Palantir Is Bad-Mouthing Big Tech While Taking Its Tech Public: Chafkin

is making its way through the process. Here. It's a fascinating story, fascinating company, fascinating founders and names as well. To help us bring us up to speed on all things Paloteer, we welcome Max Chaffkin, Features editor for Bloomberg Business Week. Max, thanks so much for joining us here. I thought I saw your piece and I love the headline.

Paloteers really no friend to Silicon Valley, are they? Well, it's kind of interesting, and I have to correct you here that it's actually a direct list thing, which is that's right, I mean, very similar to an I p O. But but but they're not issuing new shares and the shares have sold somewhat differently. Um kind of new hot phenomena in Silicon Valley. You know, it's interesting the question because Palentteer for years was basically the Silicon Valley defense contractor.

That was kind of a pitch. You know. Peter Thiel, uh, the the venture capitalist entrepreneur, founder of PayPal, uh was that you know, basically came up with the idea and and and this company was pitching you know, the US government for a long time as the like we're gonna bring kind of Silicon Valley thinking, um and try to display some of these entrenched defense contractors, you know, like

names like Raypeon. Now, um, what's happened is Palanteer is now one of those defense contractors and we're seeing sort of a pivot where where as Silicon Valley has sort of uh as things have become polarizing Silicon Valley. You know, obviously a lot of liberals, um, who are who are very against Trump are are work at work at the Silicon Valley companies, Palentteers kind of trying to chart a

slightly different path. Is there enough for somebody to get involved, so private equity or one of these SPACs that's roaming around the place. So it's talent here. I mean the direct list thing is happening. Although they did today just uh you know update the day it was supposed to happen on in September twenty three. It looks like now the stock will begin listing on the twenty nine. But

but this is happening in the next you know, this month. Um, So, so there's definitely not a not a spack situation or although I suppose, you know, anything could happen. I mean, one thing that is interesting here is Talent here is kind of typically described as a startup, but it's been around for a really long time. It's been around for seventeen years um, which is again another way in which

is not not exactly a conventional Pilicon Valley company. And they've raised you know, a turn of late stage capital. So so it's not it's it's a little bit different than than a conventional startup. And that's actually one of the reasons we've seen some skepticism from investors an analysts because they've been around for a really long time um and are still not making any money. So, Max, what's

the feeling on the street as to this company? We've seen some really well received technology uh new issues Uh this year, is there a sense that this is a stock that big tech investors need to own. Well, you have a really wide range of sort of expectations and valuations, which is part of a feature of these direct listings. UM. But but what what kind of what's driving the conversation? Uh, it was basically COVID. So Palentteer in many ways COVID

is a great opportunity for this company. What what Palentteer does is data integration. They take UM numbers from all different parts of businesses or or governments and they make it easy for companies, governments to make sense of them. So if you think about, you know, the typical things that these these large corporations are dealing with with COVID in terms of like looking at where are the outbreaks, what kind of PPE do I have? How do I allocate that PP? How do I know project sale? That's

all stuff that palent here Um can do. So so that and and so that's kind of like a new source of demand. And as we report in our story, you know, they've done a lot of new deals over the last six months or so. And you know, cost has been a huge thing for this company, where they were spending huge amounts of money flying these um you know sort of pseudo sales people that they call them forward to Floyd engineers all around the world pitching the software,

you know, spending a portion basically selling this stuff. And now they're doing that you know obviously over zoom like like the rest of us. So that's kind of a huge um sort of change in the business. Now it's not totally clear how sustainable it is, how big those deals are gonna be. And you have this big wild card in the election. Palanteers a company that has done very well um over the last four years with the current administration, and you know, obviously no guarantees that that

that continues UM past November. Peter t obviously owns a lot of it, max is they suggestion that he will sell some of what he owns UM. I don't think we know exactly how how that's all going to shake out. There is an immediate lock up where where the investors are are prevented from selling you know, most of their

stock within the first couple of months. Um. You know, I think the nature of the direct list thing is you would expect existing investors, especially these big investors, and Peter Teel owns a lot of this stock as you say, uh, to to start, you know, pering down their their holdings, especially if we see it, you know, open up with a big valuation because you know it'll that will suddenly be like a lot of Peter Teel's net worth UM. And And the other thing that's kind of interesting is

Palanteer has a very unusual structure. So it's it's it's there's um, there's a trust, and that trust has has three sort of main shareholders, one of whom is Peter Teal. This group can basically control the company even if they start paring down UM their shares. So so so there are a lot of reasons why why you would think that some of these large shareholders will at least start to pair back if not, if not sell kind of a substantial amount UM in the next year or so.

