: best case scenario in terms of the the economy being
Speaker 1: fully reopened by the time spring rolls around. That is
Speaker 1: where I feel these markets are priced. For a friend
Speaker 1: of mine, PHILLIPA Done, did some fabulous work looking at
Speaker 1: the Schiller Cape price to earnings, the longer term price
Speaker 1: to earnings ratio on the SMP back and right now
Speaker 1: stocks are trading in the percentile historically. So you know,
Speaker 1: I have to say that that that the stock market
Speaker 1: right now is priced such that we are a fully
Speaker 1: open economy in the headed into Q two. Um Daniel,
Speaker 1: what do you think of Janet Yellen as a Secretary Treasury. Well,
Speaker 1: you know, I've been openly critical of Janet Yellen because
Speaker 1: in in higher testimonies, in statement she has she has
Speaker 1: spoken to the fact that she didn't really understand the
Speaker 1: makeup the structure of the financial system and did not
Speaker 1: see the crisis coming as we were headed into the
Speaker 1: last crisis. Uh. You know, she's a labor economist by training,
Speaker 1: and I have my I have my my doubts as
Speaker 1: to whether when the repo overnight repo crisis cropped up
Speaker 1: at the end of last year when that was what
Speaker 1: we were talking about. I don't know how well equipped
Speaker 1: she is because of her background and I should say
Speaker 1: lack of background in the financial markets in being able
Speaker 1: to tackle something like that, especially because you have another
Speaker 1: pure academic running the New York Fed, John Williams. So
Speaker 1: I think somebody who was savvier to the structure of
Speaker 1: the markets, the plumbing of the financial system which we've
Speaker 1: we've discovered is so critical to the execution of quantitative
Speaker 1: easing or quantitative tightening and the ability for the normalized
Speaker 1: monetary policy. I would have preferred to have seen somebody
Speaker 1: who was much more familiar with the makeup of the markets.
Speaker 1: But of course my opinion doesn't count because most of
Speaker 1: most of the political world knows that she will be
Speaker 1: able to cross that aisle. Well, there's also Chris Waller,
Speaker 1: who has not gotten through sanergy yet. So this particular
Speaker 1: meeting goes ahead without two governors as a vacancy to
Speaker 1: and Chris Waller, and uh, well see if that gets
Speaker 1: resolved as well next year. Um, Danielle, I presume you
Speaker 1: know a FED without all of its governors is not
Speaker 1: a fully functioning FED either. Well, you do want to
Speaker 1: have all of the voices around that table. I would say, Vannie, though,
Speaker 1: that the leadership structure, those at the very top of
Speaker 1: the FED right now are extremely familiar with one another,
Speaker 1: so I wouldn't I'm not too I'm not too particularly
Speaker 1: worried about that. One thing I would watch out for
Speaker 1: with today's meeting, in particular, is that we forget the
Speaker 1: last time that FED had Quie running, that they put
Speaker 1: unemployment rate targets out there, and they had to continuously
Speaker 1: move the goal post down further and further because they
Speaker 1: realized the markets could not be weaned off of que.
Speaker 1: In fact, at the time, J Powell himself said that
Speaker 1: Quie had become habits forming to to the market. I
Speaker 1: wouldn't be surprised if they tried to put another target
Speaker 1: out there, like the unemployment rate today that we that
Speaker 1: we didn't see some dissenting voices there on that committee.
Speaker 1: Danielle's thank you for that. Always some sobering advice there
Speaker 1: from daniel D. Martino, Booth CEO and Director of Intelligence
Speaker 1: at Quill Intelligence, coming to us from Dallas, Texas. Well,
Speaker 1: we've been talking about the consumer whole year, really, but
Speaker 1: this morning we got retail sales data that we're a
Speaker 1: little bit less positive than we were anticipating so advanced
Speaker 1: month of a month, they were down one point one percent.
Speaker 1: Economists were looking for them to be just down point
Speaker 1: three percent. The control group was down a half a percent.
Speaker 1: Economist were looking for that to be positive. Let's bring
Speaker 1: in somebody who handles consumers money their cash, and through
Speaker 1: his bank allows them to keep that cash on deposit
Speaker 1: if they wish. Brendan Coughland is head of consumer banking
Speaker 1: at Citizens Bank, and he's coming to us from Providence,
Speaker 1: Rhode Island today. So, Brendan, what have you seen with
Speaker 1: the amount of savings in your bank right now and
Speaker 1: whether it's increasing or decreasing. Yeah, we've seen very healthy
Speaker 1: savings by the consumer. Uh. We're certainly not out of
Speaker 1: the woods yet with the economy, and Q one is
Speaker 1: certainly going to be a bit rough until the economy
Speaker 1: fully reopens. But the consumer has been very resilient through
Speaker 1: all this. In fact, much better than expected. Savings are
Speaker 1: really piling up through stimulus and with the economy shutting
Speaker 1: down in general, spending as you as you teased, and
Speaker 1: the open has been a little off. Having said that,
Speaker 1: what we're seeing is a real recovery on both credit
Speaker 1: card spending and debit cards spending. So debit cards spending
Speaker 1: is actually up about fifteen percent right now year or
Speaker 1: a year on a dollar basis, and flatish on units.
Speaker 1: So customers aren't going to the grocery store two times
Speaker 1: a week, they're consolidating that into one one trip, and
Speaker 1: they're spending a little bit more. And credit cards have
Speaker 1: actually come all the way back up to slightly positive
Speaker 1: year over year, So we're seeing consumer confidence come back
Speaker 1: a little bit in their behaviors around spending, which is
Speaker 1: certainly a good sign. Brendon, what are you seeing in
Speaker 1: terms of credit quality out there right now? Yeah, I
Speaker 1: have been, isn't lea surprised non credit quality And as
Speaker 1: I said a second ago, we're certainly not out of
Speaker 1: the woods yet, but we um we do have very
Speaker 1: positive indicators on a relative basis on credit. So at
Speaker 1: its worst, we had eight percent of our portfolio in forbearance,
Speaker 1: which means uh, the customers taking a break from making
Speaker 1: their payments. That has geared down to about one point
Speaker 1: five percent, so the vast majority of customers have left
Speaker 1: forbearance status. At the same time, our delinquency rates have
Speaker 1: actually gone down, not up, and so as these customers
Speaker 1: have migrated back into repayment, the vast, vast majority are
Speaker 1: landing on their feet, which is a very very good fine.
Speaker 1: So the remainder of customers are going to transition off
Speaker 1: through December and into January. So we'll have to help
Speaker 1: them make sure the remainder land on their feet. And certainly, uh,
Speaker 1: some of the stimulus talks out there could really help
Speaker 1: make sure that's the case. What kind of loans are
Speaker 1: being asked for brendon Our companies that are looking for
Speaker 1: you know, fresh or extend the lines of credits, still
Speaker 1: doing that, or you know, have they decided to just
Speaker 1: close their business and mortgages. Yeah, so um um. On
Speaker 1: the commercial side of the bank and with our small businesses,
Speaker 1: certainly we saw a lot of them draw down at
Speaker 1: the height of the anxiety in April and May a
Speaker 1: lot of that has gone back away. Liquidity is very
Speaker 1: strong with our businesses, both in the mid corporate and
Speaker 1: small business space. Um so that's kind of coming back
Speaker 1: to normal. We on the consumer side, we've seen actually
Speaker 1: pretty significant loan demand this year, and it's really led
Speaker 1: by two spots. Of course, mortgage is booming. We're having
Speaker 1: a stellar year in UH in mortgages. The market could
Speaker 1: hit four trillion this year in mortgage originations, which is
Speaker 1: incredibly high, probably the largest year on record for mortgage
Speaker 1: originations just given the speed of rate drop that happened.
Speaker 1: And citizens is doing quite well UM in in the
Speaker 1: mortgage space taking market share. We're we we will potentially
Speaker 1: get close to fifth billion in mortgage originations UH this year,
Speaker 1: so very very strong year. The other product that has
Speaker 1: stimulated a ton of demand is student loan refinancing. As
Speaker 1: rates drop, a lot more customers have been placed in
Speaker 1: the money, if you will, so there the rates offered
Speaker 1: today are much better than what they have today, and
Speaker 1: they're refinancing and restructuring their debt for payment savings, and
Speaker 1: of course, refinancing your student loan debt or your mortgage
Speaker 1: is in some ways a form of stimulus for the
Speaker 1: customer to put extra money in their pockets every month
Speaker 1: and be able to help stimulate more spending and some
Speaker 1: of the savings that we've seen customers accelerate. Brendon talk
Speaker 1: to us about digital banking. I for one, has really
Speaker 1: ramped up my digital banking game during this pandemic. I'm
Speaker 1: suspecting other people have as well. Do you expect that
Speaker 1: to be a big trend going forward? Yeah, I do.
Speaker 1: Digital banking has been a trend that's been increasing for
Speaker 1: some time now, and this UH, the COVID period has
Speaker 1: has massively accelerated UM digital banking activities. So our digital
Speaker 1: metrics are up over and a relatively short period of time,
Speaker 1: our brick and mortar banking is down about the same
Speaker 1: amount UH and and so what we're seeing is that
Speaker 1: customers are engaging with the digital UM mobile app to
Speaker 1: do their transactional banking much more frequently. They still want
Speaker 1: to talk to humans when they have a big life event,
Speaker 1: when they want to talk about retirement or their mortgage.
Speaker 1: So it's very very important our brick and mortar strategy
Speaker 1: and our human interactions will be foundational to our our
Speaker 1: strategy and the industry going forward. But digital banking is
Speaker 1: accelerating at quite a clip, which which poses a lot
Speaker 1: of questions for retail banks. What should be the size
Speaker 1: of your brick and mortar network? UM, You know, do
Speaker 1: you have to upscale your colleagues to have them step
Speaker 1: up to more advice based banking versus transactional banking is
Speaker 1: all that moves to a self serve model. Wow, Brandon,
Speaker 1: thanks so much for journeyings. We appreciate it. Brendan Coughlin,
Speaker 1: head of consumer banking for Citizens Bank. It is based
Speaker 1: in Providence Road Island, giving us a sense of that growth,
Speaker 1: Vonny in The shift to from bricks and mortars to
Speaker 1: digital is just a fascinating and it seems like it's
Speaker 1: going to be long term for sure, and it's going
Speaker 1: to be interesting to see what happens to all those
Speaker 1: hs BC branches that are closing down. Will other banks
Speaker 1: make a bid? But you know, will there be any need?
Speaker 1: If there's going to be such a shift from big
Speaker 1: and mortar to digital, what's what will become of that?
Speaker 1: Realist exactly? I know, Just again speaking for myself, I've
Speaker 1: stepped up and done a lot more digital banking more
Speaker 1: than I did pre pandemic. Well, big in the US
Speaker 1: technology companies think Amazon, Apple, Google, Facebook, they've been facing
Speaker 1: much higher levels of regulatory scrutiny. Here in the US.
Speaker 1: We have the Federal Trade Commission, the Department of Justice
Speaker 1: looking at those big tech names. Now that European Union
Speaker 1: it wants new powers to curb tech companies dominance. To
Speaker 1: get some more color on this, we welcome Alex web
Speaker 1: European technology and media columns for Bloomberg Opinion. He joins
Speaker 1: us on the phone from London. Alex, thanks so much
Speaker 1: for joining us here. That the European Union has long
Speaker 1: had a history of tightly monitoring US technology companies. What
Speaker 1: are they looking to do now for some of these
Speaker 1: big tech giants. So there are two proposals to regulation
Speaker 1: which are called spectively, the Digital Markets Act and the
Speaker 1: Innitial Services Act. And one will classify big companies essentially
Speaker 1: that there are ones you can think of um as
Speaker 1: gatekeepers and will there then subject them to particular rules
Speaker 1: which will make it harder to do some acquisitions and
Speaker 1: protect smaller companies that operate on their platforms. And the
Speaker 1: punishments that they can be imposed are fines of up
Speaker 1: to ten percent of revenue and your revenue and in
Speaker 1: the worst case scenario, forced divestments of businesses, which but
Speaker 1: that it was a very extreme scenario. Letters, So it's
Speaker 1: sort of coming added from all sides. If you like,
Speaker 1: I mean it will be successful. How can the companies
Speaker 1: block some of this from happening? Well, so Firstly, it's
Speaker 1: gonna be passed. It's gonna be passed by the European
Speaker 1: Parliament and the Council. That's likely to take about a year,
Speaker 1: and then it will take another six months to come
Speaker 1: to effect. There is going to be a huge lobbying
Speaker 1: effort on the part of these companies. Um, it is
Speaker 1: not a question of really blocking of the European Parliament
Speaker 1: or the European Commission. It's a question of actually just
Speaker 1: ensuring that you're buy by the rules and then the
Speaker 1: europe then there will be no impetus to actually force
Speaker 1: a breakup. You know, the way that these rules work
Speaker 1: is that if you give a regulator the power to
Speaker 1: break a company up in an ideal world, they don't
Speaker 1: need to because the threat of the breakup is enough
Speaker 1: to change company's behavior. And that is you know, we
Speaker 1: have seen time and again instances of the big tech
Speaker 1: companies pursuing seemingly anti competitive behavior. They're now being pursued
Speaker 1: for that in the US as well as in Europe
Speaker 1: and Australia and elsewhere. And this is just giving the
Speaker 1: European Commission more power and more tools to punish the
Speaker 1: companies when they overset the mark because clearly the deterr
Speaker 1: and hasn't been adequate until now. So, Alex, I'm old
Speaker 1: enough to remember the European Union really coming down on
Speaker 1: Microsoft about twenty five years ago, and I think investors
Speaker 1: learn from that that, you know, the European Union, it's
Speaker 1: not that big a deal. It's a fine here, it's
Speaker 1: a fine there. It's not that big a deal. Why
Speaker 1: would this be any different. It just seems like the
Speaker 1: European Union is doesn't have much power beyond just leveling
Speaker 1: some fines. Well, I think that's exactly the problem, that
Speaker 1: that previously they have concentrated UM on remedies, which are
Speaker 1: as you say, finds, rather than behavioral remedies, which seek
Speaker 1: to change the way the company's clus in the name behave,
Speaker 1: and the US has leaning historically a lot more on
Speaker 1: behavioral remedies of trying to change the way that those um,
Speaker 1: those those companies go about their business. UM. Now, if
Speaker 1: behavior remedies in extreme don't work, then you lean on
Speaker 1: structural remedies where you can force companies to divest their
Speaker 1: businesses and um that is something where the European Commission
Speaker 1: has has been wary about taking actions in the past
Speaker 1: that this gives them, in extreme cases, the power to
Speaker 1: do it in the future. So the fine could now
Speaker 1: be up to ten percent of revenue. Is that enough
Speaker 1: of a deterrent for the likes of Amazon, Facebook, Apple,
Speaker 1: I mean other finds They've been quite happy to pay
Speaker 1: and carry on with their business. But would a ten
Speaker 1: percent of revenue fine really dentist their balance street? So
Speaker 1: we're just in of itself. Know, these companies average free
Speaker 1: cash revenue each year. If um, they you know, break rules,
Speaker 1: then they could place a one off fine center revenue
Speaker 1: or um, you know, daily finds of revenue. And if
Speaker 1: they continue to to break the rules, that's when the
Speaker 1: Commission has said that they will consider forcing divestments of business.
Speaker 1: And that's when it starts to get you know, there's
Speaker 1: sort of the really start to get really serious essentially,
Speaker 1: and that is something that inevitably these companies will want
Speaker 1: to avoid. Alex you know, is there a sense across
Speaker 1: Europe broadly defined, why there hasn't been more technology companies
Speaker 1: uh kind of created across Europe? I mean, yes, we
Speaker 1: have a couple of big big ones like SAP and
Speaker 1: so on and ericson, but just generally speaking, why the
Speaker 1: technology companies. Development across Europe has been not nearly anywhere
Speaker 1: as it's been, say the United States, even in just
Speaker 1: Silicon Valley. I mean it's a very simple reason. Really,
Speaker 1: there are any number of big factors. You know, the
Speaker 1: Silicon Valley of course has standard and you know, concentration,
Speaker 1: eventual capital all usk the same. But also the US
Speaker 1: has one single addressable market that speaks the same language.
Speaker 1: You know, you can launch in the US and you
Speaker 1: are immediately in front of three million people. Um In Europe,
Speaker 1: you know, there are a bunch of different app stores
Speaker 1: for Apple, there are a bunch of different languages that
Speaker 1: are spoken. There are you know, as much as it's
Speaker 1: theory a single market and practice it can be a
Speaker 1: little bit more complicated than that gives American companies a
Speaker 1: huge advantage. And the companies that have proved successful are
Speaker 1: the ones from Europe that have scaled immediately into the US.
Speaker 1: Think about Spotify, Swedish company now the biggest music streaming
Speaker 1: company in the world. So that I think is the
Speaker 1: singular answer that is part of the US for the
Speaker 1: europe to compete. I'm sure the teams of lawyers at
Speaker 1: all these big companies are looking at all of the
Speaker 1: different options, including actually divesting parts of their business. Alex,
Speaker 1: do you know about any of these discussions or any
Speaker 1: of the parts of any of the businesses that might
Speaker 1: be up for discussion. Well, it's it's unlikely that these
Speaker 1: companies going to voluntarily divest businesses. There was a report
Speaker 1: in the Journal earlier this year that there had been
Speaker 1: discussions at Google informally about perhaps selling part of their
Speaker 1: advertising businesses, business that places ads on third party websites
Speaker 1: that you know, would maybe addressed some of the concerns
Speaker 1: about an acquisition that Google did more than a decade ago,
Speaker 1: which beefed up that business and in hindsight looks as
Speaker 1: though it probably shouldn't have been passed. Um doesn't look
Speaker 1: as they Facebook is they're going to sell voluntarily? What's
Speaker 1: that for Instagram? Absolutely not, But there maybe are things
Speaker 1: around the edges which as a sign of good will
Speaker 1: or to take defang some of the plan incended to
Speaker 1: defang some of the attacks room from regulators, that might
Speaker 1: be feasible, but nothing significant. So just real quickly, is
Speaker 1: there an expectation that this will pass? Alex, Yes, absolutely,
Speaker 1: there's huge political will behind this In Europe. Opposition perhaps
Speaker 1: some Ireland, unsurprisingly given that a lot of these companies
Speaker 1: have their European HQs there. But broadly speaking, um, this
Speaker 1: is something that you know there might be changes, and
Speaker 1: there will be changed with the course the next year,
Speaker 1: but the trust of it looks like it will get
Speaker 1: through European Parliament and of course, as we know, the
Speaker 1: European Union and I TRUST chief Margareta Vestiga is well
Speaker 1: versed in all of this language and well well able
Speaker 1: to take on these companies. Alex, thank you for all
Speaker 1: was giving in touch with us on what's going on
Speaker 1: with these major major Silicon Valley companies. Alex Web is
Speaker 1: European technology and media columnist for Bloomberg Opinion. But of
Speaker 1: course a lot of that has to do with the
Speaker 1: big American companies as well. As he said, they're all
Speaker 1: based in Europe to they've headquarters in Ireland and some
Speaker 1: of them in other parts of Europe as well. Thanks
Speaker 1: for listening to Bloomberg Markets podcast. You can subscribe and
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Speaker 1: you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn,
Speaker 1: and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
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