Amazon Pummeled and Elon's Twitter Vision

on results. We're gonna have all the details and we're getting a glipse into Elon Musk's vision for Twitter, including his hope to avoid a quote free for all healthcape and I have more on how this could change your feet. All that in a moment, but first of vo little day on the back of matters, disappointing results in leading up to Amazon and Apple out after the bell are at Ludlow here to break it all down, add lots of action today. Yeah, I mean, and you said it right.

Amazon getting absolutely punished for the weakness in its fourth quarter forecast the holiday quarter. Of course, it's forecast for revenue significantly below what the street was looking for a hundred and forty to a hundred forty eight billion to come in the fourth quarter of the street was looking at one five five point five two billion. But also the outlook for operating income is weak, and that's putting

it mildly. We've been saying all day on Bloomberg Television that companies in this earning season either live or die by their outlook for what's to come in the final three months of this year. In comparison to other megact text dogs, this is very weak. A mixed bag for Apple down one point three and after hours pairing some of its earlier losses. But what I would say is that it was the iPhone sales that came in weaker than expected, along with services. Overall, a beat on revenue

and a beat on EPs in the quarter. But as you talked about this currency headwinds and look at that power shares kki K, it's the Investo e t F which tracks than has that one hundred. You're gonna have to take my word for it, m but being down one point four percent in after hours, that is a big move for this e t F that tracks and has that one hundred so closely so we look ahead to Friday's session, where we expect those ripples in the market more broadly to be felt by what we're seeing

in earning season. Meta the story of the day this Thursday, biggest drop since February of this year, but the stock clothing and closing at its lowest level since January. The real concern the growing expenses year on year into three, which Meta outlined as being between nine to a hundred and one billion dollars, the exact opposite of what investors

have been calling on Mark Zuckenberg to do. And Twitter, let's kind of end on a slightly more bright note, m Twitter, we are inching closer and closer to the close of this deal. Kurtwagon and I have reported in the last ten minutes that Tesla engineering talent have been inside Twitter San Francisco headquarters this Thursday, evaluating and assessing the underlying code each powers the Twitter platform to help

you long musk understand it. They've been meetings what they called code pairing, where you sit down and work on it together. But all the signs from both sides, the debt side and the equity financing side, and what I'm hearing from sources will get a close of this deal Friday is expected. All right, Ed Ludlow, thank you great reporting. I want to dig in further to those Amazon results. Shares tumbling and late trading due to a holiday quarter

forecast that came in well below expectations. Rachel Typograph is the CEO and founder of mick MC and e commerce platform that helps big brands grow, joining us now to unpack these results. So not warm and fuzzy outlook for Amazon this holiday shopping season. Rachel, what's your take on these results? Is this inflation? Is this a broader downturn?

Looming macro economic factors are impacting everyone at play. At the end of the day, net sales for Amazon did increase by which was arranged with what Amazon executives were affecting, but not what the street wanted. I think a big focus was focusing on what would happen During the first ever Prime Early Access event that happened in October. Over a hundred million items were sold, so all of a sudden,

Amazon was able to move excess inventory. It also showed that despite inflation, consumers were ready to shop as long as it was about value and convenience. What we saw at Mintmac is that the categories that performed strongest during the sale event were health, personal care, and grocery, not necessarily consumer electronics toys. So what this continues to show is that consumers are willing to spend, but spend on necessities.

M So it sounds like you're a little more optimistic than the typical dooming loom forecast that we've been hearing. That said, on the back of not so great results from Microsoft, Alphabet Meta could at all get worse than we think. So I actually think that Amazon is in a very unique position to eat those other companies lunch. And the reason why is if you look at Amazon's advertising business in this past quarter, it actually grew over It's now the third largest player in advertising in the US.

This is significant, and the reason why is that changes in iOS fourteen cook be less Internet that negatively impacted Alphabet and Meta are actually benefiting Amazon. Amazon has so much first party data, and they own their DSP and they've built out self serve capabilities that cater to the small medium businesses. They're in a position right now to significantly grow their advertising business, which has incredible margins which can offset losses in other parts of the business while

platforms like Alphabet and Eta are struggling. How is this impacting the brands that you work with, and obviously you help them grow their businesses in part with the you know, the help of Amazon and other big e commerce companies. Yeah, I mean, we work with huge consumer package good companies, and these companies understand that during trying economic times, you

cannot stop spending. You can look at Procter and Gamble, you can look at Coca Cola over their hundred year history, they always spend during trying times and they always come out ahead. That being said, CFOs that those organizations want every single dollar to be able to work really hard, and that's why Amazon is in a unique position with its advertising business during this time because it has really

really strong return on investment. And so right now, what we're seeing across Fortune one thousand consumer package good companies is that they have a dollar to spend their often moving it into environments like retail media where there's guaranteed r O. I. You have some interesting thoughts about buy now, Pay later and how that might have made the current consumer uh situation worse. Can you share that? Yeah? Absolutely, I mean, if you look at which honestly within commerce

are anomaly years. We always guide our customers to look at two thousand nineteen. That's a much more realistic comp But in many consumers were trained to essentially spend money that they don't have. As interest rates have risen, all of a sudden, consumers are recognizing that that by now pay later value proposition will put them in major debt

and cost them so much. And so I share this because there was a lot of fake money that was being spent in the ecosystem, and if you remove that all of a sudden, very quickly, you'll start to see trends that look more like two thin. And so in the long run, I actually think this is going to be benefit consumers because hopefully you'll prevent them from going into deeper debt or debt at all together. All right, Rachel Typograph, founder and CEO of Micmac, really interesting insights

from you. Thank you for sharing all of that with us. Sticking with Amazon, The National Labor Relations Board says CEO Andy Jasse violated federal labor laws when he told me this about workers earlier this year. We happen to think they're better off without a union. For a number of reasons, including the fact that you know it's it's much harder when you have a union to have a direct relationship

with your manager and to get things done quickly. The complaint against Jasse follows a number of big tech union votes from workers across the country. In a statement, Amazon says, the comments lawfully explain Amazon's views on unism and unization and the way it could affect the ability of our employees to deal directly with their managers. And they began with a clear recognition of our employees right to organize

and in no way contain threats of reprisal. Meantime, got to dig into Apple results now, the tech giant posting weaker than expected iPhone and services sales in its latest quarter. Juliasc, principal analyst at forest Or Research, with us now, So, Julie, why our investors so uh seemingly unhappy with this report? I think it's it's hard for me to say why

investors are seemingly so unhappy with this report? Um, but I think one of the things, you know, that I look at more broadly is you know it's it's there. You know it's not the big quarter. Um. You know they got product out. Even though consumers could order products, there were still a lot of delays and shipping products. They just announced a new tablet line up last week, So I think, you know, the third whatever, you know, that quarter is going to what it's going to be.

But I think, you know, it's really important for every consumer electronics manufacturers, you know, the holiday season, and that's what we've got to look forward to, and that's you know, what's most important for them the rest of the year. So let's talk about that. Some words from Tim Cook here.

He says, as we head into the holiday season with our most powerful lineup ever, we're leading with our values and every action we take and every decision we make, we're deeply committed to protecting the environment, securing user privacy, strengthening accessibility, and creating products and services that can unlock humanity's full creative potential. When you look at the product lineup, what's available this holiday season, the way that they're keeping

you know, many of the prices the same. How optimistic are you that they're gonna be able to move a lot of products? So, you know, I do have some optimism. We just put out a force to just put out their holiday forecast and we're predicting we're forecasting an increased online spent of about fourteen point six percent. When we've surveyed consumers, we have eighteen percent of consumers seeing gonna

do more this year than last year. On the flip side, we still have about forty percent saying that they're going to spend less. When we talk to consumers about how they're feeling about the economic headwinds, we do have you know, depending on the question that you asked, between like thirty nine and forty one of US online consumers saying, UM, delaying making purchases, UM, I am worried about the economy.

I there are things that I'm gonna pull back on. UM, and then you know, just not making purchases they want to make. And then if you ask them to the sentiment of how they're doing, there's probably about fifty of them that are worried about the economy and worried about their money. And definitely, you know, expect to slow down purchasing this holiday season. So I think it's you know, going to be a question of you know, what is

that mix? You know, is that eighteen percent the a fluid eighteen percent that apple relies on year in and year out. Um, but I think it's you know, it's it's still gonna be a good holiday season, but it may not be what everybody wanted it to be. You know, if we were to look at the forecast from earlier in the year, it's gonna be a tough season. Meantime time, China has historically been a huge market for Apple. Tim

Cook was really the architect of Apple's China strategy. And we're in the middle of of a of a potentially history making decoupling of the US and China. How is Apple handling that and how much will that impact or potentially hurt Apple over the longer term. Yes, so I think that's always a hard question, Emily, because I think always,

you know, the devil is in the details. I think one of the things that's been interesting about watching China from a consumer standpoint, which is closer to what I follow, is a Chinese there's still far more lockdown than we are here in the United States than we are in Europe, and so there is more consumption of um, you know, online media, virtual worlds. We're seeing far more interest in things like the metaverse. Uh, and you know in streaming

media and things, they keep them entertained at home. So I think it's it's it's hard for me to say, you know, what's going to happen in China, but it's a very different environment that we have here in the US in terms of, like I said, our mobility and how much we're depending on media and electronics and so forth that keeps entertained. It can needed to work, you know, stay in touch with our friends and family and so forth.

So it'll be interesting to watch. Meantime, I have to ask you about the controversy changes in Apple's ad tracking policies, Meta hitting back this week with how much it's hurting them and other social media companies. You've got the skeptics and the critics out there saying that Apple isn't doing this to protect privacy or security, but to add to

Apple's own bottom line. What's your take, So, you know, there's there's a little bit of both, But I don't know that anyone's crying for um, you know, half Pool

or Google's diminished ability to monetize the data of consumers. Right, those companies have grown very, very wealthy over the past couple of decades by doing so and I think as we look forward and we're looking at the values that consumers have, you know, Tim Cooke really hits on them one after day, that it is about our privacy, it is about security, it is about responsibility, it is about the environment, it is about trust. And if we look at some of the biggest themes that our clients are

asking about, it's all of those. It's trust, it's the economy, it's the green you know, it's being green, it's security, it's privacy, and so forth. And I think that's really the long game. Do I think that advertising is going to contribute in a substantial way to Apple's bottom line in the next five years, I'd be surprised if they break out that revenue. I'd be surprised if it begins

to be that big. Well, I was going to hear from you, Julie, vice president, principal analyst at Forest for Research, Thank you so much. Elon Musk has both tried to acquire and walk away from acquiring Twitter. Here's how we got here. April four a regulatory filing reveals that Elon Musk has rapidly become the largest Twitter shareholder. April fourteen, in an sec filing and accompanying tweet, Musk says he will buy out stockholders in a cash deal and take

Twitter private. The offer, valued at forty three billion dollars, is a fifty percent premium over the price. In January. May seventeen, after Musk and Twitter CEO Para Gang Rowel have it out on Twitter, Musk tweets he won't proceed unless Twitter can prove bots are less than five percent of its users. July eight, Elon Musk backs out of the deal, saying in a filing that Twitter made misleading representations over the box issue. July twelve, Twitter sues Musk

to force him to complete the deal. Musk counter suits. October four, after a trove of Musks in a circle text are revealed in court filings, Musk revives his bid at the original offer price, potentially avoiding a courtroom fight. October six, the Delaware Chancery judge pauses the court case, giving the parties more time to complete a deal. Of five pm October twenty eight, hard deadline is set. Otherwise,

the trial resumes in November. M just some of the Musk Twitter saga there that we've been living through for most of the year. But finally this deal seems imminent. In a tweet addressed to advertisers, Musk said he wants to make Twitter a well meantown square with highly relevant ads and less of a quote free for all healthscape for more. I want to bring in Bloomberg, Sarah Fryer,

and Sarah. Our latest reporting is that Tesla engineers have gone to Twitter headquarters to review some of Twitter's code, and also that Twitter's code has been frozen ahead of a pending deal. Sort of changes can be made at the eleventh hour. What's the latest that we know, Well, it looks to us from our sources that these Tesla engineers are meant to review the code to help Elon

musk assess it and think about what needs to be done. Um. You know, companies that have been around for as many years as Twitter have their their code can always be confusing to newcomers. So he's bringing in some trusted fellow of folks from his company he also runs UM. And then just in terms of the note to advertisers this morning, I think that Elon Musk is is trying a little bit of um, a reversal of what what has been

said out there about what he's going to do. I mean, we all know he has this free speech plan for Twitter. What that's going to mean is is loosening up a lot of the moderation standards and bringing on content that could make advertisers uncomfortable. So I'm not exactly sure. How

are you going to do both things at once? As they wrote um today for our quality newsletter, you you can't have a commercially viable social network, one that advertisers want to to buy promotions on, one that people want to join without some level of content moderation. There has to be some line that he's he's going to draw, and he's going to have to figure out what kind of balance he is comfortable with. How are Twitter employees feeling about this? We know he was at headquarters yesterday.

There's this picture that was posted if everyone gathered around him, some people were smiling, didn't look so, you know, potentially doom and gloom. Of course, you only can get a few few people in one photo. Um, but how our Twitter? How our Twitter employees feeling about this? Given that he's you know, there's reports that he might cut up to the workforce. He's bringing in engineers from another company to

look at their code. Well, we we skipped last night that he actually told Twitter employees that he does not plan to cut seventy five percent of the staff. In fact, he he claims he don't know where that number came from. Of course, you know, as we previously ported, it came

from his own presentations to equity investors. So I think that there's just a lot of of of putting down the hatchet and all of this tension, between months of cork fights between Twitter and Elon Musk, you know, coming to a place where they can work together, where he can work with their partners and advertisers, where he's saying basically, I come in peace. You know, I am I Am going to be the boss here and and I'm going

to care about this. And he's comes he comes in with this this perspective, or at least he says in his letters to appetituers that he's doing this for humanity. Right, there's a very grandiose vision for what Twitter can be under his law. Um, and I think that that that kind of messaging actually does appeal to Twitter employees. That they tend to say that when you talk to them, they're in it for for the impact you can have on the world and our culture and our our you know, politics,

like you know, they can make a difference. So I think that is historically why people have joined Twitter and not maybe some other bigger tech companies that might pay them better. So it'll be interesting to see if if Musk can can actually come in peace, even though he's certainly going to have to change quite a bit. He's going to have to cut staff and um dramatically pivot the company and his vision. So he's in there talking to employees, he's walking around with the kitchen sink. Give

us the TikTok of the next twenty four hours. When does this deal get sealed? I mean, we're already reporting that arch Capital is going to replace Twitter in the SMP five. It's really a matter of time before the share stop trading on on the open market. That that will be our our first public signal perhaps that the deal is done. UM, we're also looking at filings that might happen in Delaware that they need. Whatever is being

signed right now, it's not final until you know. It's like when you buy a house, is not final until you get the keys. That all these little steps have to be done before we can say the deal is closed. Um, but it looks very much on track right now. There are unlikely to be I say this with the grain

of salt. Right, it has been quite a zaga, but they're unlikely to be sumbling blocks between now and I PM on Friday, UM Eastern time, which is when the judge Enchance reports that this needs to be completely complete by She wants an email in her inbox by by PM saying it's dumb, we don't need to go to court. Alright. Well, some people might not be getting some sleep tonight. I hope one of them is not you. Sarah Friar are

Blue Brick Tech editor, Thank you so much. Microsoft is out with its first ever report on media and pay for its workforce. It shows that women do better than the US average, but black and Hispanic employees remain underrepresented in higher level rules, and Microsoft's employees of color overall make less. Tesla facing a criminal investigation to its self

driving system. Bloombergers learned that the US Justice Department is investigating whether the company made misleading claims about tesla cars ability to drive themselves down. Jones reporting the SEC is probing Tesla as well, coming up. What does the consumer want in this inflationary environment. We're gonna be talking about more earnings with shopifies Harley Finkelstein, This is Bloomberg. Welcome

back to Boomer Technology, Emily Check in San Francisco. Let's get back to the after hours action Apple and Amazon. Back to Ed Ludlow and Ed. Apple investors seem to like what they're hearing from Tim this call. They were liking what they were hearing from Tim Cook, but then Luca Mastreet started speaking and they did not like that. The stock at one point up two now through ours

then dropping suddenly. It seems to be the headlines crossing that they're not giving revenue guidance because of the uncertainty in the world and the macro picture. Total company revenue growth will decelerate compared to the fourth quarter, the fiscal fourth quarter, and the forecast here is that mac revenue will decline substantially in the holiday quarter. Those are not things of the market like you see Apple now down

by two point six percent. There was a pocket of strength in this earning season for Apple, which was the mac book executive saying that a lot of buyers of the MacBook were first time bias. Perhaps that's because of the cutting edge technology. This is what Tim Cook had said about that. Our Mac customers have already been raving about the power of M two since the arrival of

our newest MacBook Air and MacBook Pro the summer. They're incredible, long battery life, stunning lee rich display, and lightning fast speeds are a signature part of the Mac experience and helped drive an all time record revenue for Mac during the September quarter. So that's the story of Apples so far. We'll continue to bring the latest as it crosses the Bloomberg. Really the story of Amazon. We know that the investor base is not impressed with this outlook for the fourth quarter.

How often am have you ever heard Amazon say that macro economic conditions are tough? That seems like a car do you play when earnings are not very good? Hat tips editor Nick Turner for that one. An interesting bright spoting after hours though Intel, it's actually a little kind

of bastion of hope in the It's up three. Revenue was not good, numbers not great, but there's basically a pledge from the company to cut costs, be financially discipline to get this company back on track and investors seem to be buying the story with that stock high almost four percent and after rise, we're keeping on that one too. All right, Ad Ludlow, thank you. I want to dig in now to shopifys results kind of bucking the trend which shares rising over the last couple of days after

uh their numbers came out. Shopify president Harley Finkelstein with us Now, So, Harley, how did you manage to buck the trend here? You know, what is it that Shopifies doing that? Everyone else sing? Thanks trapping Emily. You know, we're we're happy with how things came out. I think the big thing that the big takeaway is that the role that Schopfli is playing in the lives of the millions of merchants is just not of a typical software company.

One of the things that I mentioned on the call quite a bit was this merchant merchant services attach rate, and that is really the amount of services and that we create for for merchants. And I think the big difference here is we're not just the commerce provider anymore.

Where the retail partner for physical retail where their capital partment we've given out now more than four billion dollars of cash events and loan store merchants where the logistics partner, and with audiences and shop by audiences where now their advertising partner in some cases too. And so we saw a two point one four percent merchant solutions attachment in Q three. That's up from one point nine eight in

Q two. So that was really good. On the revenue side, you know, revenue came in one point four billion, that's up twenty two percent year on year and on a

three year cagreats with fifty two. But I also think with the street and investors wanted to see was was operating discipline, and we saw adjusted gross profit of six over six hundred eighty million dollars that's up eleven percent and a three year cagor So when they see that plus year on year declining operating expense growth and five billion dollars of cash in the balance sheet, I think they see the Shopify is a long term, durable company.

Investors are looking at. This is potentially a sign that Shopifies worse days are behind it, quote unquote, it's been a tough year. You've had job cuts, it's a very tough retail environment. Inflation is weighing on everyone. Would you agree with that is the worst over look. I think Shopify was this incredible COVID you know, story March, physical retail shuts down permanently, and all these physical retailers end up moving to needed to move online, and most of

them did so Shopify. I think what most people missed was that the trust we build in the COVID period meant that now that stores are reopening, Phystom Stories reopening, they're now using us to to replace their existing quinte sale systems as well. So that's one issue. The second issue is that, you know, talking about sort of the macrotin of the consumer. This idea of omni channel we talked, I've talked to this on your show before. This is

now steady state. The best brands, most modern brands, they need to sell everywhere online, offline, on social media, on marketplaces, and doing so with the retail operating system like Shopify gives them the tools to do so. So I don't know what's going to happen in terms of the larger economy in the future, but certainly, you know, September was a good month from a consumer spend. It looks like