So Max, I hate to ask a nitpicky question, but does this company make any money? No? As I said, uh, the loss, uh, the loss that have been huge. You know, on the top of my head, I think, you know, something like four million dollars last year, four hundred five hundred million dollars last year on seven eight million in revenue UM. Uh. But the crucial thing is the losses have gotten a lot better. If you look at it, their their revenue went has gone way up first half

of compared to losses have gone way down. And that's because of of partly because of COVID and partly because other parts of their business were doing really well. They've got this huge contract um with the army and and that money is starting to come in. So the bet, the long term bet for investors is that you know, this is just the beginning and these trends are going

to continue. And of course the kind of bear case is that, look is a quote unquote startup that's been around for seventeen years and it's still losing huge amounts of money. You know what makes us think that this is gonna that this is gonna get any better in the future. Max, It's a great read, and thanks for coming on and explaining all about Volunteered to us. Looking forward to hearing more from you on that score. Max Chafkin, author of Volunteer is bad mouthing Big Tank while taking

its tech public. He's also Bloomberg business Week Features editor and you can follow him on Twitter as well. Very interesting guy to follow on Twitter. Well. The markets have certainly taken their cue from the Federal Reserve. The feed has been pumping liquidity into this marketplace, providing a backstop for risk assets across the board, particularly the equity assets. The question is where do we go from here? Is fiscal stimulus needed for a next move up? How at

risk is this market? Useef A Bassi, global market strategist for stone X Group, joins us uh. You said, thanks so much for joining us here. I mean, there's so many variables for investors to discount here just over the next couple of months. We've got the elections, We've got potential fiscal stimulus, and of course we have the path of the pandemic and potential vaccines. How do you put all that together into a market call? Yeah, I mean

it's it's incredibly difficult, right you. You've highlighted several factors, and some of which you're exogenists and we're not used to really dealing with, so it does become a little bit challenging. Now we are fairly cautious into year end.

We understand that most of the market risks have really been dulled by the FED and the level of stimulus that has been conducted but at the same time, there is a rebasing going on in the market currently, and you have to listen to what the market is currently telling you. The NASDAC is poised to have its worst months since uh December two eighteen, and who can forget that massive unwined stuff off we've experienced end, So you have to listen to this market right now and from

where sentiment is lying, we are searching for leadership. Unfortunately we haven't found it. So in terms of moving forward with regards to a vaccine, with regards to a second wave, you really don't understand exactly where they are and prognosticators can try to predict which comes first, but the reality is right now, the best way to play this is to be cautious, have some cash ready on the sidelines,

and probably take a barbell approach to your investment. Right now, what would the other side of the barbell be, So, if you are looking at how we would want to play this barbell, we think that you should be taking advantage of looking at some of the very high quality tech names that have seen pullbacks that have basically given back almost the entire Q three move. And if you're

looking at those franchises. We think that there are interesting opportunities to buy them on weakness and that will position you well on the growth side. On the value side, we think that you cannot ignore the fact the the materials and industrials have really been the sectors that haven't really broken trend while the rest of the market seem to be risking, and that's in a large part due to the fact that there is still an overwhelming demand

for hard commodities and hard assets. So gold, copper, or silver continue to act well, and those materials names continue to be a play we want to be in in value also in value. We'd like to complement that by

looking at them aligned banks. The sector is unloved, under owned, obviously going through a round two of a stress test, but we think most financial investors understand the capital returns aren't going to return anyway, and we think that if we do get a vaccine, these banks will be poised to come back to be able to maybe even unwind some of the reserves they've built and put those back into earnings usef we have elections coming up November three,

there's a lot of concern, I would say, some growing concern in the marketplace that to the extent that this is a contested election, in an election that could be contested for a long period of time heading into next year, that that could be a really real issue for the market.

