Jason visa c. E. O. Al kelly, no relation, says consumers are still swiping and tapping despite talk of a recession. Carol and then theres this weeks cover story. Google and the generals. The search giant wants to build its military business, its employees they do not. Jason much more of that ahead but we begin with our top stories. A busy week in d. C. With impeachment hearings. Trade talks hitting a series of road bumps. So much more and legislation passed by congress, supporting hong kong protesters. Lets break it down with Ryan Teague Beckwith in d. C. So ryan, help us understand everything that happened there in the nations capital. Ryan yeah. This was a long week. And i think the last news day was june 15, 2015. [laughter] this was a particularly newsy week. The sondland testimony from the ambassador to the e. U. On what day was that even . Thats how long of a week its been. Wednesday. The sondland testimony on wednesday established pretty definitively that there was at least one quid pro quo holding out the white house meeting in exchange for investigations into the bidens. Sondland testified that he was not definitively sure that there was a second quid pro quo on the aide but that establishes as a sort of pattern. And as the questioners, democratic questioners sort of made clear, a white house visit is an official act which would be the statutory term for something that could be considered a thing of value in a bribery case. So they could have an article of impeachment itself just on holding out the promise of a white house visit in exchange for a personal favor to investigating the bidens. Carol ryan you said a very long week and impeachment hearings going on and we also had trade talks again. And i feel like ive said this so much over last few years in terms of u. S. China trade negotiations, two steps forward and one step back. Where are we . Ryan i mean, it exists in a nebulous zone right now. Trump has been using twitter to argue that democrats should be somehow advancing a trade deal that he hasnt sent to them. I actually think that the impeachment means that both on the domestic side, that both trump and democrats will want to do it. For democrats, its a way of saying look, were not just out to get trump. Well work with him on something we can agree on. And this is one of the few things that they both agree on and have made some progress on. Like they agree on infrastructure. But theyve made no progress on that. Jason speaking of agreement, ryan, a rare bit of agreement on capitol hill supporting the protests in hong kong amid these trade talks. What do you make of that . Ryan yeah. The hong kong is what complicates it obviously. I think if the situation there gets much worse, it could make it very hard to continue to have this level of agreement. No u. S. Politician wants to be speaking out against democratic protesters in any country, especially those who cite america as a role model and especially in a place like hong kong thats also strategically important. So if china takes too hard of a stance there, and things get really ugly, then that is probably the biggest risk to getting a deal. Carol i have to say, ryan, from those of us here in new york it really felt like a surprise when we saw Congress Passing that legislation. It was like wait a minute. Where did this come from . What was the talk down in washington about the support by both the house and the senate in terms of those hong kong protesters . Ryan well, i mean, like i said, there is just certain things that you dont want to be on the wrong side of. And those are things that are going to anything that where americans broadly like that, anything where you think you could be hit by it and i also think just generally speaking that a lot of politicians down here genuinely side with the hong kong protesters. Think that they have a strong argument and that theyre making a good case. And they want to support them. And they dont want to look they dont want the u. S. To look like it doesnt have their back. Jason all right. Ryan teague beckwith, well leave it there. Thank you very much for wrapping up a very busy week in washington. Well, from d. C. , to london, a story in the magazine on how brexits chaos, its opening cracks in the u. K. s 300year plus union. Carol this was also going on. This week a televised debate and an Election Campaign also picking up momentum. Lets head to london and check in with tim ross. So much going on. Busy here in the states. Busy over in the u. K. Lets talk about the election trail. News from there, there was a lot of momentum, tim, whats the momentum that we need to know about as investors . Tim at the moment, the conservative party is still ahead comfortably in the opinion polls of Jeremy Corbyns labour party but in the first of the televised debates between Boris Johnson, the Prime Minister and tory leader, and Jeremy Corbyn who is challenging him from a really quite hard left leaning socialist angle, they ended in a bit of a draw. It was a stalemate. Everyone was really expecting johnson or most people were expecting johnson to do well. Hes a famous campaigner. He won the Brexit Campaign for those proleave voters in 2016. Hes won two terms as london mayor. And he was picked really by the tories as someone who could defeat corbyn but in that first debate on tuesday night, it was declared a draw really in the first opinion poll that was taken afterward. That hasnt really moved the dial in terms of where the party stands. But corbyn isnt doing terribly and johnson isnt doing brilliantly at the moment. Jason so as we look ahead, it feels like were working under the assumption there is going to be some sort of brexit and as we think about the implications of that, there are real implications if you