Tech, FTX, and Consumer Strength (Podcast)

at Bloomberg dot com slash podcast. We want to go deep into technology critic because I mean, tech is you know, just It's been a leader for this market for as long as I can remember, almost and my question is as we come out of this, is tech going to be a leader going forward as a sector. We had some week numbers of a week or than expected numbers I guess we would say across the tech sector over

this past earning periods. Let's dive deep into tech. Let's round table this and we're gonna do it for a couple of segments. Here, Dan, I've senior equity ANALYSTO web Bush Securities. Uh joins us here very casual attire. I will point out Uh and Man Deep Sing Bloomberg Intelligence Senior Tech analyst. Uh. They're both joining us here in Bloomberg Interactive Broker Studio, which is good, so we can

just kind of bat it around for a while. So damn, You've been in this business a long time as self side analysts, you've been one of the leading voices in promoting technology on Wall Street. How do you think about this tech sector going forward? I mean over the last I would say, since the Great Financial Crisis, it's been a leader in this marketplace in terms of stock performance.

How about the next ten years? Look, I think the hyper growth story in tech, I mean the clock struck midnight, and I think that's why you're seeing layoffs from Amazon to Meta and others. But my view is that you're gonna have trillions spent in what I used the Fourth Industrial Revolution, and that's not ending because of this recession

next three to six months. So my view is, especially on high quality tech, this is more of a fourth fifth inning rather than the eighth ninth inning in terms of attack, and I think that's why we've been bullish on it, you know, even as we go, you know, into year into two thousand and twenty three, in terms

of where we are in the cycle. Mandyp hop on in here because I think when I look at tech, I mean, it's such a broad sector naturally we think of the metas the Amazons and Microsoft, But then there's kind of this other lens of chips, and it feels like chips are kind of this magnified response of tech, and you have the chip equipment makers, which are an even bigger magnified response. Are all of these spheres of

tech on the same page right now? Well, so think of you know where the spend is going when it comes to topics. So all these companies you mentioned, Meta, Amazon, Alphabet, they're spending you know, thirty forty billion dollars fifty billion dollars a year on topics. Where is that spend going in terms of building data center? In fact, n video like you look at their data center growth, they have gone from almost nothing to fifteen billion dollar run rate

in a span of five years. That's phenomenal for a chip company. And so that gives you a sense of where the next leg of investments will be. Is it will be an AI and you know, building cloud capacity and and chips is at the forefront. That's why there's so much geopolitical tension around chips, you know, the China US aspect of it. And I think you just can't take that out of the equation. Even if you're in a downturn, when we come out of it, the focal

point will still be semiconductors, AI, machine learning, cloud. These are the trends. So you have job securities what you're telling me, I hope. So alright, hey, then you know talk to us. You know, I need to get into

this story here, this whole Elon Musk Twitter thing. I'd love to get your opinion here because you've been on top of the Tesla story since day one, Elon Musk since day one, And what do you make of Elon and Tesla has has his you know, efforts at Twitter change your view of Tesla as a company, as a stock and Elon as as an owner. Look, I mean I think it's been a circus show, you know, as

we've all seen. And I think there was a view as a Tesla holder that once Must finally bought Twitter and ultimately was forced into because he knew legally he was gonna have to win it one way or another, that it would start to die down in terms of just this horror show that continues to play out. But instead it hasn't right. I mean, since he's bought it, it's kind of been a train wreck situation. He's trying to turn around. You know what's really been a treadmill

Stock and Company for years. He's not someone culturally that's gonna be playing ping pong in the Twitter cafeteria or you know, doing parties on the rooftop. And I think now as a testa investor, you want to see him give reins to others that ultimately could operate social media because in terms of Tessa, forget the selling of the stock. Musk is the gold standard. That's why Tessa trades where

it is. There's key man risk, we'll call it. You don't want to see his attention focus too much on Twitter because it comes down to he has diamonds on one hand and Tessa has two Dour Slice in New York Pizza and the other one whatever. And I think that's the frustration for test investors. Well, okay, let's go into then the social media space a little bit more than I've wondered. If this potential bankruptcy or decline that you're seeing in Twitter, does that then create some sort

of tailwind for the likes of Meta for example. I think right now, I mean all those ships are going down right. So it's one where there could be some life rafts here and there, but books social media is that the best growth is in the rear view mirror. And that's why Zuckerberg ultimately, once Apple IOLs came out with cook and the shot across the bout, I think Zuckerberg and Facebook knew, okay, like clock Struck Midnight, it was basically time that they were gonna have to transform