How do you figure that into your calculus. Yeah, So consensus thought right now is that this will be a contested election, right, So, considering the fact that we've seen the market kind of understand that for at least a few weeks now and start to digest it, We've seen investors, rather than really taking risk off dramatically in the market, attempt to hedge by going along, you know, vix options out of the money. Vixed calls were a popular way to hedge. We saw sizeable trades in that over the

past two weeks. So I would say, you know, people are thinking about a volatility move rather than taking money off the table for equities. And I think to some extent that speaks to the fact that people do believe that the FED has dubed some of the impacts of these risks. So yes, at this point, I think everyone on the street or the majority of the street, is expecting a contested election. I think the aftermath is certainly going to be interesting. Smooth transition of powers, and question

potential civil unrest is in question. You can argue that some of these could potentially be inflationary factors. So in the calculus, this is why one of the reasons we

do want to keep that Barbell approach. We want to keep you exposed to tech and growth in case we see those disinflationary or deflationary factors, which should help multiples, And we want you exposed to value because if there is any semblance, even transitory inflation, you could see multiples start to come in and you can see values start to out. For one, where do you see inflation coming from? So this is a great question, right because the FED

has been an apt at impacting inflation. So the real potential for inflation comes from fiscal stimulus. Right, So we do get another fiscal stimulus package that could be inflationary. Now, the odds of one happening before an election have dwindled dramatically. But we think about stimulus in another way, and I think this is how people have to think about it as well. Corporates are going to want to control their supply chains more adequately. On the back of COVID nineteen.

We are going to see a move with regards to re onshore, we are going to see a shift in the economy and rein shoring is going to be one of those places where we see more investment in the U. S economy and we could potentially start to see inflation from that. Now, that's not to say that we're not already seeing inflation and hard asset prices. Right, food prices, for example, We're already seeing signs of inflation. So it just depends on if that inflation hits the real economy

significantly enough. What will the FED do then? Right? And I understand average inflation targeting clearly tempers expectations and they can point to transitory inflation, but still the impact to asset prices might be real. All right, Well, thank you very much, much appreciated there. From a stone X group, we were talking to Youth of Embassy, whose global market strategist.

This on a day we're we're not seeing too much movement in the markets, but what movement we are seeing is lower and as Dave Wilson said earlier on really wait till the close of trading today to see all that action. It is time for Boomberg opinion we're joined by Sarah Howzac Bloomberg Opinion retail columnists out with a fascinating uh column just recently talking about or comparing Amazon to Walmart, and these companies are increasingly looking a lot

like each other. I think back to the news where Amazon's opening up a thousand small delivery facilities and suburbs and cities and kind of putting out a kind of a footprint that is replicating in some respects Amazon, and of course Amazon getting into a Walmart, getting into a kind of a prime like business. Sarah, thanks so much for joining us here, talk to us about your column here and how these two companies are starting to kind

of look like mirror images of one another exactly. So with these many warehouses that Amazon is rolling out, they're effectively making a concession to a premise that Walmart has held for a long time, which is that it matters to be close to your consumer when it comes to delivery speed. So Walmart has four thousand stores around the country and they've been using those in particular to deliver groceries quickly. And they have stores the U S population

lives within ten minutes of a Walmart. You can see the benefit of being close to the consumer right in the towns where they live, as opposed to in some far flung warehouse, uh far down the highway. And so by making these mini warehouses, Amazon is kind of agreeing with that as a business model and embracing it. How much development of technology has Walmart been doing behind the scenes, Sarah, because it seems to me that suddenly it's trying to

be and is being, a technology company. It also made a bid for a part of the TikTok Us operations, remember exactly. So digital advertising in particular has been a big focus for Walmart recently. They believe that they have a big trove of data on their customers both they's done what they do in stores and online. A hundred sixty million people trapped with Walmart every week. That's a

lot of data. And they see how Amazon has become a really big force in the digital advertising space based on the data and information they have with out their customers, and so Walmart wants to replicate something similar, become a digital advertising jugger not and in turn have this more profitable revenue stream that helps offset some of the expense that they're incurring. Is more and more of their business moves online. So Walmart's business Sarah, it's it's amazing they're

digital business. I started really following closely several years ago, and they really after some fits and starts, they've really seem to get their uh dot com platform really ramping up, putting up you know, solid plus kind of growth. Um where do they think their digital business is going to ultimately end up? They haven't offered a lot of specifics on that, but I think that they see grocery as

the key to winning in that space. It's an area where they really feel like they have an advantage to Amazon. And it's also an area they really simply cannot afford to lose on fift of Walmart US businesses grocery, so they cannot seed market share there to Amazon. And that's where this Walmart Plus membership that they just rolled out comes into way. Grocery is sort of the centerpiece of it.

For ninety eight dollars a year, you get unlimited free grocery deliveries, and that is clearly a bid to, among other things, hang on to their grocery shopping customers and continue to be the leader in in that space. Will the other companies be able to stave off the Walmart advance. And I'm talking about Amazon, I suppose mainly, I think so look at Walmart Plus. I suspect what it's not going to do is make a dent in Prime membership.

But one d fifty million people who already have Prime memberships are locked into that ecosystem, and of course that ecosystem is loaded up with all sorts of other goodies, you know, TV programming, music, that kind of thing. So I don't think Walmart Plus is going to have that much sick stuss peeling away prime members I think it's key function is going to be hanging onto the people who already shop at Walmart and giving them a real

value play. Also, the pandemic has brought a lot of new people to online shopping, or at least mean people who are in frequent online shoppers into more frequent online shoppers, and those people are just now considering some kind of membership set up. Walmart has a good chance of getting those shoppers business. It's interesting Walmart, you know, I see they're kind of raising the pay for some of their employees, and of course Walmart's a huge, huge employer in the US.

What do you make of that is that kind of a competitive response to what's going on in the marketplace. M I think so. I think that UH and Walmart has found over the years. Look a number of years ago in the economy was first starting to turn and they made a decision to raise their minimum wage. They clearly saw the benefits of that in terms of talent retention.

And they had this big focus at that time called clean, fast, friendly, trying to make their stores that are stopped and trying to make them less messy, and it really worked when they started paying people more. They really saw the results of that and it showed up in their comparable sales growth numbers. And I think that lesson from a few

years ago, it's fresh in their mind. And so as they approach this kind of unprecedented time as the pandemic and are trying to address all this demand in their stores and their website, they see pay as a way to get the best out of their employees. Right. But is it not a little bit more complicated, Sarah, in the sense that they are taking out complete layers of

management by doing this. So they're going to have teams and stores, you know, pods if you like, of workers and everybody will have to do various different tasks, whereas I'm sure before if you reach managerial level, there were certain tasks that you wouldn't have to do. Uh, and presumably they if there are certain fewer ranks of managers,

that's the potential right there for lower salaries across the board. Sure, that's a good point, And I think it's also worth pointing out that these pay increases they just announced, I think it only affects something like a hundred thousand workers of one and a half exactly exactly, So you know, this is this is not we shouldn't be loby posed in rainbows about it. Um, they're you know, clearly, it

is only affecting a small portion of the workforce. And I think what you pointed out, and and the relatively small pool of workers that are being effected here is worth pointing out to Sarah. Any feedback already color on how back to school was or is in terms of retail sales. Yeah, so I think what we've heard anecdotally from retailers is that it seems like it's happening later.

And that makes a lot of sense because there was so much uncertainty right about what school was going to look like, was your kid going to be going back in person? Were they going to be going back digitally? And clearly that effect whether you need to buy, say a lunch box or a laptop um. And so the theory is that something that spending it typically would have happened in July or August was moving to late August or perhaps September UM. So that was that was certainly different.

And I think now we get into this strange time period where retailers are really trying to encourage people to do their holiday shopping early by trying to move holiday shopping more into October in order to able to fin out crowds and make people feel comfortable social distancing in

their stores. And so now I feel like we're approaching a strange time where it's going to be both the way back to school shopping in an attempt at early holiday shopping, which means we're a merchandizing challenge for these retailers. And if anyone's guest held all manage it, Sarah, thank

you so much. I think it's also worth pointing out that Walmart has been sending warnings to Washington as well, but doesn't appear Washington is listening to Walmart, the biggest employer in the country, on what will happen when you know, stimulus runs out for the average American. Sarah Holzac always keeping us up to date on the latest retail She is Bloomberg opinion columnist and part of the Woomberg editorial stuff as well, and we thank her very much. Paul,

do you live within how many minutes of Walmart? Did they say? I'm pretty close to Walmart. But it's just extraordinary, you know, they're obviously they're everywhere, and they're just massive when you go in there. Palates of of merchandise amazing. Well, we will continue to monitor retail obviously, it's one of the first channels for the economic data. Well, the tech cold war between the US and China is heating up once again the Commerce Department. The US Commerce Department prohibiting

wheat chat and TikTok transactions. To get more color, we welcome Nick Wadham's foreign policy reporter for Bloomberg News. He joined us in Washington, d C. On the phone. Nick, thanks so much for joining us here. Give us the latest on what is going on here in terms of TikTok. Wee Chat and all things tech. Well, it was a business prize this morning when Commerce Department came out and and said, listen, uh, we Chat, we're basically shutting you down.

