Amazon Still Digesting $13.7 Billion Whole Foods Takeover

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Cloble News. Well in the current issue of Bloomberg Business Week magazine catch it now. It's on news stands online on the terminal of course as well, and then at Bloomberg dot com slash a Business Week. There's an article about five years on Amazon is still digesting that thirteen point seven billion dollar Whole Foods takeover.

The article written by Matt Day. It's edited by Joshua Brustein. He is with us on the phone right now. Also with us is Joel Webber. He is the editor of Bloomberg Business Week. He's with us in the Bloomberg Interactive Broker studio Katie that we're talking about this a few minutes ago, Joel. It was sort of like the where were you when you heard moment? There were so many jokes about getting avocado toasts by drone. Yeah, so waiting

for that still. By the way, that's another good Bloomberg Business Week story is about that the drones com materializing. But but what's going on with John Mackie, the guy who he's gone all he's gone exactly? So what is that? Mere Whole Foods co founder of Whole Foods um five years ago Amazon uh went shopping for some produce and ended up with Whole Foods UM. And you know, I think the point of the story is five years on,

what was it all about? And that was sort of I think, what what interested Matt and uh, you know what, Josh to just put it to you, what was it all about? What does Amazon really had to show for it? Now? Thirteen point seven billion for groceries is more than I usually spent exactly. Um. Yeah, I think both five years ago,

both Whole Foods and Amazon needed something. Whole Foods had built itself off been to this really big player in the organic grocery market, and then everyone else kind of figured out that they could do the same thing, and so Whole Foods was UM really struggling to figure out what its second act would be. UM investors were calling for a shake up, and it was just having a

lot of trouble in the public markets. Meanwhile, Amazon had really been trying to get into groceries and grocery delivery, and it thought, you know, by this five hundred store chain of grocery stores and really just really power up our own entry into the grocery market. UM. And five years later, it doesn't seem like Whole foods problems have been solved. Its problems are still mostly the same. Amazon also has not taken over groceries UM, despite the fears

that it would at that time. And it seems like we're largely kind of where we were and not as much as happened as we would thought. Well, that's what I want to talk about. Five years later, what does it Amazon have to show with this purchase. What is Whole Foods actually added or subtracted from its bottom line? So in terms of its bottom line, the answer is that this is not This is one of the slower

growing parts of Amazon's business. If you look at other other aspects of Amazon's business like cloud, cloud computing and sort of other real revenue drivers, those have been growing faster than the grocery business. Um, and that business is also being uh it's not just that groceries are going slower, it's like they're not even growing as fast as competitors. So that just really hasn't taken off. They haven't figured out how to combine these two companies in a way

that helps them compete in the specific market. Okay, So one thing though that it has done is, you know, if you need to return Amazon products or you know, get grocery pickups, there have been some some noteworthy enhancements that either you know, either the mergers helped facilitate or that maybe Amazon shoppers have gotten out of it. So,

so what has been on the on the good side here? Yeah, So I think the good side is that you know, Amazon uh does have a large uh, this large network of physical stores um as I said, there's about five um and it has started to lean on Whole Foods the expertise in there to help with Amazon Fresh, which is its other chain of grocery outlets UM, and we haven't really seen the fruits of that yet so speak, but that could come in the future that you could see if if Amazon Fresh really does mature um and

turn into something really substantial for the company, that a lot of Whole Foods wisdom will have gone into the building of that product. It's just not quite um there yet. So we mentioned John Mackie. He was the co founder of Whole Foods. UM he's moved on retired as of September one. Who's in charge of Whole Foods within Amazon now? Yeah, so uh he is being taken over by his former CEO,

former management consultant UM very kind of uh. Mackew was known as an as an over as as sort of a really big personality um, whereas his successor is less. So Jason is his name? Yea, yeah, I mean, I'm

I'm sorry Jason. Jason Buchelle mentioned that m and his plan is kind of to take Whole Foods back to its roots, as he says, to try to get back to some of like the local produce offerings and doing things that makes Whole Foods kind of not feel like an Amazon honestly, to feel like not you get the same experience everywhere, but you go and you know that your local Whole Foods has whatever the produces um you

know in your region. Well, Joshua, that's been a big complaint for people who were sort of the die hard Whole Foods people before Amazon purchased the company. If you go back to you know, the roots of this company. It started in Austin, and it was kind of the it's like weird alternative grocery store, right, And even when it was a publicly traded company, it and it made a ton of acquisitions around the country, it still was unique because it had that local produce and it had

