This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio. It's twenty four hours from now. We will be well into the press conference with the Chair of the Federal Reserve J. Powell following the FOMC second Monetary Policy of
the year. It's a meeting that a few weeks ago was still all about the Fed on a mission to bring down inflation and perhaps be more aggressive to do so. Then the collapse of three banks in the US, then ubs buying credit suites, and then we had investors pricing in rate cuts later in the year, although that seems to be tempering back as well. So let's try and
make some sense out of this environment. Back with us is doctor Steve Skanky, chief Economic advisor over at kill Point, former US Treasuring and White House National Security Council staff member. He's based in Washington, joining us today via zoom from Cape Canaveral, Florida. Are you looking to the skies, Steve, for inspiration about what the Fed may or may not tell us tomorrow it's going to be tricky for J Powell. Well, you know, Carol there, you're absolutely right about that. But
what are the amazing things down here? Is there are rocket launches several times a month, and there's there's something absolutely amazing about seeing those go up, define gravity, beautiful plume, and away they go out of sight and it is inspiring. And I wonder if if the f o MC members are maybe doing that too, is it a reminder that life goes on and there's a bigger world beyond us.
I'm getting all crazy, but I guess my point is when the FED looks at its mission, you know it's got you know, it's looking at the labor market more importantly, it's looking at inflation that is still a persistent problem. And then it's looking at the last week and a half. We're two weeks ago, two and a half weeks ago, we weren't talking about a bank crisis, and yet we have over the last week and a half. What do you think the FED needs to be focusing on in
its decision tomorrow. Well, the FED is primarily focused on getting inflation under control without without bringing anything else. While I think they shouldn't have been surprised by what happened with some of the banks and the fragility of you know, a couple hundred others that have massive holdings of longer dated treasuries. I think it did catch them a little
bit by surprise. Generally, the Fed doesn't think of its monetary policy tools that is, raising a lower interest rates, increased in reducing the money supply as having as being a tool that they use to assure the stability and
health of the banking system. But of course it does has an impact that it does have an impact, and when we saw what happened with the two banks that went out, and then of course the continuing issues with Credit Swiss, but it was they were very effective, I believe, in putting together a package that said wait a minute,
we were certainly paid attention to the banking community. All these other tools that will help address the particular problems that we've seen with the two banks that they closed and with the other ones that were lined up at their discount window. And Steve. We did hear from Treasury Secretary Janet Yellen earlier in her talking about how the government could backstop more deposits if necessary to stop containing And you're talking about these tools and we're looking at
the market reaction that's obviously helping things. But is this enough for what we're seeing right now? Does there need to be more? Well, it's it's certainly enough until it doesn't work. But at the moment, and it's very fortunate that the Treasury Secretary Janet Yellen is a former FED share as well and has a pretty good understanding about the stability issues within the system and how those can
become problematic. But just the fact that we saw borrowings at the discount window last week week reach your record of one hundred and fifty three billion dollars, the highest that it was during the Great Financial Crisis was what was not even that one hundred and forty three billion in new loans guaranteed by the FED, and there emergency
loans also jumped by three hundred billion. I think they've demonised The point is they've demonstrated that they can back the truck up and send the money out to assure the public that they can get their deposits when they want to get them, and that what might otherwise happen with longer data treasuries and their balance sheet that they would otherwise have to sell at a loss. They're not gonna have to do that because of the tools they announced previously ten days ago. And I think that is
that is bringing competence. I mean, just with what we've seen with banking stocks and particularly small to midsized regional banking stock, Great US are bouncing back up again. So I want to make sure I understand, Steve, so have
things calmed down? Is the system working enough in terms of backstopping and making sure the global financial system is secure that the FED can should raise rates tomorrow because they've got to continue to bring down inflation, because we know statistics still show us that it's a problem inflation. It's a big problem, and it disproportionately affects lower income groups, and the FED is particularly sensitive that. And as we've just watched a room, Powell through his first and now
second term is shair. He pays a lot of attention to disadvantage labor groups and the public generally. You know a couple of times at his press conference during his announcement he's speaking over the head of the media and
straight to main street. So he cares a lot about that, and so they are paying a lot of attention to that, and getting inflation under control is what of his primary concerns, not just because it's a mandate of the Federal Reserve, sees the detrimental impact it has on so many families, and so he does want to ring that out. And if they're confident right now they seem to be that the tools to backstop the banking system are in place and working, I think he's going to continue to march ahead.