And TikTok you're not going to be able to get any updates on on your phone if you have that app, you may not even be able to download it if you're a new user. Um. But what we also learned was that this deadline that's been talked about a lot about the need for a sale of TikTok uh to u S investors, which was really looming for September twentie we now see that in some ways that was a fiction and actually they haven't still November twelve to wrap

that up. So, uh, two contrasting forces going on. One is it looks like we Chat in the US is really being almost totally neutered. But the other, uh, it looks like Oracle and the others who are looking to make a big investment in TikTok do actually have a couple of months to pin this thing down. How are the two in sync? I mean, um, I don't understand how Oracle can be given the chance to fix social media, if you like, in the United States and we Chat

is being bound. It's a it's a great point. I mean, essentially, what you're seeing here is action by this administration on two fronts. One is the belief that TikTok poses a threat to user data. There is a heavy, heavy political element that the President was extremely upset a couple of months ago when TikTok users basically spoofed his campaign by pretending that they had bought a bunch of tickets to a rally in Tulsa, Oklahoma, and it turned out not to be the case. Uh So, so there's that whole

element the TikTok cases is very very political. And then there's also the concern about we chat, which is UH more specific concern about what user data, what uh financial data UH users private information is being hoovered up by China uh and sent back there because we chat obviously is as a messaging app, but it's also primarily used essentially to do every transaction you would need to do in China, so payments and things like that. So you

you sort of see both things happening at once. Oracle may come in with UH to buy a stake in in Wich sorry in TikTok um, But that's something that we now looks like, yeah, we've got We've got a little more time, and the president has so much of his reputation to that We've got Steven Nuchin working behind the scenes desperately to get that deal done. So any sense of what a response could be coming out of Beijing, Uh, that is what we've been chasing. That is that is

the big unknown. Will China look, you know this, this TikTok demand would have has to come do after the election. So there's maybe a hope by Beijing that Joe Biden would then start to signal that he's going to de escalate. But China has always responded. In the last several months of the US has pressed, China has pushed back. So

a lot of things can happen. What happens to Apple, for example, huge operation gets a huge amount of its sales and China could Could China put the squeeze on on Apple and limited in some way, um could ad ban the sale of TikTok? There there had been some open this over night, we were getting signals that China was actually much more open than we had earlier thought up. The idea of by debts selling off a big portion of TikTok. China could reverse itself and scuttle this whole

process and just say no, we're not going to do it. Um. So still very much in the air, and China has shown in the past that they're willing to hit hard, hit the US very hard. Um So, really anything is on the table at the nick. Why would Oracle agreed to buy something that's banned. I mean, doesn't this change

the whole arithmetic for Oracle? Or is the Oracle deciding that this is going to be a temporary event on the part of President Trump ofp TikTok, Well Wilver Ross said this morning, Listen, if the if the deal goes through, then all our concerns about TikTok are taken off the table. So a huge caveat there. They're they're essentially saying, here's what will happen to TikTok if the deal doesn't doesn't

go through. So some minor inconveniences. Now, if if you have the app, you won't be able to get updates. All that goes away if the deals goes through. So they're really signaling we are we are going to make it very very difficult to you for you to use we chat, and that's not going away. TikTok, on the other hand, has a huge escape hatch, which is the Oracle deal. It's it's just extraordinary what's going on here. Nick Wadams, Bloomberg Foreign Policy Reporter, Thanks so much for

joining us, Havanni. You just think about some of these things TikTok. You know, it's it's not quite our demo, Vanni, but you know, for that kind of I've done a you yeah, the fourteen demo. It is just huge and it is a massive platform, huge growth. Um. You know, it's there's a lot of people watching what's going on here, and it's hard to separate the political from what really is potentially viable national security. Well, it really is fascinating

how it became innovative. I mean, we had all of these other social media platforms and suddenly TikTok is doing something just that slide bit differently, and it is engaging young users in politics, Paul, in political activity. It's pretty it's it's just amazing with the younger demo, so be fascinating to see how this plays out. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer.

I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio