Latest / Bloomberg Intelligence / Uber Bookings Miss Estimates, TikTok Lawsuit, Intel Revenue

Transcript

Uber Bookings Miss Estimates, TikTok Lawsuit, Intel Revenue · Bloomberg Intelligence

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
0:10
Speaker 1: Bloomberg Intelligence Podcast. Catch us Live weekdays at ten am
0:15
Speaker 1: Eastern on Apple Car playing Android Otto with the Bloomberg
0:18
Speaker 1: Business app. Listen on demand wherever you get your podcasts,
0:21
Speaker 1: or watch us live on YouTube.
0:25
Speaker 2: Let's continue the conversation with Uber and Live to get
0:27
Speaker 2: the read on what's going on here, Man Deep saying
0:29
Speaker 2: Lubering Intelligence. Senior tech industry analyst joins us. Now Mande
0:33
Speaker 2: for Uber, was it they're investing in other stuff that's
0:36
Speaker 2: why they're disappointing Or is it Paul's fault because he
0:39
Speaker 2: compareson shops between Lived and Uber.
0:42
Speaker 3: I think Uber does have a stickier business model now
0:46
Speaker 3: in the sense that people are more used to taking
0:49
Speaker 3: Uber simply because it's become part of their habits, so
0:52
Speaker 3: that price compares and narrative is sort of fading, although
0:56
Speaker 3: it's still i would say, used by a few subscribers.
1:01
Speaker 3: The overarching question is how big is this market in
1:04
Speaker 3: terms of the writer base. So what you're seeing with
1:08
Speaker 3: both Uber and Lyft is a flat lineling or flat
1:11
Speaker 3: lining of you know, the new customer ads, and that
1:15
Speaker 3: is a bigger problem because then the market suddenly feels saturated.
1:19
Speaker 3: How do you grow revenue? Do you boost right frequency
1:23
Speaker 3: or you layer in some other service? And I think
1:27
Speaker 3: the answer isn't that obvious because to an extent, there
1:30
Speaker 3: is a discretionary part to both their business models. Like
1:33
Speaker 3: if I choose to take public transportation instead of Uber,
1:36
Speaker 3: I could do that and it's just still a nice
1:39
Speaker 3: to have in.
1:39
Speaker 4: A lot of the rides that people take.
1:41
Speaker 5: So that's the aspect.
1:42
Speaker 3: I think that's what's driving the guidance and the tapering
1:46
Speaker 3: of bookings growth. And I think investors are reality.
1:50
Speaker 5: This is a global I think about areas for growth.
1:53
Speaker 6: I would agree if I would guess the US market
1:55
Speaker 6: is added close to saturation. I don't know, everybody's been
1:58
Speaker 6: using Uber for years now, so you cant and lift
2:01
Speaker 6: the card right string. But you know they get almost
2:05
Speaker 6: half of the revenue.
2:06
Speaker 7: Outside of the US.
2:07
Speaker 5: Yeah, so what's the call there.
2:09
Speaker 3: Well, so again you have to compare it to what
2:12
Speaker 3: will drive the next leg of growth, And to my mind,
2:16
Speaker 3: their take rates aren't going to expand, so take rates
2:19
Speaker 3: are coming under pressure.
2:20
Speaker 4: In the US.
2:21
Speaker 3: There are specific cities that are saying you should give
2:24
Speaker 3: higher wages to the workers, So that debate will always
2:27
Speaker 3: be with these companies. You can never get your way
2:30
Speaker 3: out of, you know, no matter how fast you grow.
2:32
Speaker 3: And Uber announced a buy back last quarter, but I
2:35
Speaker 3: think that's where the regulatory pressure is unlikely to abate.
2:39
Speaker 3: And to my mind, you know, these companies, even though
2:43
Speaker 3: they have an established business model, that right frequency element
2:46
Speaker 3: is huge and I just find it hard if Tesla
2:50
Speaker 3: is going to come up with robotaxis, that's going to impact.
2:53
Speaker 4: The take rates for Uber and Lyft.
2:56
Speaker 3: I mean, imagine Tesla adding a new tab within their
3:00
Speaker 3: app for ride sharing. That's I think it's a big risk.
3:04
Speaker 8: I mean, clearly they're really going to do that.
3:07
Speaker 3: Elon Musk has said there will be a robotaxi launch
3:10
Speaker 3: on August seventh.
3:11
Speaker 5: I bet you will not get so.
3:14
Speaker 8: Maybe not today, but your point is over time and the.
3:16
Speaker 3: Market will obviously look way ahead of that. And I'm
3:20
Speaker 3: more concerned about the take rates. Right now, Uber's take
3:23
Speaker 3: rates are close to forty percent for certain type of rides,
3:27
Speaker 3: even though the blended take rate is close to thirty.
3:30
Speaker 3: But forty percent take rate, I mean, imagine what would
3:33
Speaker 3: happen to that take rate if robotaxis come in the equation,
3:37
Speaker 3: it will be a lot lower than forty percent, for sure.
3:40
Speaker 2: But also I guess that but if you do with
3:41
Speaker 2: the ROBOTAXI thing like, can't Uber then get their own
3:44
Speaker 2: robotaxis and invest or does that? Just arow and then
3:46
Speaker 2: their take rates one hundred percent.
3:48
Speaker 3: So Uber has a partnership with Wevemo because Vemo doesn't
3:51
Speaker 3: want to deploy on their own network and being the
3:55
Speaker 3: business of maintaining the cars, so they want to use
3:58
Speaker 3: Uber's network. But test I mean, they want to do
4:01
Speaker 3: everything by themselves, so right now they haven't announced any partnership.
4:06
Speaker 4: I think it's.
4:07
Speaker 3: There's all the more reason for Lift to partner with
4:11
Speaker 3: a Tesla simply because they're the smaller player and this
4:15
Speaker 3: kind of gives them an opportunity to catch up, which
4:18
Speaker 3: is what Uber seems to be doing with the instacart
4:20
Speaker 3: partnership is how can I make my network bigger, even
4:24
Speaker 3: if that means partnering with your competitor. And I do
4:27
Speaker 3: think it's going to impact their delivery bookings in the
4:30
Speaker 3: near term, but still they want to grow their network.
4:32
Speaker 5: All right.
4:33
Speaker 6: Lift head numbers last night a little better than expected.
4:38
Speaker 5: How do you differentiate the call between Reddit.
4:40
Speaker 3: Yeah, I don't take an it's a question of lift
4:45
Speaker 3: gaining market share from Uber in anyway. This was more
4:48
Speaker 3: of a case of expectations being really low and they
4:51
Speaker 3: came out and showed, Okay, we are showing some cost discipline.
4:55
Speaker 4: We're not losing any more.
4:56
Speaker 3: Market share, which was the case for the past three quarters,
4:59
Speaker 3: and the stocks seems to have reacted ten percent.
5:01
Speaker 2: So to your point, Paul, the opposite of what happened
5:04
Speaker 2: with Reddit, good IR department.
5:05
Speaker 4: Yeah. Yeah.
5:06
Speaker 8: For example, we.
5:07
Speaker 2: Were talking earlier with Reddit being hit or Shopify, I
5:10
Speaker 2: should say Shopify that the IR department just didn't manage expectations.
5:14
Speaker 8: What's up with Reddit? What do you make of them numbers?
5:16
Speaker 5: Wait, first of all, what is Reddit? I'm not read
5:19
Speaker 5: in on this Reddit thing. I missing you.