the business model. I think the death of social media. I think what's happened is is that it's a it's a maturity of social media, and that's really what's happened is that how do you monetize? I think the problem from us someone that basically has created rockets and electric vehicles. He goes in Twitter and he's like, we got two d forty million users. Engagement, as we all know, is extremely high. How do you monetize it? That's been the

problem for Twitter. They need to monetize it. And again they were spending money like rock stars, so they needed to cut cost. That was clear, and now it's about ken you turnaround. Penn State's playing at Rutger's this weekend. I think I'm gonna get some tickets and go we are we are? Are you going? Okay? Alright? So I think I might join you there, And we got Mandep saying he does all this tech stuff for Bloomberg Intelligence. Man, Deep,

I want to start with you Meta. When I was a kid, it was Facebook, Okay, it was a phenomenal growth story. It had so many revenue growth levers to pull, whether it's Facebook or the Graham as kids call it, or What'sapp or Messenger? Stuck can't buy a friend? Right here? What's the call in Meta right here? Well, so clearly they have a lot of headmans from Apple as like changes that they made and you know the ad pricing

impact that had on Meta. But the biggest one is what are they doing with reality labs and how long are they going to spend? So even though they announced the job cuts and that actually did help the stock, it's still not clear. You know, what is the endgame there, Venville. They're leg commercial success. What kind of revenue growth can

reality labs generate? Because in terms of the installed base and unit sales, that's trending down and still Meta is talking about losing almost fifteen billion dollars on reality labs next year. So how am I supposed to buy stock when the top line revenue growth is slowing and these expenses on this business I don't even understand are going up dramatically. Is that kind of what investors are saying.

If they start winning against TikTok, or TikTok gets banned in the US, that will certainly be a big catalyst for the stock as well as for their growth. Because think of it this way. If you are an advertiser who wants to spend their add dollars, there are only so many places you can go to, whether it's Google Search or Meta or TikTok or Snap or pinterest. So they only handful of platforms, and if TikTok goes out of the equation, that will certainly be a booze for

meta reels. That's the other big investment they're making. We'll hop on in here, Dan and talk to us a little bit about the ripple effect from meta Specifically, you've seen a little bit of tail winds going to and video advanced micro devices. This idea that if Facebook now Meta is going to power the metaverse, you need the chips to do it. Is that a logical tailwinds that a sustainable tailwind for some of these other big tech players. Yeah,

I don't think it is. Look, I think Zuckerberg, it's sort of been a Ted Striker from the movie Airplane situation, and I think that's you know, you go back to that last conference call investors have really you know, the patients is worn thin because I think in terms of the metaverse strategy in this type market, that's not what you want to see. That's why they had to cut back to cost. And I think ultimately gonna have to do more and more of a U turn in terms

of metaverse. Facebook look as a stock, you know, we'd be more cautious on it, just because right now you feel like from a social media perspective you must see them doubled down. There still massive headwinds you as we talked about in terms of what we see with Apple IOLs. All right, let's go to Apple because I need your call at Dan, you've been one of the most vocal UH analysts on Apple here. Um, it's only down sixteen year to date, so it's beating the SMP. It's way

beating the NASTAC here. So it feels like kind of a safe port in a in a storm here. What's the what are the growth stories for this one going forward? Do I have to wait for the next cool phone or what's the story? It's a rocket Gibraltar stock. And I think the heaters continue to hate the you know,

fire in a crowd theater every quarter. Yet look with demand, I was held up, and I think if you look at the services business, doc continues to play out, and I think we have a re acceleration going to next year. Look in macro, it's going to hit everyone including Apple and of course supply chains in issue. But I believe it's very negative out there in from an investor perspective, and I believe numbers the decks being cleared, and I think there's a stock that can continues to move higher

as we go in next six and nine months. That's why intact, Apple, Microsoft, you'll continue to be our favorite names. You've been a real expert on cloud and the switch to cloud. Will Apple ever enter that game? Now? They will always be a consumer focused company. And look, they will keep building the back back in infrastructure in terms of supporting the services revenue that Dan was talking about.

But Apple is not an enterprise sales company. You know, they will continue to focus on devices, and I think they will enter the VR market as well. They will launch a headset that could drive the next leg of growth, like look at what air pods have done in a span of you know, three or four years. So but I I do think they will always be consumer focused.

