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Earnings, Central Banks, Gary Gensler, and Meta (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day, we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moving news.
• 0:14
  Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
• 0:20
  Speaker 1: I want to talk some cars, Matt, some German cars.
• 0:23
  Speaker 2: I would love to, you know, not just German cars.
• 0:26
  Speaker 2: You're referring to the full shory story. They're made everywhere, right,
• 0:31
  Speaker 2: and China is I think the real problem here.
• 0:34
  Speaker 1: All right, let's go to Monica raymut Auto's industry disruption report.
• 0:39
  Speaker 1: I didn't know we had a disruption reporter from Bloomberg
• 0:41
  Speaker 1: News joins us here. So Monica, let's start with Volkswagen.
• 0:45
  Speaker 1: What's the news coming out of our good friends from Germany?
• 0:49
  Speaker 3: Thanks for having me, guys. I mean, the biggest news
• 0:53
  Speaker 3: of the week, I would have to say is the
• 0:55
  Speaker 3: deal with XPANG. Basically, Volkswagen came out yesterday and said
• 1:00
  Speaker 3: that they're investing around seven hundred million dollars in this
• 1:03
  Speaker 3: EV producer in China, and it's really at first for Volkswagen,
• 1:08
  Speaker 3: it's basically sort of them admitting, you know, we can't
• 1:11
  Speaker 3: we can't really keep up on the Chinese market, so
• 1:13
  Speaker 3: we need to partner with with somebody who really has
• 1:16
  Speaker 3: their finger on the pulse of what Chinese consumers want.
• 1:19
  Speaker 2: It's amazing because I mean Volkswagen is usually the biggest
• 1:23
  Speaker 2: or the second biggest car maker in the world. Right,
• 1:26
  Speaker 2: how key is the Chinese market Monica to Volkswagen and
• 1:31
  Speaker 2: is it that important to other manufacturers?
• 1:34
  Speaker 4: Oh?
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  Speaker 3: Yeah, I mean, I mean China is absolutely huge. I
• 1:37
  Speaker 3: mean it's it's basically like thirty percent of their revenues
• 1:42
  Speaker 3: and has and has it has been. It has played
• 1:44
  Speaker 3: a key role for them over the past several decades.
• 1:46
  Speaker 3: And I mean Volkswagen was really a star there, the
• 1:49
  Speaker 3: market leader for the past decades because they were banking
• 1:52
  Speaker 3: on that German reputation of engineering ability and you know
• 1:57
  Speaker 3: that Cachet as a as a foreign autumn. But now
• 2:01
  Speaker 3: as the tide has turned and everyone's pivoting towards electric vehicles,
• 2:04
  Speaker 3: you know, the local automakers, the local startups in China
• 2:09
  Speaker 3: are able to leverage what they're able to do when
• 2:11
  Speaker 3: it comes to software and technology and the consumers are
• 2:15
  Speaker 3: are pivoting that way, and Volkswagen has been really slow
• 2:18
  Speaker 3: to sort of pivot in that direction. And they've they've
• 2:22
  Speaker 3: really struggled on software, you know, trying to.
• 2:25
  Speaker 2: Now, Herbert Deese was chased out as CEO, but he
• 2:28
  Speaker 2: was I kept seeing headlines like spending fifty billion dollars
• 2:32
  Speaker 2: to build evs and he had I think ralvald wrote
• 2:35
  Speaker 2: a story back in the day that Deese wanted to
• 2:38
  Speaker 2: start a huge software company within Folkswagen and he was
• 2:41
  Speaker 2: spending almost thirty billion dollars on that.
• 2:43
  Speaker 5: What happened to all those efforts?
• 2:45
  Speaker 3: Oh yeah, Oh, I mean those efforts are still underway.
• 2:48
  Speaker 3: The software unit carried is still alive and kicking a
• 2:53
  Speaker 3: bit barely, not barely, I shouldn't say that, But all
• 2:56
  Speaker 3: of those efforts, they haven't all been for nought.
• 2:59
  Speaker 6: You know.
• 3:00
  Speaker 3: Carriod, the software unit is still creating two of the
• 3:04
  Speaker 3: big coming platforms for Volkswagen, the two big EV platforms,
• 3:08
  Speaker 3: one for the premium brands Portion and Audi, and then
• 3:10
  Speaker 3: one sort of like a catch all platform that can
• 3:13
  Speaker 3: be tailored across all of the ten brands. The problem
• 3:17
  Speaker 3: was Carriod, the software unit just took on too many
• 3:21
  Speaker 3: tasks at the same time, and they were overloaded and
• 3:23
  Speaker 3: they weren't able to deliver non glitchy software, especially when
• 3:28
  Speaker 3: it came to the ID series for Volkswagen. So basically,
• 3:31
  Speaker 3: Luma came in and he said, okay, hold up, we
• 3:34
  Speaker 3: need to clean house a bit, we need to refocus
• 3:36
  Speaker 3: our energies. And he's he's put in a new CEO
• 3:39
  Speaker 3: at Carriod. He's you know, created this five point plan
• 3:43
  Speaker 3: of trying to get things in order. And he's also
• 3:46
  Speaker 3: taken a play a page from the playbook of Portia
• 3:49
  Speaker 3: and sort of saying, you know, listen, compared to my predecessor,
• 3:52
  Speaker 3: I'm not afraid to go into third party partnerships to
• 3:56
  Speaker 3: get the best technology here. And he's really saying, yes,
• 4:00
  Speaker 3: we will stick with our software strategy with carry It.
• 4:03
  Speaker 3: Yes we will continue to deliver the platforms, the EV
• 4:08
  Speaker 3: platforms for Audi, for the for their q Q six,
• 4:12
  Speaker 3: for the Pasha Emacon, but also moving forward, we're not
• 4:16
  Speaker 3: going to be afraid to partner with other people who
• 4:18
  Speaker 3: who have been doing this a little bit longer or
• 4:20
  Speaker 3: have more expertise that we currently don't have.
• 4:23
  Speaker 1: So Monica, just give us the kind of a sense,
• 4:25
  Speaker 1: your sense of how the European automakers in general are
• 4:29
  Speaker 1: are pursuing this this transition to EV. Is there a
• 4:32
  Speaker 1: sense that they're on the cutting edge or they're lagging
• 4:34
  Speaker 1: kind of where are they?
• 4:37
  Speaker 3: Oh man, that's a that's a really tough question. I
• 4:39
  Speaker 3: mean Volkswagen was sort of the first European car maker
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  Speaker 3: to you know, jump in feet first, uh, into the
• 4:45
  Speaker 3: into the EV uh you know push. I mean that
• 4:48
  Speaker 3: all came as a result of the diesel scandal and
• 4:50
  Speaker 3: they were sort of, you know, nudged a bit in
• 4:52
  Speaker 3: that direction, right, but they've really been you know, they
• 4:56
  Speaker 3: sort of started out, you know, they were the first
• 4:59
  Speaker 3: ones to move forward, and the you had Mercedes and
• 5:00
  Speaker 3: BMW sort of moving forward on that. The difference I
• 5:04
  Speaker 3: think there is you have Mercedes and BMW that are
• 5:07
  Speaker 3: more in the premium and luxury market, right, and so
• 5:10
  Speaker 3: they're able to It's the same thing with Portia. They're
• 5:13
  Speaker 3: still able to leverage their their IC sales, their combustion
• 5:16
  Speaker 3: engine sales as and use that to fund partially pushed
• 5:20
  Speaker 3: into evs.
• 5:22
  Speaker 7: Apparently, yess.
• 5:24
  Speaker 2: Indeed, Monica are the other car makers as active in China.
• 5:30
  Speaker 2: I remember seeing some stories about some of the Stilantis brands,
• 5:33
  Speaker 2: you know, pulling out. Now, maybe it just wasn't a
• 5:36
  Speaker 2: big enough market for those individual brands, but surely Tavares
• 5:39
  Speaker 2: has to be worried if it's this important to BLOOMA.
• 5:44
  Speaker 3: Yes, I mean some, I mean some car makers are
• 5:47
  Speaker 3: more active in China than other Stalantis. I think has
• 5:50
  Speaker 3: has your right, has moved away from China and is
• 5:53
  Speaker 3: focusing his efforts elsewhere. I think the concern for Tavares
• 6:00
  Speaker 3: more is what do the Chinese car makers mean for
• 6:02
  Speaker 3: Europe when they come over here? Because the Chinese makers
• 6:05
  Speaker 3: are focusing more on you know, sort of these small, smaller,
• 6:10
  Speaker 3: smaller vehicles that are maybe more affordable, and if the
• 6:13
  Speaker 3: European car makers can't focus on that segment, there's a
• 6:16
  Speaker 3: real fear among some analysts and automakers that the Chinese
• 6:21
  Speaker 3: makers could capture a segment of of the of the
• 6:24
  Speaker 3: market that the European makers are not focusing on. And
• 6:27
  Speaker 3: so that's why, you know, there's this drum beat, at
• 6:29
  Speaker 3: least from Tavares that we need to make these vehicles
• 6:32
  Speaker 3: more affordable. We need to get regulations, we need to
• 6:35
  Speaker 3: get you know, government policies on board in Europe to
• 6:38
  Speaker 3: make the you know, these cars more affordable in Europe.
• 6:43
  Speaker 3: But in terms of how other carmakers are doing in China,
• 6:46
  Speaker 3: I mean it's really Folks was at the top of
• 6:49
  Speaker 3: the list for for a long time. But you have
• 6:52
  Speaker 3: Uid that's, you know, really at the top now when
• 6:54
  Speaker 3: it comes to EV sales, and then you have Tesla
• 6:57
  Speaker 3: who can't certainly can't forgotten. And you know, those are
• 7:01
  Speaker 3: the two big players, at least to my mind.
• 7:04
  Speaker 1: All right, Monica, great stuff, great catching up with you,
• 7:06
  Speaker 1: Monica Raymuland, Auto's industry disruption reporter for Bloomberg News.
• 7:10
  Speaker 2: Joining us how to Berlin, joining us out of Berlin,
• 7:12
  Speaker 2: right in my old office, you're old.
• 7:14
  Speaker 5: Beat right, yeah, exactly right. Where where's your car these days?
• 7:17
  Speaker 1: Are your challenger?
• 7:17
  Speaker 8: Do we know where it is?
• 7:19
  Speaker 2: Well, supposedly it's scheduled for production in uh in Canada, Okay,
• 7:24
  Speaker 2: But they haven't sent me the actual production confirmation yet,
• 7:28
  Speaker 2: so I'm still waiting. And in the meantime, I'm looking
• 7:31
  Speaker 2: across like Auto Trader and maybe I'm thinking maybe I
• 7:34
  Speaker 2: should go for bright orange instead of dark green.
• 7:37
  Speaker 4: I'm not sure.