5:20
Speaker 3: Think of them as another social media platform, even though
5:23
Speaker 3: social media definition continues to broaden. But they're a platform
5:28
Speaker 3: where users spend twenty to twenty five minutes of their
5:31
Speaker 3: time every day, and their daily active users seems to
5:34
Speaker 3: be that's a lot okay in the social media sphere.
5:37
Speaker 3: And look, their sequential daily active user growth was nine million,
5:42
Speaker 3: so they added almost nine million new users. That's a
5:46
Speaker 3: big number and their relevance in large anglid models. That's
5:50
Speaker 3: the biggest driver. Every company that has their foundational large
5:54
Speaker 3: anglid model needs Reddit data to train their model on.
5:59
Speaker 2: So that was the whole pitch in the IPO that
6:00
Speaker 2: it was like, people are going to pay Reddit to
6:04
Speaker 2: get their user's posts because it helps their language model, right, yes,
6:08
Speaker 2: are they making money from that and how much?
6:11
Speaker 3: Yesterday they called out the incremental traffic they're getting from
6:16
Speaker 3: Google because of that. So a lot of the Google
6:19
Speaker 3: large acrid model results linked to Reddit posts, so they
6:24
Speaker 3: get those automatic clicks because the large acrid model generates
6:27
Speaker 3: a response that has a blue link to a Reddit post.
6:30
Speaker 3: So clearly that traffic, incremental traffic has been a big
6:33
Speaker 3: boost for Reddit, and now they are trying to monetize
6:36
Speaker 3: it through ads. But their ad systems aren't as sophisticated
6:39
Speaker 3: as your Meta and some of the other social media players,
6:42
Speaker 3: so that will take them a while to catch up
6:44
Speaker 3: in terms of building their ads.
6:46
Speaker 5: So the Reddit story is just an advertising story.
6:49
Speaker 3: Advertising, it's the same old, same old same and data licensing.
6:53
Speaker 6: Yeah, data, I'm not sure I'm buying that, but the
6:57
Speaker 6: IPO bought it. I mean thirty four bucks and start
6:59
Speaker 6: looking at the lone.
7:00
Speaker 3: Compared to a meta, this company has got a lot
7:04
Speaker 3: of runway to add users, to add data licensing. Why
7:07
Speaker 3: won't you buy a social media story at an earlier
7:09
Speaker 3: stage as opposed to a mature stage.
7:11
Speaker 1: Yep?
7:12
Speaker 5: So where is this? All right? San Francisco?
7:13
Speaker 1: All right?
7:14
Speaker 5: Another good San Francisco story?
7:17
Speaker 7: Who's this guy? Steve Hoffman the founder?
7:19
Speaker 5: Is he a player?
7:20
Speaker 3: I mean, look, the company has been around for eighteen
7:23
Speaker 3: plus years, so that's right, that's.
7:25
Speaker 5: Right, that's right.
7:26
Speaker 8: Big on it, John Tucker, he's all over.
7:32
Speaker 5: He's hit Yep, he's hit me.
7:34
Speaker 8: On social media.
7:37
Speaker 2: You're not even on the instant message on the Bloomberg's.
7:40
Speaker 4: Dangerous to put my thoughts out there.
7:42
Speaker 2: I have sent you just like the link of the
7:45
Speaker 2: met Gala outfits, and he still won't look at it. Mandy,
7:48
Speaker 2: thanks a lot, We appreciate you, and we deep seeing
7:50
Speaker 2: a Bloomberg Intelligence senior tech industry analyst joining us.
7:54
Speaker 8: There.
7:56
Speaker 1: You're listening to the Bloomberg Intelligence Podcast live weekdays at
8:01
Speaker 1: ten am Eastern on Apple car Play and Android Auto
8:04
Speaker 1: with the Bloomberg Business app. You can also listen live
8:07
Speaker 1: on Amazon Alexa from our flagship New York station. Just
8:10
Speaker 1: say Alexa playing Bloomberg eleven thirty.
8:14
Speaker 2: Let's hear on that Apple story for a moment. So
8:16
Speaker 2: Apple stock is down by about three tens one percent
8:18
Speaker 2: as John Tucker was reporting, the Chinese iPhone shipments jumped
8:21
Speaker 2: about twelve percent in March after Apple and it's retailers
8:24
Speaker 2: slashed prices. This is according to official data.
8:27
Speaker 8: So what does that? What does that mean? What do
8:29
Speaker 8: price cuts actually look like?
8:31
Speaker 2: Joining us now is anarag Rana Bloomberg Intelligence technology analysts
8:34
Speaker 2: on Apple's China iPhone shipments? What kind of price cuts?
8:38
Speaker 2: I read the headline quickly and I thought it was
8:40
Speaker 2: twelve percent price cuts? What kind of price cuts are
8:42
Speaker 2: we looking for?
8:44
Speaker 4: See again, this is very old. Also showed why the
8:47
Speaker 4: people are getting so excited about it.
8:48
Speaker 9: I mean, they already reported the quarter in April, and
8:52
Speaker 9: you know, I mean a few days ago, and you
8:54
Speaker 9: know Tim Cook said that they grew their sales in China.
8:58
Speaker 9: So I'm not so sure why people getting so excited
9:00
Speaker 9: about March. The big thing is there's an event coming
9:04
Speaker 9: in June. The big version would be whether Apple's going
9:06
Speaker 9: to repeat the price cuts in June or not because
9:09
Speaker 9: right now everything hangs out and what will happen in
9:12
Speaker 9: the second quarter because the guidance though it's good, but
9:15
Speaker 9: if you back into it, iPhone stalls will still be
9:18
Speaker 9: down in the second quarter.
9:19
Speaker 6: For Apple, Anra, can we step back and can you
9:22
Speaker 6: help us just kind of frame out the competitive landscape
9:25
Speaker 6: for the phone business in China. What was it like
9:29
Speaker 6: for Apple several years ago and what is it now?
9:33
Speaker 9: So you know, Apple has been gaining share over the
9:36
Speaker 9: last several years steadily, and it is extremely important for
9:40
Speaker 9: Apple to do well in China because that is the
9:42
Speaker 9: growth engine. That is only place where they're going to
9:45
Speaker 9: you know, show a decent amount of actual number of
9:48
Speaker 9: units growth. However, what happened was Huawei, which is this
9:52
Speaker 9: is a local brand, had not released a big phone
9:56
Speaker 9: for years because of certain restrictions and other things, and
9:59
Speaker 9: they released a big five V phone for the first
10:01
Speaker 9: time after a long you could say break. What happened
10:05
Speaker 9: with that is who had those phones early on went
10:08
Speaker 9: in you know quite a bit of them, increased the
10:11
Speaker 9: sales of that particular brand, while Apple continue to struggle
10:15
Speaker 9: at that time for that particular period only because you know,
10:19
Speaker 9: eight there was a lot of discussion about not you know,
10:22
Speaker 9: government officials not using Apple phones want to use something local.
10:27
Speaker 4: As well as consumer weakness.
10:28
Speaker 9: Apple for the first time, I would say, a few
10:30
Speaker 9: months ago, you know, did unusual price cuts and which
10:34
Speaker 9: is what we are hearing, you know, led to the
10:36
Speaker 9: unit ship increase.
10:38
Speaker 4: The big question or the big debate for all of.
10:40
Speaker 9: Us, including you know, what we have discussed with you
10:42
Speaker 9: as well, is whether this is a cyclical problem for
10:46
Speaker 9: Apple in China or whether there's a structural problem of
10:49
Speaker 9: people not buying iPhones.
10:51
Speaker 4: We think it's a cyclical issue.