look especially north of where you are to scotland. And that figures into a much larger and maybe in some ways more limited future for the United Kingdom. Tell us what you learned. Tim well, as in the magazine this week, we have a story about the future of the u. K. Being at stake in this election. If for example the conservative party doesnt get that majority and if the labour Party Managed to squeeze into power with the support of potentially the Scottish Nationalists who are saying they would they would help get Jeremy Corbyn into 10 downing street, that who give the proindependence campaigners in scotland a really big boost. The kind of boost they havent really had since scotland voted in its own referendum in 2014. On the question of whether to break away from the u. K. Nicola sturgeon is this sort of tough firebrand leader of the Scottish National party. And she is very sure that brexit means scotland must now get a vote on its own future and whether to break away from the rest of the u. K. And if she helps Jeremy Corbyn get into power, he might just give her that vote. Carol and its interesting because in the story we talk about Boris Johnson whos talked about after we get through brexit that the United Kingdom will be more united than ever. But really whats going on, its a bigger question out there that will ultimately everyone come together or do we see kind of an undoing of the United Kingdom as weve known it for such a long time . Tim well, its when you have these seismic shifts in political debate and in political allegiance and peoples identities change, you see quite often in referendums and weve seen that in scotland and weve seen that in the brexit aftermath across the whole of the u. K. That in the end, politics can change and countries can decide their own destiny in different ways. Another case we looked at was the situation in Northern Ireland where for the first time really people are starting to talk a bit more about the question of whether the north should join up with the republic of ireland again. Its not in any way on the cards immediately but you can see the reality in which scotland goes first and then maybe a unification referendum in ireland, too. Jason amazing, amazing. Seismic shifts it feels like happening over in your part of the world. Tim ross, thank you so much. Joining us from london. Coming up, here in the u. S. , joy replacing gloom when it comes to the economy. Its done a 180. Carol completely. Plus c. E. O. Al kelly no relation. He says consumers are still spending, swiping and tapping. Jason this is Bloomberg Businessweek. Carol welcome back to Bloomberg Businessweek. Im carol massar. Jason and im jason kelly. Join us for Bloomberg Businessweek every day on the radio. That starts at 2 00 p. M. Wall street time. You can also catch up on our daily show, via podcast. Get at that at bloomberg. Com or wherever you get your podcast. Carol and you can find us online at businessweek. Com and on our mobile app. In the economic section, a global sigh of relief. Im just going to say. What a difference three months makes. Sentiment has improved and were also hearing less about the risk of a recession. Jason heres this weeks Bloomberg Businessweek explainer. On august 14, all the indicators were bad ones. Major u. S. Stock indexes fell 3 . The bond market was signaling a recession was in the making. And the trade war between the u. S. And china wouldnt go away. Hope you didnt panic and sell everything back then because the attitude has gone from doom to boom. American stock indexes are setting records almost daily. Sentiment has changed, too. According to a bank of America Merril Lynch survey in august global fund managers, they overwhelmingly expected Slower Growth in the coming year. Now november most of those surveyed expect stronger growth in the coming year. Whats the biggest reason . A change in central bank policy. Almost a year ago, the fed was planning on three quarterpoint Interest Rate increases in 2019. Instead, it cut rates three times this year, two of them coming this fall. Meanwhile, the European Central bank has become more dovish, too. Still economists arent completely sold. They see in Business Investment lagging. They wonder whether the recent strength in the economy is sustainable sore the last gasp of an expansion thats past its prime. Carol and if indeed the expansion is past its prime jason we sat down with the economics editor behind the story you just heard, sultry sounds of his voice, peter coy joined us in studio. Peter thats the fly in the ointment of the consumer is really strong in the u. S. The u. S. Consumer had to pick one force in the entire global economy, its the u. S. Consumer out there still spending but in a sustainable way. Because real wages, adjusted for inflation, have been rising. And unemployment is super low. So people have spending power. Theyre not carrying a lot of debt. The question is can this keep going for a long time if businesses are cutting back . Because businesses cut back on spending, maybe theyre going to cut back on hiring. Maybe some of that the income of the consumer will eventually trail off. Now, ed yardeni, one of the really smart guys on wall street carol love it. Peter was telling me he thinks the downturn in Capital Spending is misleading because its a lot of it has to do with the oil patch. And you know it is weak. Carol important, yeah. Peter you take that out things kind of look better in tech, health care, are doing relatively carol finance, too. Peter finance. Carol which are key areas. Peter yeah. So but it remains to be seen. Thats still an open question. Jason i do feel like we did hear some caution on earnings calls from c. E. O. s. Essentially saying you know what . Im pulling back a little bit. Or im not spending on that new factory or im not expanding, maybe as aggressively. Peter right. Right. Jason as i could. Peter historically Capital Spending is much more volatile than Consumer Spending. Consumer spending is like yeah, tends to just rise gradually. So thats what you want to Pay Attention to, even as to the as big as Consumer Spending, it can kind of be the thing that was the tail the tail that was the tail that wags the dog. Carol and the magazine covered that. The longer you get into an expansion like here we are the longest u. S. Economic expansion on record. Peter thats right. Carol the longer youre in it to keep it going thats where Capital Expenditures usually typically come in toward the end. And give it that last kind of oomph. And i wonder if thats the case here . Peter this has been such a long cycle. In its 11th year now. That Capital Spending has had its own mini cycles within that. Weve had our ups and downs. And if we get another up here, it could really be good news for keeping this thing going. Jason and staying with Economic Growth and Consumer Spending carol we sat down with al kelly for another addition of businessweek talk. Despite all of this thought a recession coming we dont see it. Our Fourth Quarter numbers which for us were september 30 numbers were better than the third quarter. The u. S. Was up 8 . The international is up 12 excluding china. Europe was up 13 when you exclude the u. K. Which has done a little bit of selfinflicted wound. Jason whats wrong with everyone that were talking so much about recession . It might be the cycle. A long time that weve had this upswing and people look at the history and say its got to go down at some point. But the consumer has stayed extremely strong around the world. The only place we see any weakness is in the u. K. And as i said thats kind of related to the whole brexit situation. But or than that the world looks pretty darn good. Jason where are they buying . Where is their money going . In our world there are a couple of things that are really driving the increases in the number of transactions were seeing. One is obviously ecommerce. People are jumping on their phones and jumping on their ipads and jumping on their computers. And buying. In big ways. Were seeing every month those numbers, the growth in e commerce is anywhere between two and three times the growth in the facetoface world. Every single month. Were also seeing people continuing to travel. There was a real downturn in travel back in december and january. If you remember, thats during the height of the u. S. China trade talks. It was during the height of the brexit conversations. And then we had the 45day u. S. Government shutdown. And almost immediately consumers started to just stay at home and not travel. But weve seen that pick up, especially in the last six months. And thats always a good sign that when people are willing to leave their home country and go to another country, thats thats a very, very good thing. The other thing that were seeing is an increased amount of smaller ticket items being used using digital payments. And a lot of that i think is driven by mass transit. Carol i agree. We are really excited about mass transit. Just in the last 90 days, weve seen open systems in edinburgh and sao paulo. We started in june in the m. T. A. In new york where only at 18 stations from Grand Central station to atlantic avenue in brooklyn but by the end of october, of 2020, the m. T. A. Hopes to be in all 424 subway stops. Carol are people using it . Absolutely. Tap and go . Tap and go. Its so convenient. Jason right. Coming up, pun alert. Retail is in focus. Carol warby parker eyes another revenue stream. Jason this is Bloomberg Businessweek. Jason welcome back to Bloomberg Businessweek. Im jason kelly. Carol im carol massar. You can also listen to Bloomberg Businessweek on sirius x. M. Channel 119 and on a a. M. 1130 in new york. 106. 1 in boston. 99. 1 f. M. In washington, d. C. Jason bay area in london and on d. A. B. Digital and through the Bloomberg Business app. Over in the feature section, warby parker focusing on contacts. Carol see what you did there the brand made a name for itself with affordable direct to consumer glasses and just like its signature frame, the focus will be on keeping the price point low. Warby parkers cofounder spoke with bloomberg about the rollout. Were super excited to be able to produce daily contact lens. At a much better price point than you can find elsewhere in the market. And its really the first opportunity for contact lens wearers that have been wearing extended wear so two week or monthly lenses really their first opportunity to enter into an affordable daily contact lens. Jason and heres businessweeks austin carr on what it means for warby parker to become the warby parker of contacts. Just a few years ago we were talking about the retail apocalypse and in many ways were still talking about. This is the one store the company that sort of bucked that trend. They back in 2010, Neil Blumenthal and dave gilboa came up with this idea to disrupt luxottica this massive conglomerate in the eyewear space that was a monopoly, a lot of analysts think when it comes to distribution. Carol they own all of eyeglass manufacturers. Rayban, sunglass hut, pearl vision, what have you and they marked up their frames massive rates. If you you buy raybans for a couple hundred dollars, theyre pretty expensive. With warby parker one low price point of 95. It was just very straight for a direct to consumer marketing and sold online and then eventually moved on offline into physical retail. And theyve really become known as a sort of bespoke brand that has this end to end Customer Experience thats very seamless and a lot of copyc