• 7:37
  Speaker 1: Yeah, so you haven't selected that even that yet?
• 7:39
  Speaker 6: All right?
• 7:40
  Speaker 1: It's just supply chain still an issue in the auto industry.
• 7:42
  Speaker 1: Matt's been waiting for this challenger with this scat pack
• 7:44
  Speaker 1: all year logic for like a year. I don't know
• 7:46
  Speaker 1: what's going on there.
• 7:49
  Speaker 6: You're listening to the team. Can's a live program Bloomberg
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• 7:59
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• 8:02
  Speaker 1: Matt Miller, Paul Sweeney here in our Bloomberg Interactive Brokers studio,
• 8:05
  Speaker 1: and I forgot to mention we are simulcasting on YouTube
• 8:09
  Speaker 1: so people see me, so people can see the MAT's
• 8:12
  Speaker 1: actually here. He's back after a little hiatus in the afternoon.
• 8:15
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• 8:17
  Speaker 1: Bloomberg Global News. All right, this has been in addition
• 8:21
  Speaker 1: to just a week of I think one hundred and
• 8:23
  Speaker 1: sixty five of the S and P five hundred companies
• 8:25
  Speaker 1: reporting earnings next week, and I think one hundred and
• 8:27
  Speaker 1: seventy two next week, So super busy in the earning season.
• 8:30
  Speaker 1: But we've had a lot of central bank movement over
• 8:32
  Speaker 1: the past couple of days, including the Fed yesterday and
• 8:35
  Speaker 1: the European Central Bank today. So let's kind of break
• 8:38
  Speaker 1: it all down and see where we are. Anika Gupta
• 8:41
  Speaker 1: joins us. She is the director of Macroeconomic Research, Equities
• 8:45
  Speaker 1: and Commodities for Wisdom treat She joins us via zoom. So, Anika, boy,
• 8:51
  Speaker 1: what do you make of kind of what we've seen
• 8:52
  Speaker 1: coming out of these central banks over the past twenty
• 8:54
  Speaker 1: four hours.
• 8:56
  Speaker 9: Yeah, it's been really interesting, Paul. You know, at one
• 8:59
  Speaker 9: hund we have both of these central banks, the FED
• 9:03
  Speaker 9: as well as the ECB. Uh, you know, keeping their
• 9:06
  Speaker 9: optionality open. I think they they they've they've tried to,
• 9:12
  Speaker 9: you know, indicate that they have they have covered quite
• 9:16
  Speaker 9: a bit of ground on the inflation front. The only
• 9:20
  Speaker 9: difference between the FED and the ECB is the FED
• 9:23
  Speaker 9: is facing an economy which is a lot more resilient
• 9:25
  Speaker 9: and stronger based on the consumer strength, whereas in the
• 9:30
  Speaker 9: Eurozone the ECB is faced with the situation where they
• 9:33
  Speaker 9: have made a lot of progress on inflation. Yet uh,
• 9:37
  Speaker 9: you know, the recent indicators are pointing to growth slowing down,
• 9:41
  Speaker 9: so we are headed for a period of stagnation before
• 9:44
  Speaker 9: we actually get that rebound back into a growth phase.
• 9:48
  Speaker 9: So I think the ECB gave out a lot today
• 9:51
  Speaker 9: at the at the at the meeting where you know,
• 9:54
  Speaker 9: some of the some of the statements that were made
• 9:56
  Speaker 9: when when President la guard was asked, is there still
• 10:00
  Speaker 9: more ground to cover? And you know, she clearly said
• 10:03
  Speaker 9: at this point she wouldn't say so. And I think
• 10:05
  Speaker 9: that that indicates this looks likely to be the last hike.
• 10:10
  Speaker 9: But clearly they've kept that optionality open where you know,
• 10:14
  Speaker 9: there's so much additional data to come out until the
• 10:19
  Speaker 9: September meeting that they you know, anything could influence their decision.
• 10:23
  Speaker 9: But as of now, I would say for both central banks,
• 10:26
  Speaker 9: it looks like this is the last one in their
• 10:28
  Speaker 9: tightening cycle.
• 10:29
  Speaker 2: Well, you know, Chair and Powell referenced the data points
• 10:33
  Speaker 2: that he was looking forward to between now and September meeting.
• 10:36
  Speaker 5: There are many.
• 10:38
  Speaker 2: We got some this morning though, that were pretty darn impressive.
• 10:41
  Speaker 2: GDP came out at two point four percent for the
• 10:44
  Speaker 2: second quarter. We were looking for one point eight percent
• 10:47
  Speaker 2: in our survey of economists. Personal consumption consumer spending also
• 10:51
  Speaker 2: higher than anticipated one point six percent, And you got
• 10:56
  Speaker 2: the core PCE, which is the Fed's preferred gauge of
• 10:59
  Speaker 2: inflation and not nearly as bad as we expected at
• 11:02
  Speaker 2: three point eight percent rather than four percent. So this
• 11:06
  Speaker 2: looks pretty darn goldilocks to me. How do you think
• 11:09
  Speaker 2: it looks to Chair Powell?
• 11:13
  Speaker 9: Well, you're absolutely right, Matt. You know, I think we've
• 11:16
  Speaker 9: even seen the IMF echo similar a similar viewpoint where
• 11:21
  Speaker 9: the US has been and is proving to be a
• 11:24
  Speaker 9: lot more resilient than investors expected at the at the
• 11:27
  Speaker 9: start of the year. And I think, you know, given
• 11:31
  Speaker 9: given the fact that the US economy has been that brasilient,
• 11:34
  Speaker 9: it does open a goldilocks environment because we have seen
• 11:37
  Speaker 9: progress made on inflation, and given the fact that the
• 11:42
  Speaker 9: growth has been quite resilient, it should put this fit
• 11:45
  Speaker 9: in a situation where they could hold rates at current levels,
• 11:50
  Speaker 9: and then that expectation of them, you know, beginning to
• 11:54
  Speaker 9: cut just gets postponed further down the line.
• 11:58
  Speaker 1: So Anka, you're based in life. And then I believe
• 12:00
  Speaker 1: right around one King William Street, which is just right
• 12:03
  Speaker 1: around the corner from Bloomberg's European headquarters at Queen Victoria Street,
• 12:07
  Speaker 1: talk to us about inflation, inflation in the UK, inflation
• 12:10
  Speaker 1: in across Europe. Christine Leguard called that out as still
• 12:14
  Speaker 1: higher than she would like to say. Why is inflation
• 12:18
  Speaker 1: across Europe maybe a little bit stickier than maybe what
• 12:20
  Speaker 1: we're seeing here in the US.
• 12:22
  Speaker 7: So I think what seems to.
• 12:24
  Speaker 9: Be quite different in the UK is largely due to
• 12:29
  Speaker 9: more structural factors. I think Brexit in a big way
• 12:32
  Speaker 9: has contributed to inflation being a lot stickier. That being said,
• 12:38
  Speaker 9: the most recent inflation report has shown you know, a
• 12:42
  Speaker 9: small sliver of cooling. But I think Gregsity has a
• 12:47
  Speaker 9: very important role to play as to why the UK
• 12:49
  Speaker 9: seems to be the laggard in actually bringing down that
• 12:52
  Speaker 9: inflation side. But for the EU Zone, you know, what
• 12:56
  Speaker 9: seems to be holding inflation up quite strong has been
• 13:00
  Speaker 9: the strength in the labor of MAK. Wages have been rising,
• 13:04
  Speaker 9: and I think that that has essentially, from an income standpoint,
• 13:08
  Speaker 9: helped your your your zone consumer you know, actually have
• 13:13
  Speaker 9: a better and a higher purchasing power. So you've got
• 13:15
  Speaker 9: wages rising, You've got inflation beginning to come down, be
• 13:19
  Speaker 9: it headline inflation feeding into lower core inflation, and that
• 13:24
  Speaker 9: is just you know, from an income standpoint, making the
• 13:26
  Speaker 9: uarsone consumer a lot, putting them in a much better position.
• 13:30
  Speaker 9: So I think those two factors really stand out, and
• 13:33
  Speaker 9: that's that's one of the reasons why our fight inflation
• 13:35
  Speaker 9: has been a bit of a laggart compared to the US.
• 13:39
  Speaker 2: So you were talking about how rate hikes are going
• 13:42
  Speaker 2: to get pushed back, but I noticed on the dot
• 13:44
  Speaker 2: plot that we're expecting, at least the FED itself is
• 13:48
  Speaker 2: forecasting a full percentage point of rate cuts over the
• 13:54
  Speaker 2: next year. Why do you think that the Fed's forecast
• 13:59
  Speaker 2: differ so much from what Jerome Powell, you know, we'll
• 14:02
  Speaker 2: say at any given press conference.
• 14:05
  Speaker 9: Well, I think it's it's, you know, purely based on
• 14:08
  Speaker 9: the fact that the economy has been fairly resilient. There
• 14:11
  Speaker 9: are also risks lurking around. You know, we've seen commodity
• 14:15
  Speaker 9: prices over the past few weeks actually rebound. We've seen uh,
• 14:19
  Speaker 9: you know, the escalation between Russia and Ukraine actually increase, uh,
• 14:26
  Speaker 9: you know, with Russia pulling out of the Black Sea
• 14:28
  Speaker 9: grain deal, and so as a consequence, we've seen agricultural
• 14:32
  Speaker 9: prices within the commodity spectrum also rise. U and I
• 14:36
  Speaker 9: think central bankers have taken note of that that these
• 14:39
  Speaker 9: these risks are there at the horizon and for the US,
• 14:42
  Speaker 9: it's quite important because you know, the we're seeing growth
• 14:45
  Speaker 9: quite resilient. For the Eurozone, we are seeing growth being
• 14:49
  Speaker 9: quite tepid. You know, forward looking indicators are saying there's
• 14:52
  Speaker 9: weakness ahead. So I think the ECB is right to
• 14:56
  Speaker 9: say that they you know, they they they've covered quite
• 14:59
  Speaker 9: a bit of ground. There isn't all that more left
• 15:02
  Speaker 9: to do so at this point in time. But for
• 15:04
  Speaker 9: the US, you know, as as growth seems to be
• 15:07
  Speaker 9: a lot stronger and the consumers appears to be a
• 15:11
  Speaker 9: lot more resilient, and you're also seeing a few inflationary
• 15:16
  Speaker 9: concerns rising on the horizon, there's always the risk that
• 15:19
  Speaker 9: you know, they've go on me just does better than expected,
• 15:22
  Speaker 9: and that gives less need for power to actually have
• 15:25
  Speaker 9: to invene intervene.
• 15:27
  Speaker 2: With k What does that mean for the FX picture?