And if I know, you and the tech team at Bloomberg Intelligence kind of look at the industry as a whole as well, talk about tech spending in the last couple of years and what it might look like a a kind of recession or environment maybe for the next

year or so. Yes, so we definitely were in above historical growth rate environment when it comes to tech spending, and we probably pulled forward some of the data centers spend over the last couple of years, given everyone was talking about digital transformation and you know, the shifting work clothes to cloud. But still I think, you know, when it comes to I T spending, you break it apart

into software and services, it will still be high single digits. Yes, semiconductor is more cyclical, so the hardware and semiconductor component will slow down, but overall tech spending will continue to be you know, at least two times GDP. Yeah, I'm sticking with it. I mean, I don't know. I mean, it's been good for me for the last twelve years, don't you think, I mean you know, so you know

when you were a kid. Yeah, exactly, exactly, all right, Mandy seeing Bloomberg Intelligence tech analyst Dan I's web Bush securities are covering all things on the TMT space for web Bush. We appreciate them coming into the studio round tabling a couple of segments here talking about tech um. It's going to continue to be a solid growth story going forward. Look at a bitcoint pretty I mean finally

getting a little bit of stability here. It's up about a four tenths of one percent here sixteen thousand, five ninety. But the world of crypto, I mean you talk about the crypto winter, Okay, I guess the asset class a little bit out of favors. What I take you the term crypto winter. But then we got f t X blowing up. This is like the nasdacs saying we're going out of business. This is crazy and it is an ever ever changing story on a daily and hourly a

minute basis. And Bloomberg has got some great, great reporting, uh and on this story and part of that reporting team is Annie Massa. She's an investigating reporter, investing reporter for Bloomberg News. He joins us here in our Bloomberg Interactive Broker studio. She's not mailing in, phoning it in, She's in the studio exactly. So Annie, the Sam Bankman freed guy. What do we know about him and what kind of happened here? We know a lot about him.

We've all been very exposed to Sam Bankman Freed over the past year or two years. But what is coming to light is that he's a totally different kind of person than many people really thought. In the bankruptcy documents that came out today, there is a trove of information about how he ran f t X and his affiliated hedge fund, Ali Alima Research, and how there was no there was no internal system, no controls, and actually a pretty flagrant um sense of uh. I mean, it's it

goes beyond lack of oversight to to really irresponsibility. Is there anybody talking fraud at this point? That's that's a big suspicion. I mean, when when you talk to people in the industry, they're like, yeah, this guy's going to jail, But I mean, who's to say, like it's still playing out, but there's uh, there's certainly not a good feeling about what's next. Well, I think one of the issues in

crypto broadly has been the story of credibility. It's almost a experiment that's taking place in crypto that we've seen in other markets, in the bond market, in the equity market as well. The new f t X CEO saying there's a complete failure of corporate controls. How does a company like f t X, for example, regain some of the credibility scene, say, the equity markets. Yeah, I mean, I just want to underscore what you just said. The man overseeing the bankruptcy of f t X and its

affiliated entities oversaw the end Ron bankruptcy. And this is a guy who said, I have never in my career seen such a lack of trustworthy financial information um and

complete lack of corporate control. So even he is shaken to his core as far as I can tell, and says throughout the document that some of the financial information provided to him anything provided to him while the company was understand Bankman Freed, he doesn't even necessarily trust Sam Bankman Freed, I just wonder why is he not sitting in an FBI office in Washington or in New york Y? Is he? I mean, he's the center of all this and there are billions of dollars that have been lost.

Why is he still hanging out in the Bahamas? A great question for regulators when they come on the show next time. But it's it's true. So um, he's been questioned by authorities in the Bahamas, and I think it speaks to why was he in the Bahamas in the first place? Right, it was no secret that he based his business in the Bahamas. Both of these businesses, by the way, Alameda and f t X. And you know

this is a guy who ran these companies. You know, Alameda started in no surprise, Alameda County in California, then moved to Hong Kong, then moved to the Bahamas. It's like, why did this corporate entity have to hop around the world to the Caribbean ultimately to UH to survive? So, I mean, clearly he was trying to stay out of the reaches of US authorities. We know now, I mean,