October is pretty good too. But our our our merchants and millions of merchants on shop they are getting set up for a good holiday season and we want to be there to support them on that. You know, investors were not happy with Amazon's results there. Holiday forecast was not great. You know, what's what's your read on that and what it also could bode for Shopify. I mean, we're certainly dealing with an inflationary economy right now, there's

no doubt about that. What I what I what I think is certain is that the direct to consumer business model, where brands manufacture and sell direct to the consumer, where there are no intermediaries, there is more margin there, there is more room for inflation. And so I actually think that that a direct to consumer model operates better in this environment than say a third party reseller might who's

already operating on on razor thin margins. But so far, I mean, you know what you look at companies, uh just this quarter, Glossier for example, or Spanks for exam Apple or Alo Yoga or Vori for example, like these these brands on Shopolate are doing really really well, and so you know, we we we think the consumers remain strong, but we'll see what the holiday season comes from. The most important thing, though, is that we're there to support them no matter what they want to do. You had

me at Viori Carley love it great. Brand Great. Let's talk about your logistics and fulfillment network. Obviously you've been developing that. Where does development stand now and what are your ambitions there when it comes to investing and you know, potential acquisitions. Yeah, we've made a lot of progress there.

I mean, the goal is to build an end to end logistics network, so from the second year product is made at the factory to to when your your consumer gets it, we want to basically we want to handle that for for all of our merchants. The key though, is that we want to make it so that when you use Shopify, Shopify, film and Network, when you use our logistics product, you don't have to think about logistics. But the key here is something that I mentioned the

urnings call today. It's called shop Promise. This idea that when you use our fulfillment product, you can provide an anticipated delivery date with certainty to your consumer. In early testing of shop Promise, we know that consumers will spend more, they will convert higher when they know when to anticipate it. So we're not trying to build out what Amazon did

this like one day free shipping thing. What we're trying to do is make it so that our merchants one don't have to think about logistics, it's not a problem for them, will take care of it. And second that they can provide and anticipate anticipation of when the product will get into the hands of consumers. And we made a lot of progress there so when that you know, we we've disclosed a partnership that we have with flex Board.

On that first phase from factory to port, from port to fulfillment, we acquired a company called Deliver that does balancing better than frankly anyone on the planet. And that third phase from the fulfillment center to the end consumer, that's really where shop Life Fulfillment Network takes really ramps up.

And and and we have partners you know, all over the U S right now that are using our software, our robotic technology from six River System and we are creating this this this logistics network and we've made a lot of progress. Well can you need to do so, But the key really is the shop promise to give everyone, every small business the same tools that frankly Amazon has with things like you know, Amazon Prime, and we think

we can do that. That's aid in person shopping is back and I can imagine back even bigger this holiday season. How is Shopify prepared to adapt to that? And are and what are you planning for? Yeah, so you're your correct, It is back, Um, it is. I mean it went away obviously during the pandemic, but you know, we always believe the future retail is gonna be retail everywhere. It will be a consumer choice. The consumer may want to buy online or offline, or on Instagram or snap or

TikTok or you know in person. So those are the tools that we've been building. What you saw in this past quarter was we saw thirty increase year on year of g m V on point of sale. At the same time, we're seeing larger merchants replace their entire point of sales systems with Shopify, whether it's Alo Yoga or

it's James Purse, my favorite brand. But also this quarter alone, more than eight excuse me, eight retailers with more than twenty five locations replace their existing traditional point of sale systems with Shopify. We actually one merchant of ours who replaced us in a hundred and seventy five locations, so we really are scaling up around Shopify. We call point of cell pro to help larger retailers for lots of stores really replace and modernize their their in store experience.

But the idea is this, if you are a consumer and you buy something online and then you go into a store a week later, they should have the same information. It's one set of information, one set of customer data, one set of inventory. That this I like the idea of omni channel. I think it's going to become like talking about the color TV. In a few years from now, you don't say color TV, because every TV is fundamentally

colored TV. That's what omni channel will be. The best retailers that are most successful will be omni channel by default in the future. All Right, Spify president probably Finkelstein and should be should will certainly be an eventful holiday season that at least we can say. Ethereum is transitioning to low energy consumption at a time of crisis, which could maybe should turn in turn bump up demand and adoption. Bloomberginney Bossi joins us now from New York to explain.

Do explain, yeah, because it's interesting. It's not even just the energy used to cheer Emily. You're seeing there's a lot of questions on what the merge really did for ethereum. And the reason we have to look at it is are people trading ethereum more on the fundamentals more than they are the macro story? And the answer is, if you look at it since the merge, it's about flat to down, but in the last month period, one month period, it is up nearly fifteen per cent. It is up

pretty significantly over seven day period. So you are seeing some positive impacts here on ethereum, and it comes to pricing here. One of those reasons is that people believe that there is more deflationary impact when it comes to ethereum. That means supply is somewhat more pressured here, which would have an impact on the pricing. Now, Bloomberg Intelligence also has more information about ethereum. They're really positive on the trends here in terms of usage over the longer term.

Remember the reason I bring this up, Emily, is because when I talk to my sources, not just in crypto, but in the banking industry. They're watching Ethereum really closely on what it could mean in terms of, you know, the next cryptocurrency that could really help form a backbone to the financial system. So the more you see Ethereum succeed, the more you see more traditional players also be more

comfortable with the network itself. Now, I think we should also kind of turn our attention to hear to kind of what this means for the broader network. I know we're gonna talk about this in a second here, but you know, the idea here that people are treating more on fundamentals and less on the macro story, I think

is really important to a lot of large investors. And there's some questions about how that is starting to form in the market, especially as you're seeing some more macro hiccups come to the forefront and inflation be as sticky as it is. Bitcoin had a couple of strong sessions earlier this week, it's back above twenty, and yet you know, we've had you know, several guests on this show, uh saying it's going to go down to twelve or thirteen. You know, is it really do couple from the rest

of the market. Is this just a blip. The reason that it's important to watch this at this point. To your point, it's held above twenty thousand. It's faced a little bit of pressure in the last twenty four hour period. But again that twenty tho levels the psychological level. It's an important level to hold on. When you talk to folks that were surveyed by by Bloomberg hundreds of people, they really say that it's not going to break in or out of a very large range. Twelve thousand would

be lower than that range. So if you do see a drop to that point, then you do have a lot more psychological issues when it comes to treating bitcoin, especially barring any large leveraged event like you saw earlier this year with three urrows or anybody else. So to your point, if it were to fall that much, it would be concerning. But I think you also have to take note that you saw ma tech firms report earnings that were very disappointing. Yeah, Bitcoin hold up generally in

the face of that. When bitcoin has been trading correlated to the NASDAC for a while. I'll refer back to Dan moorehead in a note that he put out with Pantara just a couple of days ago, and that crypto has really traded a very low correlation to SMP for most of its life, but in the last eight months it was very correlated to the NASDAC. And he says that there are risk assets struggling, but there is a

world where blockchain does well. And the SMP was down, gold was down, treasuries are down, and the Galaxy Crypto Index was up seven point three pc in that same time frame. So again near term signs of decoupling. Does it hold is the main question for the market. All right, Bloomberg Shannelly bassik As always appreciate it coming up. More earnings over Stock, We're going to talk about that and more with its CEO, John's Johnson with us next, This

is Bloomberg. More earnings today, including over Stock missing estimates in the midst of rising inflation. Want to dig into the numbers and e commerce trends with Jonathan Johnson, the CEO of over Stock. Jonathan, thank you so much for joining us. So earnings beat, but we saw revenue drop more than What is driving this? Is it inflation? Is it? Is it? Uh? This pending downturn? Well, I think it's a lot of things. I think it's lapping pandemic numbers

where we grew really well. It's a very promotional environment. Uh, many of our competitors are at too much inventory in our working to liquidate that. That makes the environment more difficult. And of course there's inflation and rising interest rates. When interest rates rise, housing sales go down. That of courts of course hurts our business as a home furniture retailers, so lots going into it. I think the good news is even with all that headwind, Overstock is profitable for

its tenth consecutive quarter. We've got a very asset light business model that works when the jolts help us, and that works when the jolts are against us. How is Overstock responding? There's some criticism that growth and advertising is sort of overshadowing bread and butter retail on the website and that there are too many promos. Well, right, you know, I think, Uh, in a highly promotional market where competitors are holding more and more sales, we have to be there.