• 15:31
  Speaker 2: I mean, we had seen the dollar hold strong for
• 15:35
  Speaker 2: so long this year against all you know, predictions, and
• 15:38
  Speaker 2: then it came kind of the Bloomberg Dollar Index came
• 15:41
  Speaker 2: tumbling down a couple of weeks ago. Now it's on
• 15:44
  Speaker 2: a steady climb higher. You know, in the euros trading
• 15:47
  Speaker 2: it less than a dollar ten right. The pound is
• 15:49
  Speaker 2: trading it less than a dollar thirty. What do you
• 15:51
  Speaker 2: think the growth differential means for the currencies?
• 15:55
  Speaker 9: It has, It has a very big impact. So what
• 15:58
  Speaker 9: we've seen is the dollar response to two important factors,
• 16:03
  Speaker 9: one being the growth of differential and the second being
• 16:06
  Speaker 9: relative interest Now. Clearly, until now, the dollar was weakening
• 16:11
  Speaker 9: because interest rates and the rest of the developed market
• 16:13
  Speaker 9: world was actually rising and interest rates expectations for the
• 16:19
  Speaker 9: FED were actually declining, so there were expectations for them
• 16:21
  Speaker 9: to pause or cut. But the way things are evolving
• 16:26
  Speaker 9: with the strength of the US economy, you know, we're
• 16:29
  Speaker 9: now seeing relative interest rates move in favor of can
• 16:33
  Speaker 9: continue to remove in favor of developed developed market economies
• 16:36
  Speaker 9: as opposed to the US. And at the same time,
• 16:40
  Speaker 9: we're also seeing growth prospects in UK and Eurozone actually
• 16:45
  Speaker 9: deteriorate compared to the US, and hence that seems to
• 16:49
  Speaker 9: be the dominant factor in play right now, which is
• 16:51
  Speaker 9: why the dollar has been strengthening.
• 16:54
  Speaker 1: All right, Anitka, thank you so much for joining us.
• 16:55
  Speaker 1: Really appreciate getting your perspective. Anika Gutta. She is the
• 16:59
  Speaker 1: director of me Acroeconomic Research for the Equities and Commodities
• 17:02
  Speaker 1: Business at Wisdom Treaty is based in London. Again, we
• 17:06
  Speaker 1: had the ECB this morning, fed yesterday. Rate increases. Yes,
• 17:10
  Speaker 1: the market's kind of reading into it that they may
• 17:13
  Speaker 1: be perhaps the last of the rate increases, at least
• 17:16
  Speaker 1: for now, when we're seeing some reaction in the market's
• 17:19
  Speaker 1: s and P five hundred up a half one percent.
• 17:21
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• 17:40
  Speaker 10: I'd like to begin with your newest rules that you
• 17:43
  Speaker 10: just unveiled yesterday, putting restrictions on brokerages and money managers
• 17:47
  Speaker 10: and their use of AI to interact with clients. What
• 17:49
  Speaker 10: is your primary concern with the adoption of this technology
• 17:53
  Speaker 10: that you're trying to address?
• 17:54
  Speaker 11: First, Kaylee, it's good to be with you, But talking
• 17:57
  Speaker 11: about this, I think that predict data analytics, including artificial intelligence,
• 18:03
  Speaker 11: is the transformative technology of our times, and every bit
• 18:06
  Speaker 11: is transformatives to the Internet or mass production of the
• 18:09
  Speaker 11: automobile one hundred years ago.
• 18:11
  Speaker 4: Now, what are we trying to address?
• 18:14
  Speaker 11: When an investment advisor or a broker works with you
• 18:19
  Speaker 11: as an investor, they're not supposed to put their interest,
• 18:23
  Speaker 11: the advisor's interest ahead of yours, Kayley, as an investor.
• 18:27
  Speaker 11: And so what we're trying to do is make sure
• 18:30
  Speaker 11: that the technology aligns with that standard, that the technology
• 18:35
  Speaker 11: that can predict about each and every one of us
• 18:38
  Speaker 11: so much about how we might react to a little
• 18:42
  Speaker 11: behavioral prompt or a little knowledge how we might react.
• 18:46
  Speaker 11: That they're putting our interest as an investor in the
• 18:50
  Speaker 11: right place and not putting themselves ahead of it.
• 18:54
  Speaker 10: And of course the AI move wasn't the only one
• 18:55
  Speaker 10: you made yesterday. You also just approved a plan to
• 18:59
  Speaker 10: require companies to disclose cyber breaches within a four business
• 19:03
  Speaker 10: day timeline.
• 19:04
  Speaker 12: Why is that the appropriate time break?
• 19:06
  Speaker 11: Well, if I could just give a little bit more,
• 19:09
  Speaker 11: it's about material.
• 19:12
  Speaker 4: Incidents.
• 19:13
  Speaker 11: So if a company lost a factory and that factory
• 19:17
  Speaker 11: is wiped out, and that factory is material to its operations,
• 19:22
  Speaker 11: let's say because it's lost to a hurricane. Investors need
• 19:27
  Speaker 11: to know when they're buying and selling the stock. In
• 19:29
  Speaker 11: a similar way, if you had a cyber incident that
• 19:33
  Speaker 11: management determines as material you know, hundreds of millions of
• 19:36
  Speaker 11: files lost or something or compromised.
• 19:39
  Speaker 4: Investors benefit from that disclosure.
• 19:43
  Speaker 10: But giving business is just four days to disclose that.
• 19:46
  Speaker 11: That's what we have in our rules today currently four
• 19:52
  Speaker 11: business days if you have, like if that factory you know,
• 19:57
  Speaker 11: was wiped out by a hurricane, to put out the
• 20:01
  Speaker 11: material information.
• 20:04
  Speaker 4: And so that's consistent with rules on the books.
• 20:07
  Speaker 11: And by the way, many companies have been making such disclosures,
• 20:11
  Speaker 11: some haven't. It's been fragmented and we thought it was
• 20:14
  Speaker 11: important to bring some consistency to it around these material events.
• 20:23
  Speaker 13: Mister chaired, Danny Berger here in London, really wonderful to
• 20:25
  Speaker 13: speak with you today now on some of your proposals
• 20:28
  Speaker 13: when it comes to equity market structural reforms. You joined
• 20:32
  Speaker 13: Bloomberg TV back in March. You said, of market participants,
• 20:36
  Speaker 13: give us your best advice, tell us what you think.
• 20:39
  Speaker 7: What did you get.
• 20:40
  Speaker 13: What was the best advice you got?
• 20:43
  Speaker 11: Well, we got in terms of equity market structure, thousands
• 20:49
  Speaker 11: of comments. So I would say that what we're about
• 20:53
  Speaker 11: at the SEC is trying to drive greater efficiency and
• 20:57
  Speaker 11: competition in those markets, so when you send an order
• 21:01
  Speaker 11: into a broker, that you feel that you're getting best
• 21:06
  Speaker 11: execution in that order, and also that the markets themselves
• 21:12
  Speaker 11: are competitive. So one of our rules was about sort
• 21:16
  Speaker 11: of leveling the playing field between the lit markets, the
• 21:21
  Speaker 11: so called New York Stock Exchange and NASDAK and so forth,
• 21:25
  Speaker 11: and the wholesalers are dark market, which at times the
• 21:29
  Speaker 11: dark part of the markets are between a third and
• 21:32
  Speaker 11: a half of the market. So it's trying to bring
• 21:34
  Speaker 11: some level the playing field and ensure that investors are
• 21:39
  Speaker 11: getting best execution in these markets.
• 21:42
  Speaker 13: What about in terms of the feedback you got, are
• 21:45
  Speaker 13: you taking any of that on board? Would you change
• 21:47
  Speaker 13: anything considering what you've heard so far?
• 21:51
  Speaker 4: Well, we do that as a regular basis.
• 21:54
  Speaker 11: When we make a proposal, we put it out to
• 21:56
  Speaker 11: public comment and get feedback. And we put out four
• 22:00
  Speaker 11: separate proposals for different aspects in the markets, and I
• 22:06
  Speaker 11: think we've gotten four to six thousand comments on each
• 22:09
  Speaker 11: of them. So and we naturally consider it and the
• 22:15
  Speaker 11: staff makes recommendations about adjustments.
• 22:18
  Speaker 10: Okay, I'd like to discuss another proposed rulemaking that has
• 22:21
  Speaker 10: received a certain degree of feedback your climate risk disclosures,
• 22:24
  Speaker 10: specifically as it relates to Scope three emissions. What conversations
• 22:29
  Speaker 10: are you having around Scope three in particular.
• 22:32
  Speaker 11: Well, we've heard a lot from the public on this,
• 22:35
  Speaker 11: but to set the stage, companies today are making disclosures
• 22:39
  Speaker 11: around climate risk. In fact, well over half of the
• 22:42
  Speaker 11: top thousand or so companies currently make climate risk disclosures,
• 22:47
  Speaker 11: including greenhouse gas emission disclosure. So we're trying to bring
• 22:52
  Speaker 11: consistency to that and yes for investors that they can
• 22:56
  Speaker 11: compare comparability for that. You asked about one part of
• 23:00
  Speaker 11: greenhouse gas missions, so called Scope three, which is about
• 23:04
  Speaker 11: the supply chain and where a lot of the concern lines,
• 23:07
  Speaker 11: and so we've heard from a lot of commenters about that,
• 23:12
  Speaker 11: both from issuers and investors.
• 23:16
  Speaker 4: We understood when we made a proposal.
• 23:18
  Speaker 11: That this was not as well developed so called disclosures
• 23:22
  Speaker 11: around supply chain emissions, and so we're taking that into consideration.
• 23:28
  Speaker 11: And as I just chatted with your colleague, the staff
• 23:32
  Speaker 11: considers what to recommend upon adoption and whether to make adjustments.
• 23:38
  Speaker 10: So we could see you change there potentially.
• 23:40
  Speaker 11: Well, just as in the equity markets that I talked about,
• 23:43
  Speaker 11: we do take these comments seriously, Kayley. It's a really
• 23:48
  Speaker 11: rigorous exercise in climate. We got sixteen thousand comments.
• 23:52
  Speaker 4: So it's a lot to sort of sort through. But
• 23:55
  Speaker 4: the Scope three issue is one that we've heard significant comments.
• 24:00
  Speaker 11: Interestingly, we've heard from I think forty eight or forty
• 24:04
  Speaker 11: nine of the state farm.
• 24:06
  Speaker 4: Bureaus literally about well, what is this effect? And we
• 24:11
  Speaker 4: only oversee.
• 24:13
  Speaker 11: The public companies, the six or seven thousand public companies.
• 24:18
  Speaker 4: That's it.
• 24:19
  Speaker 11: We are a disclosure based agency. I often say we're
• 24:24
  Speaker 11: merit neutral.
• 24:25
  Speaker 4: We are not. You know, we're not.
• 24:28
  Speaker 11: This disclosure is about something already happening between investors and issuers,
• 24:34
  Speaker 11: and it's an important thing to bring consistency. It's not
• 24:38
  Speaker 11: about those, you know, those farmers and ranchers who thoughtfully
• 24:42
  Speaker 11: wrote us.
• 24:44
  Speaker 4: So we've heard.
• 24:45
  Speaker 10: Okay, I'd like to move to a different topic which
• 24:47
  Speaker 10: has gotten a lot of attention lately, Crypto, specifically a
• 24:51
  Speaker 10: ruling that was made in the Ripple case that XRP
• 24:54
  Speaker 10: is only a security when sold to institutional investors, not
• 24:57
  Speaker 10: so with retail investors. I know you've previously said you
• 25:01
  Speaker 10: were disappointed by that ruling. The SEC has also said
• 25:04
  Speaker 10: that it intends to seek further review. So does that
• 25:07
  Speaker 10: mean you are going to appeal it? Can you elaborate
• 25:09
  Speaker 10: on your thoughts around that ruling.
• 25:11
  Speaker 11: Kayleie, great question, But the Commission, I'm one of five commissioners.
• 25:17
  Speaker 4: The Commission has not acted on that, and.
• 25:22
  Speaker 11: If the staff makes a recommendation, we'll have a discussion
• 25:28
  Speaker 11: of it and we'll take it up then.
• 25:29
  Speaker 4: But I don't really have anything more on.
• 25:31
  Speaker 6: You for a you for that.
• 25:33
  Speaker 13: In the meantime, as we wait for this, what does
• 25:36
  Speaker 13: it mean for your efforts around crypto, for your efforts
• 25:40
  Speaker 13: to try to protect the consumer in these areas?
• 25:43
  Speaker 7: Does it complicate it?
• 25:46
  Speaker 11: Look this field of crypto investing, a lot of investors
• 25:56
  Speaker 11: should be aware it's not only a highly speculative asset class,
• 26:01
  Speaker 11: it's also one that they currently should not assume that
• 26:07
  Speaker 11: they're getting the protections of the securities laws, even though
• 26:11
  Speaker 11: the securities laws apply to many of those tokens without
• 26:14
  Speaker 11: prejudging anyone, but you as investors are not getting the.
• 26:20
  Speaker 4: Full, fair and truthful disclosure.
• 26:23
  Speaker 11: And the platforms the intermediaries are doing things that we
• 26:27
  Speaker 11: would never in a day allow or think the New
• 26:32
  Speaker 11: York Stock Exchange or NASDAQ would do. The platforms often
• 26:37
  Speaker 11: are co mingling and trading against you and have market
• 26:40
  Speaker 11: makers that are on the other side of your trades,
• 26:45
  Speaker 11: and we don't allow that in the rest of our
• 26:47
  Speaker 11: securities markets and the securities laws are there to protect you.
• 26:53
  Speaker 4: And that's right now.
• 26:56
  Speaker 11: This is a field rife with fraud, rife with huckster
• 27:01
  Speaker 11: and they're good faith actors as well, but there are
• 27:04
  Speaker 11: far too many that aren't.
• 27:06
  Speaker 13: And of course you've brought cases against crypto exchanges on
• 27:10
  Speaker 13: this point, But do you need to change tactic? Does
• 27:13
  Speaker 13: it change anything for those cases? Again this XRP ruling.
• 27:18
  Speaker 11: Again, I'm not going to go into any one ruling,
• 27:23
  Speaker 11: but I think that the securities laws are clear and
• 27:26
  Speaker 11: if you're if the public is investing in your project
• 27:31
  Speaker 11: because they're anticipating profits based upon the efforts of that project,
• 27:37
  Speaker 11: or there's entrepreneurs congress painted with a broad brush, and
• 27:43
  Speaker 11: I would ask you this, It's like, when you look
• 27:45
  Speaker 11: at a token, you can find a website, you can
• 27:48
  Speaker 11: find a CEO, you can find a Twitter or x feed,
• 27:52
  Speaker 11: whatever it's called these days. And there are entrepreneurs behind
• 27:58
  Speaker 11: many of these projects. Without again prejudging any one of
• 28:01
  Speaker 11: them Elsewhere in.
• 28:02
  Speaker 10: The crypto space. I'd like to discuss the spot ETF
• 28:05
  Speaker 10: because we have seen a wave of filings recently recently
• 28:09
  Speaker 10: from Blackrock and others trying to finally achieve this one
• 28:12
  Speaker 10: has never been approved in the US, just a futures ETF.
• 28:15
  Speaker 10: It seems like everyone thinks there has been a tone shift,
• 28:18
  Speaker 10: that something is different this time around. What do you
• 28:21
  Speaker 10: make of that wave of recent filings. Has anything actually
• 28:23
  Speaker 10: changed for the sec.
• 28:25
  Speaker 4: Kayleye, Probably won't surprise you.
• 28:27
  Speaker 11: Those filings do ultimately come up to a five member commission,
• 28:30
  Speaker 11: so I can't prejudge any filing. But back to your colleague,
• 28:34
  Speaker 11: as I said, this is a field that there's a
• 28:40
  Speaker 11: lot of non compliance in this field, and that the
• 28:46
  Speaker 11: platforms themselves where trading is occurring of various crypto tokens.
• 28:54
  Speaker 11: Though some of it comes under the securities laws, currently
• 28:59
  Speaker 11: they're not necessarily compliant with those time test of protections
• 29:03
  Speaker 11: against fraud and manipulation.
• 29:05
  Speaker 10: Okay, on the subject of securities laws, which obviously is
• 29:08
  Speaker 10: your purview at the SEC. Just yesterday House Financial Services
• 29:12
  Speaker 10: Committee passed through committee legislation on crypto market structure that
• 29:15
  Speaker 10: would actually give more authority in regulating this space. To
• 29:18
  Speaker 10: the CFTC still has a long way to go if
• 29:21
  Speaker 10: it were to become law.
• 29:22
  Speaker 12: But what is your thought on that legislation.
• 29:25
  Speaker 4: I sort of share my thoughts directly with members on
• 29:29
  Speaker 4: the way I told them.
• 29:30
  Speaker 11: I understand your question, Kayley, but I think that those
• 29:33
  Speaker 11: members on the hill would appreciate if I continue to
• 29:35
  Speaker 11: share my thoughts directly with them.
• 29:39
  Speaker 13: Not too dissimilar, mister Tara, I wonder if there's some
• 29:42
  Speaker 13: degree that you would want a wider scope when it
• 29:46
  Speaker 13: comes handing down fines to batter actors. Do you think
• 29:49
  Speaker 13: it would be helpful to have higher finds again in
• 29:52
  Speaker 13: order to discourage certain behaviors.
• 29:56
  Speaker 11: I would say this, we have good tools at the
• 29:59
  Speaker 11: SEC around not just penalties, but also what's called discoragement,
• 30:05
  Speaker 11: to give back ill gotten gains and so forth. But
• 30:09
  Speaker 11: if you're asking whether we could use more authorities, I
• 30:15
  Speaker 11: would say, we need more cops on the beat, We
• 30:18
  Speaker 11: need more resources. Our agency is just the size we
• 30:21
  Speaker 11: were in twenty sixteen. We actually shrank, We've kind of
• 30:25
  Speaker 11: come back, and yet the markets have grown so significantly
• 30:30
  Speaker 11: in those seven years.
• 30:32
  Speaker 10: And finally, as you say you need more resources, I
• 30:34
  Speaker 10: wonder how you feel about the ability of you to
• 30:36
  Speaker 10: get those things from this Congress, in particular, when you
• 30:39
  Speaker 10: have certain members of Congress who have said things like
• 30:41
  Speaker 10: introducing legislation to remove you as chair, referring to tyrannical chairmen,
• 30:47
  Speaker 10: including the current one, Does it mean it more difficult
• 30:50
  Speaker 10: to do your job when there's that kind of political
• 30:52
  Speaker 10: rhetoric out there in your efforts to protect investors.
• 30:56
  Speaker 11: We work closely with Congress and individual members, and I
• 31:01
  Speaker 11: look forward to those public debates. I think that we're
• 31:05
  Speaker 11: really an important agency. The capital markets really wouldn't work
• 31:10
  Speaker 11: without cops on the beat and rules of the road.
• 31:14
  Speaker 11: Just you know, think if you're watching soccer matches, if
• 31:19
  Speaker 11: there were no refs on the field, what would that
• 31:21
  Speaker 11: soccer match look like? It would look first more like rugby,
• 31:24
  Speaker 11: and then after a while it would really look worse
• 31:27
  Speaker 11: and fans wouldn't come to the field anymore or well
• 31:31
  Speaker 11: most so, I really do think that it's important to
• 31:37
  Speaker 11: have this agency, and we're part of these well regulated markets.
• 31:44
  Speaker 6: You're listening to the Team Ken's a live program Bloomberg
• 31:47
  Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot com,
• 31:51
  Speaker 6: the iHeartRadio app, and the Bloomberg Business app or listen
• 31:54
  Speaker 6: on demand wherever you get your podcasts.
• 31:58
  Speaker 1: We're talking about A in the context of financial services,
• 32:02
  Speaker 1: businesses and markets. It's also a big deal basically for
• 32:05
  Speaker 1: every other industry out there. And what does it mean
• 32:08
  Speaker 1: for a lot of these industries and people that work
• 32:11
  Speaker 1: in the industries, think Hollywood writers. That's come up in
• 32:14
  Speaker 1: their discussion. Ronie A. Settholm joins us. She is a
• 32:17
  Speaker 1: managing partner of set Home Law Group. She joins US
• 32:19
  Speaker 1: life here in our Bloomberg Interactive Broker studio. Thank you
• 32:22
  Speaker 1: so much for joining us. So what are some of
• 32:25
  Speaker 1: the early thoughts within the legal community about AI. I
• 32:29
  Speaker 1: don't know where this thing goes.
• 32:31
  Speaker 7: Thank you for having me well.
• 32:33
  Speaker 14: AI is definitely a hotbed topic and there are so
• 32:36
  Speaker 14: many issues to discuss.
• 32:37
  Speaker 7: We don't have time.
• 32:38
  Speaker 14: We can speak for days. But you know, one thing
• 32:41
  Speaker 14: that I'm concerned about as an attorney is the use
• 32:44
  Speaker 14: of AI. While I don't think there's going to be
• 32:47
  Speaker 14: a nefarious use in this labor dispute, as the technology
• 32:51
  Speaker 14: becomes more prevalent and accessible, who knows what anyone will
• 32:55
  Speaker 14: actually be saying. Because once I've captured you know your
• 32:59
  Speaker 14: image and your tone using AI, I can manipulate it
• 33:03
  Speaker 14: to say anything, and so this is going to raise
• 33:06
  Speaker 14: a lot of eyebrows.
• 33:07
  Speaker 5: And it's going to raise I guess a lot of.
• 33:11
  Speaker 2: Lawsuits, right, I mean yes, for the legal industry, this
• 33:15
  Speaker 2: is going to be a big money maker.
• 33:16
  Speaker 7: It very well can be.
• 33:19
  Speaker 14: You know, another legal issue that we're talking about is
• 33:23
  Speaker 14: what kind of intellectual property rights exist when you use AI?
• 33:27
  Speaker 7: Right now, the answer is.
• 33:28
  Speaker 14: None, because it only protects original works created by a
• 33:31
  Speaker 14: human being. And so there's a huge discussion now as
• 33:35
  Speaker 14: to what is the purpose beyond making money? Of course,
• 33:39
  Speaker 14: right you create a television show or something else using
• 33:42
  Speaker 14: AI quickly and you make money when people watch it.
• 33:45
  Speaker 7: Okay, fine, but do you actually own it?
• 33:48
  Speaker 6: Yep?
• 33:49
  Speaker 7: Likely not.
• 33:49
  Speaker 1: So what are the like for example, just in this
• 33:52
  Speaker 1: writer's strike. Forget the actors for the moment, but just
• 33:54
  Speaker 1: the writer's strike. I mean, that's intellectual property that they
• 33:58
  Speaker 1: have created.
• 33:59
  Speaker 7: I guess the question is.
• 34:01
  Speaker 5: There are two issues there.
• 34:02
  Speaker 2: Right on the one hand, they don't want anyone using
• 34:04
  Speaker 2: the IP that they've created, Right on the other hand,
• 34:07
  Speaker 2: they're worried that AI is going to come in and
• 34:09
  Speaker 2: write new material instead of thanks it.
• 34:13
  Speaker 14: Yes, exactly, and depending on what their current CBA collective
• 34:18
  Speaker 14: Bargaining agreement says, they may have already relinquished all rights
• 34:23
  Speaker 14: to use of those materials you.
• 34:25
  Speaker 5: Know, they've already written.
• 34:27
  Speaker 2: I mean, for example, Sarah Silberman wrote a book and
• 34:31
  Speaker 2: it's been I guess accessed by open ai.
• 34:37
  Speaker 5: In training. I would guess, yes, that's exactly right. And
• 34:40
  Speaker 5: so and now she's suing what open ai.
• 34:43
  Speaker 14: She's suing open ai and meta and it's for copyright
• 34:47
  Speaker 14: infringement because one of the ways you can infringe upon
• 34:49
  Speaker 14: copyright is to utilize someone else's work to create a
• 34:53
  Speaker 14: derivative work or maybe a sequel, you know, in more
• 34:56
  Speaker 14: common vernacular.
• 34:57
  Speaker 5: So, but Ronnia, this isn't a breaking new ground. This
• 35:00
  Speaker 5: isn't you know.
• 35:01
  Speaker 2: We don't have to create any kind of new framework
• 35:03
  Speaker 2: to address these issues.
• 35:04
  Speaker 5: The law is already there and it's clear, Yes, that
• 35:08
  Speaker 5: is true.
• 35:09
  Speaker 14: I think some of what is happening now is consumers
• 35:12
  Speaker 14: are talking about it. Are we as consumers going to
• 35:15
  Speaker 14: accept these AI generated copies or movies or television shows
• 35:21
  Speaker 14: or not? Are we as consumer is going to accept
• 35:25
  Speaker 14: AI generated anything? I mean, this is really a kind
• 35:29
  Speaker 14: of an existential threat. Almost any job if you think
• 35:32
  Speaker 14: about it.
• 35:33
  Speaker 2: But again, those are two issues right on the issues,
• 35:35
  Speaker 2: We're not going to accept theft if a company uses
• 35:39
  Speaker 2: copyrighted material and doesn't you know, follow proper procedures there,
• 35:44
  Speaker 2: i e. Paying some kind of royalties to Sarah Silverman
• 35:48
  Speaker 2: in this case, that's not okay. On the other hand,
• 35:51
  Speaker 2: if open ai writes a new comedy special with without
• 35:56
  Speaker 2: infringing on anyone's copyright, which I don't know how that
• 35:59
  Speaker 2: would happen because they have to train the model.
• 36:01
  Speaker 14: But exactly I don't know how that would happen either,
• 36:03
  Speaker 14: because AI is only as smart as the information you provide.
• 36:08
  Speaker 5: I so I'm not just talk to myself into understanding
• 36:10
  Speaker 5: what you were saying.
• 36:11
  Speaker 7: Glad to feel of help.
• 36:13
  Speaker 1: So is there sense Runnie that the legal industry. I mean,
• 36:18
  Speaker 1: hopefully they're going to do better than our regulars in Washington,
• 36:20
  Speaker 1: But is there any sense that there's Is there any
• 36:22
  Speaker 1: academic work being done in the legal industry about how
• 36:25
  Speaker 1: to look at this stuff from a legal perspective?
• 36:28
  Speaker 7: I think it's extremely exploratory.
• 36:30
  Speaker 14: So, just like any technology, some use of AI will
• 36:34
  Speaker 14: be beneficial to all and some of it won't. And
• 36:38
  Speaker 14: in fact, you're likely using AI now without even knowing right,
• 36:42
  Speaker 14: because it's part of a lot of systems that you're
• 36:44
  Speaker 14: currently utilizing. And so I think there has to be
• 36:47
  Speaker 14: some regulation around how to use it and when not
• 36:50
  Speaker 14: to use it, and there should be also some contractual
• 36:54
  Speaker 14: provisions that attorney's right. So I represent some celebrities and
• 36:59
  Speaker 14: some influencer and when we are working with production companies
• 37:05
  Speaker 14: or others, they'll ask us to release the likeness, the tone,
• 37:09
  Speaker 14: the image of the.
• 37:10
  Speaker 7: Celebrity in perpetuity, in perpetuity and in any medium known
• 37:16
  Speaker 7: or unknown or soon to be known.
• 37:17
  Speaker 5: That's a wide scope.
• 37:18
  Speaker 14: It's a very wide scope. So I think the attorneys
• 37:21
  Speaker 14: they have a power of a pen. And when the
• 37:23
  Speaker 14: other side says this is a deal breaker, you should
• 37:25
  Speaker 14: just take a step back and ask yourself.
• 37:27
  Speaker 7: Is it really a deal breaker?
• 37:29
  Speaker 14: Or can we carve out something to keep the integrity
• 37:33
  Speaker 14: of the image of the person.
• 37:35
  Speaker 1: Any idea how this act that the writer's strike will
• 37:38
  Speaker 1: play out, because I'm not sure the Well, if I
• 37:41
  Speaker 1: were a media company, I'd be saying, hey, guys, I'd
• 37:43
  Speaker 1: love to give you a cut of the streaming revenues
• 37:45
  Speaker 1: or whatever. But I don't know what they're going to be.
• 37:47
  Speaker 2: You know, I don't know how the economic side is unclear.
• 37:50
  Speaker 2: I heard your interview yesterday with I think she was
• 37:53
  Speaker 2: the head of a guilt Yeah, yeah, a writer's guild,
• 37:57
  Speaker 2: and she I mean, her insistence is that these streams
• 38:00
  Speaker 2: companies are just cashing in hand over fist and making
• 38:02
  Speaker 2: billions and billions and billions in profits. But as we
• 38:06
  Speaker 2: know from watching the market move every day, investors aren't
• 38:09
  Speaker 2: sure about that.
• 38:09
  Speaker 1: No exactly, so any sense of how this might play out?
• 38:12
  Speaker 1: It seems like it could go on for a long time.
• 38:14
  Speaker 14: It can go on for a long time, but I
• 38:16
  Speaker 14: think as more people feel the pain, they'll have to
• 38:19
  Speaker 14: be some compromises. Right now, it seems like everyone has
• 38:22
  Speaker 14: their dukes up yea, and nobody cares about the you know, fringes.
• 38:27
  Speaker 14: But this strike is not only affecting writers and actors.
• 38:31
  Speaker 14: It's affecting so many other people in the professional Tangentially.
• 38:35
  Speaker 2: It reminds me tangentially of the lawsuits we saw flare
• 38:39
  Speaker 2: up over NFTs. Yes, and I wonder did we ever
• 38:42
  Speaker 2: sort that out? For example, Quentin Tarantino wanted to make
• 38:46
  Speaker 2: an NFT.
• 38:47
  Speaker 5: I think of his script for.
• 38:51
  Speaker 2: Paul Fiction, right, but the Studio said no, no, no, no,
• 38:53
  Speaker 2: Hang on a second, we own that script, you know,
• 38:55
  Speaker 2: even though you have the physical paper copy in his hand.
• 38:58
  Speaker 2: So there were similar copyright issues coming up around Crypto.
• 39:02
  Speaker 7: Yes, well, the.
• 39:03
  Speaker 14: Copyright laws are the same, they're applied across the board.
• 39:07
  Speaker 14: But again a lot of this can be taken care
• 39:09
  Speaker 14: of contractually, hence this strike. But here neither side seems
• 39:14
  Speaker 14: to be communicating very well, and that always ends badly.
• 39:18
  Speaker 1: All right, Ronnie, thank you so much for joining us.
• 39:20
  Speaker 1: Lots of issues out there for you guys to figure out.
• 39:23
  Speaker 1: Ronnie is set Home Managing Partner, set Home Lawgroup.
• 39:26
  Speaker 6: You're listening to the tape Cat's are live program Bloomberg
• 39:29
  Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 39:33
  Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 39:36
  Speaker 6: You can also listen live on Amazon Alexa from our
• 39:39
  Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
• 39:46
  Speaker 1: Cam Harvey, he's professor finance down there at the Duke University.
• 39:49
  Speaker 1: All right, let me explain to how this works at
• 39:50
  Speaker 1: FUCA when I was there. Here's the grading system pass,
• 39:54
  Speaker 1: high pass, Superior pass, anything below pass you don't want
• 39:57
  Speaker 1: to talk about now. On Cam Harvey's class Futures Options.
• 40:00
  Speaker 1: I think I don't know what it was. It was
• 40:01
  Speaker 1: something very hard. I didn't say with great comments. I
• 40:04
  Speaker 1: probably did not get a superior pass. There's chance I
• 40:08
  Speaker 1: got a high pass. But if I had to put
• 40:10
  Speaker 1: money on it, I put it pass. Yeah, but that's okay.
• 40:14
  Speaker 2: Well, and you're not an economist, and what we said,
• 40:16
  Speaker 2: we still have questions to ask.
• 40:17
  Speaker 1: You still have questions. What we said back in the
• 40:18
  Speaker 1: day is twenty p's twenty passes equals sixty g's, which
• 40:22
  Speaker 1: was the going right on Wall Street for You're in
• 40:23
  Speaker 1: the NBA, so all you had to do is pass.