that kind of heart to get stuff. And and I'm wondering, It's funny, you know, when this article came out, I saw people tweeting about it who didn't work at Bloomberg, and they were saying, the Whole Foods the experience of going to Whole Foods has changed too much since Amazon took it on, So you know, I don't go there anymore. Is one of the tweets that that I saw that tweeted out this story. How is Whole Foods physically different

because of Amazon? Like, what's the experience like now, Yeah, I think there's two things in there that The first that you mentioned about, you know, the whole foods really feeling different and sort of losing that local feel is is that was a complaint before the acquisition and one that I think one of the problems that Hold Food had and it certainly hasn't been solved. UM hasn't been solved by Amazon, nor would it really like that's not

Amazon's strength. UM. But to your question about what's physically different, you know, Amazon has has helped re re engineer Whole Foods UH stores a little bit to be um, you know, more focused on delivery. There's a lot of delivery pickers in the store people mentioned, which I think some people really don't like. You know, you're you're trying to shop and there's someone you know, they're like clearly like filling

up carts to move along. And they've had to dedicate some some space that used to be cafes and somewhat for the physical infrastructure around the delivery business. So that I think is really changed in some of the stores and ways that um, you know, long standing customers don't necessarily like. UM. One other thing that's interesting is in terms of the actual technology. That's the biggest and most

visible technology change since the Amazon acquisition. You think it would be drones or something like super high tech, it's actually just the self checkout. Um. Whole Foods had resisted doing that for a long time, despite the fact that their grocery change had gone along with it. They thought it would feel impersonal right. Eventually it just kind of became the standard than though self checkout always always takes longer than waiting in mind for me at least. Joshua

Breustin is editor at Bloomberg Business. Joe Weber is the editor of Bloomberg Business Week. With us in the Bloomberg Interactive Broker Studio. Check out this story. It's in the current issue of Bloomberg Business Week magazine. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Joining us now to talk about s back e t f S is Emily Graffeo.

She is a cross asset reporter for Bloomberg News. She's with us in studio sitting to my left, which is thrilling because this is how we sit when we're actually at our desks um. Let's talk about these back e t F So we're talking about the Defiance next Gen SPAC derived e t F and the Morgen Creek Exos Spack originated e t F both shut last month. Why did it take so long? I feel like we've been talking about this back downturn for a while now. Yeah,

well we have. And there's actually still a lot of spack e t F s that are still trading, like a lot of E t F s um in the market right now that are following these speculative areas of the market crypto psychedelics, cannabis, and they're still on the market. But all the fun stuff, yeah, all the fun stuff,

and it's been doing pretty poorly. But these two Spack e t F s. I think it's an interesting story of the FED tightening of monetary policy kind of giving a double whammy two spack e t f s, because on the one hand, you have this tightening that's not very good for speculative risk assets like an e t F that tracks a new industry, and then on the other hand, the tightening is drying up the liquidity that

made the back market thrive in the first place. And so before they shut It felt like they never really gained a lot of traction if you look at the assets, if you look at the performance for example, exactly you're an E t F reporter, You're an expert E t F reporter, so you know, I mean, even at the peak a defiance, et F was only about a hundred twelve million in assets, which isn't that large, and then it moved down to about twelve million when actually liquidated

in August. Even though I'm not an E t F reporter, Can I still be part of this conversation? You can try, Okay, I'll try. What does it say about SPACs though? I mean, we had Michael Burry talked about this a little earlier on Twitter. Katie and I talked about it in referencing Emily's story. That was pretty that's pretty cool. Hey, that's

really cool. Congratulations. I mean, and Katie mentioned that it kind of you know, symbolizes excess and frothiness in the market, whether we're talking about crypto, but specs are a little different because they're kind of cyclical. Right, we've seen SPACs before. That wasn't the first rodeo for SPACs, right, but it was probably the biggest rodeo force backs that we had seen,

and it was all again about that fed liquidity. So not only are we seeing these funds close up given the fact that the liquidity is drawing, but we also have regulators um warning about scrutiny over SPACs. And so I was talking to a strategist who was saying, maybe these et f issuers are just thinking this is not worth it anymore. We don't want to be involved in this space with the perhaps oncoming regulation for this back space.

But then again, there's so many crypto et f s like we were saying, that are still on the market, and of course that they're all doing terribly. Yeah, and there's regulation you know, in that space as well. I actually have a fun fact, you guys want to hear it. So I was looking at the worst performing non leveraged e t s so far this year. The first one, the top worst performer, is a dry bull shipping e TF. The next nine are all crypto related. I thought they

were like psilocybin. One of them was still Yeah, No, that's also doing really poorly, not as poorly, it's still super bad. Wow. Yeah, I didn't know the crypto ones. I mean it makes sense, and we're gonna talk about the crypto winter a little later. Yeah, so you didn't read the story that I put out last week. I have no excuse. I was going to say I had COVID but was recovering. Yeah, excuse long, Let's go back to the U t F world, the six trillion, six

point eight trillion U S E t F arena. You write that this what we're seeing with these spack e t F closures. It's actually, uh, mirroring a broader pattern that we're seeing in the industry overall, in terms of how young these firms were. Yeah. So both of these e t f s that closed were less than two

years old. And we've been tracking on the Bloomberg Cross Asset Team the fact, Yes, in the e t F industry this year, almost half of the e t F s that have closed in two were launched in So we're seeing the trend of these newer funds um launching and trading and then closing pretty soon after. Did you guys, I'm sorry, I was like fixing my computer here in

my microphone. Did you guys talk about the anti spack e t F s. Yeah, so, actually we're talking about the ranking of different funds, and I was looking at the best performing active equity e t F s in the US. I love the nuances, you know, you have to really streamline it down. But one of them is a e t F that shorts um SPACs. This is the a excess short despect daily e t that one's doing really well. How well, want to give it a number?

I think it's more than It feels like anecdotally a lot and we could put numbers to this, but it feels like a lot of the short e t f s are doing well because you think of the short Cathy would et F, the short innovation e t F that's also one of the blockbuster hits of this year. Yeah, and they're both from Access, which is pretty impressive for

a newer, more indie e t F issuer. And we're talking about fund closures here, but we know that fund e t F launches have actually been really, really robust this year. Yeah, So that's another the fund closures and these new funds. It might not be all that bad that we're seeing so many new funds close because in the last two years we've seen so many new e t F s launched. So just this year, like volume of products out on the market means that there's more

funds that are bound to close up as well. Yeah, it almost feels as if maybe we are actually nearing the point where there is an e t F for everything. Yeah, I think there is. I'm still tracking that breakfast one that I wrote about in Tanuary. What was that one? It was breakfast commodities. It was like so much battle. It was poor cogs hogs. I mean, with inflation, it's probably gone up quite a bit, although you have seemed

some disinflation in that space as well. Yeah, but it's certainly is not to it's sound like seventy something per cent. I wonder if people jumped in there after it was one of the best performing et okay, exactly when shipping rates were just off the chart. Sign of the times, all right. Emily Graffeo cross asset reporter for Bloomberg News with us in the Bloomberg Interactive Broker Studio. Check out her late Well it's actually not even her latest story.

She's got another one in there. She's very busy. Two spack ETFs wiped out in one month. Signal to Boom is truly over. Check it out on the Bloomberg Terminal, and of course more of her work at Bloomberg dot com. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We're here with Stacy Marie Ishmael. She's managing editor for Crypto here at Bloomberg News. She's with us in the Bloomberg Interactive Broker studios.

And I gotta say we're doing a little reminiscing. Katie brought it to our attention Stacy that today is your one year anniversary of being here at Bloomberg. And typically, you know, you walk by people's desks here and they have these kind of cool little blocks that they put up if they've been here for like ten thirty years. Um, one year not huge, however, in the context of Crypto A huge anniversary. And I should say not huge in the context of like, um, you know, Katie thinks every

anniversary is a big deal. It's worth celebrating. It is. We're celebrating, happy anniversary, Thank you, thank you. What is the last year though? How is I mean, like, how do we describe the last year in crypto? I'm great, I worry about other people who have had their you know, companies off of bankruptcy or lose access to all of their savings. Um. The way that I have remembered the fact that September seven is a big date is because it's also the one year anniversary of El Salvador starting

to accept bitcoin is legal tender. And I feel like I measured out most of my weeks, months, weekends in terms of what chaotic thing happened in the crypto market. So there was the weekend in which China was like, we think crypto transactions are illegal. There was the weekend in which you know, Celsia said that it was halting withdrawals,

and just kind of on and on and on. And I think the the highs and the lows of this market have been very interesting and perhaps more pronounced and more profound than people were expected going into September last year. And if we think about September last year, we were on our way to what would be an all time high for bitcoin in November that was around the launch of the first bitcoin futures e t F. For you and I really got to know each other so much time.

It was fun bringing it or to today, though the big headline out is that the crypto market cap has dropped a one trillion dollars sort of tell us how we got here and where we're going. Sure, so if we were having this conversation last November would have been like, wow, crypto market values above three trillion dollars, we're flirting with sixty five. People were making prognostications about like nine hundred

ks in sight. And now you know, there's a meme that I saw on Twitter today that like, you know, the nineteen thousand um range and Twitter is looking like somebody's holding it together with duc dapen string. And that shift in sentiment seems to me to really do a good job of telling the story, which is that folks were very much betting on all things going up, which was also the problem with Three Arrows Capital. They blew themselves up because they were like prices could never go down.

And now we're at a point where prices have been hovering in this fairly tight range between you know, sort of seventeen five and twenty one, which is a frankly unusual lack of all utility for something like bitcoin. And so I think the fact that we are we seem to be stuck. Here is again testimony to the fact that there isn't really anything pushing it significantly up, but

also not anything pushing it significantly down. So if the last year was characterized by a huge hedge fund that managed ten billion dollars blowing up big layoffs at companies f t X coming in and being the hero, the same hero, yeah, the savior, the White Knight, if you will,

what does what does the next year look like? One of the things that we've really been trying to look at is, you know, I grew up in a in an euro financial reporting in which people cared about counter party risk, and I feel like counterparty risk super back. And the big question or the series of questions that we're asking in crypto right now is like, Okay, we know about the celsius is, the voyages, the volts who

are all of their counter parties. We know about these minas that are saying, you know, they're dealing with liquidity challenges or other forms of financial distress, and they have different pools of energy that they might be writing who are their customers and trying to sort of work down the chain of where do we expect different kinds of

full out simultaneous. So that is we fully expect executive shakeups, and we've already started to see that happening, like CEO departures, web voluntary or otherwise CFOs deciding you know what, I'm going to piece back out to JP Morgan, where my life was a lot more chill um that kind of This is a time of distress, and in a time of distress, senior executive and senior management teams are going

to reorg in ways big and small. Yeah, it feels like the crypto sphere is learning a lot of trad five less super trad five when it comes to founter, party risk, collaterized lending. Well, that's a good idea. But I want to go back to the market cap uh question here, because obviously Bitcoin has gone down a lot, but Ether there's actually a lot of optimism there. The Ether market cap has kind of been growing over the past few months. Of course, as we lead up to

the merge. Do you have any sense of whether this is going to turn into a sell the news sort of event. Well, our colleague Vildana has Her of course, has written a series of very smart stories about the fact that options activity does suggest that there is a dent going to be a sell the news event where we have folks positioning themselves for a great, great run. Congratulates everybody on the on the merge, We're out there,

quarter guys. Well done. At the same time, though, you do have this, if there's any optimism in crypto right now, it is it seems to be concentrating around ether and ethereum and the merge and the idea of to use the jargon the flippening, right like this, this idea that there could be a moment in which the market value of ether overtakes that of bitcoin. We are so far away from that being a practical reality, but that is at least something that folks have some degree of conviction.

And perfect segue for me to tease your podcast, because in recent weeks the flippening has been at the subject of one of the episodes. Correct, make sure to check out Bloomberg Crypto. It's actually a daily podcast, so you're managing at her for Crypto and you also have a daily podcast. She does it all and still here some home, still here have the anniversary here at Bloomberg. Stacey mriya Ishmael, Managing editor for Crypto, the host of the Bloomberg Crypto podcast.

You can catch that on iTunes. I don't call it iTunes anymore, the Apple podcast app or wherever you get your podcasts. Tim Coke not happy with me right now. I'm sure I really appreciate you joining us this afternoon, Stacy Pleasure. I'm rom a journal. Yeah, but you let me drive? Oh no, no, no no, no, who's leave. I'll do the ride grivels. I want to drive. It's good question. This is the Drive to the clothes down on Bloomberg Radio. Wow, it is already that time for the drive to the close.

We got less than ten minutes ago in trading on this September seven, and we got ourselves a rally. We just heard it from Doug Krisner. The S and P five fund at Hire by one point nine percent, to dal Hire by one point five in the NASDAC Hire by two two percent. Let's get into the technicals of this with Quincy Crosby, chief equity strategist at l LPL Financial. Quincy joining us this afternoon on the phone from Charlottesville, Virginia. Quincy, good to have you back with us. How are you fine?

Thank you? Well, it's it's really good to have you with us, UM, especially on a day where we're seeing a rally like this, because I want to know from a you know, technical analyst perspective, what you're keeping an eye on. Because a few weeks ago, when we were talking about the rally that we saw, you know, coming off of June UH, a lot of technical analysts were like, Okay, this is you know, retraced more than fifty of its lows,

so this rally is good to go. But here we are Wednesday, September seven, and we are still down sixteen point five percent for the year. Well exactly. I mean, you know, technical analysis is very helpful, but you also have other factors for the market, and needless to say, UH, this market is one that has attributes that are that are a little bit different than for example, when the market just moved off of its lows UH in January fourth nineteen, when the said basically had a major pivot.

So that this market right now, today's market, what's what's nice to see because we're not seeing selling into it. We've had a couple of other days where the markets started off in the green. There were catalysts for that UH, and yet the selling into it the selling pressure was immense. You know, this is still a trader's market, and if traders are losing money, they're going to find a pocket of strength in order to sell into it. And here we are just about at the clothes and um, the

market I think is holding very very nicely. Doesn't mean this is the uh, this is the beginning of of of of a new trend upward. But certainly uh, lower gasoline prices, lower oil prices in total, and absolutely a weaker US dollar is extremely how full to underpinn the market? Well, let's talk about the US dollar because you are seeing a bit of a reprieve today. But I mean it feels like the dollar I can't keep it down. We do have the European Central Bank decision expected tomorrow could

be seventy five basis points. When you think about the dynamic between the interest rate differentials, would have seventy five basis point hike from the ECB be enough to sort of stop the dollar strength that we've seen. It would initially absolutely, because you know even the last or the should I say the first hike they had was fifty basis points. The market had been expecting twenty five basis points.

They surprised the market. And at the Jackson Whole meeting, a number of the officials from the e c B echoed, uh, you know the comments that Chairman Powell mentioned. They even talked about front loading, they talked about being aggressive. So I think that the market, the the currency market kind of sniffing out that they may actually come in with seventy five basis points. The rhetoric matters, um, you know

when they have the um the press conference. But again it may not be lasting if then they start pausing and if they then go back to fifty or twenty five basis points. So, but it's enough. It just shows you how how the US dollar is underpinned by other central banks. Granted, it's a refuge um safety currency, there's no doubt about that. But in this period it is about the interest rate differential. A hawk ish FED and the FED that is acting on its aggressive rhetoric, and

part of the Fed's aggressive rhetoric and action. Uh. The net effect of that has been higher interest rates, of course on all bonds, but especially on cash, which is really interesting to me. I cover E t F s and if you look at the cash like E t F they cover treasury bills. They've just seen billions and billions of dollars come in in the past couple of weeks. Quincy, I'd love to hear your view on cash whether in this sort of equity market we are seeing some strength today,

but it's been very choppy. Is cash a good place to be well, it is, if you know, if we look at it in terms of the market through the market's eyes. So for example, if you look at the cash that portfolio managers have under management, it's immense. And when that cash starts moving into the market, they pay very close attention. Usually when they followed technicals, it's the two hundred day moving average. But once that cash starts coming into the equity market, it's going to be powerful.

It's going to be a a tsunami of money coming in. So in that sense, it's very important. And then you know, there are others who just want to hold on to it um retail retail traders and you know, start going into the market when they feel that it's not a one day blip. You know, we don't know where we're going to be tomorrow. I mean, the mentality in this market is such that you don't know what tomorrow has to offer. So once there's stability in the market, I

think you're going to see more cash coming in. Others just want to hang honk to cash. You can argue with them that you know, inflation is going to eat and up. People love cash. They feel safe, they feel secure, and that's why money is going into the banks, is going into money market funds even with low rate. I'm already wondering what's gonna happen tomorrow. If we see, you know, a gain of one today in the sp you know what ends up happening in tomorrow's trade. But only time

will tell. Hey, Quincy, we gotta half half a minute left right here. Um, I want to get your thoughts on when we're gonna know if we're out of the woods, at what point, Like, what are the signs that you have to look for to say, okay, the bottom is in what one is? Clearly? Uh? You know, Look, the market gets the news first. We always like to say that. And when the market feels that the Fed really is on its way to finishing up, I think the market

is going to move very very quickly. But in terms of sectors moving, we saw consumer discretionary today along with consumer staples doing well. But when consumer staples give way to consumer discretionary, that's the signal. And I always look at the semi conductors when they can have a stable bit, a viable bit telling you that the market sees gross ahead. Quincy Crosby, chief equity strategist at LPL Financial, joining us this afternoon on the phone from Charlotte'sville, Virginia. Thanks for

listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Sarah to Bloomberg Global News