Having said that, if he's talking to main Street as well, Steve, I mean this whole idea that if the Fed does rates rates and this banking problem is maybe deeper than we know at this juncture, then everybody on Main Street it's going to be impacted in a big way ultimately as things slow down, as we maybe then go into a deeper recession. So hence the quandary for the Federal Reserve kind of damned if you do, damned if you don't.
So you think at this point, based on how things and markets are operating, the Fed can confidently go ahead with a quarter point hike. I believe that they can, and I believe that they will. What will be really interesting is what their summary of economic projections show. You know, a data is due out at this meeting, and you know the Soll dot plot that we that we pay attention to but don't always pay too close attention to, is is going to give us an indication as to
where they think rates are going after this. There's a strong belief that that they'll raise a quarter point now and maybe another quarter point at their next meeting, and
then they're going to pause. And if you look at FED fun futures, there's still a belief although it's it's declining that will right cuts at the end of the year, which was clearly not the case after Powell's congressional testimony now two weeks ago, Steve, we do know that tighter financial conditions obviously are a principal objective for the Fed's efforts to combat in fleation. How much do you think these banking issues well actually tighten financial conditions. I think significantly.
We'd already seen just from the beginning of the year banks shoring up their balance sheets, tightening up their lending standards, and with what we've seen right now, while they're holdings of government securities or backstop their loans, that could create problems for them are not, And so I think that we're going to see a tightening of liquidity as a result of this and as a result of what's going on in the banking system, which is what the FED
would like to have. You know, they've been very frustrated that with all that they've done with quantitative tightening and raising interest rates, that the financial system has still had plenty of liquidity. This will be a change for that, and it does play into what they like to see happen. It does mean they're going to have to watch it more close. Yeah, that we don't get another surprise. Okay, Well, it feels like we are always living with the expectation
of surprises. M Steve. Great to check in with you. Doctor Steve Skanky, chief Economic advisor of at keel Point, joining us via zoom from Cape Canaveral, Florida. He's a former US Treasury and White House National Security Council staff member. Weighing in on that FED decision tomorrow. You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the Ihard Radio app and the Bloomberg Business app or
watch us live on YouTube together. All right, everybody, so keeping up watching that GameStop results in the after hours certainly rallying. But as we just talked about, more than just a one quarter story. We're waiting for Nike to come out in the meantime. One of the things that has been on our radar, and that is what's going
on between Russia and China. Specifically Russian President Vladimir Putin meeting with Chinese President Jijimping, who has been in Russia for three days of meetings, two days so far under way. They've talked about the war in Ukraine, maybe an ending, maybe peace. A lot of things going on. Meantime. You've got President Biden set to unveil tight restrictions on new operations in China by semiconductor makers that get federal funds to build in the United States. So a lot going
on back with us. Is Tiff Roberts. He's senior Fellow at the Atlantic Council's Indo Pacific Security Initiatives. He's former Bloomberg Business Week China Bureau chief, author of The Myth of Chinese Capitalism, The Work of the Factory and the future of the world. Joining us once again from Montana, Tiff. Nice to be with you again, g and Putin. Should
the world be worried? I yes, nice to be back, Carol, But yes, I do think the world should be China has been selling this ongoing visit by Shijimping to Moscow and the meetings Putin as a mission of peace and talking about their twelve point plan to try to bring peace in Ukraine. But I think that's really a bit of propaganda. If you look at, for example, the commentary that Shijimping published in Russian media. Putin also did a commentary in Chinese media right on the eve of the visit.