but we see this now right in retrospect. Hindsight is always but I have to for for the viewers who are listeners, I should say, who aren't as familiar with the rise of Sam Bankman Freed. How did f t X get so big so quickly? Yeah, um, well, it's a good point because or it's a good question because f t X hasn't been around that long. It was the second largest crypto exchange before the bankruptcy. But it's not that old. Um. Alameda started first of all. I

want to underscore that Alameda started first. Alameda started as his crypto trading hedge fund in f t X emerged as an offshoot of that in Okay, so we're talking just a few years this this company rises to be the second largest player in all of crypto in the world. How did that happen? Well, he was a master manipulator, but knew how to access people. He knew how to get people on the platform, and he uh and he put ads like he got all this VC backing. He

was able to charm vcs. Raised two billion dollars, right, you can. You can throw your weight around with that kind of money. And we all saw the Super Bowl commercials Um, you know ft X plastered on the sides of stadiums. He knew how to get in front of retail investors, and I think it started this cycle this like flywheel almost where. Um, once the vcs saw all the people on trading on the ft X platform, then they're like, hey, wait a minute, like everybody else is

you know in this investment? Why am I not? And it's snowballed from there Binance. They seem to be I guess the winners here and their founders c z I just known by his I'm not sure his name. Um, they seem to be the winner here. Is anybody looking at them because I know they sold some bitcoin I guess last weekend, which would have been the weekend before, which kind of accelerated the demise of the ft X platforms. Anybody looking at them in any way, shape or form,

or are they just the winners here? I would be cautious to say there are any winners in this story, at least now, because it is hard to overstate how seismic this event has been in the cryptocurrency industry. Yeah, we've spoken to CEOs of other entities within the crypto space and they are shaken to their core. They're almost they can't believe this happened. Because Sam Bankman Fried was, if nothing else, the savior of the industry. He was the voice, voice, and face to Washington, d C in

terms of creating credibility. It's a highly destabilizing event and there's been a huge loss of trust in the space. So we'll see what emerges from this. But I'm not declaring any winners at this point. I'm still shocked that and Paul met this point I believe earlier is that crypto is actually still sixteen thousand literally at Bitcoin at a level of sixteen thousand, uh five, fifteen ish, we'll

call it at the moment um. I'm surprised that there isn't an even bigger reaction to a collapse of the second largest crypto exchange, because if he saw that and say the equity market, there would definitely be a massive collapse. And um Crypto, I felt like, was a growing um entity. You've covered exchanges, You've covered accent managers. Do you think I get worse from here? I think it absolutely can

and will get worse from here. I think that we're we're still kind of waiting to see the full effects of what will happen. This is going to have ripple effects in the crypto lending space. It already is. Um, the effects are going to ripple out from here. Um.

To your point about bitcoin, Uh, it's interesting bitcoin. I mean, crypto gets all lumped together, right, but but bitcoin is different from some of these like fantasy Land tokens that were just being minted by f t X. So it's seen as more of like a safer bet among the speaking of I need a final for my poker table. Are you available? Are you? I sure do? Yeah. She's

a champion to the champions. So if we had brought you in, you would have cleaned us out, is what you're telling Usily, all right, I didn't know that, Thank you very much. That's interesting. Alright, any massive investing reporter, poker player for bloo Bo Bourber News, and we appreciate her bringing a summer her reporting chops here on this whole FTX story in crypto ever evolving. We know that the consumer it's about of the US economy, it's pretty big.

So Bloomberg Intelligence, which is the research arm of Bloomberg LP, we allocate a lot of top resources to covering retail and the consumer. We've got Punum Goyle, she covers retail. Jen bartashes covers retail. Lindsay Dutch also covers retail. We've got Lindsay here on the line to give us a sense of what's going on out there with the retail space and the consumer. And she has her BS and math from Lafayette College. She's a leopard. Did you know

that the Lafayette left with a mathematician? Yeah? Does that BS and math at Lafiat College. I mean, I mean I would not go up to Lindsay at a cock de party, I mean, math person. Why don't they is going to come out with formulas and the small talk? Hey, Lindsay, thanks so much for joining us here. Of the retail companies you cover, what have you been seeing here over you know, this quarter? What are they telling you about the consumer? About recession all that kind of stuff? Hi, Paul,

thanks for having me. Um. My focus is on the hard lines, and we haven't had too many report but there is sort of, you know, a common thread that I'm seeing sort of across my space and some of the other retailers is you know, obviously, you know, the consumers are focused on value. They're very price sensitive, and that is driving an extremely promotional environment for these retailers. Heading into the key fourth quarter. You know, we see that with Bath and body Works, UM And I think

that the other thing is like managing inventory. These retailers are don't want to get over inventory, some of them already are there, and that's also really driving these promotions UM and we expect them to continue and be elevated in the fourth quarter. You mentioned Beth and Body Works, it starts up nine today. I mean this is a big company, eight and a half billion dollar market cap.

