This is Bloomberg Business Wait 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 Stenebeck from Bloomberg Radio.
Among those stops on the decline today two point six percent lower. In fact, is Walmart's staying at its worst levels. That despite the world's largest retailer lifting its annual profit outlook again. But you know what else was with it? Tim, a bit of a cautious tone.
Yeah, it's always good to look at the commentary, and perhaps this is why the stock is lower. The cautious tone on consumers in the US economy. Walmart said that the rising borrowing costs, Okay, we know that those are hitting consumers. Look at what's happening to you know, credit card loans, people having to pay off those, and then of course mortgage rates as well, and the resumption of student loan repayments will add to the strain on US
household budgets in the coming months. We've got a great guest with us this afternoon. It is with more on the results outlook and on the company that is the world's largest retailer. We got Bloomberg Intelligence senior retail staples and packaged food analysts Jen bartashis. She is joining us from New Jersey this afternoon. So why are shares of Walmart lower?
Jen? Well, I think you nailed it when you were talking about this in the intro, and it's really just that conservative outlook. And you have to remember, for retail, back to school and holiday are the most important seasons of the year. So if Walmart's striking a cautious tone headed into those key seasons, that's probably what's pulling the stock down a little bit this afternoon.
It's like one of those like, uh, what was the cautious Was the cautionary?
Was the caution with the actual outlook when it came to numbers, or was it the commentary that we repeated there about student loan repayments and borrowing costs.
It's more about the commentary about the state of the consumer. Because Walmart's numbers were great, and you know, the appeal of their value proposition is continuing to grow. So when you listen to what management's talking about their gaining share in some critical areas like grocery, and you know, but it's that cautious tone. And the problem is that grocery is a great business, but it's not a high margin business.
And so for Walmart to really be successful, they want to incorporate some of more of that general merchandise sales. And those are the things that are important to back to school and holidays.
And for those who missed, and I bet Jen heard at first hand the CEO Doug McMillan of Walmart said on that conference call with investors and analysts, the good stuff, jobs, wages, and pockets of a disinflation are helping our customers. That's the good stuff. The bad stuff, but rising energy prices, resuming student loan payments, higher borrowing costs and tightening lending standards and a draw down in excess savings mean that household budgets are still under pressure. I mean, Jen, that's
a big laundry list. And especially for customers that typically shop at Walmart, I mean, you're talking about a lot of Americans. This is where they shop and that's a big, you know, stress list, if you.
Will, It really is. And what we're seeing and what the patterns so far the year has been is that people do want to spend, but they're being super selective on where they're doing it, which means that they're saving everywhere else that they can. And so where you know, you do see that people are still going on trips, they're still going on vacation, they're still going out to dinner for special occasions. That's where they're choosing to do
that little bit of splurge. But they're making up for that splurge by saving and saving, saving, cutting down on other expenditures. And that's part of what the behavior that we're seeing happen at Walmart as well.
Go ahead, Carol, Well, Tim and I constantly talk about, well, you know Amazon, I need something, go to Amazon. I just did a big thing last night because I know it's easy to return and stuff.
But tell us what, Well, I was going to say, I heard Jen, I heard you this morning on surveillance and you were like speaking to me. I think you said everybody goes to Walmart for something? Is that what you said?
It is?
It is?
And it's true, so true, Carol, because I do the vast majority of our shopping at Amazon. But because I have American Express, I'm able to join like the Walmart Amazon Prime thing whatever it's called for free, like you can join that for free, and if we need something that's not available on Amazon, we do it at Walmart. And it's like the same thing as Prime.
So Jen talked to us about Walmart Plus, how big a deal is it and how much of a growth engine it potentially is or will be for Walmart.
So Walmart Plus started about two years ago, so it's still a pretty new program, but it does compete with Amazon Prime, and I think it is going to really become a very powerful driver for both sales and profit for the company over the next five years. We actually published a research piece on this earlier this week where we think over the next five years it can add one hundred to one hundred and sixty billion dollars in
revenue for Walmart. And that's just on that's just on that on that program, and if you put it in perspective, that's the size of target, right. So it has the potential to really be a differentiator for Walmart. And part of the reason for that is that it appeals exactly to what people want, which is convenience and access to
low prices. And so the fact that you can have deliveries of groceries or things that are in store to your house on the same day with no fee associated with it is a pretty powerful engine for them to build off of.
Can they do it in a way that gives them margins?