Jim Ping talks about how the two countries Russian China are united in opposition to hegemony, domination and bullying. I think it's really about showing their mutual opposition to a
US led world order. And something that really struck me is just when it comes to these chip makers that obviously have that exposure toward China, what do you think from a broad sense, a big picture sense, do you think this means for corporate American especially these semiconductor type companies that aren't going to benefit from this, well, I think it's not good news for corporate America. The already multiple problems, very real problems in the US China relationships
have been putting pressure on corporate America. And you mentioned semiconductors. The US is in the midst of an a radical rethinking of its semiconductor relationship with China, and as as I think Carol mentioned in the introduction, there's new restrictions coming almost every week on US companies, US persons being associated in any way with the Chinese semiconductor industry. Well, it's a big market for the US on the semiconductor side, and obviously more broadly, so this is not good news.
One more source of very real tension between the US and China. This budding relations ships growing stronger and stronger between Russian and China, one more reason to one more place where there's really bad news for the US corporate relationship with China. Are we at the point of no return where China and President Gees specifically have turned its back on the United States. I think we can't say we're at the point of no return, but I would note that last week or during the two sessions the
annual Legislatives meetings held in Beijing. Shijingping actually singled out the US by name, which he doesn't usually do, and said that they were leading a block of world nations that were trying to contain and suppress China and bringing severe challenges to China's development. That's a big deal. Shijing Ping usually when he's referring to the US will say
something like certain countries or hostile foreign forces. But I think the fact that he meant in the US at this point by name shows just how bad the relationship is getting. All Right, tiff for at risk of sounding really stupid, but I'm okay with that. I mean, is China desperate? I don't think China feels desperate at this point. I think that what they're doing is, first of all, they're going to do their best to try to continue
to woo American corporates to China. The spokesman for the Ministry of Commerce during the same legislative meetings basically sent out the message we're open for business, we want you, we want you back now that we're lifting we've lifted the restrictions from the pandemic, So they want corporate America. But they're going to try to sort of divide and conquer. They realize that the relationship with Washington is in very
dire strait. At the same time, they're trying to woo Europe and it's obviously not easy when they've cited to the degree to which they have with Poutin in the invasion of Ukraine. And you were talking about the strained relationship China does have with Washington. What do you think the long game is here for China? What is the sort of motivation to all of this? I do think and I am concerned that China is deciding that the two sides are implacably opposed to each other and that
they're the room for actual cooperation is narrowing. So UM, I hope that's not the case, but I do feel I do get that feeling that this is increasingly how Beijing seals I think, as I said, they're they're certainly not going to close the door to American companies, They're certainly not going to close the door to the European Union.
Um they if the US, If the US were to move a little closer to what China thinks is a proper bilateral relationship, I bet Beijing would be willing to more than willing to talk with Washington, but I do think that the trend lines are pretty bad. You know, you talk about closing doors, and it's interesting. There's another story in the Bloomberg Tiff today about Vanguard planning to shutter its business in China. This is after they've been I guess, a retreat two years ago. This accordin to
folks familiar with the matter. But you know, in our story it says the moves will market complete exit from China for the seven point one trillion dollars giant, which one saw significant potential in the world's second largest economy. I've said it a million times before because I think about at the beginning of my career, any company I talked to, it was as China was real, you know, was opening its doors and kind of almost begging multinationals from around the world to come in set up shot,
you know, kind of teach us what you know. And it's it's only you know, a few decades ago that I feel like things have changed dramatically. So it's pretty significant. The shift, I think it really is significant. We're seeing hedge funds pulling out. Came in early after the pandemic restrictions were lifted, and then they were they started getting out. We see surveys by the American Chamber of Commerce that are showing that for the first time, China is not
even a top three investment choice for American companies. You're seeing companies, American companies say that they are very they feel very little optimism about the China market going forward. And yeah, we're seeing some big prominent examples like Vanguard. It sounds like that are thinking of actually moving on somewhere else. So I do think there's been a real shift.
China's trying to China doesn't want to see that happen, as I said a moment ago, so they're trying to They're trying to make put out this message of we're open to the world. I'll come back investors. But things aren't looking very good on that front. Hey, hold on for a second. Tip. Just want to mention. Nike results are out. Third quarter revenue. It's big beat, twelve point three nine billion. The estimate was for eleven point fifty
two billion. Speaking of China, an important market for the company. A third quarter greater China revenue one point ninety nine billion. That's a little bit light. The street was looking for two point zero three billion, but the company is saying it made quote tremendous progress on inventory, and we're seeing shares of Nike up about four percent in the aftermarket. Hey, Tiff, just got about thirty seconds. Last time you were on, I asked if you were writing a new book. You
said you were heading in that direction. The title you offered up maybe China isn't going to take over the world. Would that still be the title? And just got about thirty seconds. Absolutely, I see tremendous structural challenges facing China. Demography, growing inequality, and above all this politicization from the top leadership and ching himself. That makes it much less likely it's going to be the economic superpower many of us
thought it was going to be. All right, Well, always appreciate when you can join us to talk about this subject. Tiff Roberts he senior fellow at the Atlantic Council's Into Pacific Security Initiatives, former Blueberg Business Week China bureau chief. He knows a lot about this, the myth of Chinese capitalism, that's the book he wrote just a couple of years ago. But as I like to kill him, sounds like he
is getting ready to write another book. Nike third quarter EPs IT two is a beat seventy nine cents versus fifty four. Stock is up three point three percent in the after hours. This is Bloomberg Business Week. You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just
Say Alexa play Bloomberg eleven thirty. As we get ready for the next FED meeting, we continue to talk to individuals that might give us an insight into what's going on with consumers and just the business landscape, what is going on when it comes to it spending, and I do feel like our next guest plays into both of these worlds big time. With This is Maju Kua Villa. He is CEO of Bolt It's a checkout in e commerce platform company. He's former VP and general manager for
Amazon's Global Logistics. Was at Amazon and part of the team that built out Amazon Primed. He's joining us here in our Bloomberg Interactive Broker Studio. So nice to have you here with justin myself. How are you and let's start big broad How would you describe the business environment right now? Well, I mean there's a lot going on. That would be an understatement, but we are very excited about what we see for the future and for retailers,
for example, we look at three things. Number one, really focus on the consumer because there's a lot of changing for the consumer right now, helping to figure out how can we really focus on the consumer. Number two, so much happening on from a technology perspective. We were nobody was talking about generati ai last year. Now that's top of mind for everybody, and that's just one thing. So many happening in the technology, so how can we innovate fast and move fast? And number three, e commerce is
still fifteen percent of the overall commerce. How can we get from fifteen to fifty? And that is actually in the hands of some of the big retailers, So we are excited about working on all three and helping the industry on that. Speaking though, to the environment, are you finding that you have more customers the growth in your business like they're coming to you like, is there growth that tells you the economic outlook, the economic environment maybe
not so bad, the market environment not so bad. As we continue to talk about recession, no recession, soft landing, landing, all these different scenarios. Carol, That's interesting because for us, the product what we are providing, which is helping retailers with one of their number one problems, that's conversion a checkout. You know, around seventy percent of shoppers drop off right at the point of checkout. I do that a lot. Yeah, and on mobile that is eighty five percent because it's
difficult or what are you see something? You're excited, You get all the way to check out, and then you are ready to buy. You have to fill in all these fields on every single side. Then you have to walk and get your walk, all the credit card typing, all that information, so many steps. So how can we remove all those frictions? And what if you have found is with Bold, we can remove pretty much all of those steps and make it a one click buying experience.
And when we do that see around fifty percent increase in conversion versus someone who have to type in all that that problem. I have to suggest it makes me feel like, wait, maybe they're storing information somewhere. I wonder what you're thinking. How we thought about that as well too, because I'm definitely guilty of that, especially at certain price points. Sometimes I debate whether or not I want something. But I was curious as far as specifically, how exactly do
you compete in that type of market? How do you compete in that way? Yeah, So think about from a consumer perspective. You are trying to buy something on a merchant site, and we give the opportunity for them to
save that information right on the network. And now when they go to any other merchant site who are on the Bold network trying to buy something, we look up and see if they have or on the network, and if they are on the network, we pull up all the information and give them a faster experience to buy. And that what we do, though, is very unique in the sense that we do that in a very marching
friendly way. Our magic sit behind the scenes. We empower march and we empower merchant to directly connect with the consumer without adding a friction of ourselves in the middle. So help me out here, because if I buy something through Apple Pay, I just say Apple pay and they have all my information. If I do something a PayPal, same thing. So how is what you're doing is different? What we support all of the above what you just mentioned. But I remember what you just said, Carol, you said
Apple pay and PayPal. What what we are trying to do is empower the merchant, so people remember the merchant's name. Okay, they can provide that feature themselves, empower them. Like when you go to Amazon buy some right, you don't remember Apple pay or paper. You remember Amazon. Yeah, and Amazon
remembers me. And turns out, you know, like you mentioned before, I worked at Amazon helped them with that growth and part of some of making those functionalities ready for everybody, and Amazon landers a long time, that is still no true for almost every other merchant. Interesting, what we are doing is bringing that functionality in a very decent alized way for everyone else. So all merchants and consumers can be on this network and empower they're buying experience everywhere.
Wells And I was kind of hinting before though, then the security of that information is crucial because if you are doing that then ultimately for a lot of different retailers, So how do you make sure ensure that that information is protected? Well, you are absolutely right, we obsess about it. I mean, one of the good things about us is
we built from the ground up for security and privacy. Yeah, and we go through every rigorous testing and certification that's available so we can meet and beat the bar for anybody. And the level of complexity and sophistication we have, we are able to get very large, multi billion dollar merchants like Fanatics, Revolve, you know, like even big brands like
cass were. A lot of the big brands trust us to provide help them with one of the most important functions that is check out and help save and store that information for them. And we only have about a minute left. But I knew you're a private company. It's been a tough time for many private startups that have been struggling to raise money. What has it been like
for you in this environment. I mean, we have been reacting very fast since the beginning of the changes, and I had to make several tough decisions so that we
can be where we are. And what we are seeing now is we're looking forward, very excited about the new customers we are able to bring in, Like some of the we moved up to larger enterprises and you're seeing is our product is now more relevant than ever before, right because everyone is trying to convert, everyone is trying to get more customers, and we are able to bring them in. And you know, we were fortunate enough to raise a bunch of money and we are really strong
and a good place. I'd be remissed not to ask you just at thirty seconds. You're in San Francisco. Has there been any chilling effect of the collapse of Silicon Valley Bank just quickly, not for us, and you had no exposure. We have no exposure to that, but you haven't seen any impact in terms of innovation or impact on the valley, And everybody's stepping back a little bit. Well, everyone is thinking about what it means, and I'm sure there's going to be some ruple effect or longer term,
we have to wait and see how it unfolds. Yeah, that certainly feels like the environment as we continue to see how it plays out. Thank you so much. Come back. We'd love to hear certainly as you continue to grow your business and things to impact the retail world. Great to have with us. Maju Kua Villa. He's CEO Bolt, former VP and general manager for Amazon's global logistics. As we said here in our Bloomberg Interactive Studio, you're listening
to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six East on Bloomberg Radio, the Bloomberg Business App and YouTube. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty. I'm broommacae a journal. Now about you? Let me drive? Oh no, no, no no no, who's going to judge? Home? Honey? Please I'll do the riding rebels. I want to drive. It's good question. This
is the drive to the closet. Count music. Well, Brian jogging down on Bloomberg Radio. All right, everybody, about seventeen minutes left in today's trading session. Shortly roll head of to our TV colleagues to talk about the market clothes. Having said that we are seeing in these last sixteen seventeen minutes of trading some buying into the clothes. The equity averages pretty much at their best levels of the session.
So as you heard from Charlie rep about one point seven percent on the nastac up, about one and a third percent on the S and P. And you know, we got a FED decision tomorrow, but investors, they seem to be a lot more happier with risk today. I know, it seems like a Carol And I'm excited about our next guest, Gino Bolvin, president of bolven Wolf Management Group, who's here to speak with us and Gina, I have
to ask you the million dollar question. What are you expecting to hear from the FED tomorrow and how are you specifically positioning for this? Yeah, what do I expect or what do I think they should do? I mean two different questions, but I'll give you two different answers for that. Let's just take a look at we were just two weeks ago. Right, just two weeks ago, we were questioning and debating if the FED should do fifty or twenty five bases points. Now we're discussing if they
should raise rates at all. So things are changing very quickly. The market has built in about an eighty percent probability of a twenty five basis point hike, and the market's excited because it's closer to the end of these interest rate hikes. And basically that's what I think the FED is going to do. The market is giving power permission to increase hikes, and I think because the market's up,
that's what they're going to do. I also want to talk about, you know, what happened with the ECB and Christine Lagarde, and she raised the rates by fifty basis points. However she offered she talked about she had a very dovish tone, and she gave strong guidance that they would do whatever is necessary to show up financial stability. And I think that's what the market is expecting from Powell.
Perhaps he raises rates tomorrow, but he gives some type of devish guidance, and that will probably be the first time. Let's see what he says. You know, I don't think he should hike though, and I wanted to get more specific your take because we're seeing this rebound in financial shares bank shares again today. Does this create an opportunity for investors? How are you exactly positioning for this? So?
I think it does. I think the high quality big banks, I think that they're going to do better and they are the beneficiaries of the problems at the regional banks are having. I think that if you stick with quality, you'll be Okay, it might be, it might be a little bit early. That's not one of our top sectors for this year, so you would you wouldn't be on the dips. And forgive me Gina for breaking in, but regional banks are up six percent today after being hammered
as you know, over the last week or so. True, the KBW Bank index is up as well, But you wouldn't be committing money, or did you or advising your clients to put money into the banks as they were getting beaten up over the last week or so. We haven't done that. But as part of our asset allocation, we have a value tilt and that does include some of the larger financials which we've always owned, but we
haven't stepped into the regional banks. And what would make you change your thought process around the regional banks as far as do they need to see valuations drop further or is it an area you just don't want to have any exposure or whatsoever during this time because of
everything going on. Well right now, we're more focused on different parts, you know, like we like technology, we like information information tech, and we stepped into that earlier in the year because we thought as came closer to the end of the rate hikes that technology would do well. It's it's doing extremely well, better than we thought. Also because of some of the companies and technology that I
have in layoffs. It's bad for our individuals getting laid off, but it's good for the balance sheets and the profits of some of the big tech information technology. We've all decided it's a terrible name for an industry because it tells you nothing. What do you mean by information technology? What specifically? It is up about sixteen and a half percent so far this year, but what names in particular?
And I know last week we were talking about the rally we saw on Microsoft, there's some names that just have been on a tear So what specifically within that infotech umbrella would have you been pretty much? And that's a great question. This is not a recommendation, but stocks in information technology would be like the Fang stocks. It would be like Microsoft, and it would be like Apple. So those are the types of stocks that would be included in that sector. But you know, we're also balancing
that with some value stocks. We like healthcare, we like medical devices, and big farmer. You know, it's an aging demographic and we see some value in healthcare, so we think that's an important sector. Industrials like aerospace and defense. As our defense budgets are expanding, those stocks should do well. So it's China reopens, they should also do well. Do you know? We only have about a minute left, But I want to know specifically what are clients asking, what
are they what are the biggest concern right now? You know, clients are really asking how we're heading into a recession and is this a recession like two thousand and eight. It's been a long time since we've had a recession. And our answer is that we don't think that we're heading into a recession, but if we do, it's going to be mild. One of the reasons is that the consumer is still strong. Yeah, unemployment unemployments really low. But also you know, if we do head into a recession,
this is the most telegraphed recession in history. That's true, so everyone's prepared for it. It's a really good point. But I will say that you know who knows. I mean, I like last weekend half has reminded us of that. We can be surprised. As you've seen within the banking sector break to catch up with you though. Gina Bolbage's president at the financial advisory firm Bolden Wealth Management, joining
us via zoom from Boston. This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcast. Listen live week afternoons from three to six Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business App. You can also watch us long ive every weekday on YouTube and always on the Bloomberg Jerminal