• 40:26
  Speaker 5: That's a really materialistic way to look at in your generation.
• 40:28
  Speaker 1: That's why expiration because I played golf every day. Hey,
• 40:31
  Speaker 1: camp professor, thanks so much for joining us here. What
• 40:33
  Speaker 1: did you take away from boy? We had a lot
• 40:36
  Speaker 1: of central bank speak over the past couple of days,
• 40:38
  Speaker 1: with the ECB this morning and the FED yesterday. What
• 40:40
  Speaker 1: are you taking away from some of these central bankers.
• 40:44
  Speaker 8: That they fundamentally are misjudging the inflation threat? It is
• 40:51
  Speaker 8: It is shocking to me that you just need to
• 40:57
  Speaker 8: look at the data. Look at the most recent inflation release,
• 41:01
  Speaker 8: which was three percent, and actually the more precise number
• 41:07
  Speaker 8: was two point nine seven percent. And if you look
• 41:12
  Speaker 8: at the drivers of inflation, the main driver is shelter.
• 41:17
  Speaker 8: So shelter is a little over one third of the CPI,
• 41:22
  Speaker 8: and shelter is running at seven point eight percent. So
• 41:27
  Speaker 8: let's do some really simple math. The contribution of shelter
• 41:31
  Speaker 8: to that three percent print is about one third of
• 41:36
  Speaker 8: seven point eight percent, and that comes to about two
• 41:41
  Speaker 8: point six percent. So almost ninety percent of the inflation
• 41:46
  Speaker 8: print was shelter, and shelter is not running at seven
• 41:51
  Speaker 8: point eight percent. So you look at the data, you
• 41:54
  Speaker 8: look at rents year over year, you look at housing prices,
• 41:57
  Speaker 8: it's close to flat or one percent or two percent,
• 42:01
  Speaker 8: and it's because shelter lags. So that's seven point eight
• 42:05
  Speaker 8: percent is reflecting stuff from six to nine months ago.
• 42:09
  Speaker 8: If we use the real data, the inflation is not
• 42:12
  Speaker 8: three percent, is one point five percent, and it seems
• 42:17
  Speaker 8: to give the reason that, oh, well, inflation is still there.
• 42:22
  Speaker 8: It's three percent, that it's not two percent. It's a
• 42:26
  Speaker 8: false logic, a totally false logic. So this increase that
• 42:32
  Speaker 8: the FED just did was completely unnecessary. It increases the
• 42:36
  Speaker 8: risk in many different dimensions that we are pushed into
• 42:42
  Speaker 8: an unnecessary recession.
• 42:44
  Speaker 15: So, Professor Harvey, this is Barry Ridults. Let's pretend I'm
• 42:49
  Speaker 15: in your class at school, and I want to argue
• 42:52
  Speaker 15: this proposition that the not only have we seen homes
• 42:58
  Speaker 15: underbuilt since the ear and the financial crisis, but the
• 43:02
  Speaker 15: FED raising rates as aggressively as they have are actually
• 43:07
  Speaker 15: making owners' equivalent rent and apartment rentals more expensive. They're
• 43:13
  Speaker 15: forcing people who would otherwise be home buyers into the
• 43:18
  Speaker 15: rental market. What's the number, Something like sixty one percent
• 43:22
  Speaker 15: of homeowners with mortgages are at four percent or less
• 43:26
  Speaker 15: and they don't want to pay seven and a half
• 43:28
  Speaker 15: percent more for a mortgage. Should the is the FED
• 43:32
  Speaker 15: two title ready? Are they accidentally driving owners equivalent rent
• 43:37
  Speaker 15: and CPI higher?
• 43:41
  Speaker 16: Yeah?
• 43:41
  Speaker 8: So, very great points, And you just need to look
• 43:47
  Speaker 8: at the data. So if you go to Zillow or
• 43:52
  Speaker 8: red fan, you see that rents year every year are
• 43:56
  Speaker 8: running at one percent, zero percent been in a negative territory.
• 44:01
  Speaker 8: There's a big disconnect between what people are paying and
• 44:06
  Speaker 8: what is in the actual SPI. And we've seen this before.
• 44:10
  Speaker 8: This is not new. This is the mistake the FED
• 44:13
  Speaker 8: made initially in thinking that inflation was transitory, that the
• 44:19
  Speaker 8: numbers that were using for owner's equivalent rent were really
• 44:23
  Speaker 8: really low, when we could observe in the market that
• 44:27
  Speaker 8: it was much higher. And there's a reason for these legs.
• 44:32
  Speaker 8: So the lag makes sense. So if there's rental inflation,
• 44:36
  Speaker 8: for example, it goes up by ten percent, well that
• 44:40
  Speaker 8: only hits you if you have to have your lease renewed,
• 44:45
  Speaker 8: and many people have a longer lease, so that ten
• 44:47
  Speaker 8: percent inflation wouldn't be realized until you actually renew your lease.
• 44:53
  Speaker 8: So there's a natural leg. And my point is that
• 44:56
  Speaker 8: this component, which is driving ninety percent of the current inflation,
• 45:02
  Speaker 8: that is going to head down. It just takes a while.
• 45:07
  Speaker 8: And again this is very similar to what we saw
• 45:11
  Speaker 8: with the so called transitory inflation, that that inflation is
• 45:15
  Speaker 8: substantially mitigated. And the other point you're making about increasing
• 45:22
  Speaker 8: the rates causing problems, it's like two sided. So those
• 45:25
  Speaker 8: that have mortgages that are already attractive, you're correct, that
• 45:32
  Speaker 8: is the disincentive to move, and it does put pressure
• 45:37
  Speaker 8: on the rental market. But again looking at the data,
• 45:40
  Speaker 8: we don't see that rental inflation. We saw it go up,
• 45:45
  Speaker 8: but now it's down and that partends the future. And
• 45:49
  Speaker 8: again it undercuts very substantially the fed's logic.
• 45:53
  Speaker 2: And yes, so, professor, does does this mean that the
• 45:57
  Speaker 2: FED is going to push us into asion? And I
• 46:02
  Speaker 2: want to bring in also your yield curve inversion to
• 46:05
  Speaker 2: the discussion, because I have in front of me the
• 46:07
  Speaker 2: three month ten year yield curve. We're looking at an
• 46:11
  Speaker 2: inversion of one hundred and fifty basis points basically, And
• 46:15
  Speaker 2: I was talking about Jeff Sherman from Double Line earlier.
• 46:18
  Speaker 2: He thinks that that signal signals a deep recession and he's,
• 46:23
  Speaker 2: you know, very concerned about it over there.
• 46:25
  Speaker 5: Is that fair?
• 46:26
  Speaker 2: Do you think when you look at the history of
• 46:28
  Speaker 2: this yield curve inversion does it?
• 46:31
  Speaker 7: Does it?
• 46:32
  Speaker 5: Is it a good signal for a recession?
• 46:34
  Speaker 6: Yeah?
• 46:34
  Speaker 8: So, as you know, this is my dissertation at the
• 46:37
  Speaker 8: University of Chicago, and at the time pretty good. It
• 46:41
  Speaker 8: was like four out of four. Now it's eight out
• 46:43
  Speaker 8: of eight without a fault signal. And we've had this
• 46:46
  Speaker 8: inversion that is like ten months inversion.
• 46:52
  Speaker 5: And without a false signal.
• 46:53
  Speaker 2: Is an important clause because Rick Reader was on with
• 46:57
  Speaker 2: us the other day from black Rock, and he said,
• 46:58
  Speaker 2: the yield curve inversion is forecast nine out of the
• 47:01
  Speaker 2: last three recessions or something like that.
• 47:03
  Speaker 5: But I think people look at it two.
• 47:06
  Speaker 8: Yeah, yeah, it's totally false, And of course you need
• 47:10
  Speaker 8: to There could be a part of the yell curve
• 47:14
  Speaker 8: that you choose that's got a lot of false signals.
• 47:17
  Speaker 8: I'm talking about what I chose, the ten year minus
• 47:20
  Speaker 8: three month, and that doesn't have any fault signals yet.
• 47:24
  Speaker 8: Of course it could be a false signal, but it's
• 47:27
  Speaker 8: too early to declare a false signal. The lead time varies,
• 47:34
  Speaker 8: so that's not consistent. So the lead time has been
• 47:38
  Speaker 8: as short as five months and as long as twenty
• 47:42
  Speaker 8: two months, so it's too early to tell. But again,
• 47:48
  Speaker 8: let's not just look at this signal, but look at
• 47:50
  Speaker 8: the economic logic as to what is happening when you
• 47:55
  Speaker 8: severely invert the ill curve, and when you averted in
• 48:00
  Speaker 8: a way where short rates and long rates go up,
• 48:04
  Speaker 8: then you were stressing the financial system. So an inverted
• 48:09
  Speaker 8: deal curve is bad for banks because it hits profitability
• 48:13
  Speaker 8: because they're paying a short term rate and kind of
• 48:16
  Speaker 8: receiving a long term rate. But when that longer term
• 48:20
  Speaker 8: rate also goes up, that hits the balance sheet also.
• 48:24
  Speaker 8: And we've already seen this play out in March in
• 48:28
  Speaker 8: terms of you know, some banks failing. So this puts
• 48:35
  Speaker 8: stress on the financial system and it creates other issues
• 48:40
  Speaker 8: in addition.
• 48:41
  Speaker 15: So, Professor, given how rapidly the FED has been raising rates,
• 48:46
  Speaker 15: and given that we've spent so much time at zero
• 48:50
  Speaker 15: in the last moments we have, how impactful has that
• 48:54
  Speaker 15: rapidity been to this inverted deal curve?
• 48:58
  Speaker 8: Yeah, so, the the scale of the inversion is unprecedented
• 49:05
  Speaker 8: in the data that I've looked at. So of all
• 49:08
  Speaker 8: of the inversions is number nine, this one is the
• 49:12
  Speaker 8: largest relative to the long term rate. So we're in
• 49:17
  Speaker 8: an area of the data that we've never seen before.
• 49:22
  Speaker 8: And on top of that, the FED is pushed very quickly.
• 49:27
  Speaker 8: And in January I said, given my look at the
• 49:31
  Speaker 8: shelter data in inflation, they should stop. They did not stop.
• 49:36
  Speaker 8: And what they're doing is just increasing the risk of
• 49:39
  Speaker 8: a hard landing. It seems there calculus is unemployment has
• 49:43
  Speaker 8: to increase, people have to be thrown out of their job.
• 49:46
  Speaker 8: That is not necessary. We don't need a reset, all.
• 49:50
  Speaker 1: Right, Caim, thank you so much for joining us, Campbell Harvey.
• 49:52
  Speaker 1: He's a professor of finance at the Fucal School of
• 49:54
  Speaker 1: Business at Duke University. I appreciate getting his thoughts here
• 49:57
  Speaker 1: on the Central Banks and on the Inverted Yield cover.
• 50:02
  Speaker 6: You're listening to the tape can Tour live program Bloomberg
• 50:05
  Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 50:08
  Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
• 50:12
  Speaker 6: You can also listen live on Amazon Alexa from our
• 50:15
  Speaker 6: flagship New York station Just say Alexa, play Bloomberg eleven thirty,
• 50:21
  Speaker 6: What a Deed?
• 50:22
  Speaker 17: Even deeper into metas earnings reports CEO Mark Zuckerberg, saying,
• 50:26
  Speaker 17: look quote, we continue to see strong engagement across our
• 50:28
  Speaker 17: apps with the most exciting roadmap I've seen in a while.
• 50:31
  Speaker 17: Our investments in AI will continue. We remain fully committed
• 50:34
  Speaker 17: to the metaverse vision as well. Let's again further with
• 50:38
  Speaker 17: Meta Chief Financial Officer Susan Lee joining us. And it's
• 50:41
  Speaker 17: not just Mark finding things, exciting investors, analysts, upgrading exciting
• 50:46
  Speaker 17: economy for the world at large. Today it feels here
• 50:49
  Speaker 17: in the United States, how excited Susan, are your clients
• 50:53
  Speaker 17: right now how resilient is this digital ad spending well?
• 50:57
  Speaker 18: First of all, thank you Ed Andternline for having me at.
• 51:00
  Speaker 18: It's a pleasure to be with you guys and with
• 51:02
  Speaker 18: your viewers this morning. You know you noted that we
• 51:04
  Speaker 18: reported really strong Q two results. We're really happy with
• 51:09
  Speaker 18: all of our execution efforts across our core user and
• 51:12
  Speaker 18: engagement metrics. Obviously, the reacceleration in our ad revenue which
• 51:16
  Speaker 18: we've been talking about and you know which we think
• 51:19
  Speaker 18: is the is the reflection both of an improvement in
• 51:22
  Speaker 18: the macroeconomic landscape which the digital ads market is so
• 51:25
  Speaker 18: closely tied to, along with our own efforts continuing to
• 51:30
  Speaker 18: invest in and execute on quarters and years of work
• 51:34
  Speaker 18: in making sure that our ad systems are performing well,
• 51:38
  Speaker 18: that we're delivering measurable results for our advertisers, and we
• 51:40
  Speaker 18: really have seen those results bear fruit.
• 51:44
  Speaker 12: So that's something we're really excited about.
• 51:45
  Speaker 18: In Q two, we also talked about how our year
• 51:49
  Speaker 18: of efficiency work is really setting us up for success
• 51:52
  Speaker 18: going forward.
• 51:53
  Speaker 12: I think it's put us into a place.
• 51:55
  Speaker 18: Where we have a leaner cost structure which will serve
• 51:57
  Speaker 18: us well as we plan for the future, and it's
• 52:00
  Speaker 18: also enabling us to move faster, to build more and
• 52:03
  Speaker 18: ship more quickly new products and experiences in service of
• 52:07
  Speaker 18: what of our customers, and so Mark talked about this
• 52:10
  Speaker 18: yesterday on the call. Threads is a really good example
• 52:13
  Speaker 18: of that. It's something that we built with a relatively
• 52:16
  Speaker 18: smaller team on a tighter timeline, and I think is
• 52:19
  Speaker 18: a good reflection of the year of efficiency paying off
• 52:23
  Speaker 18: for us. Finally, the last theme I'd highlight from our
• 52:26
  Speaker 18: earnings call is around twenty twenty four, we have I
• 52:30
  Speaker 18: think a lot of compelling opportunities to invest in. We
• 52:33
  Speaker 18: talked about our AI investments and how that will flow
• 52:36
  Speaker 18: through and too infrastructure costs. We talked about hiring top
• 52:40
  Speaker 18: tier technical talent as we evolve our workforce towards a
• 52:43
  Speaker 18: more technical mix, and then of course our longer term
• 52:46
  Speaker 18: ambitions and vision for reality labs and for the metaverse.
• 52:50
  Speaker 16: You know, AI also seen Susan two AI recommendations on
• 52:54
  Speaker 16: the timeline to have a real impact on engagement, particularly
• 52:59
  Speaker 16: on the core FACEOK platform. How much is that a
• 53:02
  Speaker 16: driver behind the forecast for the current period of thirty
• 53:05
  Speaker 16: four point five billion dollars in sales.
• 53:08
  Speaker 12: It's a great question.
• 53:10
  Speaker 18: First, I want to say we have been investing in
• 53:12
  Speaker 18: AI for a really long time. We often use the
• 53:15
  Speaker 18: phrase core AI to talk about the work that's been
• 53:18
  Speaker 18: powering our ranking and recommendations engines, which are really the
• 53:22
  Speaker 18: foundation of both our organic recommendations for the content that
• 53:26
  Speaker 18: you see.
• 53:26
  Speaker 12: Along with the ADS work.
• 53:28
  Speaker 18: And in particular, one of the big drivers of growth
• 53:32
  Speaker 18: that's been both strong on our platforms and increasingly incremental
• 53:37
  Speaker 18: is around recommending content from accounts that you don't already follow.
• 53:41
  Speaker 18: We often call this unconnected content, and that's been really
• 53:44
  Speaker 18: good for core engagement trends. And then of course the
• 53:47
  Speaker 18: AI investments, as we've put GPU capacity towards our ADS,
• 53:51
  Speaker 18: ranking and recommendation systems have really paid off. So I
• 53:54
  Speaker 18: think that's really translating both into the results that you've seen.
• 53:58
  Speaker 18: It's part of what factors and to our guidance, along
• 54:01
  Speaker 18: with of course a big range of possible macroeconomic outcomes.
• 54:05
  Speaker 18: At the same time, we're really excited about a newer
• 54:08
  Speaker 18: opportunity ahead of us in the GENAI space, and that's
• 54:12
  Speaker 18: really around building compelling new consumer experiences. Mark talked about
• 54:17
  Speaker 18: some of the things we're working on on the call yesterday,
• 54:20
  Speaker 18: making it easier for people to create better, more individualized content,
• 54:25
  Speaker 18: and then of course also making it easier for businesses
• 54:27
  Speaker 18: to communicate with the consumers that they want to reach.
• 54:31
  Speaker 12: That is newer for us.
• 54:33
  Speaker 18: That's not factored into our revenue guidance or our revenue
• 54:36
  Speaker 18: outlook in any meaningful way, but it's something that we're
• 54:40
  Speaker 18: really excited about the opportunity to build new and compelling experiences,
• 54:44
  Speaker 18: and we think it'll be an important part of our future.
• 54:47
  Speaker 16: Susan, why did Meta change its mind about charging cloud
• 54:52
  Speaker 16: providers for access to Lama too, I'm not.
• 54:59
  Speaker 12: Sure what you mean by changed.
• 55:00
  Speaker 18: By changing our mind, we've made Lama to free and
• 55:04
  Speaker 18: widely accessible. They're a small handful of really large cloud
• 55:08
  Speaker 18: providers that we're working on specific arrangements with, but broadly speaking,
• 55:13
  Speaker 18: we expect this to be free, and we want it
• 55:15
  Speaker 18: to be accessible to a really to a really wide
• 55:19
  Speaker 18: range of possible use cases.
• 55:21
  Speaker 17: Cloud providers, will they be charged anything.
• 55:27
  Speaker 18: This is a place where, again with very specific cloud
• 55:30
  Speaker 18: providers who have very large user bases. Again we're working
• 55:33
  Speaker 18: on specific arrangements with them, but it's not something that
• 55:36
  Speaker 18: we broadly anticipate charging.
• 55:37
  Speaker 17: For and of course, we're all waiting to see when
• 55:40
  Speaker 17: you turn on the money funnel from Threads. I'm interested
• 55:43
  Speaker 17: as to how much inbound you're getting from clients, how
• 55:47
  Speaker 17: many want the capacity to start advertising alongside Threads.
• 55:50
  Speaker 12: At the moment, you know, we're really very pleased with Threads.
• 55:55
  Speaker 18: It's a new standalone app that you know, we released
• 55:58
  Speaker 18: earlier this month, and we're where it is in both
• 56:02
  Speaker 18: user growth terms as well as engagement and retention trends.
• 56:06
  Speaker 18: Is certainly ahead of where we would have expected for
• 56:08
  Speaker 18: a brand new standalone app, but it's incredibly early in
• 56:11
  Speaker 18: its life cycle. This is not something that we expect
• 56:14
  Speaker 18: that we're going to monetize in the near term. We
• 56:16
  Speaker 18: know when we launch new consumer experiences that there is
• 56:19
  Speaker 18: a playbook around all of the product foundation work that
• 56:23
  Speaker 18: needs to be done, around core features that users will
• 56:26
  Speaker 18: ask for, being responsive to things that futures users are
• 56:30
  Speaker 18: looking for in the product, scaling it over time to
• 56:33
  Speaker 18: a much larger user base, focusing on driving increased engagement
• 56:38
  Speaker 18: and retention. Those are all things that we're going to
• 56:40
  Speaker 18: need to do in advance of thinking about monetization. But
• 56:44
  Speaker 18: it's a playbook that we've executed multiple times and We're
• 56:47
  Speaker 18: excited for the opportunity to do that again here.
• 56:51
  Speaker 16: Susan, I think I'm right in saying you a Facebook
• 56:53
  Speaker 16: employee number four hundred and something, four hundred and eight.
• 56:57
  Speaker 16: How has the launched a Threads compared internally to bringing
• 57:03
  Speaker 16: in Instagram, WhatsApp, the launch of the hardware business and quest.
• 57:09
  Speaker 4: Yeah.
• 57:10
  Speaker 18: So I joined then Facebook back in two thousand and
• 57:13
  Speaker 18: eight when they're around four hundred people here, and so
• 57:16
  Speaker 18: I've seen us launch a lot of things over the
• 57:18
  Speaker 18: course of that period. Now, some of those examples that
• 57:20
  Speaker 18: you mentioned, like Instagram obviously were already popular apps when
• 57:24
  Speaker 18: we acquired them. But I think that over the course
• 57:26
  Speaker 18: of that time, we've learned a lot of things about
• 57:29
  Speaker 18: how to bring products to market, thinking about the trade
• 57:32
  Speaker 18: offs between standalone apps or features within existing apps. We've
• 57:36
  Speaker 18: learned a lot in our growth playbook and how to
• 57:38
  Speaker 18: drive engagement and retention, and I think we're going to
• 57:41
  Speaker 18: bring a lot of those lessons to the way that
• 57:43
  Speaker 18: we execute against our vision for Threads.