Yeah? And you know, if you think about the way a retailer makes the most margin, it's when somebody comes into the store, buy something and takes it out to their current takes it home themselves. The next most profitable thing is when somebody comes and they pick it up at the store curbside and then take it home. And
then the third is one it's shipped to your house. Right, So what Walmart has done is that part of the value proposition is that curbside pickup and so that business has been growing very quickly for Walmart and is getting a lot of adoption. So that's actually a pretty a pretty good way to engage digital customers without having a margin drag that you would associate with things that have to be shipped to your home.
We live so Caroly and I live in Carroll's in New Jersey. I'm in Brooklyn, which just outside, so you're in the sun. What I'm saying is you're in the city, You're not like driving to these places to actually pick stuff up. Now, when I was on printal leave while we were visiting my parents in California, and my sister was like ordering stuff from Target and we'd go, we'd drive there, they would I mean, anyone listening who has a car is actually laughing at me the fact that
I'm like talking about this. But it's such a we're such strange animals in New York City because we don't take advantage of these programs. But I will tell you it is so easy to order something on one of these apps and then drive up to the curb and they literally bring it out to your car.
I will tell you my daughter who goes to school six hours outside of New York City in a southern state, it's much more like residential and so and so forth. I remember one of the years we were driving to her school and Jen along the way, we kept ordering from Target, like she's like, oh, I need this, So we'll be like, okay, well in an hour, we'll be at this Target and we would just pick up curbside, and it was incredible.
And it's that convenience that's really driving the success of these retailers because they're not only offering value, but it's convenience. And this is where for Walmart's perspective. You know, Amazon is a behemoth and they're very good at what they do. But Walmart has been building out the size of its marketplace.
The number of sellers on its marketplace is becoming more competitive, and that powerful engine of being able to pick things up at the store at your convenience or have it delivered to your home same day is a pretty good strategy that they're following.
What's that stat Jen with the X percentage of the US population lives within you know, just a couple miles of a Walmart.
It's like over eighty five percent of the US population lives within a ten mile radius of a Walmart.
I believe is what incredible the company has said.
All right, so you were sitting down with Doug McMillan and you wanted to I don't know, you had two minutes with him. What would be the question you would ask him?
Well, I would ask him about things for the company hasn't really given a lot of disclosure. I would ask him about the size of their membership for Walmart. Plus, I would ask him about the current profitability level of their of their online business. These are things that we know they're building, things that we know that they're working on, but we don't have a lot of detail behind it yet to understand how profitable it is or will be for the company long term.
Ye, and it's matth I'm like, look at your research to about you know, advertising revenue at Walmart. Like it's just this company that the broad reach by just evolving.
Jen, you're the best you've been up since, like you know, the crack of dawn covering this stuff. We love it when you join us and we get to talk. Also, just be honest, do Carol and I just sound like complete luttites the fact that we just found out about this curb side pickup.
At a little while.
Not in the least.
Okay, goody, Jen, And no worry, it's just back to school shopping is next and oh yeah the holiday shopping season, so you'll get plenty of rest or not listen, we do.
I think it's going to be a busy second half of the year, let's put it that way.
Well, we'll be checking in with you, no doubt about it. Jen Bartasha's she's Bloomberg Intelligence Senior Retail Stables and package food analysts really a must read among our Bloomberg Intelligence team, and so appreciate her finding some time Walmart chairs, though still under pressure. In today's straight.
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I don't know if he would pall, but Bill Gates back in March talked about seeing an artificial intelligence system ac tricky medical examination and how it represented the most important advance in technology since the graphical user interface. The guy uh. He said that software that, of course lets people to more easily interact with computers, and in the nineteen eighty set the standard for modern operating systems, including Microsoft's Windows.
That's the gooey Carol, that gooey gewey.
I said that, I know, gueye wooey.
Gooey wooey, but keep it in mind. Incredible statement.
Well, it is right you think about how game changing that was. Keep in mind, Microsoft has an app. It's called the DAX app. It's powered by AI. It's from the company's Nuanced division, and it transcribes doctors and patients comments, then creates a clinical physician summary formatted for an electronic health record. So AI in helping out doctors.
It's an episode actually of the Bloomer Originals video series AI I RL earlier this year. It can be found on our streaming surface service. With more on the topic and curious if AI is yet penetrating his world, We got back with us doctor Ian Luspader. He's clinical professor of Medicine at NYU Lango and Medical Center. He joins us on Zoom from New York City, Doctor Lusbater, How are you.
Great to see you guys, Carol and Tim. Tim, congratulations on the new born. Hope ball is going well.
Yeah, all is going well. Thank you very much. Hey, how is that AI hitting your world? I mean, the medical community is one where I got to tell you sometimes I'm still required to send faxes.
Right.
Well, well, we're not there yet, but AI has tremendous potential, and AI functions in many ways like a person or a doctorate takes a lot of data points, analyzes it and process it and comes up with some conclusions. We're still not quite there integrating in every way. But the potential is enormous, from scheduling appointments, to pre interviewing patients to find out what they're coming in for, assisting with a diagnosis in the exam room.
Well, talk about that part, assisting with the diagnosis. That's that's really interesting to me because what you guys as doctors try to do. And look, I didn't go to medical school, but I've been to plenty of doctors. You ask so many questions about symptoms, and each time somebody answers a question about that symptom, you know, there's sort of this calculation that goes on inside a doctor's head. Okay, it could be this, or it could be this, and
you keep investigating. So how do you use how do you use you know, first the internet or databases right now? And how do you think that can be aided AI.
So we, in a very similar way, extract information. A patient comes in with a complaint or an issue. We review a variety of questions that helps us hone in eliminate certain things and gives us the most likely diagnosis based on history, and then we get additional information from tests or labs to try and make a specific diagnosis. And then a specific treatment. AI can be very helpful because it can also process a lot of questions, either interrogate the patient or review lab data and kind of
synthesize the information. And we see this most helpfully for example, with X rays. If you're comparing a series of cat scans, tremendous amount of data and subtle abnormalities can be picked up. Same for lab data we're using it for example with colonoscopy, where AI picks up subtle abnormality such as a polyp. Now it can't really tell if that is a polyp or necessarily maybe a clump of mucus. The doctor still has to irrigate it away and say, oh, yes, you're right,
and is pursuing it. So AI can be very helpful to say, hey, have you thought about this? Is this relevant? Do we need to explore it further? And whether it's developing new drugs, whether it's processing a lot of lab data to say, hey, it looks like this blood count has slowly been trickling down. Do we have to worry about bleeding somewhere? Could there be a cancer? So it's not really integrated yet into the medical record system. It's not in the office helping us. Yet it's really more
scheduling appointments. It's more helping with cat scans or diagnostic tests, even robotic surgery. But eventually, I think it will come into the office to really help extract important questions from patients, tact important data, and help us make a diagnosis and a treatment plan.
Ian how long does it take for it to come in you think in a really significant way.
You know, a lot of that is based on doing trials, A lot of it is based on the developer of the electronic medical record. We spend probably fifty percent of our time documenting, so if we can expand our patient contact time and thinking time and reducing our documentation time, that will definitely improve our ability to get information. I think within the next few years it's going to be in the office, but it's not certainly next month.
Do you see this from the incumbent players in medicine right now? And I think of one, I mean Epic Medical Systems is like, if you go anywhere EPIC owns, the room is are they going to do it?
Epic?
It is the behemor it's the behemor well.
They're talking about it, yep, it's the behemoth. All the major medical centers. They've been able in a few short years to really dominate it, and basically everyone has to join now because all the big players are on it and it is actually a pretty good medical record system. They are working on it and we're working with them to develop different algorithms. But it is not yet interviewing the patient. It is not yet documenting helping us document.
We still have to dictate the charter or type the note, and it is not at the end of the day helping us process the information and say, hey, you missed this low blood count or high liver enzyme. Maybe we should look into it. I think that's going to happen, but I don't think it's going to happen in the next year.
Do we need one system though, for this to really work.
Yes, we've talked about this before for many years, having a national system where if someone goes to a hospital across the street or us the country, we have all the information integrated so we can do less tests and have to be less redundant in what we do. But that is a problem with administration and hip and privacy violations. We really would need the government to say, look, we're mandating that everyone have one system that puts everyone on one platform. So that's also a few years away. But
we should have done that years ago. It's really been a waste of time having all these separate systems that don't really talk to each other.
So, doctor Lespater, how does this end up in the operating room in the future.
Well, we're already doing it for robotic surgery, which is a tremendous advance small incisions. The robots really help us do very technically delicate procedures. There are better outcomes. It's helping with drug development, it's helping with analyzing studies, so it can take all our information.
So Carol, go back to what you were saying. When it comes to medical imaging, right, you know, it's only as perfect as the person reading the image.
Right, What if somebody has a bad day or is tired, or they just miss it. It's not judge. I'm not being judgy.
It happens.
It's life.
It happens. Happens to people in my family, like and you know what happens is there can be serious consequences to that. What if you were able to use AI and I know they're working on this. There was an article in times just a few months ago when it comes to mammograms using AI technology to try to find masses and mammograms.
And just if it's a case of able to go through stuff and then just say listen, we got some questions about this, and then a radiologist or a doctor comes in and says, okay, let me take another look at this, and just it's another layer of really making sure that you don't miss something that's truly truly important.
I mean it's in a hybrid way, right, working hand in hand, right.
And in terms of medicine, right, it's never necessarily an exact science. So if you are able to have some kind of database that pulls in all the kind of different variations, if either an A or reading on a scan that shows when there could be potential problems, I think, think about how valuable and important that could be. Ian ls Beta, We always look forward to it. Doctor Ian las Beta over at NYU Lango Medical Center.
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Thirty tim Some data last month a came out from the research from Pitchbook. It showed VC venture capital funding globally almost halved in the first six months of twenty twenty three, so showing investors just not interested. Also some less demand amid sharply higher interest rates. And this is though, despite huge interest in AI startups sparked by the success of open AI's Chatchipe. That's where money is going.
Yeah, Investors report more than forty billion dollars into AI startups in the past six months. That's according to the data, including the ten billion dollar investment by Microsoft and open Ai and one point three billion dollars in funding for rival Inflection AI.
All right, so let's get to it. Because back with us to talk about what's going on when it comes to the VC world. And we're delighted to have her back with us. Shila Patel. She's vice chairgeneral partner of b Capital. She's former chairman of Goldman Saccesset Management. She's with us on Zoom from Park City, Utah. Sheila, Nice to be talking with you again. Last time I think it was at the Milken Institute Global Conference in May.
How are you and talk to us about your world and how things have changed.
I'm great, Thank you so much, and it's so great to chat with you again. You know, I think the world since Milkin has had some good news, had some rougher news, but overall, I think it's been a fascinating period to see how investor sentiment hasn't necessarily responded to some of the good news we're seeing on the economy and particularly among public companies on profits and so on.
So there's a lot out there to look to. But as you pointed out in opening this, when it comes to venture there are definitely some challenges and it'll be fun to chat about them with you.
Well, let's talk about the challenges first, and then I want to talk about the opportunities. So it's been choppy waters certainly given higher interest rates and pullback on funding, and we've seen some venture backed companies wealth cease to exist, cease to operate. It's a different world than it was in twenty twenty and twenty twenty one. What are the challenges that you're seeing at the capital.
Well, I think you know, along with the entire VC community. We certainly see challenges as you mentioned, in terms of investor interest, and I think institutional investors data a survey of about forty four LPs show that almost three quarters would allocate less to VC next year. Now, many of them have been strong allocators and supporters, and I think they'll be back, but I think there's definitely concern over valuations, and that's where sometimes challenging news can end up being
good news. We've been very fortunate in being able to raise our latest fun Growth fund three and beat our goals with that, and you have seen several VC firms, particularly some of the largest, have some success raising money. I think because of those other themes that you mentioned, the interest in AI, the focus on areas where tech really can be additive in up and down markets, and that in many cases is enterprise and fintech, which are
areas in which the capital operates. So I think there are some high points, but in particular, investors are looking to really make sure that the people they give money too are focused on these questions of valuations, and that's where the data has really been stark and is the opportunity maybe the silver lining to the cloud, so to speak, because valuations have come in and it means there are great opportunities to find good tech companies at much more reasonable and appropriate valuation.
Hey, CILA, is AI actually helping you guys find better opportunities right now and able to go through maybe a lot more deals and figure out what really makes sense.
Yeah.
I think applying AI to deal flow and to analysis goes hand in hand with looking at how our companies are using AI. And certainly I would say it's been an amazing partnership talking about AI with our strategic partner BCG.
When you look at the work that BCG has put in at all levels of Corporate America and global corporates and thought about how to apply AI to solving some of the problems they're facing, it has really helped us take it in house and think about ways to apply it in our own investing, in our application of analyzing potential portfolio companies.
But I guess what I'm also wondering too, has something fundamentally It's interesting to hear what you say about, you know, investor interest when it comes to VC. Is there something fundamentally structurally going on? We talk a lot about I know, I think we did it milk, you know, the private credit markets and the amount of money that's out there. I mean, is there something structurally fundamentally going on that's changing the VC world like it was, like it's always been.
Yeah, Look, I actually I guess I'll I'll put my longer term hat on it. To me, is the maturation of a segment of investing, just like we've seen other areas go through. There was a moment when index investing was young and new, and some crazy you know, evaluation, some crazy structures, lots of things went on, and now
it's a typical part of people's investment in portfolios. I think when I look at venture and I compare it to the history my twenty years at Goldman, my thirty years in the industry, and watching various areas come into their own such as quant even hedge funds and private equity. They go through a maturation process, and I think it's a natural evolution to me, you know, I look at venture and maybe it's because I'm one of the old people in venture. That's how young an industry it is.
It's filled with amazing technology experts, but maybe you haven't seen as many market cycles and at the end of the day BC has to perform the same as other areas, and that maturation is part of why you see some funds able to cope with the changing environment, the same as you see some portfolio companies coping better with a more difficult funding environment.
Okay, you know, we only have a couple of minutes left, and I wanted to get to the opportunities that you're seeing right now. Sheila's so, so talk to me about two opportunities in two senses of the word. One geographically, where are you deploying money? And then also what types of companies excite you right now?
Sure, well, maybe I'll start with the last first, because I think it ties into that question of AI. I think that we spend so much time and maybe this is a trend in general on the downside of certain technologies or of things in general, that the upsides sometimes get missed. And when I look at AI, I look at the way a can turbo boost drug discovery and research in areas that will be really important in a
climate changing world, like crop protection. So a company like atom Wise, which is one of our portfolio company, a small molecule expert partnering with the world's leading pharmaceuticals, biotechs, agrochemical companies to discover new ways and new treatments, whether drug treatments or whether crop protection, et cetera. So I think that's an incredible area for focus for AI is drug discovery, small molecule work that can go beyond medications
into other applications, industrial applications. That's amazing to me. And then when I think about that broader question on opportunity, I think that what we have to look to is the longer term prospect for some of these companies when you have a lower valuation to start with, and that means from an investor perspective, you want to be sure where the challenging valuations, you're challenging companies on the levels they're looking to raise.
Super stuff. So appreciated. Shila Patel, Vice Chair, General Partner be Capital, joining us on Zoom from Park City, Utah. As we said from a chairman of Goldman Sachs Asset Manage talking about the VC space.
If 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 iHeartRadio app, and the Bloomberg Business app or watch us live on YouTube.
Carol Ifuber get those textounts to just from unknown numbers. Sometimes they say just hello, or maybe they have something more like, Hi David, I'm Vicky Hoe. Don't you remember me?
I run in the other direction.
Okay, well that's probably a pretty smart thing to do. I mean I get them all the time, but unlike Bloomberg, Zeke Fox, and probably like most people who are just a bit technologically savvy, I ignore them. We're grateful that Zeke didn't, though, because even if it meant there was a risk he'd be led to what's known as pig butchering. If you're a little confused, don't worry. This is all part of Zeke's brand new book. It's called Number Go Up.
Inside Crypto's Wild Rise and Staggering Fall, in which he uncovers a crypto powered human trafficking ring in Cambodia.
Yeah, Zeke's new book coming out September twelfth. The excerpt is the domestic cover story of the new issue of Bloomberg Business Week on stands right as we speak online a Bloomberg dot com slash businessweeknd on the Bloomberg with more Zeke is with us. He is financial investigations reporter at Bloomberg News. He's on Zoom in New York City. Also here the editor of Bloomberg BusinessWeek, Jill Weber. Here in our Bloomberg Interactive Brokers studio. Hi, Joel High, Vicky Hei Zee.
Only two of those three characters are real. So so this is an amazing excerpt. I'm so excited for Zeke in this book.
Number go up.
You can pre order your copy right now on Amazon dot com. Right Zeke, And uh, this is a little sneak peak of where some of the book goes. And we're just so tickled to have it as an excerpt in this current issue and as our cover story. And you know we're talking about Zeke here and uh, you know it all begins with this text that he got, uh from a person named quote unquote Vicky. Who was Who is Vicky? And what text did you get?
Zeke?
Yeah, so Vicky gave me and sent me a text out of nowhere saying like Hi, David, how's it going or something like that, and like I'm not David obviously, So I've been getting a lot of these. I'm been kind of curious about that I decided to me.
Yeah, Tim says he gets like Carol, get them, Yeah, I ignored delete reporter of spam if you can, right, but you you wrote.
Back, yeah, And the first part of this, like, it's probably about what you would assume. Where Vicky. She tries to make friends with me. She's flirting a little bit, she's sending me suggestive pictures and she's like a beautiful, heavily airshed young woman who claims to be in New York like me, but does not want to meet up, and none of her pictures actually look like she's in
New York. And after I'm waiting for her to try to scam me because I wanted to know how it works, and it takes like days before she's very patient before her true mission comes out, and she starts telling me about how good she is at bitcoin trading and that I gotta try to well. She doesn't even say like you got a trade like me. She really plays it slow. She's like, you know, I'm just just real busy today. I can't talk. I got to make like thousands of
dollars on my bitcoin trades. And then finally, after like a lot of trying, she's like Okay, I'll let you in on it, download this app and send me some of this cryptocurrency called Tetor. And that's what I was really waiting to hear.
What I love about it, though, is how how slow she is. It's like, I mean, and this comes through in the excerpt, is like you're like encouraging her along to like, come on, get to the point where you're trying me.
I even I had to tell her that, like I really wanted a tesla, like I need to make money, like she just she was really wanted to make sure I was hooked before she went for the scam. And once so I sent her Tether is like it's a stable coin. It always costs a dollar because it's supposedly backed by real dollars in the bank. And you can go on any of your normal crypto apps like coinbase or crypto dot com or whatever, you can buy tether and then you send them to Vicky at her supposedly
like magiccoin trading app. And so all that involves is getting Vicky said. Vicky gave me her address. I mean, she walked me through it very carefully, and I sent her a hundred tethers from like a normal trading app to her special app where I was going to get make this like big score. But as soon as I sent it, she started telling me like I needed to send more, at which point I felt like it had gone far enough. I told her I was a reporter,
and she disappeared. But the part where the story gets really dark and really weird is when I tried to figure out who is on the other end of these messages, like who could Vicky b.
So?
And it turns out.
That that I want to I want to slow you down before I let.
You go there, Uh the great revel Yeah, Which that's it, right.
You know part part of what the book is so much bigger than just this, right. Keep in mind this is an excerpt, and Zeke, I do want to just like back up for a second and talk about, uh, how you ended up having this book at all?
Well, I was I was hoping that I was hoping that you would because good this really started. This started like, uh, you know, it's almost two years ago, maybe even a little more than two years ago. Joel came by my desk and I had not been reporting on crypto at all. I tend to write about like weird stuff going on on Wall Street. But I've sort of resisted crypto as
a topic. I like most of you listening to this, you probably feel like I'm never going to get it, and like the constant like boosterisms of a turn off. But Joel said, hey, what do you know about stable coins like Tether? And I thought, huh, I mean, maybe like this wants I mean, if Joel wants the story, it might be kind of fun to look into it. And but I mean, I don't think I'm sure that neither of us had any idea where looking into Tether was was going to take us now.
Certainly not me. And we've had you know, great reporting from Zeke on on Tether and more crypto along the way. So yeah, just a little pop up my own car there for helping Zeke get inspired to write and get interested in Tether, because the Tether part is ultimately where this this other side of your your story about you know, quote unquote Vicky takes you. And I will say, this is where it gets dark. We've been kind of laughing,
ha ha, it gets dark really quickly here, Zeke. And why don't you take us to this human rights catastrophe that you discovered yeah, on the other side of the world.
I mean, the truth, as I learned through activists and reporters on the ground in Southeast Asia, is that the people who send these text messages are themselves often victims of human trafficking. And there's whole office buildings of people who've been learned to say, like Cambodia is a popular spot for this, and they've been learned there with the promise of a good job. Once they arrive, they're trapped and they're forced to scam people under with the threat
of beatings or torture or even worse. And it sounds like some sort of like QAnon conspiracy thing, but like it's real. These messages are often coming from people who are suffering like horrible abuses and can't leave unless they pay essentially like a large ransom to the gangs that run these scam compounds.
Can you Zeke talk about who you met in Ho Chi Minh City and how he was able to escape from this one of these uh, one of these sort of prison like structures.
So over a video chat with the translator, I started interviewing people who had escaped from these compounds. One of them his name is twee. He's twenty nine years old. The first time we speak on Zoom's it's like a rainy night in ho Chi Minh city. He's walking down the street smoking a cigarette. I can see that he's missing quite a few teeth, and he tells me that these were he lost them in like a horrible beating by his captors. And it was truly a desperate situation.
He'd been tricked into, tricked into going to Cambodia, and he was only able to escape by stealing a guard's phone then hiding it in his rectum, which was a trick that he'd learned in prison. Then and like he's telling me this stuff and it's it's pretty hard to believe. He told me that he was able to take the phone apart with no tools, and then since he didn't have a charger, he hot wired the battery to a fluorescent light fixture in the ceiling of the room where
he's being held. So he had been a great source of information about these schemes and about these scam compounds and Cambodia. But I wasn't quite sure about this part of the story. So I went to Hochi min the city I met hup with him. I told him like tweet like, I'm so sorry for what's happened to you. I hate to say this though, but like, is that even really possible to charge an iPhone like that? And
with no hesitation? Well he said yeah, he said, I'll show you right now, went to the store, bought like a old iPhone for about fifty bucks, and with no hesitation he took it apart. Took apart a lamp at an LED light bulb in my room hotel room, wired it to the battery and got should turn on.
So it was so you can do that?
Incredibly impressed.
Yes, so, and so bring it back to to so we if we if you have firsthand experience from these people and what they've endured and what they've endured to get their freedom back, what did you learn from talking to them about what was on the other side of these let's call it like a modified a hotel, shall we say?
Well, we had been held in se Anookville, which is a city in southwestern Cambodia that had an incredible casino
building boom fueled by Chinese investors in recent years. Then like a horrible bust win the during COVID and also due to a change in the law about online gambling in Cambodia, so there was now all this empty space, all these people who specialized in gam online gambling, and he'd been held in this one area called Chinatown, which is like the most like evil office park on Earth, like twenty maybe like fifty towers, where there were credible reports and also at local media and other press that
were saying that these were sites of where there were thousands and thousands of people who were forced to scam. But I felt like this was one of those stories
that you had to see to believe. And also the people who covered it, understandably were not that interested in the in the crypto angle, but I felt like crypto was I wanted to know how crypto was really fueling these these scams, because at the heart of it, like people in the US or other well off countries need to send money to like Chinese gangsters in Cambodia, And if you tried to do that with like your visa card, like that's not going to work for very long, Like
there's going to be charge. Visa would cut you off in a minute, and uh Bank of America is going to like flag that transfer, but if you do it using crypto, it's instant, it's irreversible. And it's also it's kind of plausible that there could be this like great bitcoin trading strategy, I mean plausible for if you're like
not that well informed. So and what I saw when I went to Cambodia was that at I went to Chinatown and it was just as twe and the other escapees had described and right although by the time that I went to visit, it had largely been shut down by become like an international embarrassment and Camponian authorities had closed down most of the scam compounds there. But right at the entrance, there was a store that had closed.
There's a money changing store, and it had a sign on its billboard advertising that you could change your tether for US dollars there, which is not something I'd seen like anywhere else in the real world. So that was a big shock to me.
So we have about a minute left here, Zeke, and there's we know so much more in your book, but this particular excerpt, I mean, how does it make you think kind of about you know, this the crypto world where we are a lot of questions out there.
I mean, to me, this is like the one I looked all over the world from like El Salvador, Philippines, Bahamas, everywhere I went. Crypto was not really living up to the hype here. Sadly, it was extremely useful for these scammers, and to me it explained, uh it could. These types of illicit uses could explain a big part of Crypto's continued popularity in the face of like so many reasons to avoid it.
Now, all right, we're gonna leave it on that note. Unbelievable, Jill, what are.
Your I'm just so proud of proud of the zequ Fox for this, for this book, and grateful for this excerpt. And just remember to pre order your copy of Number Go up now so that you you get one of the first ones off the press.
And all we're going to say is there's more of Zeke Fox. We're going to cover this book certainly again in September and cover more of it, So looking forward to that. Ze Fox check out his book. As Jiell just mentioned, he is financial invest gations reporter at Bloomberg, and of course Jill Webber the editor of Bloomberg Business Week. This is the domestic cover of Business Week.
M a journal.
Now about you let me drive?
Oh no, no, no, no, please, honey, please, I'll do the riding gravel.
Let's wat I want to drive.
It's a good question.
This is the drive to the globe down thing.
We'll buyer on Bloomberg Radio.
All right, TikTok, everybody, About eighteen minutes left in today's trading session. It's been safe to say for at least the second half of the day decidedly lower. As you just heard from Bill and Charlie tracking the trade here. Really the Nasdaq down the most on a percentage basis. So stocks are down, bonds are down two as yield have moved up to.
Nasdak is down seven percent just this month, Carol.
Yeah, August has been a bummer. Yeah, it is, except if you're a mayor then you're like, hey, finally my time has come.
Weather's pretty good. No, okay, that's true.
All right, So let's get to it. Let's talk about the trade. Back with us is John Augustine. He is CIO of Huntington Private Bank, joining us on zoom from Cincinnati, Ohio. John, Hey, nice to have you back here with Tim and myself. If we may first up because you are at Huntington Private Bank. You are bank. Talk to us though about the banking trends and what you guys are seeing stress points. I don't know what you can tell us about loan demand.
What are you seeing just in general about the lending environment, what it tells you about the overall macro environment.
Well, from my perspective, at least healthy bank the environment is. You know, business spend on capex in the second quarter. I don't have any numbers for the third quarter so far, but one of the surprises in the overall economy been around the Great Lakes. Businesses were spending on capex in the second quarter, and arguably that's good news for the economy.
What do you think it's going to look like this quarter though.
Probably slows down a little bit. I mean, they go through cycles, just like you and I would buy endurable goods. But it'll probably slow down. But so far, not a lot based on the economic reports this week.
So the people who want to go out and borrow money, the business owners who need to go out and borrow money, even at these high interest rates, they're still doing it.
There's probably more cash. They're using more cash, just like you and I. Consumers are using more cash, paying cash for high dollar items. Businesses are doing the same thing. We're still, you know, three and a half trillion dollars in cash levels above where we were pre COVID.
Wow.
Well as a country, as a country.
Yeah, not just you and Mary.
Yeah, Carroll might be.
But not you and I.
Hey, so, John, you showed with our producer Paul Reddan a top list of items on your mind. Of them, what is the one thing that you think and talk about the most and that you think we should all be paying the most at attention to as investors?
The Fed? You know, we thought, we erroneously thought the Fed would be done at their June twentieth meeting, and they're not. They'll probably skip in September, but probably raising in November. So it's the Fed that's still on our mind. We thought they'd be off our mind by now, but that's not the case.
Why do you think they'll raise again in November?
GDP, you know, inflation is probably going their way enough, even though we get another report in August before excuse me, in September, before they meet, but GDP is not going their way. In other words, GDP maybe according to the Atlanta Fed accelerating in the third quarter. That will come out about a week before they meet in November. That's probably why they raise in November.
You're talking about the Just so everyone is aware, you're talking about the Atlanta Fed's GDP now index, right.
Yeah, Yeah, it rose now tracker with over five percent.
It rose yesterday a five point seven six percent, Carol, from five point oh three percent in third quarter versus it's previous release on.
All that's impressive. That is impressive.
It can move around, though, John, Right.
Oh, no, it's just this week. Think about this week though, Carol. We were three for three. This week was activity economic reports, and we were three for three that those came in higher than expected.
Yeah, you know, it's it's kind of the good conundrum, if you will, if you're the Fed, right, you're kind of glad that the economy hasn't fallen apart and people are still working. But it also means that they're still momentum for people to go out and buy or invest and continue to kind of keep inflation either at these levels or even potentially higher. That's the conundrum we live in.
Yeah, I mean, and you see that in markets, right. The story about in August so far has been about yields moving back up, and the economy is part of that. We would say, the economy is part of that. Stocks aren't quite sure what to do with it yet. But good news, we would say, we agree with you. Good news. Employment is staying high and GDP growth is arguably staying high. But the Fed keeps referencing it and they're going to probably talk about it again at their September meeting.
So, John, you've got new money. Tim O's always asked us, and I think it's a good question when we have folks like you on But if you've got new money, do you commit to the fixed income world where you can get decent yields or the equity world where there are questions about valuations, but if you think the outlook is good and growth momentum continues, that kind of makes sense, or would you prefer alternatives of some sort.
Well, what we talked about internally with our portfolio managers yesterday. We have about seventy portfolio managers through the Great Lakes region and then out west, and what we said was probably buy bonds now and do three months to step into stocks. We're in the scary season for stocks August, September, October, So step into stocks, be a little bit more aggressive buying bonds right now, and so far that's that's working.
How far out though, in terms of bonds are you comfortable to go?
Not far.
We have a short term bias, so we're generally think of the three to five year space. Think of the three to five year space.
So going back to the Fed, is there a chance that the Fed isn't done after November?
Yeah, I mean there's always a chance. We hope they're done after November. Obviously the futures market thinks they're going to be done. But if the economy, what they're worried about, let me back up is the seventies where inflation decelerated but then everything's sped back up and they had to raise rates again. And that's what they're fixated on right now, even though we're obviously in a much different economic situation.
But what that could mean is on the seventies. But maybe we can interpret that as holding rates higher for longer rather than cutting or rather than raising again.
We hope, Yeah, we don't know, raising again, but holding higher for longer. They're finally getting to by the way the futures market.
With that thought, Hey, John, just got about forty five seconds left here. You guys recently edited Adobe, Amex, American Express, Rockwell Automation, Parkerhannafen, T Mobile, Netflix, Tarbuck Salesforce. It's a variety of companies. Is there any kind of commonality meaning? Was it a fundamental play, valuation play, technical plane a play or was it kind of a stock pickers market? And again got about forty seconds.
Sure, stock pickers market. What our equity team generally does is make their buy and sell decisions after earning season. So there's something in that, either in the conference call or in the earnings report that triggers them. So that those were some names there that you talked about, but they'll generally do their trims and ads after earning season. We like that. Actually, that gives a little bit more let's say, conviction to our thoughts there, even though they
may not work out the very short term. We like what the actuity team does.
All right, great conversation, John, Thank you so much. You well, John Augustine, He's CIO over at Huntington Private Bank. Joinning us on zoom from Cincinnati, Ohio.
This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcast. Listen live weekday 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 live every weekday on YouTube and always on the Bloomberg terminal