Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Affocar Playing and Broun Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Alex Deel Paul Sweeney live here in our Bloomberg Interactive Broker studio in New York City. We're also streaming live on that internet thing YouTube, YouTube dot com search Bloomberg Podcast and that's where you'll find the broadcast here. Boy, what a movement in these markets over the past forty eight hours. Big, big sell off yesterday, even a little bit of a panic in the morning, it felt like,
but then turning it around here on Tuesday. Peter Cheer, head of macro strategy at Academy Securities, He joins us live here in a Bloomberg Interactive Broker studio. Peter, you've got some experience, You've been around the block once or twice. What do you make of kind of the last several days of trading?
You know, I think we're starting to see a little bit of a we saw a little bit of fear. I think whether it's the carry trade or not, it kind of pushed us in. There's a lot of leverage in the system. A lot of people have been selling volatility, a lot of people bought you know, full in on the AI story. I think those are fading a little bit. And yeah, we're getting a little bounce today. I think we're gonna see more.
Selling though exactly that that was what I was worried about, Like.
It bounced, which I was shocked. We had to explain that to somebody.
But anyway, whatever, why why.
Do you think it is to be more selling? Because that was looking at the systemic funds and worried they're the gamma hedging, the carried trade not being done. What do you see that tells you more selling?
Yeah, I think a lot of those And even on a simple level, you just look at QQQ it took in inflows, SPY took in inflows, and even more esoteric TQQQ, which is a leverage act took in inflows yesterday.
And that's my leveraged s and P five hundred.
Leverage okay, and then my favorite one I think is MVDL, which is a leverage in VideA ETF and that had inflows yesterday, So I would like to see outflows there to really believe we've had some capitulation.
So what did that tell you? Though? It just tells you that it's still a by the dep mentality inside.
I think it's still a by them mentality. But I think, you know, yesterday everyone was so calm, Hey, don't worry about this, It's all fine. People reacted. I think there's more going on, the economy slowing, we have stretched valuations. The FED is not going to be super supportive of markets. They've got their own agenda, which is to kind of make sure we don't get inflation again. So I think we're very ripe for selling on any sort of earnings weakness or economic data weakness.
What have you thought about the earnings? Let's get back to something that presumably still matters in the markets. What are you making of earnings.
That we finally have a higher standard for what's going on with AI? You know, six months ago, certainly if you just raised your hand and said we have an AI strategy, you were rewarded. The chip companies were all rewarded almost no matter what. And it feels like people are putting a little bit of scrutiny on this saying where valuations are, and unfortunately, I think so many of these stocks got heavily piled into that they're a little
bit overbought. And the other part that we've been talking a lot more about is the concept of passive right passive. So whether you put your money into the S and P five hundred or Nasdaq one hundred, about fifty cents in the dollar are going to just a handful of stocks. So that fed the momentum on the way up, and I think it's going to fuel the momentum unfortunately on the way down.
Right, So it can go up in a straight line and then it can also go down in a straight line, doesn't have to go down differently. Do you think the Fed should cut fifty bases points in September?
I don't think so yet. I think, well one, I think they should have actually cut in July, and I would have done fifty in July just to get this out of the way.
You done fifty in July, Why fifty in July.
You've seen a nice slowdown and everything on the inflation front. The only thing that's holding up CPI is the owner's equivalent rent and Gosh only knows why we still use something like that, anything that's you know, a contemporaneous measure of inflation or sorry rent, whether it's Zillo is showing rents of decline. The other thing that's kept CPI up was auto insurance. We're not seeing that come through, so I think they could react to that. I think the
job number have been overstated. I don't like what's going on in the private The Jewelts even had a big reduction in private jobs available. Get ahead of this. Plus, I really am scared of fifty BIPs cut in September, right in the heat of the election. I think it's just going to become a political nightmare and people are going to be screaming at the Fed. It's going to detract from the Fed's mission, I think, which I think they are very good at. I would have cut now, see where it goes, and let.
It play out.
Once the FED does begin cutting, it's been such a long time for at least in my mind, how do they do it? Did they kind of go twenty five basis points every meeting? Did they skip meetings? How did they do it?
You know, that's kind of what my view would I would have liked to see a fifty on the first one and then wait two or three months. I think in September, unless the data comes in so weak, they do twenty five and then push the next one off to la after the election. I think a fifty in September if it really sparks a big equity rally or something will be troublesome. They want to not reignite inflation, so to me, we get twenty five and then they wait a month or two, and it's really going to
be dependent on the data. I think the data is going to turn out weak and justify more cuts, but it might not.
