Latest / Bloomberg Intelligence / Both Administrations Claim Economy But It’s Yellen’s: Eisenbeis

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Both Administrations Claim Economy But It’s Yellen’s: Eisenbeis · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg P and L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Changes
• 0:33
  Speaker 1: at the Federal Reserve a new chairman, Jerome Pale, taking
• 0:37
  Speaker 1: over from Janet Yellen, who chaired her final meeting yesterday
• 0:41
  Speaker 1: and on Tuesday. Here to help us understand the future
• 0:44
  Speaker 1: of the Federal Reserve is Robert Eisenbeis. Bob Eisenbis is
• 0:48
  Speaker 1: the vice chairman and chief monetary economist for Cumberland Advisers
• 0:52
  Speaker 1: and they're based in Sarasota, Florida. Bob, thank you very
• 0:55
  Speaker 1: much for being with us. As a former employee of
• 0:59
  Speaker 1: the Federal Serve at the Reserve Bank of Atlanta. What
• 1:03
  Speaker 1: can you tell us about the new FED in context
• 1:06
  Speaker 1: for a selection of vice chairman or vice chair and
• 1:11
  Speaker 1: who do you believe will fill that role? Well, the
• 1:16
  Speaker 1: organization issues right now are pretty challenged because of the
• 1:19
  Speaker 1: large number of vacancies and there are a number of
• 1:23
  Speaker 1: names being floated. Obviously, the one most recently mentioned as
• 1:26
  Speaker 1: John Williams, and John would be a very experienced and
• 1:31
  Speaker 1: well qualified economist. I think that's probably one of the
• 1:36
  Speaker 1: objectives that the administration has since UH new Chairman Paul
• 1:42
  Speaker 1: was not an economist, to have an economist as a
• 1:44
  Speaker 1: vice chairman would be essentially putting someone like that in
• 1:48
  Speaker 1: a support of function. UM. The vice chairman role changes
• 1:52
  Speaker 1: quite a bit. It used to be historically that the
• 1:54
  Speaker 1: vice chairman was sort of the operating officer of the organization,
• 1:59
  Speaker 1: but that's changed as time has changed. UM. I think
• 2:03
  Speaker 1: the real challenge right now is to essentially deal with
• 2:08
  Speaker 1: the fact that, given the present structure of the board
• 2:11
  Speaker 1: and as chair Yelling leaves, the Reserve Banks actually will
• 2:16
  Speaker 1: have the dominant vote as far as policy is concerned,
• 2:20
  Speaker 1: and I think that's going to be an interesting challenge
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  Speaker 1: for new Chairman Powell. Bob, this is Taylor Riggs. I'm
• 2:27
  Speaker 1: filling in here for Lisa Bramwoods, who's out on assignment.
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  Speaker 1: You you mentioned Janet Yellen, and you know, yesterday on
• 2:35
  Speaker 1: Bloomberg Radio and TV we spoke with Alan Greenspan. He
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  Speaker 1: of course would not comment on Janet Yellen's legacy as
• 2:42
  Speaker 1: you think about her legacy as the outgoing chair. Of course,
• 2:46
  Speaker 1: she was the first female chair of the Federal Reserve.
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  Speaker 1: What else comes to mind when you think about her
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  Speaker 1: legacy and her term. Well, I'm glad you asked that question,
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  Speaker 1: because when you consider the State of the Union address
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  Speaker 1: and all the claims that are being made as to
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  Speaker 1: who gets credit for what's going on, I don't think
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  Speaker 1: that either the previous administration or the current administration can
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  Speaker 1: claim credit for what's happened as far as the economy
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  Speaker 1: is concerned. I think that is a tribute to Janet
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  Speaker 1: Yellen that she has helped guide the economy and policy.
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  Speaker 1: When administrations and Congress are sitting on their hands, it's
• 3:30
  Speaker 1: really hard to point two specific initiatives that either administration
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  Speaker 1: put in place that you can link to the overall
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  Speaker 1: performance of the economy. Uh. I know Republicans will claim
• 3:44
  Speaker 1: the tax cut, but that's in the last month and
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  Speaker 1: a half or thereabouts. That doesn't explain the past four
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  Speaker 1: and five years of growth that the economy has had.
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  Speaker 1: So I think UH, the position that Chairman Powell UH
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  Speaker 1: has when it comes to the economy that he's inherited.
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  Speaker 1: That's her legacy at this juncture. Okay, so you mentioned
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  Speaker 1: j Powell. Let's go with that going forward. What's his
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  Speaker 1: biggest headwind this year? What would be his biggest challenge?
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  Speaker 1: Like you said, he's been given a decent economy here, right.
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  Speaker 1: I think this is a case where uh, he wants
• 4:24
  Speaker 1: to practice the hippocratic growth do no harm. UH do
• 4:28
  Speaker 1: no harm in this case means don't rush Liz a
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  Speaker 1: lot of rating increases. I think they're going to be
• 4:34
  Speaker 1: very cautious about what they do, partly because it was
• 4:38
  Speaker 1: mentioned in the leading to the whole program here is
• 4:41
  Speaker 1: the fact that with interest rates right now on the
• 4:45
  Speaker 1: fixed income side moving up, UH, that's essentially doing the
• 4:50
  Speaker 1: Fed's job for it. So the Fed looking out at
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  Speaker 1: the markets and the interest rate environment, that's a situation
• 4:58
  Speaker 1: where rates are going up, and as a result, the
• 5:01
  Speaker 1: Fed doesn't need to essentially act to try to move
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  Speaker 1: things in that direction. So they can afford to wait
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  Speaker 1: and be cautious and see how things sort out. And
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  Speaker 1: I think that's probably what he's going to have to
• 5:14
  Speaker 1: do and manage. And I think he's got a uh
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  Speaker 1: an f MC right now that's in sync with that
• 5:21
  Speaker 1: kind of concern Bob Eyeson, Bis, if you're an institutional
• 5:25
  Speaker 1: investor and you have the option to buy or sell bonds,
• 5:29
  Speaker 1: you don't have to hold them, perhaps like an insurance
• 5:31
  Speaker 1: company or a pension plan. Would you be suggesting that
• 5:35
  Speaker 1: the institutions sell their bond holdings or at least reduce them. Well,
• 5:40
  Speaker 1: I think what they want to do is you want
• 5:42
  Speaker 1: liquidity to be able to reinvest at higher rates, and
• 5:46
  Speaker 1: probably a barbell strategy is probably something that you can do.
• 5:50
  Speaker 1: I think the the biggest concern is to be sure
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  Speaker 1: that you're being compensated for the maturity risk that you're
• 5:57
  Speaker 1: taking on and with a very flat Yeld curve. Uh,
• 6:01
  Speaker 1: there's a tendency to, particularly if you're dealing with clients,
• 6:06
  Speaker 1: to try to keep them from reaching for risk where
• 6:08
  Speaker 1: they're not being and reaching for rates where they're not
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  Speaker 1: being compensated for either the maturity risk or in the
• 6:15
  Speaker 1: case of corporate bonds and municipal bonds, where they're not
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  Speaker 1: being compensated for the credit risk that they're taking. How
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  Speaker 1: do you I measure That's the real challenge, Bob. How
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  Speaker 1: do you imagine that? I mean, for example, I mean
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  Speaker 1: if you tell me all right, the duration risk on
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  Speaker 1: a tenure at two seventy three. How do you actually
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  Speaker 1: measure that duration risk that is in a way that
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  Speaker 1: is meaningful to the investor. Well, I think you have
• 6:36
  Speaker 1: to use history in that particular case, and uh in
• 6:39
  Speaker 1: the case of the credits that I'm talking about, you
• 6:42
  Speaker 1: have to dig into the underlying cash flows us that
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  Speaker 1: are being uh forwarded on those instruments and make that
• 6:50
  Speaker 1: judgment of bob juice. Finally, to wrap it up, you
• 6:54
  Speaker 1: talked about rising rates and the yield curve. The the
• 6:58
  Speaker 1: yield curve does look both the two tens and the
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  Speaker 1: two thirties. You know, my question is is a flat
• 7:05
  Speaker 1: yield curve concern you or is this sort of normal
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  Speaker 1: in this late stage business cycle. Well, we don't know
• 7:13
  Speaker 1: because we've never had this kind of the length of
• 7:15
  Speaker 1: a business cycle combined with h central bank activities that
• 7:22
  Speaker 1: have pumped so much liquidity in the marketplace. So we're
• 7:25
  Speaker 1: in unchartered waters when it comes to this situation. I
• 7:28
  Speaker 1: know a lot of people are concerned about a flat
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  Speaker 1: eel curve and what that might mean in terms of
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  Speaker 1: inversion and signaling recession and everything else. If you sort
• 7:38
  Speaker 1: of take a look back. However, what's happening in the
• 7:41
  Speaker 1: real economy. The real economy seems to be doing pretty
• 7:44
  Speaker 1: well and doesn't doesn't seem to be showing any signs
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  Speaker 1: of recession risk at this juncture, at least so. And
• 7:52
  Speaker 1: it's not, in my view, a case where the markets
• 7:56
  Speaker 1: are going to cause that kind of problem. Abs it's
• 8:00
  Speaker 1: some unanticipated shock and we don't see that yet on
• 8:05
  Speaker 1: the horizon. But you just have to be cautious because
• 8:08
  Speaker 1: of this flat eel curve in terms of where you
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  Speaker 1: position your your holdings now, shorter time is better than longer.
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  Speaker 1: Bob Eyes and Bis, thank you very much. Vice chairman
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  Speaker 1: and chief monetary economist at Cumberland Advisers. They're based in Sarasota, Florida.
• 8:39
  Speaker 1: Joining us here in our studio is Shira ov day
• 8:42
  Speaker 1: Are expert for all things technology. She's a Bloomberg gad
• 8:46
  Speaker 1: Flag columnist, and she's gonna tell us about what's she
• 8:50
  Speaker 1: gonna tell us about? Well, I've been dying to ask
• 8:52
  Speaker 1: this question, Sierra, So I'm so glad that you have
• 8:54
  Speaker 1: been able to join us. All about if Amazon is
• 8:57
  Speaker 1: getting too big? I know ahead of their earnings are
• 9:00
  Speaker 1: for it. I believe this might be the second report
• 9:02
  Speaker 1: where Whole Foods is now included. Earlier this week, we
• 9:05
  Speaker 1: all know that they talked about creating the healthcare company
• 9:08
  Speaker 1: with JP Morgan in Berkshire Hathaway. At what point is
• 9:11
  Speaker 1: Amazon getting too big that they start to draw eyeballs,
• 9:15
  Speaker 1: maybe from regulators or antitrust officials. I think that's happening
• 9:19
  Speaker 1: already at Amazon's current size. So one of the most
• 9:23
  Speaker 1: popular parlor games among academics and economists of the last
• 9:27
  Speaker 1: year is debating whether Amazon is currently a monopoly given
• 9:33
  Speaker 1: its market share in online shopping and its ability to
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  Speaker 1: dictate that market and also to have a big hand
• 9:41
  Speaker 1: in a job creation or where jobs are created. Amazon
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  Speaker 1: now has five hundred and forty thousand employees UM. That
• 9:49
  Speaker 1: jumped up a large number once Amazon acquired Whole Foods
• 9:54
  Speaker 1: towards the end of last year. And look, Amazon is
• 9:57
  Speaker 1: at the size like a lot of these tech giants
• 9:59
  Speaker 1: where they're attracting scrutiny from regulators all over the globe.
• 10:03
  Speaker 1: Talk to me about margins. Are we going to start
• 10:07
  Speaker 1: to see more investors more focused on margins? We know,
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  Speaker 1: of course at this point they've been ignoring that in
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  Speaker 1: lieu of gaining market share. At what point do we
• 10:15
  Speaker 1: need to start to be looking at margins? I don't know.
• 10:18
  Speaker 1: I think investors kind of go back and forth about
• 10:21
  Speaker 1: how much they care about Amazon's profit margins. Who who
• 10:25
  Speaker 1: knows what they feel like today. I guess we'll see
• 10:28
  Speaker 1: once the company reports. But look, the story of Amazon
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  Speaker 1: almost since the beginning of its history has been they
• 10:34
  Speaker 1: take almost every dollar that they earn and they plow
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  Speaker 1: it back into the business. And so far largely that
• 10:40
  Speaker 1: has been a good bet on the smarts of Jeff
• 10:43
  Speaker 1: Bezos to intelligently invest shareholders money. At some point they
• 10:48
  Speaker 1: may not believe that anymore. And you see some quarters
• 10:51
  Speaker 1: um investors are more nervous about Amazon spending than other quarters.
• 10:55
  Speaker 1: But that's definitely been the consistent strategy at Amazon. So
• 10:58
  Speaker 1: what do we need to pay attention to on the
• 11:00
  Speaker 1: earnings report today? Because you've got what prime customers. Everyone
• 11:04
  Speaker 1: looks to see whether there are more prime customers because
• 11:07
  Speaker 1: of course they pay the subscription price. And then you've
• 11:09
  Speaker 1: got the expansion of that fulfillment by Amazon, and that
• 11:13
  Speaker 1: some people say this could be a record corner for them. Yeah,
• 11:16
  Speaker 1: I mean, I think it's pretty clear from all of
• 11:18
  Speaker 1: the data that we've seen so far that the holidays
• 11:20
  Speaker 1: were very, very good for Amazon, and the company continues
• 11:24
  Speaker 1: to um expand its market share and online shopping, and
• 11:27
  Speaker 1: that's a category that continues to grow quickly around the world.
• 11:31
  Speaker 1: I think what investors are looking for is, in addition
• 11:34
  Speaker 1: to revenue growth, what are they spending right back to
• 11:37
  Speaker 1: this kind of margin question, um and what are they
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  Speaker 1: spending it on? Is it on fulfillment centers, on these
• 11:42
  Speaker 1: package warehouses, is it on the video service, which I
• 11:45
  Speaker 1: think has been a little bit of a wobbly business
• 11:48
  Speaker 1: for Amazon. Is it on Amazon Web services, on their
• 11:50
  Speaker 1: advertising business? Of what they spend And I think there's
• 11:53
  Speaker 1: gonna be a lot of focus on the forecast for
• 11:56
  Speaker 1: this coming quarter because this is a year where in
• 12:00
  Speaker 1: usters so far have been expecting Amazon to generate higher profits, uh,
• 12:04
  Speaker 1: and so we'll start to see that reflected in the forecast.
• 12:08
  Speaker 1: I want to shift to the other a we're talking
• 12:10
  Speaker 1: about Apple. Of course, we've heard a lot this week
• 12:13
  Speaker 1: about production problems with the iPhone ten. Is it too
• 12:17
  Speaker 1: early to tell what's going on with the iPhone ten
• 12:20
  Speaker 1: or are we going to get some more details about that? Yeah,
• 12:22
  Speaker 1: I think it's been very interesting to see the changing
• 12:25
  Speaker 1: sentiment about iPhone sales just in the last few months.
• 12:28
  Speaker 1: There was a belief a few months ago that the
• 12:30
  Speaker 1: iPhone tin was going to be this blockbuster that was
• 12:32
  Speaker 1: going to a sharp, significantly increase the number of phones
• 12:36
  Speaker 1: Apple cells after a couple of either down or modestly
• 12:40
  Speaker 1: up years in unit sales. I don't think investors think
• 12:44
  Speaker 1: that largely anymore. That the iPhone ten story is less
• 12:47
  Speaker 1: about how many Apple cells and more about what price
• 12:51
  Speaker 1: is Apple getting from those phones. That's a thousand dollar
• 12:54
  Speaker 1: en up phone, right, So that is inevitably going to
• 12:56
  Speaker 1: increase the average sale price for the company, and that's
• 12:59
  Speaker 1: good news for Apple. Although it we'll see the puts
• 13:02
  Speaker 1: and takes how quickly the revenue grows. Well, revenue, we
• 13:06
  Speaker 1: got what the estimate is for eight seven point three,
• 13:09
  Speaker 1: So let's say eight seven billion of revenue and net
• 13:12
  Speaker 1: income of nearly twenty billion for the company. What what's
• 13:16
  Speaker 1: the most important number, like, what would you think will
• 13:18
  Speaker 1: be traded on? I think the biggest, the biggest focus
• 13:23
  Speaker 1: of attention is going to be on the forecast for
• 13:25
  Speaker 1: the March quarter. UM. Apple gives a revenue forecast, so
• 13:30
  Speaker 1: investors will use that to extrapolate, Okay, how our iPhone
• 13:33
  Speaker 1: ten sales likely to go in the in the March quarter,
• 13:38
  Speaker 1: and what does that mean for the rest of the year.
• 13:40
  Speaker 1: You can extrapolate some assumptions about iPhone sales for the
• 13:44
  Speaker 1: rest of the year from the March forecast. And I
• 13:46
  Speaker 1: think there's a lot of anxiety about Apple's potential revenue
• 13:50
  Speaker 1: growth this this fiscal year, and that March forecast is
• 13:54
  Speaker 1: going to be I think ultra important. Well. And they
• 13:57
  Speaker 1: also got to face competition because on February, guess what,
• 14:00
  Speaker 1: Samsung is going to launch its Galaxy S nine. So
• 14:03
  Speaker 1: that's a competitor to the Apple iPhone. You call it
• 14:07
  Speaker 1: the X of the ten. Apple calls it the ten um.
• 14:12
  Speaker 1: I have tended to call it the X mostly just
• 14:14
  Speaker 1: to thumb my nose at Apple hood. Yes, it's alright,
• 14:18
  Speaker 1: well done, Thanks very much. Here every day Bloomberg gad
• 14:21
  Speaker 1: Fly columns for all things technology. Here to tell us
• 14:37
  Speaker 1: a little bit about what's going on in the world
• 14:39
  Speaker 1: of electronic payments is David Rittard. He is our Payments
• 14:42
  Speaker 1: and Specialty finance analyst for Bloomberg Intelligence. Shares of PayPal
• 14:47
  Speaker 1: they're down six percent the shares of eBay. They're up, David,
• 14:52
  Speaker 1: I know you can tell us why. Sure, Well, I
• 14:56
  Speaker 1: think that you have to keep PayPal in context of
• 15:00
  Speaker 1: how the stock has done. Um it had nearly doubled
• 15:04
  Speaker 1: in it was up another fifteen percent this year. And
• 15:08
  Speaker 1: you know, I've been saying for months you had the
• 15:09
  Speaker 1: fundamentals have been very strong, and and the trends continued
• 15:13
  Speaker 1: in the fourth quarter with very strong acceleration in account
• 15:18
  Speaker 1: growth and revenue growth. Again. Um, So, I think the
• 15:23
  Speaker 1: eBay loss is going to be manageable over time. It's
• 15:26
  Speaker 1: going to be staged out over the next several years.
• 15:29
  Speaker 1: I think the company could have done a better job
• 15:30
  Speaker 1: of telegraphing some of the impacts ahead of time. Um
• 15:34
  Speaker 1: but I think this is natural, and we're seeing the
• 15:36
  Speaker 1: stock rally actually quite a bit here in the last
• 15:39
  Speaker 1: hour already. David, it's Taylor Briggs here. I'm wondering, you know,
• 15:44
  Speaker 1: after eBay said that it will shift its payments business
• 15:46
  Speaker 1: to the Dutch company Audion from PayPal, why why, now,
• 15:53
  Speaker 1: I write, don't doesn't their partnership extend through Why did
• 15:56
  Speaker 1: they talk about this now? Yeah? I mean, I think
• 16:00
  Speaker 1: we need to be clear on what it is they're
• 16:01
  Speaker 1: actually doing. So. They have an agreement with PayPal UM
• 16:07
  Speaker 1: that governed when the two companies split, a five year agreement,
• 16:11
  Speaker 1: and they're at the point now, at the halfway point
• 16:13
  Speaker 1: where um eBay is permitted to allow other companies to
• 16:19
  Speaker 1: be their primary payments processor, so paypals he didn't called
• 16:25
  Speaker 1: Braintree that does that function. So they're really only transitioning
• 16:29
  Speaker 1: their core processing. They're still going to be accepting PayPal.
• 16:33
  Speaker 1: I mean, they're not taking the PayPal button off the
• 16:37
  Speaker 1: eBay merchants. So that's important to bring up UM. So
• 16:41
  Speaker 1: this is something that's been in the works and a
• 16:44
  Speaker 1: possibility for some time. The other important thing to remember is,
• 16:47
  Speaker 1: on the other hand, the agreement also prohibited PayPal from
• 16:52
  Speaker 1: signing up certain marketplaces that eBay competes with, and they're
• 16:56
  Speaker 1: going to be free to do that in the next
• 16:58
  Speaker 1: couple of years as well. Hey David, and as you noted,
• 17:02
  Speaker 1: the stock of palers trading around seventies six sixty nine
• 17:06
  Speaker 1: on the open and then now we see it as
• 17:09
  Speaker 1: much as so yes to turn around, although the stock
• 17:12
  Speaker 1: is still down about five and a half dollars to share.
• 17:14
  Speaker 1: Can you tell us about master Card because they, along
• 17:17
  Speaker 1: with Visa, they are also considered this you know, electronic
• 17:21
  Speaker 1: payments giant. Yeah, no, absolutely, I mean I think it's
• 17:26
  Speaker 1: a sign of really very very strong global growth, not
• 17:30
  Speaker 1: just a US story, but globally. You know, you saw
• 17:33
  Speaker 1: acceleration in payments growth in the fourth quarter and in
• 17:38
  Speaker 1: cross border payments, which is a really lucrative source of
• 17:41
  Speaker 1: revenue for them because they're translating currencies that they charge
• 17:44
  Speaker 1: and added fee for um. They're really cranking on all cylinders.
• 17:49
  Speaker 1: And the part partly it's the transition for in cash
• 17:52
  Speaker 1: and check globally to electronic payments, and obviously they are
• 17:56
  Speaker 1: a dominant central player, and there's certainly benefiting from a
• 18:01
  Speaker 1: shift of commerce to to mobile channels as well. Yeah,
• 18:05
  Speaker 1: David talked to me more about the outlook for this
• 18:07
  Speaker 1: continued shift to digital payments when it comes to master Card.
• 18:11
  Speaker 1: Is that helping with margin expansion given the high margins
• 18:15
  Speaker 1: there in the cross border sales. Yeah. I mean, you know,
• 18:19
  Speaker 1: the interesting thing about both Visa and master Card, by nature,
• 18:22
  Speaker 1: they're very very high operating margin businesses because when you
• 18:26
  Speaker 1: think about it, it's really a giant computer system and
• 18:30
  Speaker 1: communication system, so high fixed costs but the incremental cost
• 18:34
  Speaker 1: of each transaction is very very very low. So as
• 18:38
  Speaker 1: transactions convert from cash and check over to electronic means
• 18:43
  Speaker 1: um that's pure profit. And so what it's to allow
• 18:45
  Speaker 1: both companies to do is to say, Okay, well we're
• 18:48
  Speaker 1: going to take that natural margin benefit that we have
• 18:51
  Speaker 1: in our model and reinvest it in in digital initiatives
• 18:55
  Speaker 1: and in trying to grab other types of payment flows,
• 18:58
  Speaker 1: not just consumers pay businesses, but maybe government dispersing funds
• 19:02
  Speaker 1: to consumers, maybe businesses paying each other. And so you
• 19:06
  Speaker 1: saw a MasterCard by an a H company based in
• 19:11
  Speaker 1: the UK, and so they're looking to grab the substantial
• 19:14
  Speaker 1: portion of commerce that takes place on outside the traditional
• 19:19
  Speaker 1: consumer to business channel. So that's kind of their next
• 19:22
  Speaker 1: leg of growth. Well, thanks very much for enlightening us.
• 19:25
  Speaker 1: David Ritter is our Payments and Specialty finance analyst for
• 19:28
  Speaker 1: Bloomberg Intelligence. Good morning, I'm Taylor Riggs. I'm filling in
• 19:46
  Speaker 1: for Lisa Abramaitz. She's out on assignment. We are talking
• 19:50
  Speaker 1: about artificial intelligence and it is set to further disrupt
• 19:55
  Speaker 1: the retail industry. Joining me now, Rona, he's here with
• 19:58
  Speaker 1: us in studio Senior analysts of software and I T
• 20:01
  Speaker 1: services of Bloomberg Intelligence and over the phone Punum Goyle,
• 20:05
  Speaker 1: senior US retail analysts also with Bloomberg Intelligence. You know,
• 20:10
  Speaker 1: my first question you two, is the retail industry has
• 20:13
  Speaker 1: already been facing some problems with disruption, with Amazon coming
• 20:17
  Speaker 1: in disrupting really the entire sector. You tube put together
• 20:21
  Speaker 1: this massive report that AI will will further disrupt. I
• 20:26
  Speaker 1: guess generally, is this a net positive or a net negative?
• 20:30
  Speaker 1: Honor Rug, why don't you take that one? So one
• 20:33
  Speaker 1: of the biggest things that we talk about it is
• 20:35
  Speaker 1: today you really don't need a lot of capital to
• 20:38
  Speaker 1: come up with new stores. Um. So we follow a
• 20:40
  Speaker 1: company called Shopify, where you can go out and launch
• 20:43
  Speaker 1: a store tailor you can launch any store tomorrow for
• 20:47
  Speaker 1: a month with enterprise capabilities of payments, shipping, a look
• 20:53
  Speaker 1: and feel off a very large retailer with very little capital.
• 20:57
  Speaker 1: And every day or every year, I would say, we
• 20:59
  Speaker 1: are seeing hundreds of thousands of these stores pop up
• 21:03
  Speaker 1: that are targeted to your mobile device, to your Facebook,
• 21:06
  Speaker 1: to your Instagram, and that's how you're going to shop next.
• 21:10
  Speaker 1: I want to bring you in because I understand that
• 21:13
  Speaker 1: an UG attended the major retail convention and not too
• 21:17
  Speaker 1: long ago, and there was some technology that he was
• 21:20
  Speaker 1: able to access that told him something about himself that
• 21:23
  Speaker 1: he did not already know. Tell us about this experience. Um,
• 21:28
  Speaker 1: so the NR conference showcased much of this technology. I
• 21:31
  Speaker 1: mean think about, you know, going into a store and
• 21:35
  Speaker 1: picking up an item and then putting it back down,
• 21:37
  Speaker 1: and then the retailer knows that you picked up this
• 21:41
  Speaker 1: item and you didn't purchase it, so why didn't you
• 21:43
  Speaker 1: purchase that? And not only provides intelligence on the product,
• 21:46
  Speaker 1: but also it helped identify you as a party interested
• 21:50
  Speaker 1: in that item. The other thing we saw was the
• 21:53
  Speaker 1: makeup app and I don't know if that's what anorag
• 21:55
  Speaker 1: was referencing. Yes, tell us about it and how did
• 21:57
  Speaker 1: he use it? Yeah, so I guess you know, you
• 21:59
  Speaker 1: walk up in front of a mirror or in front
• 22:01
  Speaker 1: of a screen, they look at your skin, they tell
• 22:03
  Speaker 1: you what you should do to improve your skin. Is
• 22:07
  Speaker 1: quite interesting. Um it's actually being used in Europe right now.
• 22:11
  Speaker 1: They are talking to clients in the US. But it's
• 22:14
  Speaker 1: about giving clients the right feedback. So it's about you.
• 22:17
  Speaker 1: It's about the personalization, the connection to you, and it's individualized,
• 22:21
  Speaker 1: so it's not one size fits all or one suggestion
• 22:23
  Speaker 1: fits all, which is really what you know AI aims
• 22:27
  Speaker 1: to fix. Um. Everyone is unique and everyone should have
• 22:30
  Speaker 1: a unique recommendation. Okay, So at the end of the day,
• 22:34
  Speaker 1: Alex is giving me fashion advice, right this when it
• 22:39
  Speaker 1: comes down to see, that's just a tool that's going
• 22:41
  Speaker 1: to help you shop a little bit better. But you
• 22:43
  Speaker 1: have technology moving at such a rapid pace. Um, we
• 22:47
  Speaker 1: saw transactions that would be done through your Facebook messenger.
• 22:51
  Speaker 1: You could start buying things on a website and you
• 22:53
  Speaker 1: know that the data of that would go straight to
• 22:56
  Speaker 1: your messengers. You would use payment systems through that to
• 22:59
  Speaker 1: complete the purchase. You're bypassing a lot of legacy systems
• 23:03
  Speaker 1: through it. And as I said, you could be a
• 23:05
  Speaker 1: small mom and pop shop, you are now competing head
• 23:08
  Speaker 1: to head with very large established brands on all. Right,
• 23:12
  Speaker 1: let's say you're an investor. Right, let's be there and
• 23:14
  Speaker 1: say I want to get in on this. Who's making
• 23:17
  Speaker 1: the chips, who's making the actual technology that is making
• 23:20
  Speaker 1: all this reality? So, believe it or not, on the
• 23:23
  Speaker 1: tech side, it is still companies like Microsoft. Um, I
• 23:27
  Speaker 1: we heard that a lot of investors, a lot of
• 23:29
  Speaker 1: retailers are not working with Amazon because of obvious reasons.
• 23:33
  Speaker 1: So you have Google Cloud, you have Adobe, you have Microsoft,
• 23:38
  Speaker 1: you have IBM, you have SAP that's a very big
• 23:40
  Speaker 1: player and that. So on the tech side, it's pretty
• 23:43
  Speaker 1: much all the large giants we know and it's all software.
• 23:45
  Speaker 1: It's all software driven, so no, no no chip players
• 23:49
  Speaker 1: in here. That it's pretty ordinary chips that Intel's there,
• 23:54
  Speaker 1: Samsung is there, so you would always have those companies
• 23:57
  Speaker 1: that provide the infrastructure and the camera US and because
• 24:01
  Speaker 1: facial recognition is a big deal, so you have those
• 24:03
  Speaker 1: companies as well. Intel's big player obviously, but large portion
• 24:07
  Speaker 1: of the value edition comes from the software providers and
• 24:10
  Speaker 1: Punham who on the retail side has started to use this.
• 24:14
  Speaker 1: So it's not a lot. Actually, American Eagle has constantly
• 24:17
  Speaker 1: talked about at the show where they've they're trying, testing
• 24:20
  Speaker 1: and implementing a lot of these technologies. But you know,
• 24:22
  Speaker 1: if you ask me today who's doing it, well, there
• 24:25
  Speaker 1: really isn't one brick and mortar retailer that I can
• 24:28
  Speaker 1: think of that's implementing and using AI in a way
• 24:32
  Speaker 1: that someone else can replicate. Or would want to replicate
• 24:35
  Speaker 1: outside of Amazon. I mean, and that's sound brick and mortar.
• 24:37
  Speaker 1: What about Wayfair, that's the the online retailer of furnishings.
• 24:42
  Speaker 1: I don't cover Wayfair, but Wafair has been making strides
• 24:45
  Speaker 1: from what I know to implement this. Once again, not
• 24:47
  Speaker 1: a brick and mortar. Right, so you see the e
• 24:48
  Speaker 1: commerce players do a little bit more on AI and
• 24:52
  Speaker 1: on technology to get ahead of the curve. It's the
• 24:54
  Speaker 1: brick and mortars that are really lagging and it's them
• 24:58
  Speaker 1: who have been suffering throughout the whole surge and technology.
• 25:02
  Speaker 1: All right, the well, thanks for and just quickly on
• 25:04
  Speaker 1: a rog what did the what did the app tell you?
• 25:06
  Speaker 1: For your face? A lot of lotions A not dead
• 25:10
  Speaker 1: in by any of them. I just but you didn't
• 25:12
  Speaker 1: make the purchase? No I didn't. That doesn't sound like
• 25:16
  Speaker 1: a successful transaction. All right, Thanks very much on a
• 25:18
  Speaker 1: rag Grana He is our senior analyst of software and
• 25:21
  Speaker 1: I T Services are Thanks also to Punam Goyal, Senior US,
• 25:24
  Speaker 1: a retail analyst for Bloomberg Intelligence. Check out their latest report,
• 25:28
  Speaker 1: Bloomberg Intelligence taking a look at artificial intelligence when it
• 25:32
  Speaker 1: comes to the retail industry. Thanks for listening to the
• 25:38
  Speaker 1: Bloomberg P and L podcast. You can subscribe and listen
• 25:41
  Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform
• 25:45
  Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox.
• 25:50
  Speaker 1: I'm on Twitter at Lisa Abramo. It's one before the podcast.
• 25:53
  Speaker 1: You can always catch us worldwide on Bloomberg Radio te