Our Our view is we're always going to provide marked value to our customer, which means the best product they can afford for the amount of money they're spending really quality product. Uh, we promote. We are also in the middle of launching a new marketing campaign that associates our brand more with home. We are a home furniture and home furnishing company. We've got a new ad out that's

entitled come On, Get Comfy. We've got social media brand ambassadors that have just signed on really pushing our mobile app. So there's a lot of marketing to try and push overstocked over stock sales that are not just promotions. Let's talk a little bit about the broader landscape. Though Amazon stock was pummeled today. Not uh not a bright forecast

for the holiday quarter. I'm curious what you make of that and if you're you know, expecting to feel similar trends, well, look, I think it's a very competitive market, uh, in a tough economy, and uh, you know, our top line sales were down year over years significantly. We're not pleased with that, but I think it's incumbent up on all businesses when that happens, to manage to the bottom line and make

sure you're profitable. The way I viewed today's economy, it's like we're hiking down into the Grand Canyon and we're gonna have a long hike up at some point. In order to hike up that north rim. Every hiker needs energy and fuel, and for a retailer, that need means you need lots of inventory and a strong balance sheet. Overstock has both. I think that bodes well for us in the future. Let's talk about your inventory, because you've been diversifying your products, and I'm curious how well that's

working out. You know, for example, when when Amazon diversified into more products, return rates went up. There now a machine at accepting returns. Are you getting more returns? And how would you say your return operation compares. We've actually been focusing. We went from being a general merchandiser and over six quarters we got rid of everything that wasn't related to home, so we're really a furniture and home furnishings company. During the last three years, we have doubled

the amount of home product we have on site. That doesn't mean tens or hundreds of thousands more, it means millions of more products. We have always been good at managing returns on home furniture and furnishing a difficult thing to do, and we think it's one of the characteristic that sets us apart. We are all about easy delivery

and support for our customers. They know that if they buy something for us, they're gonna have a good experience on the back end, It's going to be delivered well and on time, and if for any reason they want to return it, we're good at facilitating that return and we're getting even better through a partnership we're piloting with ups right now. Give us a status update on supply chain issues? Is the worst behind us? How are those going to be felt through the holiday quarter? First off,

I think most retailers are flushed with inventory. We're flushed with inventory too, so that that piece of the supply chain is not a concern. If customers are worried about getting product on time for the holidays, if you come to our site and you push click to order or pick packing and shipping that day or the next, so there's no worries there. I think on the supply chain front, UH stuff being manufactured overseas, that supply chain is running

fairly smoothly. Container costs have gone way down, the ports aren't colg like they were before the police where they are still supply chain constraints is from the distribution center to the customer, and that's mostly in costsom were expensive because of higher fuel, more asset sorreal search arges. That means it's either being passed on to the customer or in our case often eating as part of our gross margins. So what are going to be the most popular items

this holiday season? And it's going to get too folks on time. We got a lot of inventory. One place that we're particularly deep our giftable products. We've got lots of home appliances, big brand names like kitchen Aid, Mr Coffee, Queens, and art. These tend to be highly giftable items. We've got lots of them. The other products that have been selling well recently are things to do with home improvement.

Is home sales are down and people realize they're staying in their home and they want to spruce it up. We've been selling lots of home improvement products, things like bathroom vanities. Alright, some gift ideas too that I hadn't thought of. Jonathan Johnson, CEO of over Stock, thank you so much, uh for joining us. And that does it for this edition of Bloomberg Technology. Coming up Friday, We've got Ross Gerber. He will be talking about Elon Musk

and more. Of course, a big Tesla investor who wasn't such a fan of Twitter. And of course we'll give you an update on the deal. This is Bloomberg