Tell us what happened with their their numbers? Yes, so they basically beat from the top to the bottom line UM with results, and they raised their outlook for the year after they sort of drastically cut it back in July when everyone started really questioning what was going on with the consumer and where the pullbacks were going to be.

And Bath and body really does sell discretionary item, so you know, the gut feel, you know, the initial reaction might be like that they would be severely hurt in this environment, but I think their results really show how loyal they're following is and their customers really go to their products as sort of state items, especially for the the key holiday season. UM. There they use them as gifts. You know, people incorporate their their products, their candles, their

body care into you know, their holiday season. So I do think, Um, you know, the results were great, but it also demonstrates the future with this company and the growth potential that they have with this loyal base. What does that then mean for this divergence that I feel like a lot of people expected to narrow a little bit between perhaps some of the luxury shoppers and then some of the uh not luxury shoppers for lack of

a better term. But essentially what I'm referring to is this kind of divergence you saw in Macy's versus Coals, in um, even Walmart versus Target. Arguably, what are the share shifts that are happening in this space? So for bet the body work, because their customer base, you know, really does align pretty l with you know, the demographics across the US nationally, So they have some high income shoppers and they have some low income shoppers, and you know,

they consider their products sort of affordable luxury. Um, if you will, Um, But I think again, it comes back to my point of you would kind of expect, you know, if people are going to cut back and people are cutting back, you know, cutting back on body lotion or sprays seems like an obvious thing, right, you may not need that item, but I think you know, people are very focused on self care and these items are important

to them and they're basically willing to spend on them. Um. But the one thing we did see is they do want a deal. So so they want these products, but

they want a deal. And I think that in the fourth quarter, you know, especially Black Friday, Cyber Monday, you know, some of the deals are going to be very, very good, and I think you know where there was some pullback and that lower income consumer in the third quarter, I think we're going to see some transactions from that customer because they want the items, They're going to come into the store and they're gonna stock up when the price is low. So little line for the companies you cover

in retail, are shoppers coming back to the store. Are they still just clicking from their couch so? Um. You know, since stores sort of started reopening in one you know, we've seen a resurgence of brick and mortar. Right the storefront is essential to drawing people, um to buy your products. UM,

and we are seeing people back in the stores. I think, you know, Black Friday is going to look a lot more like pre pandemic UM, where you know, people are waiting a little bit to do their shopping, and I think they are going to go in person to these stores and explore the products um and and try to take advantage of the deals out there, not me sitting on the count and I'm clicking if I can't buy with my phone, it in happen it, Lindsay, thank you

so much for joining us. Appreciate it. Lindsay Dutch. She's an analyst at Bloomberg Intelligence. Comes lots of things, but she really does a great job on the retail space. We've got a strong team there at Bloomberg Intelligence because hey, there's a lot of companies out there in the retail space UH and be the consumers such a big part of this economy. And it's interesting to see how the consumer UH is faring here with high inflation, appending recession.

Yet the retail sales numbers we saw come out we're pretty darn good. UM, So we'll have to keep on top of that. We need to get the latest on the Ukraine. This is a fluid situation, of course, but we need to speak to some experts and get the real, uh sense of what's going on there, and we do that right now with Dr Ariel Cohen. He's a senior fellow at the Atlantic Council Eurasia Center. UH. He also served as a Senior research fellow in Russian and Eurasian

studies and International Energy policy at the Heritage Foundation. The author of six books, He's been doing his stuff a long time. Folks, Um, Dr Colin, thanks so much for joining us here. Boy, I guess I think about the last fourty eight hours, it seems like the world kind of dodged the bullet, if you will, in that this missile strike in Poland. You know, perhaps was not a premeditated act on the part of Russia, but boy, it just highlights how risky things are over there and maybe

potentially getting even worse. What's your current state of affairs over there? Absolutely? Uh. This is probably the worst deterioration UH in the global security field since the Cuban missile crisis. But the Cuban missile crisis was resolved quickly. Both the US and the Soviet Union did not want the nuclear war. Here, it's different because Jima puts in deliberately threatened the use of tactical nuclear weapons in Ukraine and wanted the world to walk him back from the break. And he really

really wanted attention. He got it. UH. Now it looks like China and India a sort of distancing in different ways, but distancing themselves from Russia, including in the recent G twenty summit. Um Chairman C who just won the power struggle in Beijing, was very careful not to criticize Russia directly, but the statement about the necessity to avoid the nuclear

war was their front and center. Of course, Russia said they are against the nuclear war as well, but what you see here is a prolonged, protracted conflict in Ukraine. Russia things that time is on its side because it has more human resources and a greater UH industrial capacity, whereas the Moscow power Circle thing that the West will lose interest. UH. They hope that the Republicans would win both houses, and mistakenly, in my opinion, I thought that

the Republicans will not support Ukraine. UH. And with the exception of some fringe figures who got reelected recently, the majority of the Republican Party and Republican voters do support our aid to the struggle of the Ukrainian people for their freedom. So, but this into some perspective for us

when it comes to the situation with Poland. At the moment, I believe the investigation is still ongoing in terms of OH, I believe what has been called a stray missile that then hit Polish territory, and I should add NATO territory as well. Present Biden has been very vocal about saying any inch of NATO, the United States will of course go to defend. But there are historical dynamics between Poland Ukraine and then Poland Russia. Highlight to our audience why

that's so important. The missile fell in the Polish territory close to the Ukrainian border. UM. The missile appeared to missiles appeared to be at this moment the Ukrainian anti aircraft missiles that hit air Russian UM missile that was flying towards UM a Ukrainian target probably and energy target. And UH. President Biden said that because Russia started this war, UH, the ultimate responsibility is with Russia. Two people were killed

in Poland. For a moment, it looked at like a Russian strike against Polish territory that would of course escalate this war to a whole new level. But looks like, thankfully this is not the case, and we very much hope that this is not going to be a step in escalation. But the escalation is deliberate Russian destruction of the Ukrainian energy infrastructure, in which hundreds of thousands of civilians remain without electricity and heat in the middle of

the war. So the Russians are trying to break the spirit of resistance in Ukrap Dr Cohen, you know, we're now many months into this war in Ukraine, we're coming upon you know, uh, the winter season in that part of the world. Based upon your experience, how do you think this war resolves itself? How do you how do you think it plays out? And maybe over what time frame? I think we are going to see fighting in winter,

which is brutal. Um, it will get into the negative tens and twenties occasionally there or the thaw maybe freezing, but it's still December through March is quite nasty. Then there'll be a little hiatus when the mud season strikes late March early April, and then into the summer. So I I see probably close to another year unless something major happens. Look, Russian history teaches us at every tar every ruler that loses war loses power. And Mr Putsen

is a great student of Russian history. He knows he will not be an exception. All right, Dr Ariel Cohen, thank you so much for joining us there. We appreciate getting your thoughts in your perspective. Dr Errol Cohen, he's a senior fellow at the Atlantic Council Eurasia Center. Getting the latest on the fighting in Ukraine, and Dr Cohen was saying, pretty it doesn't seem to be any resolution

in sight at this point. Yeah, and even I believe the joint chis to have the Pentagon yesterday is talking about, well, the timeline is going to extend certainly into the winter. I had a lot of retail data come out over the last week or so. We had some retail sales government figures come out little bit better than a expected. We've had some pretty good earnings numbers from most of the retailers, and Macy's today with some good number stocks up um, so we're starting to see getting some decent

figures of how the consumers really faring. To get some more color We've checked in with Harley Finkelstein, president of Shopify Shopify trades on the NASDAC under the simple s H O P. That makes sense, Hardy, thanks so much for joining us here, UM to tell us what's happening with your business here, because there is concern about the consumer as we potentially head into recession over the next

several quarters. Hey, Paul, Yeah, thanks for having me. Well, it's like I think the UH, if the past few years have proven anything, it's that changes is kind of the only constant in commerce in general. UM. But we're heading into you know, the biggest shopping moments of the year. UM. And and there are still some notes in the in the landscape. UH surveys are telling us at eight of US businesses are planning for a big Black Friday, Cyber Monday sales weekend. So that's that we think is really

really great. UM. And one of the things that you know, we're seeing is that there are a couple of trends happening bote both for the consumer but also for the merchant and and uh, you know, if you compare it to last year. Last year we saw but forty seven million shoppers buying from Shopify brands over the forty weekend UM that felt like it was a vote with their wallets to support these amazing independent brands as opposed to go to department stores. And so we'll see what happens there.