10:53
Speaker 9: Over time, it's going to play out because you know,
10:56
Speaker 9: you have ups and downs in unit shipments and if
10:58
Speaker 9: Apple is going to be as great have been investing
11:00
Speaker 9: in China adding more factories over there. You know, I
11:03
Speaker 9: don't see a reason why the Chinese government is going
11:06
Speaker 9: to be against them.
11:07
Speaker 4: But on the other side of the equation, if.
11:08
Speaker 9: The US government is very strict with you know, Huawei
11:11
Speaker 9: and other local brands, you know they're going.
11:13
Speaker 4: To go after Apple.
11:13
Speaker 9: So there is a lot hanging on on Apple at
11:16
Speaker 9: this point when it comes to the phone market.
11:19
Speaker 2: What did you make of the iPad announcement yesterday? I
11:22
Speaker 2: got to say, it was like the least covered Apple
11:24
Speaker 2: event I think I've ever seen. So they have AI
11:28
Speaker 2: focused pro model. So that was where really sted it
11:31
Speaker 2: out to me, and I kind of want to know,
11:32
Speaker 2: did you like it? Would you think of it? And
11:34
Speaker 2: is there a template now that we're going to use
11:36
Speaker 2: from the iPad to then what an AI phone maybe
11:39
Speaker 2: looks like.
11:40
Speaker 9: That's a brilliant question because I really was thinking on
11:43
Speaker 9: the same lines yesterday that, Ah, this is an interesting
11:46
Speaker 9: because if they had chip.
11:48
Speaker 10: Ready for the for the iPad, maybe they're working hard
11:52
Speaker 10: to do something similar for the phone because that's what's
11:54
Speaker 10: going to drive growth for them now as well as
11:56
Speaker 10: the product existence concerned.
11:58
Speaker 4: I was blown away. It was beauty for I'm actually
12:01
Speaker 4: they're going to have.
12:01
Speaker 9: It in my local store on Wednesday, and I'm going
12:03
Speaker 9: to go test it out and see how it plays.
12:06
Speaker 11: Now.
12:07
Speaker 9: The thing that's relevant is Apple iPad really got a
12:12
Speaker 9: boost in FY twenty, right around the pandemic. That year,
12:15
Speaker 9: I iPad sales grew up thirty four percent, with a
12:18
Speaker 9: you know, high watermark of thirty one billion dollars that year.
12:22
Speaker 9: Since then, the sales have been declining only because you
12:25
Speaker 9: have this massive pull forward in demand because of the
12:28
Speaker 9: pandemic app iPad refresh rate or you know, typically you know,
12:33
Speaker 9: the years it takes for one to replace it or
12:35
Speaker 9: it goes bad is about five years. So we are
12:38
Speaker 9: really not expecting mathematically this release to do a fair
12:42
Speaker 9: amount of stuff in terms of revenue for this year.
12:44
Speaker 9: For next year, we are expecting that to have a
12:47
Speaker 9: double digit growth rate for iPad for FI twenty five.
12:50
Speaker 4: So that's really the iPad story.
12:51
Speaker 9: But I think the read through is if they have
12:54
Speaker 9: an AI chip that's doing you know, it's performing so well.
12:58
Speaker 9: If that, if something similar to that comes to the phone,
13:00
Speaker 9: I think it could be a game changer.
13:02
Speaker 8: Okay, all right on Rock.
13:03
Speaker 6: I think I'm going out to San Francisco next month
13:05
Speaker 6: for this developer conference.
13:06
Speaker 7: I think that's the place to be.
13:09
Speaker 6: Am I if I go out there, am I going
13:10
Speaker 6: to see an AI oh wow moment from Apple?
13:13
Speaker 7: Do you think?
13:15
Speaker 4: I think?
13:16
Speaker 9: I personally think if it is just left for Apple,
13:19
Speaker 9: it's not kind of to it only because they just
13:22
Speaker 9: started pushing a lot of R and D into this
13:24
Speaker 9: over the last six to twelve months. But if they
13:27
Speaker 9: announced the deal with Google that they're going to license
13:30
Speaker 9: some of the Google's product to run on the iOS.
13:34
Speaker 4: I think that could make a difference.
13:35
Speaker 9: Now, remember they already have a very strong partnership with
13:38
Speaker 9: Google on the search side, and I'm hoping for you know,
13:41
Speaker 9: both the company's sake because you know, we heard, we
13:44
Speaker 9: have heard, like all the trouble that Google has to
13:47
Speaker 9: you know, overpower it, all the discussions around search and stuff.
13:51
Speaker 9: If they do a partnership with Apple, it's going to
13:54
Speaker 9: help both the companies. And it's really going to help
13:56
Speaker 9: Apple in order to get a small language model onto
13:59
Speaker 9: the phone that can help me with you know, a
14:01
Speaker 9: lot of the AI related queries. Now, assuming the you know,
14:04
Speaker 9: the hardware is there to support it, I think it
14:06
Speaker 9: helps out both the companies.
14:09
Speaker 2: For let you go, you mentioned that you said the
14:10
Speaker 2: iPad was amazing and YadA YadA, you're gonna go to
14:12
Speaker 2: the store and look at it really like it was
14:14
Speaker 2: that it was that cool, like like like Paul and
14:17
Speaker 2: I need to care it was.
14:20
Speaker 9: I mean, it is it is something that you know,
14:22
Speaker 9: I don't carry a laptop nowadays.
14:24
Speaker 4: I mean it's certainly the phone that you deal with.
14:26
Speaker 9: But if you do want a device that is extremely thin,
14:29
Speaker 9: extremely light, and it can take care of all your
14:32
Speaker 9: computing needs. I mean, why not, you know, make the leap,
14:35
Speaker 9: then get rid of the laptop altogether. Because remember the
14:38
Speaker 9: iPad was always supposed to be a replacement for the.
14:42
Speaker 4: For for for the laptop, but it never has you know, occurred.
14:45
Speaker 9: A lot of people use it to watch moviesm and
14:47
Speaker 9: that's where it ends usually. But you know, but but
14:51
Speaker 9: I but but I think I'm gonna try to make
14:53
Speaker 9: that lead now interesting?
14:55
Speaker 8: Well that actually, I mean, so I don't have a computer.
14:57
Speaker 8: Did you know this about me?
14:58
Speaker 7: I don't have one other?
14:59
Speaker 2: Okay, okay, because you have your phone, yep. But if
15:02
Speaker 2: you could do it on the iPad or the bigger screen,
15:04
Speaker 2: I work.
15:05
Speaker 6: But I use it less and less and less and
15:06
Speaker 6: less because I use the phone more and more and more.
15:08
Speaker 8: That's even to work and do all those things.
15:10
Speaker 7: Yes, the whole thing on the phone.
15:12
Speaker 8: Interesting. Well, yeah, go ahead, an rock.
15:14
Speaker 6: Can you tell me what Shopify is and why the
15:16
Speaker 6: stock are down twenty percent today?
15:19
Speaker 4: Shopify is one of the most innovative companies that's out there.
15:22
Speaker 9: In fact, I would you know, I equate their founder
15:24
Speaker 9: to be one of the smartest people that I have seen,
15:26
Speaker 9: you know, from our generation.
15:28
Speaker 4: Very equivalent to when I asked, yeah.
15:30
Speaker 9: Equivalent to what Steve Jobs was on, you know, let's
15:32
Speaker 9: say fifteen years ago. So yeah, it is as a
15:35
Speaker 9: remarkable company. The starts down today because the guidance is
15:39
Speaker 9: a bit light. So I'm sure all the heydphones are
15:42
Speaker 9: getting out of this thing. But this is a company.
15:44
Speaker 9: I think it's going to be there for a very
15:46
Speaker 9: long period of time. But I have liked this company
15:49
Speaker 9: for you know, I think six seven years. It's just
15:52
Speaker 9: a phenomenal story.
15:53
Speaker 5: And the software I don't use it, So explain to
15:56
Speaker 5: me what they do.
15:57
Speaker 9: Yeah, so they allow merchants to get onto line and
16:00
Speaker 9: start you know, stores immediately.
16:02
Speaker 4: It's it's it's just like you can.
16:04
Speaker 9: You can you know if if you are an entrepreneur,
16:06
Speaker 9: if you are a millennial, you know, if you are
16:10
Speaker 9: you know, if you are one of the influencers, you're
16:13
Speaker 9: going to be using their software to sell sell their products.
16:15
Speaker 9: I mean, this is a this is the next gen
16:17
Speaker 9: company for in what I call digital commerce software. So
16:21
Speaker 9: in principle they help people get online and sell products.
16:25
Speaker 9: It's they sell the software, they sell the platform.
16:28
Speaker 4: I mean it is it is for the people.
16:30
Speaker 2: Frankly so I don't go and shop there, but any
16:33
Speaker 2: website that I may go to helps me.
16:35
Speaker 8: Yes, that's what's helping me do that.
16:38
Speaker 4: Yeah, it is.
16:38
Speaker 9: If you see one of the coolest websites on your phone,
16:41
Speaker 9: on your web on the browser, it's most likely being driven.
16:44
Speaker 4: By something that Shopify, that's built on Shopify. So is it.
16:49
Speaker 2: So if I'm shopping on Instagram, though, and then I
16:52
Speaker 2: go to a website from Instagram, is that still Shopify?
16:55
Speaker 4: Yes?
16:56
Speaker 9: So Shopify is one of the very few companies that
16:58
Speaker 9: can integrate with any digital channel. You can shop through
17:01
Speaker 9: your you know, Instagram, through any of the other social
17:04
Speaker 9: media platforms, you know, if you If I'm a merchant
17:08
Speaker 9: and I want to sell a product, I can go
17:11
Speaker 9: onto the shop of Ice platform, create my own websites,
17:13
Speaker 9: billing system, front end system, back end system, payment systems.
17:17
Speaker 4: They take care of everything on the back end. All
17:19
Speaker 4: you have to do is have a good product to sell.
17:22
Speaker 6: All right, Very cool, explain it now, I understand. All right,
17:25
Speaker 6: And this seems like, again I'm going to reiterate, just
17:26
Speaker 6: a bad job of investor relations managing expectations.
17:30
Speaker 5: It seems like a rag.
17:31
Speaker 6: Rana technology analyst at Bloomberg Intelligence, big fan of Shopify,
17:36
Speaker 6: who knew? Joining us from that technology capital that is
17:40
Speaker 6: known as Chicago, Illinois?
17:42
Speaker 5: Who knew about that?
17:45
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
17:49
Speaker 1: weekdays at ten am Eastern on Affo card playing Android
17:52
Speaker 1: Oro with the Bloomberg Business app. Listen on demand wherever
17:56
Speaker 1: you get your podcasts, or watch us live on YouTube.
18:00
Speaker 2: So one other story we want to focus on here
18:02
Speaker 2: is Tikno So, China based a byte Dance made it
18:07
Speaker 2: clear that it will not comply with a new US
18:09
Speaker 2: law requiring it to sell its popular TikTok video sharing app,
18:13
Speaker 2: and that sets up, guess what it's all for the
18:15
Speaker 2: lawyers and the judges, a prolonged court battle that basically
18:19
Speaker 2: is going to pit free speech rights against national security interests.
18:22
Speaker 2: And the rumor is that it could wind up at
18:25
Speaker 2: the Supreme Court. So we want to get more data
18:28
Speaker 2: on this. Matthew Shettenhelm is Bloomberg Intelligence media litigation analyst.
18:33
Speaker 2: I just think the fact that we have a media
18:34
Speaker 2: litigation analyst I know says a lot about where we
18:37
Speaker 2: are in m and A and in big tech growth,
18:39
Speaker 2: et cetera.
18:41
Speaker 8: Matthew, what do you make. But first of all, walk
18:42
Speaker 8: us through what this lawsuit is.
18:45
Speaker 12: Yeah, so this is the First Amendment lawsuit that we
18:47
Speaker 12: expected TikTok to bring, basically saying that Congress's action violates
18:53
Speaker 12: its First Amendment rights, that it, like any other platform,
18:59
Speaker 12: think about The New Times or any other media outlet,
19:03
Speaker 12: if Congress were to effectively ban it, that it violates
19:08
Speaker 12: the First Amendment to do so unless Congress can pass
19:12
Speaker 12: a pretty tough test. And so I think this is
19:17
Speaker 12: a pretty substantial First Amendment case because we've rarely seen
19:21
Speaker 12: Congress take such drastic action with respect to such a
19:26
Speaker 12: major media platform.
19:28
Speaker 5: You know what we hired, Matt. He was just a kid,
19:31
Speaker 5: gray hair. I know, I don't know what happened exactly.
19:36
Speaker 6: As a grizzled veteran there, Matt. I know it's important
19:40
Speaker 6: which court these things go to. So tell us where
19:42
Speaker 6: you think this case will be litigated initially and kind
19:45
Speaker 6: of how that might play.
19:46
Speaker 12: Yeah, So this one's pretty easy to figure that out
19:49
Speaker 12: because Congress limited where the companies can sue, and they
19:53
Speaker 12: said any suit can only be filed at the DC
19:57
Speaker 12: Circuit here here in Washington, which is sometimes referred to
20:01
Speaker 12: as the second most important court in the United States
20:05
Speaker 12: below below the U. S. Supreme Court. This is a
20:07
Speaker 12: court that that takes most of its cases actually involved
20:11
Speaker 12: challenges to US government action, usually agencies, the the alphabet
20:17
Speaker 12: soup of agencies, the FCC, the the f A A, the.
20:21
Speaker 11: E p A.
20:22
Speaker 12: But here it's it's Congress actually taking the action. So
20:26
Speaker 12: so this is a pretty experienced court. This won't allow
20:31
Speaker 12: a single judge to go out and sort of make
20:33
Speaker 12: a name for himself with an opinion. This will be
20:36
Speaker 12: a three judge panel of very experienced judges, and then
20:41
Speaker 12: the only appeal option would be to the Supreme Court
20:44
Speaker 12: after that.
20:45
Speaker 2: Does it violate the First Amendment free speech rights?
20:50
Speaker 12: So I think it's it's a strong argument that that
20:53
Speaker 12: TikTok presents. This is not an easy case on on
20:56
Speaker 12: either side. What what the court is going to look
21:01
Speaker 12: at is whether there's an important interest that Congress was
21:05
Speaker 12: trying to serve and whether it tried to address that
21:09
Speaker 12: interest in an appropriate and narrow way. Did it burden
21:14
Speaker 12: more speech than is necessary to go after the interest.
21:17
Speaker 12: And one of the things that the government has going
21:20
Speaker 12: for it here is that this is a national security question.
21:24
Speaker 12: I think if if if this were just an agency,
21:28
Speaker 12: you know, trying to do this. I think that the
21:31
Speaker 12: DC Circuit would would have issues with the state of
21:34
Speaker 12: the record here and and and require it to do more.
21:38
Speaker 12: There's very little evidence in the legislative record about what
21:42
Speaker 12: exactly is the risk and what exactly why Congress needed
21:46
Speaker 12: to pursue this avenue versus another avenue. If an agency
21:50
Speaker 12: did this, a court would would have issues with it.
21:52
Speaker 12: But this is Congress. This is our biggest policy making body,
21:57
Speaker 12: and it's on national security, something these judges really know
22:00
Speaker 12: nothing about, and they're going to be be very careful
22:03
Speaker 12: about interfering. So at the end of the day, it's
22:06
Speaker 12: a close call, but I give the United States a
22:09
Speaker 12: slight edge because of that deference on national security questions
22:13
Speaker 12: where judges just aren't expert.
22:16
Speaker 6: So let's just assume that maybe the second this DC
22:19
Speaker 6: District rules in favor of Congress, Tiktak presumably would then
22:24
Speaker 6: take it to the Supreme Court. Do you think the
22:26
Speaker 6: Supreme Court would hear such a case.
22:29
Speaker 12: Yeah, so every Supreme Court case is discretionary. They could
22:32
Speaker 12: say no, you know, I think more likely if the
22:36
Speaker 12: scenario were flipped, I think the Supreme Court would take
22:40
Speaker 12: it that if the DC Circuit rules initially in TikTok's favor,
22:44
Speaker 12: I think the United States would would almost certainly get
22:48
Speaker 12: a second chance at the Supreme Court. And that's one
22:51
Speaker 12: of the reasons why I like the United States chances
22:53
Speaker 12: here is that I see even if it doesn't go
22:56
Speaker 12: well for the United States at the DC Circuit, I
22:59
Speaker 12: think it it might go better at the Supreme Court.
23:02
Speaker 5: It gets two shots at it.
23:04
Speaker 12: If the DC Circuit rules for the United States, I
23:08
Speaker 12: could say this, I could see the Supreme Court saying,
23:10
Speaker 12: you know what, the DC Circuit got it right. We
23:12
Speaker 12: don't need to take it up and say the same thing.
23:15
Speaker 12: So you know, it's definitely going to be on the
23:17
Speaker 12: Supreme Court's radar, assuming the timing fits. That's going to
23:20
Speaker 12: be the first question is how do you squeeze all
23:22
Speaker 12: this in on Congress's timeline by January nineteenth, we're supposed
23:27
Speaker 12: to have a divestiture. The courts usually take much longer
23:30
Speaker 12: than that.
23:31
Speaker 2: If Minutian gets together as buddies, or if somebody else
23:35
Speaker 2: comes in and wants to buy it, how does that complicate.
23:39
Speaker 8: The court case.
23:41
Speaker 12: Yeah, so that's a great question because for all of
23:45
Speaker 12: this to happen on such a short timeline is almost impossible.
23:50
Speaker 12: And so, you know, I think the court case is
23:53
Speaker 12: going to press ahead, and one of the first things
23:55
Speaker 12: we're going to see is a filing from TikTok giving
23:59
Speaker 12: us its strategy the timing. Is it going to ask
24:01
Speaker 12: the court to expedite this case. Is it going to
24:04
Speaker 12: ask the court to pause Congress's deadlines to give more
24:07
Speaker 12: time for for those sorts of negotiations.
24:11
Speaker 5: We don't know yet.
24:12
Speaker 8: That should come.
24:13
Speaker 12: I think in the next couple of days. You know,
24:15
Speaker 12: some some look at the strategy there, but it's definitely
24:20
Speaker 12: difficult to see how you squeeze both a potential divestiture
24:25
Speaker 12: and litigation in at the same time. I think they
24:27
Speaker 12: have to be going at the same time on two tracks.
24:30
Speaker 5: Who argues this case on behalf of the US government?
24:33
Speaker 12: Good question, Yeah, I would I would think it's it's
24:37
Speaker 12: pretty high level attorneys in the Attorney's General Office, you know,
24:42
Speaker 12: and so so the potentially the Solicitor General of the
24:46
Speaker 12: United States if this goes to the US Supreme Court. Uh,
24:51
Speaker 12: this suit named Merrick Garland, the Attorney General, as the defendant,
24:56
Speaker 12: so I would think he would he would name one
24:59
Speaker 12: of his top attorneys to represent him and the United
25:02
Speaker 12: States in this case.
25:04
Speaker 5: All right, presumably we have some good attorneys working for
25:07
Speaker 5: us in the government.
25:08
Speaker 7: I would like to think.
25:09
Speaker 8: I think this is a David So David Weston is
25:12
Speaker 8: a recovering lawyer.
25:13
Speaker 2: He's anti trust but still and years and years and
25:16
Speaker 2: years ago, he was like, you know what, anything is
25:18
Speaker 2: just good.
25:18
Speaker 8: For lawyers, good for all of this just puts lawyers more.
25:22
Speaker 7: Job because they built by the hour, by the minute.
25:24
Speaker 7: Matt Shuttingham, thank you so much.
25:26
Speaker 6: We appreciate it. He doesn't build by the hour. We
25:27
Speaker 6: get him on a straight retainer. Come on to Bloomberg
25:30
Speaker 6: Intelligence radio show, Matt Sheltenhelm Middy media litigation analysts for
25:34
Speaker 6: Bloomberg Intelligence. He's down in DC where all this A
25:36
Speaker 6: lot of this stuff happens, you know, all these agencies
25:39
Speaker 6: in the litigation arising there. So again, TikTok important. I mean,
25:42
Speaker 6: I don't know how many gajillions of people are on tiktech,
25:44
Speaker 6: but a lot. It's important for the kids and support
25:46
Speaker 6: for John Tucker. He's got a huge presence. He's in
25:48
Speaker 6: I think he's an influencer, is what they call. So
25:52
Speaker 6: he's paying close attention to this litigation.
25:57
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Don't catch us
26:00
Speaker 1: live weekdays at ten am Eastern on applecar Play and
26:04
Speaker 1: Android Auto with the Bloomberg Business app. You can also
26:07
Speaker 1: listen live on Amazon Alexa from our flagship New York station.
26:11
Speaker 1: Just say Alexa play Bloomberg eleven.
26:13
Speaker 2: Thirty and I'm Alex Steel alongside Paul Sweeney. This is
26:17
Speaker 2: Bloomberg Intelligence Radio. We cover all the top news for
26:20
Speaker 2: you in the financial and business world. Where are great
26:22
Speaker 2: analysts that cover all the industries worldwide, one hundred and
26:25
Speaker 2: thirty industries in two thousand plus companies. Let's get more
26:28
Speaker 2: on this Intel thing. So apparently the withdrawal of the
26:31
Speaker 2: license affects US sales of chips for using Huawei phones
26:35
Speaker 2: and laptops. That's according to people familiar with the matter. Now,
26:39
Speaker 2: the overall decision may not affect a significant volume of chips,
26:43
Speaker 2: but it's really about the US government's determination to curtail
26:46
Speaker 2: China's access to a huge swath of the semiconductor technology.
26:51
Speaker 8: That's why Intel stock is down almost three percent.
26:54
Speaker 2: Michael Shepherd is Bloomberg News a senior editor, and he's
26:56
Speaker 2: standing by to help us break all of this down,
27:00
Speaker 2: walk us through the revenue pain that Intel sees from this,
27:04
Speaker 2: and the intricacy is of what kind of chips they
27:06
Speaker 2: can and cannot sell.
27:08
Speaker 11: Well, that's a great question, Alex. And for Intel, the
27:12
Speaker 11: company is under some pressure to produce on the turnaround
27:16
Speaker 11: that pet Gelsinger has outlined to try to get the
27:20
Speaker 11: company back into the vanguard of manufacturing, but here in
27:24
Speaker 11: the US in particular, So analysts are out there looking
27:28
Speaker 11: for any sign of potential trouble for Intel as it
27:34
Speaker 11: tries to execute this plan. And here, even though we're
27:38
Speaker 11: not seeing a significant market for Intel with Huahwei, nonetheless
27:43
Speaker 11: any sign of trouble is something that they have to
27:46
Speaker 11: take into account.
27:47
Speaker 6: So, you know, for I guess the bigger picture here
27:50
Speaker 6: as you step back, it just feels like this technology
27:54
Speaker 6: cold war between China and the West, China and the
27:58
Speaker 6: US is intensifying. Is that the feeling in Washington is
28:03
Speaker 6: that where Washington really wants to take this.
28:05
Speaker 11: But Paul, I'm glad you brought it up that way
28:07
Speaker 11: in those terms, because we really are seeing much more
28:09
Speaker 11: of a frost when it comes to technology settling in
28:13
Speaker 11: the US. Has been making clear we heard Commerce Secretary
28:19
Speaker 11: Gina Raymonder just a few weeks ago say technological security
28:22
Speaker 11: is national security, and they are drawing a line when
28:26
Speaker 11: it comes to the more sophisticated and more advanced technology,
28:31
Speaker 11: especially when it comes to computer chips. The US is
28:34
Speaker 11: a leading innovator, if not a leading producer, of some
28:37
Speaker 11: of the most advanced and tiniest semiconductors that are out
28:41
Speaker 11: there powering technology everywhere. And one of the emerging fronts is,
28:45
Speaker 11: of course, artificial intelligence. And we spoke yesterday to House
28:50
Speaker 11: Foreign Affairs Committee Chairman Michael McCall, who's been pushing for
28:53
Speaker 11: these WAWEE restrictions, and he said, the idea of the
28:56
Speaker 11: export controls that we've reported on yesterday was to keep
29:02
Speaker 11: the most advanced AI tech out of China's hands.
29:06
Speaker 2: What about tech that's already in their hands that then
29:08
Speaker 2: China can adapt themselves. Wasn't there like a Huawei phone
29:12
Speaker 2: that really scratched everyone's head on like how what kind
29:15
Speaker 2: of chips they actually used?
29:16
Speaker 8: I mean, how do you restrict that kind of stuff?
29:19
Speaker 11: Well, the US is actually investigating what happened with the
29:22
Speaker 11: May ninety This device was unveiled as Gina Raimondo was
29:27
Speaker 11: visiting China, and it was taken as a you know,
29:32
Speaker 11: something that was aimed directly at her during her visit
29:37
Speaker 11: to say that, look, you're trying to put these restrictions
29:39
Speaker 11: in place, we will show you. Now. The US has
29:43
Speaker 11: launched an investigation into how Huawei was able to develop
29:48
Speaker 11: it and whether there are other companies that are forming
29:50
Speaker 11: this shadow network of suppliers to Huawei, in other words,
29:54
Speaker 11: creating proxies that allow the device maker to obtain the
29:59
Speaker 11: chips at an otherwise can't.
30:02
Speaker 6: So what's the response been from China? What can we
30:05
Speaker 6: It's just gonna be a tit for tat type of thing.
30:06
Speaker 6: So I'm Tim Cook, I'm paying attention here.
30:09
Speaker 11: Well, American technology executives should be watching this space. China
30:15
Speaker 11: overnight responded, calling the moves economic coercion and a violation
30:20
Speaker 11: of what it sees as World Trade Organization rules, and
30:23
Speaker 11: they may very well decide to proceed with the case.
30:27
Speaker 11: At the same time, the US is trying to draw
30:29
Speaker 11: a line around the whole question of national security, and
30:33
Speaker 11: that is going to be something that we see as
30:35
Speaker 11: a tension point between the two countries. The US is
30:39
Speaker 11: made clear that it wants to do business with China,
30:42
Speaker 11: but just not that far. It is only willing to
30:46
Speaker 11: go so far when it comes to trade in more
30:50
Speaker 11: advanced technologies. It wants to preserve the American edge here
30:55
Speaker 11: at home.
30:56
Speaker 8: How hard is it for Intel to make up that
30:58
Speaker 8: revenue elsewhere?
31:00
Speaker 11: You know, it's a good question. It's unclear exactly how
31:03
Speaker 11: much they would be losing here. It was only a
31:07
Speaker 11: slight drop. If you read between the lines on it.
31:12
Speaker 11: You know they're now seeing something more to the midpoint
31:15
Speaker 11: of their guidance, but it is still within the revenue
31:19
Speaker 11: that they have projected between twelve and a half billion
31:22
Speaker 11: and thirteen and a half billion.
31:24
Speaker 6: You know, Michael, we've all grown up with Intel, and
31:29
Speaker 6: you know, kind of I guess we now consider kind
31:31
Speaker 6: of the older generation of Silicon Valley of technology. It
31:35
Speaker 6: appears that they just have not been able to catch
31:38
Speaker 6: that AI wave, at least from investors perspective, in any way,
31:41
Speaker 6: shape or form. Is there any optimism that maybe they
31:45
Speaker 6: can infect pivot their company to go to where the
31:49
Speaker 6: puck is going, which is for AI.
31:52
Speaker 11: Well, Paul, we all remember the Intel inside jingle from
31:56
Speaker 11: those ads years ago, and that is something that Pat
31:59
Speaker 11: Gelson is really trying to recapture and he is seizing
32:04
Speaker 11: upon the Biden Administration's Chips Act. All those investments. We're
32:09
Speaker 11: seeing the company launch plants in Arizona and in Ohio.
32:13
Speaker 11: We just profiled the construction of this new facility in
32:17
Speaker 11: Ohio was really impressive. Look inside what they are trying
32:21
Speaker 11: to build there. It's ambitious, but it will take some
32:24
Speaker 11: time too. These plants can't be built overnight, and it
32:28
Speaker 11: is a race against the clock when it comes.
32:29
Speaker 8: To ai well, and also is a question.
32:31
Speaker 2: I mean a lot of the stuff if you announce
32:34
Speaker 2: it doesn't mean it actually happens. Things get pushed back
32:36
Speaker 2: or paired back. You're going to start off with, say
32:39
Speaker 2: a plant that's going to do X amount and then
32:41
Speaker 2: you reduce it to M amount or are we expecting
32:45
Speaker 2: anything along those lines from Intel? I think there was
32:47
Speaker 2: a great chart on Bloomberg today that showed where chips
32:51
Speaker 2: come from now and it was an amazing circle charts,
32:55
Speaker 2: circle chart they called circle charts pie chart, Oh my goodness,
32:59
Speaker 2: pie chart that showed a Taiwan and Korea and then
33:03
Speaker 2: how in like nine years, eight years, and just the
33:05
Speaker 2: diversification was tremendous and the majority of that coming from
33:09
Speaker 2: the US.
33:11
Speaker 11: Well, what the US is really hoping to do through
33:14
Speaker 11: the Chips Act is to get twenty percent of production
33:18
Speaker 11: of advanced semiconductors done domestically. Currently that figure is zero,
33:24
Speaker 11: so that and they would like to achieve this goal
33:27
Speaker 11: by twenty thirty. That is a really ambitious target and
33:30
Speaker 11: they're pushing all out to see if they can achieve it.
33:34
Speaker 11: But the European Union also has a similar goal of
33:37
Speaker 11: trying to amp up its own percentage of advanced semiconductor production.
33:43
Speaker 11: And the idea also is as a hedge in the
33:46
Speaker 11: event that China decides to actually make some move against
33:49
Speaker 11: Taiwan militarily. The US wants to be sure that it
33:53
Speaker 11: can produce chips in the event of a severe supply
33:56
Speaker 11: chain disruption akin to the one that we saw during
33:59
Speaker 11: the pandemic.
34:00
Speaker 7: Yeah, I mean that drove home kind of.
34:03
Speaker 6: I think kind of just brought to the forefront this
34:04
Speaker 6: whole you know, reshoring or friend shoring for a lot
34:07
Speaker 6: of different industries, including technology.
34:09
Speaker 5: Michael Sheppard, thanks so much for joining us there.
34:11
Speaker 6: Michael Sheppard, he's a senior editor for Bloomberg News, joining
34:15
Speaker 6: us from Washington, DC. And I remember that you know,
34:17
Speaker 6: I guess we all remember that kind of in the
34:19
Speaker 6: beginning of the pandemic, when the global economy really shut down.
34:22
Speaker 5: You're like, oh, we a lot. We import a lot
34:25
Speaker 5: of stuff, a lot of.
34:26
Speaker 6: Important stuff, and from some places that may or may
34:28
Speaker 6: not be that dependent, I guess are dependable, and therefore
34:33
Speaker 6: that whole reshoring friend shoring, and I guess Mexico has
34:35
Speaker 6: been one of the real beneficiaries of that.
34:38
Speaker 8: Yeah.
34:39
Speaker 2: Absolutely, And that's what was so staggering about this pie chart,
34:42
Speaker 2: just to show how bifurcated it actually is now in
34:45
Speaker 2: terms of how much market share Korea and Taiwan have
34:49
Speaker 2: and then how much money apparently will be poured in
34:51
Speaker 2: even like Europe is going to gain some share, nothing
34:54
Speaker 2: like the US, but nonetheless, I mean the first mover advantage, right, Like,
34:58
Speaker 2: if you put a lot of money into some thing
35:00
Speaker 2: and you build something, now, are you going to go
35:01
Speaker 2: then build a second plan in Europe? Or is it
35:04
Speaker 2: kind of a one and done kind of thing when
35:06
Speaker 2: you're looking at billions and billions and billions dollars worth
35:09
Speaker 2: of investments.
35:10
Speaker 6: And Michael's referencing a piece of work done by Bloomberg News,
35:14
Speaker 6: the Big Take story of a week or two ago
35:16
Speaker 6: about that Ohio plant. Yes, and how big that's going
35:19
Speaker 6: to be in the investment there. So that's a huge investment.
35:23
Speaker 6: But as Michael is suggesting, if your intel, the payoff's
35:26
Speaker 6: going to be a while.
35:26
Speaker 8: It's going to be a while.
35:27
Speaker 2: And that makes it hard for an investor too, because
35:29
Speaker 2: you're still in a cyclical business with structural change. And
35:32
Speaker 2: I keep going back to that this is a brook
35:34
Speaker 2: Settle and special Bloomberg opinion and check her out there.
35:36
Speaker 2: But and how you invest then for something along those lines,
35:39
Speaker 2: and what your timeline has to be like when you're
35:41
Speaker 2: looking at something along a cyclical versus structural world.
35:47
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
35:51
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
35:55
Speaker 1: Auto with the Bloomberg Business. You can also listen live
35:58
Speaker 1: on Amazon Alexa for our flagship New York station, Just
36:01
Speaker 1: Say Alexa, playing Bloomberg eleven.
36:04
Speaker 2: Thirty and Alex Steel alongside Paul Sweeney. This is Bloomberg
36:08
Speaker 2: Intelligence Radio. We bring you all the top news from
36:11
Speaker 2: Bloomberg News but also the analysis from Bloomberg Intelligence. They
36:14
Speaker 2: cover about one hundred and thirty companies excuse me, industries
36:17
Speaker 2: and two thousand companies worldwide. We also keep you updating
36:21
Speaker 2: all the great enterprise reporting that we do here at Bloomberg,
36:23
Speaker 2: and this one ties nicely into some earnings that we're seeing.
36:26
Speaker 2: So affirm that stock is off by over seven percent. Now,
36:31
Speaker 2: this is a buy now, pay later company, which, from
36:33
Speaker 2: what I hear is literally what it is, you buy
36:35
Speaker 2: now and you pay later. Their forecast revenue for the
36:38
Speaker 2: fourth quarter did beat average analyst estimates. Third quarter was
36:42
Speaker 2: also strong, yet the stock is down. The macro read,
36:44
Speaker 2: of course, is when these guys do well, what does
36:46
Speaker 2: that say about the underlying economy? Now, luckily, the Big
36:49
Speaker 2: Take addresses some of this. The Big Take is an
36:52
Speaker 2: in depth story that we cover every day on Bloomberg
36:54
Speaker 2: and joining us to discuss it. It's Paige Smith, consumer
36:57
Speaker 2: finance reporter, and also Paulina Chro she joins us. They're
37:01
Speaker 2: both joining us in the studio. This is about phantom debt,
37:06
Speaker 2: and the quote is Americans are racking up phantom debt
37:08
Speaker 2: that Wall Street can't track. Presumably you guys did this
37:11
Speaker 2: because of Firmer's reporting, and that's part of the phantom debt.
37:14
Speaker 13: Right.
37:14
Speaker 8: The buy now pay later, Paulina, what did you discover
37:17
Speaker 8: in this reporting?
37:18
Speaker 13: So, you know, at first we were looking at how
37:20
Speaker 13: American households are already carrying about seventeen point five trillion
37:24
Speaker 13: dollars in debt, and sometime last year an economist at
37:28
Speaker 13: Walls Fargo pointed to the fact that there's about forty
37:32
Speaker 13: six billion dollars worth of phantom debt lurking in the
37:34
Speaker 13: economy with buy now pay leader services, and we just
37:38
Speaker 13: wanted to note that that's a conservative estimate. Basically, our
37:42
Speaker 13: reporting looked at how no one really knows exactly how
37:46
Speaker 13: much buy now pay leader debt is out there because,
37:50
Speaker 13: you know, due to some regulatory loopholes, a lot of
37:52
Speaker 13: these providers are not furnishing data to credit bureaus. So
37:56
Speaker 13: while economists and Wall Street traders are making you know,
38:00
Speaker 13: projections on the economic outlooks based on you know, how
38:03
Speaker 13: the consumer is doing, we don't really know. We don't
38:06
Speaker 13: really have the full picture.
38:08
Speaker 6: So, Paige, I mean, how big is this that there?
38:10
Speaker 6: I mean, when I was growing up, we called this
38:12
Speaker 6: stuff layaway. Now it's pay pay out, buy or whatever,
38:14
Speaker 6: it's buy now, pay pay later. Is it a big market?
38:17
Speaker 6: Do we think it's a lot out there are people
38:19
Speaker 6: doing this stuff.
38:20
Speaker 14: Yeah, So just just to go back to one thing
38:22
Speaker 14: that Pauline is said. Actually, so to be clear, it's
38:24
Speaker 14: not lenders that kind of exist in credit card lenders,
38:28
Speaker 14: auto lenders, et cetera. They're not required to actually report
38:31
Speaker 14: this data to credit years, but they are. It's kind
38:34
Speaker 14: of like an ecosystem, right, Like, you want to know
38:37
Speaker 14: what consumer debt is out there. I want to know
38:39
Speaker 14: what consumer debt is out there. Let's provide as much
38:41
Speaker 14: data as possible to the credit uros. But I think
38:44
Speaker 14: that's a good question because we really don't know how
38:47
Speaker 14: much consumer debt is out there, in particular the buy now,
38:51
Speaker 14: pay later debt. And that's kind of why this Well
38:54
Speaker 14: Wells Fargo analyst Tim Quinlan kind of you know, penned
38:58
Speaker 14: this or this phantom debt.
39:02
Speaker 8: How does it work?
39:04
Speaker 2: So does it like okay, by now pay later? Is
39:07
Speaker 2: it zero percent interest? Do I have to pay a
39:09
Speaker 2: minimum every month?
39:11
Speaker 11: Like?
39:11
Speaker 8: How does that work? And how is it different or
39:13
Speaker 8: similar to credit cards? For example?
39:14
Speaker 13: Paulina, So, typically, you know, a buy now pay lead
39:18
Speaker 13: option will show up in most online checkouts. It offers
39:22
Speaker 13: you know, most customers allows them to split up their
39:27
Speaker 13: purchase into four installment payments over the course of six weeks,
39:31
Speaker 13: so the first payment is due write at checkout, and
39:34
Speaker 13: then the next three or do every two weeks after that.
39:38
Speaker 13: And they usually offer this with a pretty quick credit
39:41
Speaker 13: approval and they offer zero interest rates. So where consumers
39:46
Speaker 13: start to kind of fall into trouble with buy now
39:49
Speaker 13: pay Leader services is one, you know, if you do
39:53
Speaker 13: fall behind on a payment, there are late fees associated
39:57
Speaker 13: with that.
39:58
Speaker 8: And it's not just that.
39:59
Speaker 13: One of the concerns that the Consumer Financial Protection Bureau
40:02
Speaker 13: sited was this issue of loan stacking. So a consumer
40:06
Speaker 13: could take out a buy Now Pay Later loan on
40:08
Speaker 13: a Tuesday of one week and a Wednesday of you know,
40:12
Speaker 13: the next week, and those payments will just happen two
40:16
Speaker 13: weeks from that time of purchase, and it can be
40:17
Speaker 13: really difficult for consumers to keep track of, you know,
40:21
Speaker 13: when those payments come do how much they actually owe
40:24
Speaker 13: across you know, one or sometimes several different buy now
40:28
Speaker 13: pay Leader service providers.
40:30
Speaker 6: I'm looking at your store here at a gentleman Fabricio Lopez,
40:34
Speaker 6: he found out the hard way that paying on time
40:37
Speaker 6: won't help them build up their credit score. But on
40:39
Speaker 6: the other hand, the downside is that they fall behind.
40:42
Speaker 6: Not only they get charge late fees, but they'll also
40:44
Speaker 6: get you know, the loan turned over to debt collectors.
40:46
Speaker 5: So are we seeing more of that?
40:48
Speaker 7: I guess I would say it is.
40:51
Speaker 14: It's just again, it's to go back to the main point,
40:54
Speaker 14: it's challenging to quantify how much of this debt is
40:57
Speaker 14: out there on top of expensive payment it's that consumers
41:00
Speaker 14: already have to grapple with like rent and gas.
41:03
Speaker 8: And sort of you name it.
41:05
Speaker 14: But yes, essentially a lot of these companies kind of
41:08
Speaker 14: market themselves as being able to build credit or help
41:11
Speaker 14: consumers to build credit, when in fact the downsides are
41:14
Speaker 14: still there, which is if you miss those payments, you know,
41:18
Speaker 14: those are charged off and then it's turned over to
41:22
Speaker 14: collectors and you do see a ding on your credit score.
41:25
Speaker 14: But there's a little upside in that when if you
41:27
Speaker 14: are making your payments on time, like a credit card,
41:30
Speaker 14: you see that reflected in your credit Europe, do.
41:33
Speaker 2: We know like how much they're spending, like what the
41:35
Speaker 2: biggest proportion of money is being spent on buy now,
41:38
Speaker 2: paid later, and what they're buying, so.
41:41
Speaker 13: You know obviously buy now, pay later services kind of
41:44
Speaker 13: you know, rose to popularity in the pandemic when people
41:47
Speaker 13: were using it to fund you know, buying a new
41:51
Speaker 13: wardrobe or new electronics. But increasingly, as inflation has continued
41:56
Speaker 13: to squeeze American consumers, we're starting to see them use
41:59
Speaker 13: them for necess cities like groceries. We actually talked to
42:02
Speaker 13: a consumer who used Klarna to split up his grocery payments,
42:06
Speaker 13: and when he lost his job unexpectedly, he couldn't pay
42:10
Speaker 13: pay back, pay those back?
42:11
Speaker 6: Are there any regulators? Are the regulars looking at this?
42:13
Speaker 6: I don't know who the regulators would be the anywhere
42:16
Speaker 6: along the banking I.
42:17
Speaker 7: See fdi C.
42:18
Speaker 13: Yeah, well, the Consumer of Financial Protection Bureau to use
42:22
Speaker 13: GO said that they would issue guidance on whether the
42:26
Speaker 13: industry would be regulated, as Credit and Paid reported about
42:30
Speaker 13: the occ also warning banks that this was a potential risk.
42:34
Speaker 13: But so far we have not seen any clear regulation
42:38
Speaker 13: on the industry.
42:40
Speaker 14: Yeah, no substantive new regulation to be clear out of
42:42
Speaker 14: the CFPB, but it's been hinted and it's on the
42:46
Speaker 14: horizon potentially.
42:47
Speaker 8: All right, thank you guys.
42:49
Speaker 5: I mean again, when I furnished the Jersey Shore estate.
42:53
Speaker 6: I went out, I was gonna just throt on the
42:54
Speaker 6: credit card, and he said, how'd you feel about twelve
42:57
Speaker 6: months interest for your boom hit?
42:59
Speaker 5: That definitely payments. That was cool.
43:01
Speaker 8: That makes up for your sis.
43:03
Speaker 7: Yes, yes, oh definitely that evens the books there right there?
43:06
Speaker 5: All right, Page Smith, thanks so much for joining us here.
43:08
Speaker 6: Page Smith, consumer financial reporter for Bloomberg News, and Paula
43:11
Speaker 6: Coccetto personal fanc reporter Bloombergers, both here on Bloomberg Interactive
43:15
Speaker 6: Broker studio.
43:16
Speaker 7: Not mailing me in like some people.
43:18
Speaker 6: Actually, today has been a day like its surveillance we've had.
43:21
Speaker 6: We had like six or seven people in the studio,
43:23
Speaker 6: including mister Clariday.
43:24
Speaker 2: So Paul likes to throw a lot of shade at
43:26
Speaker 2: people who don't come in the office. Yes, mostly because
43:28
Speaker 2: I don't think he necessarily wants to be in the office.
43:30
Speaker 7: No, but I'm here everybody's day, every day.
43:33
Speaker 8: Ragged himself in.
43:33
Speaker 4: All right.
43:34
Speaker 6: It's great reporting. You can find that stuff. The big
43:37
Speaker 6: take stories are great stuff. You can read the story
43:39
Speaker 6: on the Bloomberg terminal and at Bloomberg dot com. Slash
43:44
Speaker 6: a big take every day. Bloomberg News comes out with
43:46
Speaker 6: these really deeply sourced and well written stories on some
43:50
Speaker 6: really compelling issues, including kind of this shadow debt out there.
43:54
Speaker 1: This is the Bloomberg Intelligence Podcast. I'll ailable on apples, spotipy,
43:59
Speaker 1: and where else you get your podcasts. Listen live each weekday,
44:03
Speaker 1: ten am to noon Eastern on Bloomberg dot com, the
44:06
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You
44:09
Speaker 1: can also watch us live every weekday on YouTube and
44:13
Speaker 1: always on the Bloomberg terminal