What do you think of the corporate credit market. I was looking at at high yield spreads yesterday and I know that they rose, and I get that, but compared to other events, it's still so calm.
Yeah, I think, you know, credit really isn't the valuation story, particular investment grade credit. Right The companies are great across the board, there's still cashual, the economy is still growing to some degree, so it makes sense to me that spread. It's widened a little bit in sympathy. I am starting to watch though, if the Russell two thousand rolls over, because that, to me is a good proxy for what's
going on in high yield. What really did encourage me yesterday we had some selling pressure on high yield, but the ETFs behaved very well. What I don't like is when you see the ETFs start trading at a big discount to NAV. That to me tells me there's an overwhelming amount of selling pressure. We didn't see that yesterday. Clearly're not seeing it today as the market does well. That's my one trigger to watch is how the ets
behave relative to NAV. And if they do well, that's healthy and we will get a small correction credit spreads. You have to with equities down here, but there is no credit problem this time around.
What are you seeing ETF flows? Let's get your attention.
These days again, just this continued buying into the kind of riskier end of equities. You know, no one's giving up on the tech trade, no one's really giving up on the AI trade. And so every time I look and we see these selloffs, I'm thinking, Okay, maybe we got de risking. And what I think we've been doing is getting degrossing, which to me is people taking off longs and shorts so that sometimes shows up as rotation, and I think people are taking off some of these
more lever trades, the selling of options, et cetera. But we really haven't seen anyone say I want out of this market. There's this real belief I've got to hang in, and that's what I'm waiting for. Something that changes there. The only thing that I thought was neat. I'm starting to watch the Chinese stock market again. I actually kind of like FXI for the first time in a while.
In the ETF front, Well, what's your level of confidence that we get that kind of event, that capitulation, I mean event.
I think it's reasonably high. It's you know, and part of it like last Wednesday, right, we were up five hundred on the Nasdaq last Wednesday as the FED was speaking, I didn't see what justified that, So there was very little liquidity that sucked people in. I think it helped set up for the Thursday, Friday, Monday trade. And here again and we're kind of rallying. Everyone seems too excited.
There's no real fear, and the odds are again. I think people are much more cautious on the earnings front, right, and people aren't getting the free pass that something comes on that and I really am very nervous that we've been overstating the economic growth and we're going to see some weak data. So that's I guess my bed is we get a data and earning sprint that triggers another round of selling pressure and people are too long ones Again.
I said, you're looking at China. How about the nie K index? Our friends in JAPANO crazy couple of days?
Yeah, man, yeah, And I do think that's when. One problem we've been talking about for ages is this full liquidity. I've been trying to term it, and these markets seem liquid because the screens are all priced, but it's all very algo driven. There's no real support at any given time, and you can have these big moves. It's you know now that summer, if you go snork me or something, you see a school of fish and you put your
hand near the fish, they disappear. They immediately recongregate. And this reminds me of the sort of pattern that we saw in around the financial crisis, these air pockets where something's trading normally moves five percent, that starts trading normally like WHOA, what happened to move five percent, and that to me shapes us up more for a downside than an upside.
So for the carry trade. So speaking of is that how that winds up playing out, Like eventually there's even more upside pressure on the end and then it just blows out other positions.
Yeah, so you know, the carry trade defined the carry trade. So in theory, I think people say you borrow in yen, you keep it in yen, and you buy us.
Assets a catch.
I think to me, it's just more there was leverage in the system, right, the carry trade. More traditionally you would buy you fund yourself in yen and buy US treasuries. Treasuries rally yesterday. I think there's a little bit of a boogeyman sort of you know thing going on where the carry trade is just a small part of this. I think what it really is is people got over levered.
They went to full positions, they went aggressive end of stocks, they bought leverage gtfs, they did all these ball selling strategies. So I think it's leverage in the system, not a specific yen carry trade.
So it's not like I just borrowed an end to bind Nvidia.
No, and you know there's the thing. What's the six degrees of Kevin Bacon?
You?
So, I don't know about you, right, but I know all sorts of people in this market. I can't find anyone who admits to having the carry trade on before this all started. So I think some of that's overstated. I think this is really just good old fashioned leverage and people borrowing and putting too much risk into the market.
All right, Peter, great stuff. Really appreciate you coming in. Peter Cheer, head of macro strategy at Academy Securities, joining us live here in our Bloomberg Interactive Broker's studio.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
If we had some political news today, Vice President Harris taps Minnesota Governor mister Walls to be her vice presidential candidate on that ticket. Lord Davison joined this Bloomberg Politics editor. So, Laura, what's the feeling within DC about the selection by VP Harris.
This is a little bit of a surprise pick. You know, we've heard Wall's name come up, you know, as these discussions had gone on over the past couple of weeks. But Walls is someone who was relatively unknown just prior to really Harris emerging as the Democratic standard bearer following Biden's departure from the race. So, you know, he's a very popular governor, you know in Minnesota, but not someone
who's been on the national stage as much. But he really emerged because he was sort of able to capture on the zeitgeist to the moment he you know, kind of coined the phrase weird now that that to sort of as an insult to Republicans and their policies that Harris and others have started using. And so he was sort of able to be seen as someone who could go on the attack but also you know, sort of be relatable and likable to blue collar workers.
What does that mean then about how Kamala Harris feels about Pennsylvania.
So it's clear from this from this decision, you know, sort of the main other person she was looking at was Pennsylvania Governor Josh Shapiro. He's also very popular in his state and would have been sort of the best choice if she wants to make sure she wins Pennsylvania. So either, you know, the kind of a couple of takeaways here, she feels confident about her chances outside of Pennsylvania, that there's you know, multiple ways to win the win
the race. But also Shapiro had some negatives. You know, he was very staunchly pro Israel, something that you know is a divisive issue among Democrats and one of the things that sort of her allies pointed out, you know, after this decision was made that it was Walls she had more of a personal rapport with, so that was something that she was looking at very closely. Plus he also had a record in Minnesota that had more middle class wins, so things like free lunches for school children,
expanding paid leave. Shapiro has less experience as a governor, he's only been in office for two years, has a little bit more of a mixed record, you know, for for Democrats. For Walls here kind of helps her shore up the agressive base.
Does this pick say anything about how Kamala Harris wants to run this campaign in terms of being more of a centrist versus appealing maybe more to the liberal part of the Democratic Party. What do you think, Yeah, so.
Walls is someone who does appeal on a policy level two progressives. You know, he has, you know, someone who comes from rural Minnesota. You know, the district that he represented when he was in the House is now representative represented by a Republican. But his values and sort of the issues that he champions are much more sort of the progressive wing, you know, things like paid family leave and uh you know, you know, expanding you know, uh,
student loans and student loan forgiveness. Rather, Shapiro is much more moderate, much more business friendly. Uh so this is sort of you know, an interesting uh you know mix here. But because he does have those Midwestern roots, he is from a rural area. He is a someone who you know, has been a gun owner that has become much more a vocal about you know, gun control in recent years.
He has the sort of mix of he's able to you know, not alien enate either the moderate side or the progressive side of the party.
Terry Haynes a Pangaea said this was Harris's first negative. He didn't like it. He was basically saying like this was a safe pick. It showed that she's really worried about the campaign. Is anyone in the in the zeitgeis that you're talking to sort of saying that, yes.
I mean there is sort of a different schools of thought here, but that you know that Walls was someone that wasn't going to offend anybody, and so therefore he's safe. But he may also not have the same upside potential that you know, someone like Shapiro. Had you know, Shapiro on the ticket, the chances of winning Pennsylvania and therefore potentially the whole race went up, But he also has
more negatives here. So this is she was sort of taking the path of these resistance on this pick versus someone you know like Shapiro or even Mark Kelly, who you know had some clashes with labor unions in the past, so that it was sort of another issue why his name didn't write.
All right, well, thank you so much, we appreciate it. It's definitely a crazy time. And also, you know, you have such a short amount of time with that Lord Davison Bloomberg Politics editor joining us, but you know, so truncated and.
Now they hit the road like immediately, I mean, I think seven swing states in five days or something along the line. So they're gonna be hitting the road. And obviously former President Trump and Jadie Vans are out there as well, so it's be relatively short period of time till we get to election day.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and Broud Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
It's Bloomberg Intelligence Radio. We are broadcasting to you live from Interactive Broker Studio right here in Midtown Manhattan. You can also check us on YouTube. Don't miss us there. So to get a big perspective on the market, if you're a long term investor, what do you do over the last you know, forty eight hours in the market. This is when I get like my financial guy sending me the email of like, just so you know, this is what happened, this is what we can expect. So
how do you do that? Well. Margie Patetel is senior portfolio manager at all Spring's Global Investments and she joins us now on Zoom from Boston. Massachusetts. Margie, what do you make of the last twenty four hours? Is this our forty eight? Is this a regime shift, a real paradigm shift, or is it still stay on message, stay on trend.
I think it's still the saying things.
Large cap stocks are still going to be the place to be for the best to be here.
I think what happened is after.
A few quarters where the meg seven or the dozen largest stocks reported better than expected, earning a second the market of real boosting confidence, and this time we had really sort of mixed results where some of the companies reported results that were frankly disappointing, and that took away market conference. At a time when you have stock prices at their peak, you have concerned about what the FED is going to do. Data says the economy slowing down.
So I think that's what we had. It's just a real short term stay down s andp down nine percentage, nastack down twelve thirteen ish, and really just a short term correction that's almost played out. We'll probably have a little bit more and I think we'll go up for the rest of the year.
So Margie, to the extent that we do go up for the rest of the year. Is tech going to continue to lead this market or if we've seen some kind of rotation that is of note.
I don't think we'll see much of our rotation because when you look at the economic growth level, what you think the econome will grow at for the next few quarters, I think it'll be rather low, you know, a percent and a half something like that. So that says you still have to stick with those sectors and have above average growth, which again would be check in particular some
other sectors, but primarily check. Especially when a lot of these stalks have had such a big correction, they're really priced more or less in the middle of their value range.
So if the armies go up, we think that these stalks can go up too.
So I guess this is a by the dip kind of setup for you, Yes.
Sort of, especially some of those names have had big corrections. But it's interesting when you although people talk about the correction, when you look at the indexes standard for his nasdak Dal Jones, those indexes are all still up very attractively year to date, mid to high single digit for a little and halfway through the year, So that says that's really on track to be an above average long term rate of return for stocks.
Certainly not a disaster.
And even if you look at something like in Nvidio, which I think is down forty percent of its peak, it's still one hundred percent year to date, So it isn't as if we're having a real unwinding, you know, two thousand type Internet bubble meltdown, a permanent impairmid I think this is just a short term correction typical in summer, and then we'll see the market move ahead and the rest of the year.
Okay, marg How about the fixed income market. I'm looking here my in go function, the Bloomberg Index browsers of course US fixed income. I'm seeing, you know, three four percent type total returns. That's about as good as I've seen in a long time. What do you think about opportunities in the fixing come space?
Yes, it is because actually many sectors of fixed and coome market have been negative.
As the rates have gone up. Prices are sensitive to that and.
They've gone down, and really high yield has been about the best performing sector. But it's still you're looking at three four percent your to date returns really pretty modest.
But I think what you're seeing, though, is the yield spreads still.
To me, you're telegraphing that the economy is okay, the fixed income market is okay. You've had spreads widen out the say forty to fifty basis points for most high yield bonds. However, most of that spread widening has been because treasury yields have dropped so much from say their peak peak yield in April, where the ten year was around the four sixty to say in three eighty. Now that's an eighty basis point correction, and high has not
caught up for that. So I think it's not shown any distress and high yield that spreads of widen down a little bit. I think it's just as huge movie Crasieries has changed that relationship. But the fundamentals are still there, still pretty good for fixed income.
Yeah, when I looked at the spreads yesterday, I was like, oh my god, they're still so low. Like I understand they went on. But so I guess my question, MARKIE, is what would a regime change or regime shift really look like?
Then Well, frankly, I really can't see it.
I think we had a kind of a little play in value stocks that's sort of petered out. We've had a play in small cap stocks, which looks as if it's petered out, and so I think we're still back to the same themes is where do you want to invest in a slow gross economy, which is what I think we're really looking at over the next certainly in the next few quarters, no matter what the FED does. We're hoping, of course that the FED will see the
light like the market and start to cut rates. But I think the economy is just going to trouble all it modest one percentage type growth. So where you investor that you look good companies that are in the highest sectors. Again, check certain parts of industrials, a certain very few selected healthcare, maybe some materials. But in other words, it's still a very selective market. So we don't look for broadening out either, as much as we all like to see it, but we just don't see.
That happening, Margy, For better or worse, this is an election year, Margy, how does that factor into your calculus if at all?
Well, historically, and there aren't many historic things you can rely on, it always seems that in an election year, no matter who gets elected, that we have a pretty good rally after the election.
Into the end of the year.
So I'm thinking we willful around here because of varyings and uncertainty of the election, no matter who is elected, we have certainty, and I always expect the market to have a strong finish in any case, and by that I mean a strong I'm modest finish. I'm not looking for a state of doubling another eight to ten percent over the rest of the year, but you know, three five percent something like that to finish off the year.
Marguie, do you still you mentioned slow growth, but we do have an election where it looks like both parties are going to be spending boatloads of money. The hyperscalers are spending boat loads of money. When do you think that that really filters through and sort of helps stabilize that growth.
Well, it's true you have a lot of capital investment going into certain sectors. Again, mainly the technology sector is the biggest spender and the biggest beneficiary, and so we think that trend is going to stay. And as far as fiscal spending, we already sort of blew the doors off for the last few years, either with COVID expenditures or inflation or infrastructure expenditures. So really it's really difficult to see another big blast of fiscal expenditures.
Helping to push up the market of economy.
Short term market. Bettel, thank you so much. We appreciate that, as always appreciate the perspective market Bettel, Senior portfolio manager, all Spring Global Investments. Joining us from Boston, mass via zoom.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Otto with the Bloomberg Business Act. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Speaking of Uber, let's go to man Deep sing Stuet. He knows what's going on with these companies Man Deep seing technology channels for Bloomberg Intelligence. He's all over these ride sharing companies, you know Uber. I think Man deeps can be joined us in studio. I mean we just picked them. On is literally running in our studio. So he covers all these ride sharing things. And I don't know, he's the one that got pitched me on this whole Uber thing and I'm on it. I'm on it.
I think he was right.
It's the greatest thing in the world. Uber talk to us about the quarter.
What did you see, good print, solid top line growth. I think the fact that we're talking about a business that's generating forty billion dollar run rate in a year. I mean, clearly they have the scale. The question for me when it comes to Uber five years down the line, you know, long term play, how disrupted their business model is going to be from the rollout of autonomous vehicles
and robo taxis. And I know, you know it's not the right time to talk about it, but when you look at Wemo and how successful they've been in the three cities that they have launched. I mean, the part of the call was about how Uber is integrating Wemo inside their app. Wemo is Google's autonomous driving unit. I mean, they have about three hundred cars in San Francisco, similarly in a couple of other cities Arizona, and what they have shown is their technology is ready for prime time.
They have to get regulatory approvals to do it at scale, but that changes the unit economics completely. Right now, we are talking about a business model where cost per mile is like five to seven dollars. Vemo can at scale, they can do it three or four times cheaper. So suddenly the take rate model gets disrupted. Now again it's not hit primetime, but that's what Tesla is striving for, and the risk for Uber and Lyft is they will get disintermediated.
So okay, So it's not the fact that Uber would just go get a bunch of robotaxis and use them and eventually the payoff over time because they're not paying drivers. It's not that scenario.
It's not that scenario because both these companies want to roll out the robotaxis themselves as opposed to using an Uber and even if Uber was to get involved, their take rates would be way lower than thirty percent. Right now, they are getting thirty percent of every ride. Let's say it's a fifty dollars ride. Uber makes at least thirty percent. That's a pretty healthy take rate with the you know,
autonomous driving equation. First, Tesla wants to go solo. They don't want to partner with any of the right sharing guys. That's one risk Vemo is on Uber. But my senses, they also want to kind of broaden out their reach and they will deploy their technology themselves. And in fact, Alphabet allocated five billion dollars in capex this quarter on Vemo's rollout.
So all right, I mean, all right, it's bad enough that I get in the car with somebody I've never met a total stranger. That's crazy enough to think about. Am I getting in a car that's a robo taxi? Is that really going to be a thing?
And so when I mean, these vehicles are monitored.
So by the way, I have a vest with scooter by the way, so I don't necessarily need them for the shore.
But go ahead, but just go to San Francisco right now. You can order a Veimo ride. You can, you can and just get that experience. I think every consumer who has taken a Vemo ride loves that experience. Uber talked about they acknowledged there on their call. But they also think the rollout will be slow, and they are positioning themselves by seeking all these partnerships they're partnering with byd FO one hundred thousand vehicles, that was big news last week.
Well, then why would it be exclusionary, Like if Tesla rolls it out themselves, why is it that it just means more competition, It doesn't mean it's exclusionary like with Lyft. Like you guys price compare with Lift, there's room for more than just one.
There is, but then it goes back to being the scale player and having that thirty percent take rates. The reason why Uber has done much better than Lyft is because it's a scale player and it can charge that thirty percent take rate because it has the liquidity in its marketplace, the supply demand matching, the best ETAs the most options that it can offer to its riders. So like marketplaces are all about scale, the moment you have more than three or four competitors right now, it's a duopoly.
And still we see how badly Lyft is doing relative to Uber. If you have more competition, that's not news. But again this is for the route. This quarter was solid. Nothing goes wrong for Uber until this robotaxi rollout plays out. So we're talking a few quarters out scenario.
Market cap for Uber one hundred and thirty two billion, market cap for Lyft four billion.
What happened well, I mean Uber clearly has the scale and door Nash has done similarly very well on their food delivery side. So You've got two scale players when it comes to ride sharing and food delivery, and they have the most supply. I mean, one challenge with this business model is gross margins can never be as attractive as your software companies. And that's what we keep finding with Uber. It's like, there's still a forty percent gross
margin business at an aggregate level. So what where do you for him?
That's terrible. I mean for most of the world, I'm like, but for Mandy, if he doesn't see like eighty percent gross margin, he doesn't pay attention to it. Man deep Sinc. Thank you so much, Men deep Sink. He leads her tech Covers. Along with that fellow on Oragrana lead our global team Technology Research, one of the best on the street.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with a Bloomberg Business Act. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa Play, Bloomberg eleven.
Thirty, Malex Steel alongside Paul Sweeney, This and Bloomberg Intelligence Radio, we bring you all the top news and business economics and finance through our lens of our Bloomberg Intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. And one of our favorites is Jennifer Ree. She is Boomberg Intelligence senior litigation analyst.
There's literally no one better internally or externally at Bloomberg who knows this antitrust world better than she does.
Like I wouldn't call a Paul weiss Er scatting or any of those firms. I just call go to this four floor Bloomberg, talk.
To genred percent and this this headline crossed yesterday right was out going to go on TV at around three that a judge rulled Monday that Google illegally monopolized the search market through exclusive deals, so it basically pays to get their search function on your phone. I'm just gonna done that down for a second. This could be huge, not only for Google, but it could also be huge in terms of like Apple, they could lose billions potentially in revenue from this. So we wanted to bring in
Jen to break it down. Jen, can you just explain to me in more detail kind of what the accusation is here?
Sure? Of course, and thanks for all of your comments. So Google basically was found to be a monopolist in general search services, and I think that's probably no surprise, right we all use Google. I think they have eighty
or ninety percent of the search querieson market share. But specifically, what was found to be illegal was Google paying many other third parties including Apple, Mozilla, Samsung, other OEMs to set Google Search as the default search engine had all the access points that you know, where you need to access the Internet, so for instance, behind a browser, behind
Mozilla Firefox, or behind Apple Safari. And so what the judge said is well, by placing Google as the default, this really blocks out all the other competitors, the search engine competitors. And at the end of the day, they can't get better if they can't get to customers, because search engines get better based on the number of searches done,
and Google's got all those searches locked up. And that was anti competitive because it was exclusionary and probably hindered innovation, might have hindered choice and you know, possibly hindered equality.
However, the stock is unchanged on the news here today, so suggesting that the market doesn't really care. Should the market care care?
Here?
Are there some remedies that might be really owners on Google?
You know?
I think there could be. I think part of the reason the market's not really reacting is because this was just a liability phase. So the remedies have yet to be hashed out, and you know, that process could take six months, It could take even another year before we know what they are, and then Google will likely appeal and can seek to stay any remedy pending the appeal. And if that happens, you're looking at several years before there's any impact at all. But at the end of
the day, the remedies could be onerous. First of all, the DOJ will seek structural change. I don't think they could win it here, but one of the requests they might have of the judge is to break apart parts of Google's business. Again, I think that's a long shot here. I don't think it'll happen. I think it's more likely that what the judge will say is Google, you can't
pay anymore to have that default position. And maybe the judge will say, Google, you have to share some of your data with some of these other search engines or maybe some other new nascent search engine that comes into being after this remedy phase is finished.
Okay, So if that's the case, I wonder does this change if President Trump wins the White House or is this kind of like locked in?
You know, it's such an interesting issue right now, Alex, because one might have said if an administration changes from Democratic to Republican, it could change and there might be more of a likelihood of a settlement.
But you have JD.
Vance as president former President Trump's vice presidential pick, and he actually is is aligned with the idea of breaking up Google. He's pretty anti big tech. I don't know how much he would influence the policy decisions of a Trump DOJ or FTC, but if he did, he would be all in on continuing to go after Google. So I think that possibility of some kind of a settlement that's easier on Google happening down the road is low.
Jen.
I think if you stopped any person on the street, they would say, I got no problem with Google. They're actually, it's great, It's changed my life for the better. Is this one of those issues where there it's a solution in search of a problem here, and does that factor into remedies?
You know, it's exactly you're thinking like a lawyer now because that hurts. There's a lot of commentary when this case was brought that the DOJ brought the case but they really don't have a solution, and they brought it before they knew what the solution would be. We're going to get into what they're going to suggest the solution.
But Paul, exactly why you said, you know, people love Google, and this is exactly why I think the judge wouldn't do something structural because he's not going to want to mess that up. People like Google. Google's essentially a free product, at least for people, not for advertisers, and it functions very well. And despite having a monopoly position, the judge did acknowledge that Google continues to innovate in the search area.
So I think because of the desirability for consumers of the Google Search engine, we're not going to see something structural. But I do think obviously the judge is going to have to impose some remedy because he found that the company's acting anti competitively.
This is a weirdly unfair question to ask you, is big tech too big? Like do we have a big tech problem?
Well, I think that's what the current administration thinks. Yes, But you know, there's a disalignment here with our Supreme Court, because our Supreme Court has ruled over and over that it's not illegal in the United States to have a monopoly, and in fact, that's what we want all companies to work toward, because that's what will cause them to innovate and try to gain market share by lowering their prices. So at the end of the day, just being big,
at least today isn't illegal. The problem is the conduct of a company that's really big, and that's really what the DOJ and FTC are going after right now.
How about other tech companies, what does this mean for them?
You know, I think it's atmospherics because there are different facts, different issues, different markets, and different market positions. You know, the case against Amazon against Meta, they're more case against Apple, they're quite different, and these cases rest on the facts and the specifics. But what this does do, at least for Google, we have one more case coming up, a big one against its ad tech stack that's going to
trial this September. And now Google's been found to have monopolized two different parts of its business, play Store, and now search, so psychologically, you know, it could influence a judge to think, well, they've been found to engage anti competitively in two areas, why not in a third as well?
You know, Paul, this goes to your era too. I was reading a piece today that big tech's AI problem is just going to buy smaller to companies and getting their talent right, and I wonder if that has to kind of go away now, because if you have this kind of DOJ.
Yeah, it's interesting. I mean, I think what I understand from people like Jen is that some of these big tech companies that their hands are really tied in terms of big deals at least.
Yeah, Jen, do you think, oh, absolutely, their hands have been tied for the last three years. Things could change a little bit with the new administration. I think there is no doubt no matter who's elected, there will be some change in the leadership positions the decision makers at the Department of Justice and Federal Trade Commission, and that could change things. But I do think big tech is still going to have a lot of trouble going forward trying to do any kind of a big deal.
All right, Jim, thanks a lot. We really appreciate it awesome, one of the best in the business. It's the best, if not. Jennifer Rea Bloomberg Intelligence, a senior litigation analyst, joining us on Google being accused of monopolizing search and sort of the ramifications of that as well. It is interesting though that markets are super taking this and stride. Like yesterday when the news broke, the stock was down like a couple percent and didn't really move at all from that.
I mean second, investors have been used to this from the Microsoft days back in the eighties, nineties and two thousands, and even they looked to Big Tobacco and they say, look at and Big Tobaccos is powered break through all that litigation risk here. So you get to these companies to get to such a size and such a strength that it really doesn't matter. The horse is kind of out of the barn here, so we'll keep an eye on that.
This is the Bloomberg Intelligence podcast, available on Apples, Spotify, and anywhere else you will get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot Com, Thehart Radio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube, Always on the Bloomberg Tune