But peak sales last year, we're at three point one million dollars permitted on Black Friday on Shopify and uh and for the weekend we saw were six billion dollars sold on our platform. So we'll see what happens this year. But there's certainly some optimism in the in the air. I heard that Shopify is building out their logistics arm, which is interesting is usually something we associate with Amazon for example, walk us through perhaps some of the challenges

at least a vision for that. Yeah, I mean a couple of things, I think for the relationship that our merchants have. We have millions of merchants on our platform. Shopify is now about ten percent of total e commerce

in the US alone. UM and and so if you're a consumer and you're buying from a from a great brand direct on their online storey even offline store and experiences is wonderful, there's a really good chance Shopify his power and that experience one of the things that we know that our merchants are looking for is is they want us to help with more of their their retail and their commerce issues. And so years ago we introduce Shopify payments make it easier for him to exact payments.

We then introduced things like Shopify Capital. We've now given out more than four billion dollars worth of cash advances and loan store merchants, and more recently we introduced Shopify Fulfillment. And really the idea is so because the consumers expectations around fulfillment and shipping have been reset, we want to give every merchant that uses Shopify the same effectively the same ability to delight them with you know, to day affordable shipping uh and that that the big retailers do.

And we think we can do that with shop by fulfilment. But it's not just about one particular product, whether it's a film that oar, payments or capital. The ideas we are becoming the most important piece of software that these millions of stores and merchants use and and to do so, we really are are transitioning from just being e commerce provider to being a retail operating system. And I think a lot of our merchants would say that shopify is their business for the most part. Harley, talk to us

about the pandemic over the last three years. A lot of folks, I think it's kind of suggested to me that maybe it's that has pulled forward maybe you know, five years of market share gains for e commerce forward. Um, A do you do you agree with that? Do you think e commerce will louse share? Is? Maybe people start going back to stores. How do you an you think about that? What are your merchants telling you? Yeah, I mean,

it's it's a great question. What the pandemic did was it certainly did pull forward some some acceleration in e commerce penetration. Um, you know, uh, just just to be just to be clear, Um, the metric or the vector that most people are looking at is e commerce penetration as a percentage of total retail. What happened during the pandemic is if the equation simple, then the numerator is e commerce sales. The denominator is total retail sales. When

the pandemic hit, you saw two things happen. The numerator went up, of course e commerce was higher, but the denominator you lost all physical retail, and so you saw this massive growth rate and now that we're settling back in sort of this you know, post pandemic world, what you're seeing is all the gains and e commerce have have sustained. We still have all those games, but the growth rate is now closer to what we saw in two thousand nineteen, but on a much much higher base.

And so I think the macro tail winds of e commerce is is still very very healthy. In fact, e commerce will you need to grow over time. We're still sub in the US, it's a little bit less in Canada, a little bit more in the UK, but e commerce generally is still quite small and there's a lot of

room to grow. Now. The other thing I think that is is becoming apparent to to us and certainly to the merchants that you shopify you know, uh, you know, great brands, whether it's you know, All Birds or its Figs, or it's Fashion Nova or Gym Shark. Uh. You know I mentioned on the Earnings called Glossy is now Shopify and thetels banks these incredible to use this. One of the things that we are seeing is that the future of retail is not just going to be online, nor

is it going to be offline. There's sort of this talk about is offline coming back? Well, of course, and the reason is the future of retail is going to be all about consumer choice and the brands that will be most successful. I just tweeted about this about an hour ago. But you know, Kim Kardashian, her new skin line, cosmetic line we know, has a pop up powered by Shopify, and so it's all coming together around e commerce and

commerce colliding and commerce being everywhere. Yep, it certainly seems that is the case. Hardy, thank you so much for joining us. We'll always appreciate getting the latest from you on retail and on Shopify. Harley Finkelstein, he's the president and at Shopify. Again, that is a NASTAC traded stock. You can type in s h o P, go into your Bloomberg terminally get all the latest there forty billion dollars market cap there. So again, Black Friday coming up

big for the retailers. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter. At Matt Miller three and I'm fall Sweeney. I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio