The uks antitrust watchdog strikes again with an investigation into amazon and microsofts cloud services. More concerns u. S. Tech giants could be abusing market power. It is day two in the historic ftx fraud trial. A look at the crypto hedge fund. In this hour we have an exclusive conversation with them for it with San Francisco fed president mary daly from the Economics Club of new york. First lets check in on the markets because it is about the Federal Reserve that is currently affecting the market. The macro picture being the jobs data is still looking strong. We see selloff in the nasdaq. The nonfarm payrolls data coming up the jobless claims. Two year yield recovering somewhat. Stabilization in the bond market. Still above a 5 level. What is there for the risk appetites when we have highyield . The dollar stabilizing. Lets look at some of the individual movers. I am looking at micron, up. 6 . They be that is because Samsung Electronics managing to boost the price of their own memory chips. Analysts saying we are downgrading the stock as well as wells fargo. Amazon also off 1. 4 . This is as it is being hide by the u. K. In terms of its monopolization. They are worried about the cloud market. The ftc warning amazon about its marketplace and this is all this atmospheric more regulation coming toward some of these Big Tech Companies and the worry of the prominence they have. Lets stick on that particular role of amazon. I want to bring in bloombergs thomas sealed for more that the cmi the cma is trying to show its chops. There analyzing amazon and microsoft. Thomas thats right. It is the next one in the series and microsoft in the spotlight. Amazon and microsoft occupied 70 to 80 of the storage market. It is decided there are concerns it has given this to the antitrust watchdogs which could suffer huge process again. Caroline amazon has said you are misreading our data, but what is the argument they are seeing in terms of Pricing Power that these players have . Thomas they really outlined three concerns in the study. One is a thing called egress fees, basically exit fees. If you try to check your data out of the cloud you get charged , especially if it is a big amount of data. This is something that could lock you in. Another thing is interoperability. Lots of Big Companies want to run different clouds for different things. That is technically difficult. The final thing is discounting for big committed spend. This could incentivize keeping all of your eggs in one basket and that is not competitive. Caroline amazon has come back and said we disagree with the findings. They say they are based on a fundamental misunderstanding of how the id sector functions. Remind us, this is really expensive to be an offer of cloud. You have to almost be a huge player. How hard is it to have a lot of smaller players within this . Pres. Daly thomas amazon and microsoft do not fall into this. They have the backbone of the internet. Massive data centers. Data Centers Close to cities see you get that snappy 5g internet everyone will be needing. They have put a lot of work into maintaining and building this position. The cma will be looking into can anyone else get into this . Is this going to impact the kinds of services we have in the future . Are there potential concerns for what this means for ai, which will use even more Cloud Computing then we use today. Caroline ultimately we are interested in the u. K. Visavis the u. S. Visavis germany. The u. K. Has been looking into competition in the cloud space. How much is that something the Big Tech Companies have to navigate. Thomas i think you are asking about international comparisons. It is an interesting one for the cma because postbrexit it is out there alone whereas before it was part of europe. The report does note what is going on in other parts of the world. It notes the ftc looking at this , the eu looking at this comment may maybe the cma becomes more of a sideshow as these much bigger regulatory regimes hone in on the same market and start to think caroline and start to think from a work perspective or generative ai. Great to have some time with you. Now lets get back to antitrust in the u. S. Googles trial is still underway. In transcripts unsealed by the judge we learned that apple held talks with duck duck go lace google as the private Search Engine. Bloomberg sara forden joins us from washington. More detail coming out of how much apple had analyzed other competitive search offerings. Sara yes. The unsealing of this testimony was quite extraordinary and an important part of the case. The judge said he read through the testimony, which had been taken in a sealed courtroom. He read through it line by line and felt that what is being said by these executives cuts to the heart of the case against google. This has to do with googles 12 billion agreement with apple that allows it to be the default Search Engine on all apple iphones and other desktops. It gives them access to a tremendous amount of data and we know data and building scale for a Search Engine is key to keeping those search results hi and dominating the market. Caroline the level of detail is extraordinary. Duck duck go ceo saying he met with apple 20 meetings, and phone calls with the head of safari. Does this paint a picture that they did not find a better offering out there that what google currently serves to the market . They are not favoring google because of the money. It is just a better product for the consumer . Sara that is true. There was testimony from the apple executive who negotiated the deal with google who said ultimately they did not go for an alternative and he revealed there had been talks with being as well in 2018 or 2019 but they decided google was the best. Certainly that is a business case. We think this will be critical in terms of how the judge decides about the market issues. The judge will be the one to decide this case. Caroline earlier this week the judge was out trying to build being as a competitor. It is in this moment we feel there is competition from bing with the partnership they have with openai. From all of the testimony thus far, is there any read you are getting as to which direction the judge might end up landing . Sara it is still too soon to say. Certainly the government is putting on the best case it can. This is a test case. This has never been done before. This afternoon the Expert Witness from the Justice Department will be testifying about market definition and that will be key. Caroline we will keep abreast of it with your help. Coming up, we will be looking at another trial. Sam bankmanfried, the disgraced 31yearold prepared to convince a jurys crypto empire was not a fraud. And lets take a look at shares. As we go to break there plenty of things on the move when you look at the micro detail. We are looking at individual companies that are currently not on the downside. Rivian tumbling. We sought down as much as 19 . This as the electric Vehicle Company is looking to sell convertible debt. It could end up boosting the supply of shares. The stock is off 20 . 19 is where we trade. Also looking at lucid group. This could be falling in sympathy but the be maker offering a cheaper model. Investors reading the worry about whether that is a price cut. It is down 9 . This is bloomberg technology. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com caroline we want to get you up to speed on the latest on the trial of Sam Bankmanfried. Sonali basak is keeping the context of who else will be giving evidence in what shocking revelations we could hear from them. Sonali i love being on set next to you but that courthouse is also fascinating. You have the witnesses starting to come up, including a developer at ftx who has been speaking about his long friendship with Sam Bankmanfried since m. I. T. As well as what he was told while he was working at the company. More interesting, you have gary wang, the former technology officer, cofounder of ftx, expected to testify as early as today. He was one of the people who had pled guilty and is a cooperating witness for the trial, one of three important key figures from the innerworof ftx. The prosecution has drawn out that there were only a few people that knew the extent to which this was allegedly this fraud was carried out. Caroline one of the key people is Caroline Ellison who was heading up Alameda Research which ultimately was attested to be sharing and comingling funds from an early date. Sonali the Caroline Ellison part of this is becoming more pronounced as this trial goes on. Was brought up in prosecutions opening arguments as well as the defense. For the prosecution, remember the in circle i walkig about. They were talking about bringing her to the four for them to explain their interactions with Sam Bankmanfried. The prosecution defines two ways. That alameda had taken money through ftx with cash as well as his digital wallets. They will be using Caroline Ellison to explain how that happened and what Sam Bankmanfried knew and what he directed. In the defense part of the argument they have said Carolyn Allison was running alameda. They made the defense that one person, one ceo cannot be at all places at all times and as a shareholder and directed Caroline Ellison to do things like hedge the portfolio ahead of the crash that led to the ultimate bankruptcy of ftx despite the comb mingling of the funds. This is Sam Bankmanfrieds former girlfriend who had a lot of details about how Sam Bankmanfried operated himself. It will be up for the jury to decide but his colleagues who have already pled guilty. Caroline thanks for keeping us up to speed. Lets go macro. Lets go to the economic hub in new york where our own Lisa Abramowicz is sitting down with none other than the San Francisco fed president mary daly. Lets listen in. Pres. Daly i will remind everybody my views are my own and i do not speak for anybody on the fed committee. That is how i think about it. In the june summary of Economic Projections there were two more rate hikes projected this year. In july we took one of those rate cuts rate hikes and another was the median outlook. The bond market has tightened considerably over 38 basis points since we met in september. That is equivalent to a rate hike. The need to do tightening additionally is not there. From my own perspective that is what i look at. Our job as i see it is not to tighten just do our part, it is to watch financial conditions. Monetary policy works, we raise the fund rate and it moves through Interest Rates. The financial conditions are tight our work is not necessary. Does that make sense . Lisa absolutely. Richard clarida said the rising yields does the feds job for it. Would you sympathize with that sentiment . Pres. Daly that is how it works. One of the things that has happened in the last 90 days is that Financial Markets have collectively taken on board a variety of things. One of the things i heard from many commentators in the Market Outreach i do is they have general understanding that we are committed at the fomc to keeping rates higher for longer in an effort to bring inflation fully back down to 2 . That recognition, along with all of the other factors we can put into risk about why bond yields have risen are affecting the financial conditions and the tightening and i see that is a positive outcome that we would have tighter financial conditions. Then we can get the job done for putting inflation back to rest. Lisa when is a selloff welcome from the perspective of finally the market is coming to terms with what the fed has been saying and when is it disruptive on a level that is causing concern . Pres. Daly you always wanted orderly repricing over a disorderly paris pricing. So far over a disorderly repricing. What is happening is Financial Markets are trying to find their footing and the right price for things and they will digest a lot of information. One is the supply and demand to changes in the treasury space. Supply is going up and demand is going down, especially with foreign buyers. That is one factor to digest. Another factor to digest is fed policy. A third factor is this increasing conversation people are having about whether the real neutral rate of interest has risen. We came into the pandemic about. 5 , which means nominal neutral, and when people say the neutral rate might have risen for a variety of factors, i am everything from maybe it is five to something i would say more likely, which is between 2, 5, and three for the nominal and neutral. We do not know if it has risen. Certainly we should have those conversations. Then markets try to price that in. There is lots of uncertainty in the economy and geopolitical risk and our own fiscal risk. Markets digest a lot of information and try to find their footing and that is what we are seeing. So far it has not spilled over into disorderly. Even today when the jobs claims came up and it was i dont know what to make of it, you did not see things shaking up in a wild or disorderly fashion. So far, so good. Lisa you bond quote of the day, 4. 70 on the 10 year. It seems like yields are coming in. Back in march, when there was this concern about the banking situation, yields were at the low of march. 150 basis points lower than wherewith they are now lower than where they are now. Are you seeing the same type of Financial Stress today you did back then, even on the peripheries . How you rationalize why it has not materialized in the same way . Pres. Daly march was a unique situation. We had a bank run, very oldfashioned but true bank run where the banks liquidity was completely squeezed and it dissolved in a period that was rapid. That spilled over into two other banks. That was the extent. One of the things i always remind people of his we have over 4000 banks in the country and three failed. They were neighbors in size and Balance Sheet distribution composition. They felt stresses but they manage those stresses because in part it had been more effective at edging the risks and then the fed came in with the bt fp and that produced a lot of palm this in the water a lot of calmness in the water. Since that time banking stresses have not been something when you ask people in the community what is the top of your worries, that is not something they list. They list inflation, uncertainty. One of the reasons we are seeing this yield rising not spilling back over is essentially we know what is going on in the Banking Sector. Investor letters have been published for months saying heres what this Balance Sheet looks like. There is not a surprise. The second is because the Banking System is resilient. We have remedies in place that solve parts of the crisis. It is the same thing when you have the rise in yields. We are doing it against a strong economy, a solid Banking System. That means the ripple effects are not going to be tipping things over. The fragility is not there and you have this and it is able to absorb the tension points. Lisa one thing there has been a debate around is long and variable lags. If you think 10year gilts are at 5 rather than 4. 5 or 3 that changes what implication there isnt into different Business Models . How much does it change the Business Model of commercial real estate owners and Residential Real Estate owners and the constituents you speak to on a regular basis . Pres. Daly that is a terrific question but i will unpack it into two parts. The long and variable lags and how are people reacting to that . I just met with a variety of commercial real estate ceos with National Footprints on monday so i can bring some of that to this conversation. Definitely there is always a debate. If you want to get into debate get a phd in economics and youll spend a lot of time debating long and variable lags of Monetary Policy. Here is what we can agree on. There are lags in their variable and people debate about how long are they . I go with long and variable lags in the question is we know from the feds communications to Financial Markets, and then the question is how long does it take to get through the economy. I am of the view we are still seeing the effects of that. We saw that initially in housing, now we are seeing it in the labor market and inflation. It is absolutely happening. We want to continue to watch that because with the risk balanced on the economy we could overcorrect then under correct and that is why taking the time to do it right is where i think we need to be. What im hearing and these rising yields, they are less concerned by commercial real estate roundtable about the lags and Monetary Policy as much is this. There is this time when people one person described it as a foot race. It is just like i have to see if the fed will cut rates before i have to refinance my properties. You are in a look ahead and you are saying if the fed cuts rates like the market suggests th