WEBVTT - The Amazon Threat Forces Grocers To Go High-Tech 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.120 at Bloomberg dot com. You know, when Amazon bought Whole 0:00:21.160 --> 0:00:23.759 Foods for I think fourteen or fifteen billion dollars, I 0:00:23.840 --> 0:00:25.640 thought to myself at the time, why would they want 0:00:25.640 --> 0:00:29.120 to get into the grocery business. It's a low margin, 0:00:29.720 --> 0:00:33.080 highly intensely competitive business. Why would they want to, you know, 0:00:33.120 --> 0:00:35.360 kind of get away from their cool tech and home 0:00:35.400 --> 0:00:37.800 delivery and all that kind of stuff. But they're there. 0:00:37.920 --> 0:00:39.640 They are sticking with it, and I think they're actually 0:00:39.640 --> 0:00:43.920 increasing their investments and that's forcing the industry, the supermarket industry, 0:00:43.920 --> 0:00:47.160 to respond with their own technology. Matthew Boyle, us retail 0:00:47.200 --> 0:00:49.240 reporter for Bloomberg News, joins us live here in the 0:00:49.240 --> 0:00:52.839 Bloomberg and Director Broker studio to help us break it down. So, Matthew, 0:00:52.840 --> 0:00:55.880 give us a sense of what the supermarket industry is 0:00:55.960 --> 0:01:00.720 doing to try to fend off or compete with Amazon. Uh, well, 0:01:01.240 --> 0:01:02.960 they need to do something. I mean, they're in a 0:01:03.000 --> 0:01:05.119 war of attrition right now and they're losing. And I'm 0:01:05.120 --> 0:01:09.000 talking about traditional supermarkets. You know, um places like Kroger, 0:01:09.200 --> 0:01:12.800 which just earlier this year had to throw out their 0:01:12.840 --> 0:01:16.640 long term guidance because they couldn't get a story remodel. Right, 0:01:16.800 --> 0:01:19.640 So you're talking about traditional supermarkets that are getting squeezed, 0:01:19.680 --> 0:01:22.080 and not just by Amazon, by companies like all the 0:01:22.520 --> 0:01:25.200 this German import which is very deep discount what they 0:01:25.240 --> 0:01:27.759 call hard discounters, where it's a lot of store brands 0:01:27.959 --> 0:01:30.720 and a very spartan store experience. But people don't mind 0:01:30.760 --> 0:01:32.400 if you've give them what they want at a price 0:01:32.480 --> 0:01:34.920 you know, that's affordable. They don't need a lot of 0:01:34.959 --> 0:01:37.320 the bells and whistles. So the grocers are kind of 0:01:37.360 --> 0:01:40.479 getting it from all sides. The traditional grocery stores. They 0:01:40.520 --> 0:01:43.320 need to think differently, and so they're looking to technology, 0:01:43.400 --> 0:01:46.080 some of which Amazon is has already adopted or is 0:01:46.120 --> 0:01:49.560 adopting as ways to not just you know, make shoppers 0:01:49.600 --> 0:01:51.840 go wow, look at all these funky bells and whistles, 0:01:52.000 --> 0:01:54.360 but just to sort of get the basics right and 0:01:54.440 --> 0:01:58.200 solve some operational problems that will hopefully lift those margins 0:01:58.200 --> 0:02:00.320 that you mentioned that are always a razor thing. You 0:02:00.360 --> 0:02:02.720 also suggested that perhaps they could hide under a desk 0:02:02.760 --> 0:02:05.360 in the fetal position, but that might not be the 0:02:05.400 --> 0:02:08.960 best business Other industries have industries have done that, and uh, 0:02:09.080 --> 0:02:11.239 you know, it is a business model that has been adapted, 0:02:11.360 --> 0:02:14.359 not necessarily successfully. One statistic in your story that I 0:02:14.360 --> 0:02:17.119 thought was really compelling was that food retailers globally lose 0:02:17.160 --> 0:02:21.440 about three billion dollars a year due to items being 0:02:21.520 --> 0:02:25.000 out of stock. Is this the type of technological challenge 0:02:25.720 --> 0:02:28.280 that could just be fixed by having the right program 0:02:28.280 --> 0:02:30.000 that understands what you have. I mean, I don't want 0:02:30.040 --> 0:02:32.239 to say fixed, but it will certainly help. I mean, 0:02:32.320 --> 0:02:34.680 what is easier? You know you've got these days you 0:02:34.760 --> 0:02:38.440 have to hire people to literally walk down the aisles. 