• 57:47
  Speaker 16: Caroline asked you about the inbound interest your existing advertisers, saying, Hey, Susan,
• 57:53
  Speaker 16: when can I put something on the Threads platform. I
• 57:55
  Speaker 16: know you're being conservative and careful about the development, and
• 58:00
  Speaker 16: that mark emphasize a lot of product work needs to
• 58:02
  Speaker 16: be done as well. But how do you see the
• 58:05
  Speaker 16: roadmaps for Threads going, you know, how do you change
• 58:08
  Speaker 16: the product so it is monetizable.
• 58:12
  Speaker 18: Well, we're excited obviously that there is interest both in Threads,
• 58:16
  Speaker 18: the consumer product and of course the eventual prospect of
• 58:19
  Speaker 18: advertising on it.
• 58:20
  Speaker 12: But it's really just too early, i think.
• 58:22
  Speaker 18: To be very specific about what the ads business on
• 58:26
  Speaker 18: thread will look like in detail. We're really focused on
• 58:29
  Speaker 18: executing on the consumer experience first, making it a great
• 58:33
  Speaker 18: and productive and friendly place for people to have public conversations,
• 58:37
  Speaker 18: growing it to scale, investing in the features that people want,
• 58:41
  Speaker 18: and we'll get to monetization at the right time.
• 58:44
  Speaker 17: Of course, us in the media had a field day
• 58:46
  Speaker 17: thinking about the competitive force that Threads is Visa VX,
• 58:50
  Speaker 17: and then we think about the competition more broadly, you
• 58:53
  Speaker 17: versus TikTok, when I'm thinking of the success of reels
• 58:56
  Speaker 17: of late, when we're actually more broadly thinking about how
• 58:59
  Speaker 17: Meta makes it self not just the money spinner, but
• 59:02
  Speaker 17: a culture spinner here where people start trends not just
• 59:06
  Speaker 17: perhaps copy them from TikTok and bring them on to reels.
• 59:09
  Speaker 17: Do you feel you've got that now at Meta?
• 59:14
  Speaker 18: I think that we've been, over the course of the
• 59:16
  Speaker 18: time that I've been here, you know, constantly focused on innovation,
• 59:21
  Speaker 18: and I think that we've brought that to bear with
• 59:23
  Speaker 18: a lot of the experiences in our family of apps.
• 59:25
  Speaker 18: And at the same time, when there are clear secular
• 59:28
  Speaker 18: trends in the industry in terms of formats or experiences
• 59:32
  Speaker 18: that consumers are looking for, we look to integrate those too,
• 59:35
  Speaker 18: and I think we've done a really good job at
• 59:37
  Speaker 18: executing on both of those fronts. And then of course,
• 59:40
  Speaker 18: looking forward, I think we're really excited about the innovation
• 59:44
  Speaker 18: opportunities ahead of us. With Jenai, we think we're industry
• 59:48
  Speaker 18: leading here and then of course over the very long.
• 59:51
  Speaker 12: Term with our vision for reality labs and the Metaverse.
• 59:54
  Speaker 17: We are of course with the Meta Chief financial Officers
• 59:57
  Speaker 17: Susan Lee, We're welcome across TV and with our audiences
• 1:00:01
  Speaker 17: and Susan, I've all started talking about everything apps now.
• 1:00:04
  Speaker 17: I know you're about the money, not always developing the product,
• 1:00:08
  Speaker 17: but you think about everything app as Meta as there
• 1:00:10
  Speaker 17: a race on to ensure that we can build that
• 1:00:12
  Speaker 17: here in the us, and you'll.
• 1:00:13
  Speaker 7: Be part of it.
• 1:00:16
  Speaker 12: It's a great question.
• 1:00:17
  Speaker 18: I know that there are other regions around the world,
• 1:00:19
  Speaker 18: in particular Asia, where there are apps that have gone
• 1:00:21
  Speaker 18: down this model. That's not a model that we have
• 1:00:24
  Speaker 18: right now. We haven't seen that use case to the
• 1:00:27
  Speaker 18: same extent in North America. But you know, I would
• 1:00:32
  Speaker 18: say that we're really invested in the opportunities that we
• 1:00:35
  Speaker 18: have ahead of us across our family of apps right now,
• 1:00:38
  Speaker 18: including Threads, which is the newest standalone app in our portfolio.
• 1:00:42
  Speaker 18: And then there's just a lot that we can do
• 1:00:44
  Speaker 18: to make the experiences across our family of apps richer
• 1:00:47
  Speaker 18: and more engaging with the investments that we've made already
• 1:00:50
  Speaker 18: in AI and especially recommending content that you don't already follow,
• 1:00:54
  Speaker 18: and we know that that's brought richer content experiences to people,
• 1:00:58
  Speaker 18: is growing engagement across the apps, and we'll release you know,
• 1:01:03
  Speaker 18: we'll be releasing features over the course of the next years.
• 1:01:06
  Speaker 18: But we're really excited about what we think that this
• 1:01:08
  Speaker 18: is going to bring to bear for the consumer experience
• 1:01:11
  Speaker 18: and of course also eventually for businesses to connect with
• 1:01:14
  Speaker 18: consumers across the family of apps too.
• 1:01:17
  Speaker 16: Susan investors were sanguine about the idea that expenses could
• 1:01:21
  Speaker 16: creep up. I want if you just tell us what
• 1:01:23
  Speaker 16: your priorities are, where you'll invest in talent in the metaverse,
• 1:01:28
  Speaker 16: whether your investments will be on the content side or
• 1:01:30
  Speaker 16: the hardware side.
• 1:01:33
  Speaker 12: Great question.
• 1:01:34
  Speaker 18: We talked about this a little bit on the call
• 1:01:36
  Speaker 18: yesterday when we gave some coller into the twenty twenty
• 1:01:38
  Speaker 18: four outlook. The three themes that I really want to
• 1:01:41
  Speaker 18: talk about there are. First, we expect that our infrastructure
• 1:01:45
  Speaker 18: costs are going to grow because of the investments we've
• 1:01:47
  Speaker 18: made in AI, building GPU capacity, you know, that will
• 1:01:51
  Speaker 18: go towards both the core AI work and the ranking
• 1:01:54
  Speaker 18: and recommendation engines that I talked about, along with the
• 1:01:57
  Speaker 18: new GENAI investments. So that's a place where we're investing
• 1:02:00
  Speaker 18: certainly in a lot of hardware, along with the infrastructure
• 1:02:04
  Speaker 18: such as data centers and network equipment that you need
• 1:02:06
  Speaker 18: to support that. The second area that we talked about
• 1:02:09
  Speaker 18: is we are evolving our workforce toward a more technical mix,
• 1:02:13
  Speaker 18: you know, and we want to hire top tier technical
• 1:02:16
  Speaker 18: talent where we can towards some of our most compelling opportunities,
• 1:02:21
  Speaker 18: including AI and machine learning engineers to work on the
• 1:02:25
  Speaker 18: AI efforts we talked about, and so that's a place
• 1:02:28
  Speaker 18: where we are going to be investing, but we're going
• 1:02:31
  Speaker 18: to be doing it in a very thoughtful way, making
• 1:02:33
  Speaker 18: sure that we're really focusing on the core priorities and
• 1:02:36
  Speaker 18: making trade offs we're appropriate. The third thing that we
• 1:02:39
  Speaker 18: talked about is on the reality lab side. That's certainly
• 1:02:42
  Speaker 18: a very long time horizon and ambitious vision, and we're
• 1:02:45
  Speaker 18: going to be investing in deploying capital toward it.
• 1:02:48
  Speaker 17: The capital coming from that you already have. Are you
• 1:02:51
  Speaker 17: looking at the bond market, are you looking at raising
• 1:02:53
  Speaker 17: more funds?
• 1:02:56
  Speaker 18: You know, we certainly generate enough free cash flow right
• 1:03:00
  Speaker 18: now for us to invest across the organic opportunities ahead
• 1:03:04
  Speaker 18: of us that we see that are compelling. We have
• 1:03:08
  Speaker 18: been raising that we did earlier this year, just as
• 1:03:11
  Speaker 18: we're evolving our capital structure going forward, and that's something
• 1:03:14
  Speaker 18: that will continue to look at and I think do
• 1:03:16
  Speaker 18: on a measured pace going forward. But in terms of
• 1:03:20
  Speaker 18: thinking about the capital available to us now, you know,
• 1:03:23
  Speaker 18: we generate a lot of capital that we're always looking
• 1:03:26
  Speaker 18: to allocate across the organic opportunities that we have, and
• 1:03:29
  Speaker 18: we've talked about some of those and then of course
• 1:03:32
  Speaker 18: shareholder returns.
• 1:03:33
  Speaker 16: Susan really quickly before we lose you. How do you
• 1:03:36
  Speaker 16: and Mark split up responsibilities at the company. What's it
• 1:03:39
  Speaker 16: like working with Mark?
• 1:03:41
  Speaker 18: You know, I've had the privilege of working with and
• 1:03:45
  Speaker 18: learning from Mark for fifteen years here, obviously as CEO,
• 1:03:50
  Speaker 18: you know, and as a product visionary. He really shepherds
• 1:03:53
  Speaker 18: the product roadmap and has defined the long term vision
• 1:03:57
  Speaker 18: for a lot of the things that we're investing in
• 1:03:59
  Speaker 18: with incredibly ambitious goals, and I think that's a tremendous
• 1:04:03
  Speaker 18: and powerful motivator for us, and I try to make
• 1:04:06
  Speaker 18: sure that we have the financial frameworks and targets that
• 1:04:09
  Speaker 18: are going to enable us to invest against those things.
• 1:04:12
  Speaker 18: Innovation isn't free, and that's something that we're very mindful of,
• 1:04:16
  Speaker 18: and we recognize that, especially against some of our longest
• 1:04:19
  Speaker 18: time horizon ambitions, we have to earn the right to
• 1:04:22
  Speaker 18: put capital towards those things in the way that we do.
• 1:04:26
  Speaker 12: What I will say, having worked with.
• 1:04:27
  Speaker 18: Mark for such a long time is he's tremendous at
• 1:04:30
  Speaker 18: adapting to the time that we're in. And so whether
• 1:04:33
  Speaker 18: that was leading a four hundred person startup when I joined,
• 1:04:37
  Speaker 18: whether that was overseeing our transition to the public markets
• 1:04:40
  Speaker 18: during the shift to mobile, or whether that was this
• 1:04:44
  Speaker 18: past year, helping us really retool our cost structure and
• 1:04:47
  Speaker 18: the way we operate, and leading on the Year of Efficiency.
• 1:04:51
  Speaker 18: I think Mark is tremendously good at making hard decisions,
• 1:04:54
  Speaker 18: at acting on them with conviction and looking forward.
• 1:04:58
  Speaker 16: Mesa Chief financial Officer, Thank you so much.
• 1:05:04
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