0:02:38.480 --> 0:02:41.160 It could take hours and take them away from other tasks, 0:02:41.240 --> 0:02:43.800 let's say, like filling an online order and getting that 0:02:43.880 --> 0:02:46.760 out to a shopper and doing something more value added. 0:02:47.040 --> 0:02:50.000 These robots that we talk about in the story that 0:02:50.160 --> 0:02:53.359 just sort of meander up and down the aisles checking 0:02:53.440 --> 0:02:56.840 for out of stocks, for missing items in the company. 0:02:56.880 --> 0:02:58.840 I spoke to a Giant Eagle, which is, you know, 0:02:58.919 --> 0:03:02.760 a great Pittsburgh, Midwestern based retailer. Uh. They saw a 0:03:02.840 --> 0:03:06.040 twenty one percent reduction in out of stocks in the 0:03:06.120 --> 0:03:08.200 one store where they've had this robot the longest I 0:03:08.240 --> 0:03:11.400 gotta say in this, in this technological revolution that we're in, 0:03:11.919 --> 0:03:14.840 the problems that people are discovering, and the solutions stock 0:03:14.919 --> 0:03:17.560 the shelves. Yeah, I mean literally it's you know, how 0:03:17.639 --> 0:03:20.280 much how much money and how much time can it 0:03:20.320 --> 0:03:24.720 be just put into the idea of better Yeah, exactly. So, 0:03:24.760 --> 0:03:27.840 Matthew Canney, I'm thinking about, you know, walking down the 0:03:27.880 --> 0:03:30.519 aisle of a supermarket and seeing that worker with the 0:03:30.639 --> 0:03:32.959 kind of the price gun. Do you know kind of 0:03:33.600 --> 0:03:35.240 are those days can you do that one more time? 0:03:35.720 --> 0:03:41.520 That sound? Did you? Are those days still with us? 0:03:41.520 --> 0:03:43.839 Things like which I didn't even write about, But those 0:03:43.960 --> 0:03:47.640 robots we mentioned, if you add electronic shelf labels or 0:03:47.640 --> 0:03:52.800 electronic shelf tags to replace the sticker gun, um, that 0:03:52.840 --> 0:03:56.480 can that will benefit even more so the use of 0:03:56.520 --> 0:04:00.280 those shelf stocking robots when you just have electronic shelf X. 0:04:00.400 --> 0:04:02.720 So there's a lot of them, but again it's slow adoption. 0:04:02.880 --> 0:04:04.960 A big problem here is that the grocers are very 0:04:05.080 --> 0:04:07.120 risk averse. They want to do, you know, what their 0:04:07.200 --> 0:04:09.240 dad did, their grandfather did. This is the way we've 0:04:09.280 --> 0:04:11.720 always run this store. Um, you know, this is what's 0:04:11.720 --> 0:04:14.360 worked in the past. But they again, they're starting to 0:04:14.400 --> 0:04:17.760 get a little bit more adventurous here. It's more than that, though. 0:04:17.800 --> 0:04:20.599 I mean a lot of these companies operate on pretty 0:04:20.600 --> 0:04:23.840 small margins, right. Uh, this is not a get rich 0:04:23.920 --> 0:04:27.120 quick kind of business, and you have to make investment 0:04:27.120 --> 0:04:30.239 in order to succeed against the Walmarts of the world 0:04:30.320 --> 0:04:32.279 or the Amazons of the world. So can you sort 0:04:32.279 --> 0:04:35.120 of give us a sense of how they're doing it, 0:04:35.279 --> 0:04:38.159 how they're investing, if they're able to invest given the 0:04:38.200 --> 0:04:40.320 overhang of their little Exactly, you're rightly, this is not 0:04:40.400 --> 0:04:42.839 get rich quick, this is not die. This is don't 0:04:42.839 --> 0:04:46.119 go away, don't become the next year's So they're making 0:04:46.120 --> 0:04:50.440 investments that exactly you know, they have to make. But 0:04:50.480 --> 0:04:52.360 a the same time, look at Walmart, they're they're also 0:04:52.440 --> 0:04:54.920 paying all of their workers more. You know, they've had 0:04:54.960 --> 0:04:57.440 to increase just their starting minimum wage and in many 0:04:57.440 --> 0:04:59.920 cities New York included. You know, if you're talking about 0:04:59.920 --> 0:05:02.320 a fifteen dollar minim waves. So they are making investments 0:05:02.320 --> 0:05:05.680 in their people, but these investments in technology, which are 0:05:05.760 --> 0:05:08.280 increasing what they will not make them though if they 0:05:08.279 --> 0:05:11.080 don't get a clear return on investment. That's why a 0:05:11.120 --> 0:05:13.360 lot of what we're seeing just now is just pilots, 0:05:13.560 --> 0:05:16.560 a couple of stores here, twenty stores there, figure out 0:05:16.600 --> 0:05:18.600 what's working tweak it. So we're not going to see 0:05:18.720 --> 0:05:22.400 wide scale universal adoption of a lot of these technologies 0:05:22.520 --> 0:05:25.320 for probably years, and there have been technologies over the 0:05:25.360 --> 0:05:28.200 past five years that we thought we're going to change 0:05:28.200 --> 0:05:30.200 the way we shopped, and they haven't because it was 0:05:30.240 --> 0:05:32.640 a lot of g whiz stuff that didn't really provide 0:05:32.640 --> 0:05:35.640 an r O. I. So Amazon again, they I call 0:05:35.680 --> 0:05:38.760 it dipping their toe with this Whole Foods acquisition, dipping 0:05:38.800 --> 0:05:41.640 their toe into the supermarket business. Is there any sense 0:05:41.640 --> 0:05:44.080 that they're gonna maybe do more than dip their toe. Yeah, 0:05:44.120 --> 0:05:45.640 I think we've got a foot in there now. It's 0:05:45.680 --> 0:05:48.200 more than a toe, given you know, it's started with 0:05:48.240 --> 0:05:51.039 Whole Foods, of course, but just in recent weeks we've 0:05:51.040 --> 0:05:53.000 had a lot of news from them. They are going 0:05:53.040 --> 0:05:56.800 to open a traditional, more traditional, lower priced than Whole 0:05:56.839 --> 0:06:00.400 foods Uh grocery chain. Starting in l A. They have 0:06:00.560 --> 0:06:04.320 slashed or eliminated the additional fee that they charge for 0:06:04.360 --> 0:06:07.280 their prime customers to do Amazon Fresh, which is their 0:06:07.320 --> 0:06:10.520 online service, essentially saying, if you're a Prime customer, now 0:06:10.600 --> 0:06:13.479 the food delivery is free, just as the streaming video 0:06:13.760 --> 0:06:16.560 is free. So and they're also planning to take their 0:06:16.600 --> 0:06:19.919 Amazon Go technology, the cashier list stores we all have 0:06:20.040 --> 0:06:22.560 heard about, and bring that to bigger stores rather than 0:06:22.600 --> 0:06:25.160 the tiny ones. What's that smell? It's the smell of 0:06:25.640 --> 0:06:28.760 burning cash. I mean, I'm listening to you speak. Where 0:06:28.839 --> 0:06:31.240 is the make money part? Well? For Amazon, you know 0:06:31.240 --> 0:06:35.080 they're making money off the cloud and advertising. Yeah, so 0:06:35.120 --> 0:06:38.359 that's why again we're seeing very selected small pilots. But 0:06:38.400 --> 0:06:40.800 with the things like the shelf scanning robots don't look 0:06:40.800 --> 0:06:43.120 at it of out of stocks, that's such jargon e term. 0:06:43.240 --> 0:06:46.440 Think of it as lost sales. If the honey bear 0:06:46.560 --> 0:06:48.719 isn't there on the shelf, you're not getting that sale 0:06:48.720 --> 0:06:50.920 of honey If it is there, If the robot tells 0:06:50.960 --> 0:06:53.480 you it's not there, get you know, get somebody to 0:06:53.520 --> 0:06:55.679 get it in the back. You have now gained a sale. 0:06:56.040 --> 0:06:58.839 That is a sale that is profits certainly, so that 0:06:59.040 --> 0:07:01.360 is what will help these I certainly, rather than all 0:07:01.360 --> 0:07:04.040 these fancy terms like AI and VR and stuff like that. 0:07:04.080 --> 0:07:06.640 If the money bear ain't there, the honey bear ain't there. 0:07:06.520 --> 0:07:09.359 Here's the revelation for you. I actually enjoy food shopping. 0:07:09.920 --> 0:07:12.320 But I have to tell you this. If there was 0:07:12.360 --> 0:07:14.880 an app to say, hey, where is the honey bear? Oh, 0:07:14.920 --> 0:07:18.880 it's all three road to you know, ten steps that 0:07:19.080 --> 0:07:22.400 I actually looking. Most good retailers will do that. If 0:07:22.400 --> 0:07:24.600 you have their shopping app and you walk in and 0:07:24.760 --> 0:07:26.280 a lot of them will allow you to upload your 0:07:26.280 --> 0:07:29.280 shopping list. There will be a map overlaid. It'll know 0:07:29.280 --> 0:07:31.280 where your location is, and I will say, the honey 0:07:31.280 --> 0:07:34.640 bear is here. Um. You know that's what really screws 0:07:34.640 --> 0:07:37.280 people up. When a store gets remodeled, people are suddenly saying, 0:07:37.360 --> 0:07:40.640 where's the honey bear? I will say. One thing I 0:07:40.640 --> 0:07:44.520 think would be really cool being app showing the expiration 0:07:44.680 --> 0:07:47.560 dates of different things. So that's a totally different topic. 0:07:47.680 --> 0:07:50.760 You know, the sell by used by that's we'll have 0:07:50.840 --> 0:07:52.880 to continue that. We'll have to have a full show 0:07:52.960 --> 0:07:55.960 on the sell by and used by dates. Matthew Boyle, 0:07:55.960 --> 0:07:57.240 thank you so much for being with us. That was 0:07:57.240 --> 0:07:59.600 a great story. Matt Boyle, as the US retail reporter 0:07:59.760 --> 0:08:04.040 for Bloomberg News, joining us here in our interactive broker studios. 0:08:04.560 --> 0:08:07.880 Really interesting revolution under way in the groceries, not where 0:08:07.920 --> 0:08:24.520 the industry can keep up. Boy US shopper spent a 0:08:24.640 --> 0:08:28.119 record at nine point two billion dollars on Cyber Monday. 0:08:28.120 --> 0:08:31.280 That's sevent more than last year. It added to a 0:08:31.360 --> 0:08:34.280 robust Black Friday. So it seems like the consumer is 0:08:34.400 --> 0:08:36.680 in good shape as we head into the thick of 0:08:36.679 --> 0:08:39.640 the holiday sales. To get more color, we welcome Christian Magoon. 0:08:39.920 --> 0:08:43.280 Christian is a chief executive officers Amplify e t S 0:08:43.360 --> 0:08:46.160 with over seven hundred fifty million dollars and under management 0:08:46.160 --> 0:08:50.160 based in Colorado Springs. Christian, thanks so much for joining us. 0:08:50.200 --> 0:08:53.600 So it seems like the consumer is out there spending 0:08:53.640 --> 0:08:57.480 for the holidays. Yeah, Paul, has been definitely a very 0:08:57.520 --> 0:09:01.040 good start to the season. Um, We've likely to see 0:09:01.160 --> 0:09:05.200 record holiday shopping. Um. You know, some forecasts believe that 0:09:05.240 --> 0:09:08.280 this year will grow about four percent overall and holiday 0:09:08.280 --> 0:09:10.920 shopping and actually go from about a nine hundred and 0:09:10.960 --> 0:09:15.400 seventy billion dollar season last year to a trillion dollars 0:09:15.480 --> 0:09:18.840 season this year, so very exciting. I think, you know, 0:09:18.880 --> 0:09:23.440 fifty year unemployment, steady wage growth are really helping the 0:09:23.480 --> 0:09:27.120 consumer be confident. Here. Of course, the big area of 0:09:27.160 --> 0:09:30.880 growth has been online retail. UM. Well, total sales maybe 0:09:30.920 --> 0:09:34.360 up about four percent. Online retail is trending up maybe 0:09:34.480 --> 0:09:37.480 fifteen to sixteen percent. So that's going to be the 0:09:37.520 --> 0:09:41.160 sweet spot for investors and we think for those looking 0:09:41.160 --> 0:09:45.000 for to kind of ride this retail trend, both you know, 0:09:45.080 --> 0:09:47.720 for growth, but also for kind of the trend of 0:09:47.880 --> 0:09:50.920 going online versus in store. Christian, I'm looking right now 0:09:50.960 --> 0:09:53.160 at the holdings of I Buy, which is the e 0:09:53.280 --> 0:09:56.320 t F that you run, uh with about two billion 0:09:56.320 --> 0:09:59.719 dollars of assets over under management. I'm just looking. Hell, 0:09:59.800 --> 0:10:02.079 let's one is that is that a retail stock that's 0:10:02.080 --> 0:10:05.000 your top holding according to this That's right, So it's 0:10:05.040 --> 0:10:07.240 a newly added member of the e t F. And 0:10:07.320 --> 0:10:09.959 really the criteria, Lisa, is that a company has to 0:10:10.000 --> 0:10:14.360 have seventy or more of their revenue coming from online sales. 0:10:14.600 --> 0:10:18.680 And Peloton fits that that criteria. Um, you know, most 0:10:18.679 --> 0:10:21.080 people think of Amazon as being you know, kind of 0:10:21.080 --> 0:10:24.760 the primary online retailer, but you know, Amazon is just 0:10:24.840 --> 0:10:28.800 one of many. We've actually had more performance in alpha 0:10:28.840 --> 0:10:33.560 generated in the last year from companies like Carbona, Shopify, 0:10:33.920 --> 0:10:36.640 v I P Shop, all those companies up between a 0:10:36.720 --> 0:10:40.040 hundred and thirty and a hundred this year. UM. You know, 0:10:40.240 --> 0:10:42.880 I buy is unique from an online retail ETF because 0:10:42.920 --> 0:10:45.800 it is not market cap weighted. It's equal weighted UM 0:10:45.880 --> 0:10:48.040 and we do have that revenue test, so we think 0:10:48.080 --> 0:10:50.760 that you're getting access to a lot of unique names 0:10:50.760 --> 0:10:54.440 that maybe don't necessarily know. I think Peloton is one 0:10:54.480 --> 0:10:56.760 that people know right now, but the carbon is of 0:10:56.800 --> 0:11:00.280 the world, v I P Shop, Okado, those name tims 0:11:00.240 --> 0:11:02.600 to have a nice impact and have been an alpha 0:11:02.679 --> 0:11:04.960 driver for the fund, which is a five star rated 0:11:04.960 --> 0:11:06.839 morning Star fund in the number one performer in the 0:11:06.880 --> 0:11:10.080 consumer cyclical category over the last three years. I will 0:11:10.080 --> 0:11:12.840 just say, Paul, it's interesting to see what retail online 0:11:12.840 --> 0:11:16.320 retail consists of. It consists of food and getting cars 0:11:16.320 --> 0:11:18.440 to take to places, right, I mean, it's it's grub Hub, 0:11:18.840 --> 0:11:20.839 it's getting lift uber and then and then when you 0:11:20.880 --> 0:11:23.280 feel really guilty about not moving around, you go bike 0:11:23.520 --> 0:11:28.920 and covered. Hey, Christian, so I know there's one less 0:11:29.240 --> 0:11:32.760 shopping week here for this holiday period relatutil last year. 0:11:33.000 --> 0:11:35.040 What kind of risk is that for some of these 0:11:35.040 --> 0:11:37.800 retailers and some of the ETFs that track them. Yeah, 0:11:37.800 --> 0:11:39.760 it definitely is a risk. I mean, we're six days 0:11:39.800 --> 0:11:43.160 less because the holiday shopping season started later, with Thanksgiving 0:11:43.200 --> 0:11:45.680 being six days later than last year. So you know, 0:11:45.720 --> 0:11:48.880 one risk is bad weather, frankly, because we have a 0:11:48.880 --> 0:11:51.960 compressed time period, and we've actually now seen that a 0:11:51.960 --> 0:11:54.480 little bit on Black Friday and Cyber Monday. Thank you 0:11:54.559 --> 0:11:57.599 guys experienced it yesterday a little bit. And the interesting 0:11:57.679 --> 0:12:00.920 stat we're seeing from Adobe Analytics, which tracks the hundred 0:12:01.040 --> 0:12:04.920 largest online retailers, is that uh, states that had bad 0:12:04.960 --> 0:12:08.160 weather two inches or more of snow solid uptick and 0:12:08.200 --> 0:12:11.720 online retail sales by between uh you know, seven and 0:12:11.840 --> 0:12:14.560 nine per cent. So we're seeing that, um, you know, 0:12:14.600 --> 0:12:17.240 brick and mortar kind of face this headline risk of 0:12:17.320 --> 0:12:20.360 bad weather where people stay in, but it actually turns 0:12:20.400 --> 0:12:24.200 into a tail wind for online retailers. Um. Also, you know, 0:12:24.240 --> 0:12:27.200 this this trade issue is definitely something that could impact 0:12:27.280 --> 0:12:29.839 some consumer confidence. In the last four months, we've seen 0:12:29.880 --> 0:12:33.280 it trending downward, still in a very healthy range, but 0:12:33.679 --> 0:12:36.560 it's something to watch, particularly as we've heard President Trump 0:12:36.600 --> 0:12:38.760 back away from maybe the urgency of doing a trade 0:12:38.800 --> 0:12:41.360 deal here by the end of the year. Christian, you 0:12:41.400 --> 0:12:44.080 talked about the good performance of I Buy over the 0:12:44.080 --> 0:12:46.880 past three years, and certainly the shares of stocks that 0:12:46.920 --> 0:12:48.760 you have, the shares of companies that you have in 0:12:48.760 --> 0:12:53.079 your portfolio have done very well, the likes of Expedia 0:12:53.280 --> 0:12:58.480 or let's see lift Uber Netflix, That however, is getting 0:12:58.480 --> 0:13:01.240 called into question now because of how high the valuations 0:13:01.320 --> 0:13:04.240 are and this question of yes, this is the new model, 0:13:04.320 --> 0:13:06.840 but perhaps there has been too much capital put into 0:13:06.840 --> 0:13:11.160 these particular companies. How do you respond to the valuation questions. Well, 0:13:11.160 --> 0:13:13.800 it's definitely a challenge because when you look at maybe 0:13:13.800 --> 0:13:16.960 the counterparts of brick and mortar, they have very low valuations, 0:13:17.000 --> 0:13:19.640 but of course there's the risk they're going out of business. 0:13:19.880 --> 0:13:23.679 So when we look at the valuations of these growth companies, 0:13:23.960 --> 0:13:27.320 you know, their PEG ratios are we think are still attractive. 0:13:27.600 --> 0:13:30.520 You know, right now there's still about eleven percent market 0:13:30.520 --> 0:13:34.040 share of online retail as opposed to all retail sales 0:13:34.080 --> 0:13:36.880 in the US, uh in China, for example, that's over 0:13:37.760 --> 0:13:40.439 market share. We think many of these companies are going 0:13:40.480 --> 0:13:42.960 to double or triple their market share or their sales 0:13:43.040 --> 0:13:45.960 over the next three to five years as online retail 0:13:46.400 --> 0:13:49.480 starts to continues to emerge. Right now, going back to 0:13:50.760 --> 0:13:55.080 online retail has gone about an average compounded annual growth rate. 0:13:55.280 --> 0:13:57.400 So when we look at these companies, we actually think 0:13:57.440 --> 0:13:58.960 that over the next three to five years, if they 0:13:58.960 --> 0:14:02.880 double or triple their their sales, that these these valuations 0:14:02.880 --> 0:14:07.040 will actually look potentially like values. Um. We just think 0:14:07.080 --> 0:14:11.080 this trend is going to continue. More and more consumers 0:14:11.280 --> 0:14:14.880 are going to trust going online, whether that's through mobile 0:14:14.880 --> 0:14:18.959 payments or the convenience, the competitive pricing, or the or 0:14:19.000 --> 0:14:21.680 the increased selection. So we think this is a global 0:14:21.680 --> 0:14:24.320 trend that investors can capitalize. And you know, since the 0:14:24.360 --> 0:14:27.520 fund has been out, it's returned about over the last 0:14:27.560 --> 0:14:29.600 three and a half years versus the SMP at about 0:14:29.600 --> 0:14:32.280 fift so it's definitely been a place for Elphin. We 0:14:32.440 --> 0:14:34.480 think that's going to continue. Christian mgoon, thank you so 0:14:34.560 --> 0:14:37.120 much for being with us. Christian mcgoon, chief executive officer 0:14:37.160 --> 0:14:56.200 of Amplify E t F. It's all about trade today. 0:14:56.240 --> 0:14:58.360 That's what's thinking at stocks. At least if you trust 0:14:58.640 --> 0:15:01.840 the price action in responds to certain headlines President Trump 0:15:01.840 --> 0:15:03.920 coming out and saying, who knows, Maybe we'll make a deal, 0:15:03.960 --> 0:15:05.840 maybe we won't, maybe we don't need to make a 0:15:05.840 --> 0:15:09.200 deal before election, and I'll push it back after that. 0:15:09.560 --> 0:15:12.280 You're seeing the nastack down one point two percent. Also, 0:15:12.320 --> 0:15:15.440 now we're hearing about taxes on porcelain and French wine, 0:15:15.640 --> 0:15:18.480 and she's joining us on to discuss all things trade. 0:15:18.480 --> 0:15:21.720 Brendan Murray, who covers the entire area for US here 0:15:21.720 --> 0:15:24.600 at Bloomberg News, Brendan, can you just paint a scene 0:15:24.640 --> 0:15:27.960 here on what was driving the escalation that seems to 0:15:28.000 --> 0:15:31.160 be coming to a ford in some ways? Today the 0:15:31.680 --> 0:15:34.720 President and his advisors say that we're inching closer and 0:15:34.720 --> 0:15:37.880 closer to a deal with China, uh, making it sound 0:15:37.920 --> 0:15:40.120 like something was imminent and they were going to meet 0:15:40.320 --> 0:15:43.360 meet this uh sort of a deadline of December fift 0:15:43.640 --> 0:15:46.360 before the U s raises more tariffs on Chinese imports. 0:15:46.840 --> 0:15:50.480 And yet the President today kind of stepped back and said, Uh, 0:15:50.560 --> 0:15:53.280 you know, I don't really have a deadline that I'd 0:15:53.320 --> 0:15:56.320 be fine if this drags out fully all the way 0:15:56.360 --> 0:15:59.040 through the election of next year. So I think the 0:15:59.360 --> 0:16:03.120 stock market reaction is definitely Uh. They were that is 0:16:03.160 --> 0:16:05.640 that investors have been thrown for a loop here, Uh, 0:16:05.680 --> 0:16:07.440 you know, thinking that they were close to a deal, 0:16:07.520 --> 0:16:09.960 but now this is something that could drag on and 0:16:10.040 --> 0:16:12.360 on for months and months. Uh you know, whether this 0:16:12.440 --> 0:16:15.960 is just a negotiating strategy on Trump's part, the idea 0:16:16.040 --> 0:16:17.760 being that you know, the closer you get to deal, 0:16:18.040 --> 0:16:19.880 the more you the more you act like you don't 0:16:19.920 --> 0:16:22.080 need it, you don't want it. Um is a whole 0:16:22.080 --> 0:16:25.000 another question that uh you know that that is still 0:16:25.040 --> 0:16:27.360 remains to be answered. But I just want to take 0:16:27.400 --> 0:16:31.080 a step away here. This has been just a tariff 0:16:31.680 --> 0:16:33.680 news cycle here over the last several days. It's not 0:16:33.760 --> 0:16:37.880 just China. Uh we had yesterday steel tariff discussions on 0:16:38.600 --> 0:16:44.040 Argentina and Brazil. Today it's French wine and cheese. You know, Historically, 0:16:44.080 --> 0:16:47.880 how effective have tariff's been and has the US been 0:16:47.920 --> 0:16:52.880 a big wielder of tariffs historically? Not in the recent past. 0:16:53.080 --> 0:16:56.320 Obviously the Trump administration changed all that. But tariffs are 0:16:56.440 --> 0:17:01.880 are fairly blunt instrument, used mainly as uh leverage in negotiation. 0:17:02.000 --> 0:17:06.679 You threaten them before you actually impose them. So the 0:17:06.720 --> 0:17:09.000 big difference that we've seen in the Trump administration is 0:17:09.000 --> 0:17:12.600 that they impose them and then they say, Okay, let's negotiate, uh, 0:17:12.640 --> 0:17:14.720 you know, if you want to, if you want us 0:17:14.720 --> 0:17:18.159 to remove them. So uh they have traditionally in the 0:17:18.240 --> 0:17:20.080 you know, in the recent in the recent past, the 0:17:20.119 --> 0:17:23.440 past few decades, you know, uh, countries have have been 0:17:23.440 --> 0:17:25.960 moving more and more to lower tariffs. Uh. You know, 0:17:26.000 --> 0:17:28.520 Trump has come in and uh you know, is using 0:17:28.560 --> 0:17:31.880 them to extract concessions from from trading partners. The interesting 0:17:31.920 --> 0:17:35.240 thing about the French uh move that you that you 0:17:35.320 --> 0:17:38.560 mentioned is that this could sort of bring the trade 0:17:38.560 --> 0:17:41.760 war into Europe as a whole. The the European Union, 0:17:42.280 --> 0:17:45.200 uh you know, uh will will have a reaction to 0:17:45.200 --> 0:17:48.600 to that on France's behalf. And you know there's a 0:17:48.640 --> 0:17:51.680 scenario that uh you know that you can see where 0:17:51.680 --> 0:17:53.800 things kind of spiral out of control in this sort 0:17:53.840 --> 0:17:56.639 of tip for tat uh way that the U. S. 0:17:56.760 --> 0:17:59.480 China trade war has evolved, that you know, we could 0:17:59.560 --> 0:18:03.480 wind up with two fairly large showdowns on you know, 0:18:03.600 --> 0:18:07.600 two huge continents for a huge economic trading partners of 0:18:07.680 --> 0:18:10.280 the US. Brendan, do you think that the headline is 0:18:10.440 --> 0:18:13.119 the US and Europe are kind of ratcheting up the 0:18:13.119 --> 0:18:15.480 tensions on both sides of the Atlantic, or do you 0:18:15.520 --> 0:18:17.320 think that the headline is it could have been so 0:18:17.440 --> 0:18:20.320 much worse and President Trump could have been going after 0:18:20.359 --> 0:18:24.280 the auto sector for example, uh in Europe. And this 0:18:24.320 --> 0:18:27.880 is sort of more a negotiating tactic all around as 0:18:27.920 --> 0:18:31.119 he tries to seem powerful heading into a couple of 0:18:31.359 --> 0:18:34.440 tough weeks. Absolutely, the car terirafs that you mentioned, that 0:18:34.520 --> 0:18:38.639 deadline for the Trump administration to act upon came and 0:18:38.680 --> 0:18:44.280 went without any action. A lot of people, uh economists 0:18:44.280 --> 0:18:48.000 and auto industry experts have said that, you know, something 0:18:48.080 --> 0:18:51.159 like that would surely uh you know send you know, 0:18:52.000 --> 0:18:56.080 some economies like Germany into recessions. Uh you know, so, Uh, 0:18:56.160 --> 0:18:58.879 there was a measure that there is a measured approach 0:18:59.720 --> 0:19:03.920 it easton that way from the Trump administration. Uh. And 0:19:04.000 --> 0:19:07.320 you know in in in reality, the two point four 0:19:07.359 --> 0:19:10.640 billion dollars UH tariffs on two point four billion dollars 0:19:10.680 --> 0:19:13.080 in French products is it's not a huge amount when 0:19:13.080 --> 0:19:15.600 you consider, uh, you know, the tens of billion dollars 0:19:15.640 --> 0:19:18.520 that the that the country's trade between themselves. Brendan, you 0:19:18.600 --> 0:19:22.480 briefly describe what the digital service taxes and why it's 0:19:22.480 --> 0:19:24.840 a big deal to the US government. So this is 0:19:24.880 --> 0:19:29.639 a three percent tax on the gross revenue of of 0:19:30.000 --> 0:19:33.040 large tech companies. Companies that make over bring in more 0:19:33.080 --> 0:19:35.840 than seven fifty million dollars in revenue a year. This 0:19:35.920 --> 0:19:40.320 hits companies like Google and Facebook and Amazon, and France 0:19:40.480 --> 0:19:44.680 has has enacted that's enacted it this year. They're trying 0:19:44.760 --> 0:19:50.040 to drive a sort of international move toward towards such attacks. 0:19:50.840 --> 0:19:53.920 Uh and and the U. S has has has come 0:19:53.960 --> 0:19:57.440 out against it, saying, if we're gonna tax, if American 0:19:57.440 --> 0:19:59.320 company is going to be taxed, the U. S. Government 0:19:59.400 --> 0:20:00.720 is going to do that, is going to do that, 0:20:01.040 --> 0:20:04.159 not the French government. So uh, you know, in some ways, 0:20:04.400 --> 0:20:08.919 you know, the Trump administration is acting, uh, you know, 0:20:09.000 --> 0:20:13.399 to to defend companies that it normally doesn't defend. Uh 0:20:13.480 --> 0:20:16.480 and and you know, and and in in this case 0:20:16.520 --> 0:20:18.280 in particular, you know, they could have gone to the 0:20:18.400 --> 0:20:21.760 w t O UH to dispute this, uh this tax. 0:20:22.000 --> 0:20:25.000 Instead they're taking the you know, the the Trump strategy 0:20:25.080 --> 0:20:28.800 of going one on one uh you know, so w 0:20:28.880 --> 0:20:30.760 t O case could drag on for years and years. 0:20:30.760 --> 0:20:34.360 So uh, this is this is the Trump administration strategy 0:20:34.440 --> 0:20:36.760 is to is to uh is to fight their own fights. 0:20:36.920 --> 0:20:39.800 Brendan Murray, thanks again so much for joining us here 0:20:39.800 --> 0:20:41.639 and bring us up to date on all things trade. 0:20:42.000 --> 0:20:45.400 Brendan covers the trade issue globally for Bloomberg News. Joinning 0:20:45.480 --> 0:20:48.760 us from London and there is a lot for Brendan 0:20:48.920 --> 0:20:50.760 and his trade team to be working on now. We 0:20:50.800 --> 0:20:53.480 have trade discussions, tariff discussions, it seems like in every 0:20:54.040 --> 0:20:57.200 corner of the world, and it's obviously has major impacts 0:20:57.200 --> 0:21:14.280 on financial markets. Rates continue to be exceptionally low. The 0:21:14.359 --> 0:21:16.760 question is, how about is it time to start looking 0:21:16.800 --> 0:21:19.760