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First Move with Julia Chatterley
Fed Expected to Raise Interest Rates Yet Again; Ukraine has "Nothing to do with Drone Attacks on Kremlin"; Pandora Reports Slow Post-Pandemic Recovery in China; Pandora Earnings: Company Reports "Resilient Growth"; Fed Meeting Comes Amid New Regional Bank Volatility. Aired 9:18-10a ET
Aired May 03, 2023 - 09:18 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RAHEL SOLOMON, CNN INTERNATIONAL HOST: Hello, I'm Rahel Solomon in New York you have been watching CNN's coverage of Russian claims that to Ukrainian
drones flew near the Kremlin. We will bring you more as we receive it. But now we want to turn to a tragedy in Serbia, a rare school shooting on the
country's capital Belgrade has killed at least 9 people including 8 children and a security guard.
Another 7 people were hospitalized including a teacher. A 14-year-old has been arrested on suspicion of carrying out the attack. We want to bring in
now Jomana Karadsheh, she joins us with more so Jomana mass shootings, let alone school shootings are rare in Serbia, what more can you tell us?
JOMANA KARADSHEH, CNN CORRESPONDENT: Very rare, Rahel. I mean, Serbia does have one of the highest rates of gun ownership in the world. Weapons are
widespread in the Balkans after the 1990s but this sort of thing is not something people have seen before. They're not used to the sort of mass
shootings and shootings at school.
So you've got right now, families in shock. You've got a nation in shock and many across Europe, really stunned by this news. Now what we understand
happened is this suspect a 14-year-old, opened fire inside the history classroom. According to the Belgrade Police Chief, he says that they
believe that he opened fire in that classroom because it is the closest to the school entrance.
This is a school, an elementary school in an upscale neighborhood in Belgrade, a well-known school and as you mentioned, at least 9 have been
confirmed killed, 8 of them are children, 7 girls, 1 boy and a security guard.
And according to authorities as well 7 have been hospitalized including a teacher and 6 children at least one of those children we understand is in
serious condition. Now of course police are going to be looking into the motives what may have driven this 14-year-old to open fire inside the
school that he was attending.
We understand also, Rahel, from authorities that he used a gun owned by his father. And then after the shooting, he called police himself and he was
arrested in the school yard. So as you can imagine, it was a scene as we have seen from the pictures that have emerged from that scene, an absolute
scene of horror.
You've got families who are in state of shock trying to comfort their children. Some really disturbing reports that we're hearing about children,
escaping children in a state of trauma right now, sitting outside this school that had turned into a crime scene with police and emergency
services on the scene.
And you've got families trying to comfort their children in a country where this is something so rare, that people are going to really now struggle to
come to grips with what has hit their nation today after this shooting, Rahel.
SOLOMON: Yes, truly heartbreaking. It's a scene that unfortunately Americans have become all too familiar with but as you pointed out, just
incredibly rare they're in Serbia. Jomana Karadsheh, thank you. We want to turn down to business news, the U.S. Federal Reserve releasing a highly
important interest rate decision later today against the backdrop of fresh tremors in the banking sector, and still unresolved debt ceiling crisis.
Jay Powell and company still widely expected, though, to raise rates by a quarter of a percentage point. But they could signal a more cautious path
going forward to watch that space. And a lot is at stake here and so lots of questions about the policy road ahead.
We have new concerns that the banking turmoil in the U.S. is far from over and that'll surely factor into the Fed's decision making, shares a regional
banks pack West and Western alliance tumbled well over 10 percent Tuesday shows have both remain under pressure today.
And the U.S. regional banking sector as a whole is now trading at its lowest level in three years. And amid all of this uncertainty, U.S. futures
are actually higher after Tuesday's more than 1 percent rob you can see Europe is in the green as well. And a data dump doesn't and they are just
released numbers show U.S. private employers adding almost 300,000 jobs last month.
For context that is more than double expectations. And all this ahead of the big U.S. jobs report on Friday, a lot to discuss. Michael Gapen is the
Managing Director and Chief U.S. economist at Bank of America. He joins me now Michael, welcome to the program. Great to have you today.
MICHAEL GAPEN, MANAGING DIRECTOR & CHIEF U.S. ECONOMIST AT BANK OF AMERICA: Thank you for having me on.
SOLOMON: So I know Bank of America is expecting another rate hike of 25 basis points. Does a report like this ADP report this morning essentially
give the Fed cover to continue raising rates? What do you see?
GAPEN: It certainly the employment situation is still pretty strong in the U.S. I think the ADP employment report does speak to that we'll see what
the official non-farm payroll data is on Friday, of course, but momentum in the labor market is cooling but on net, the labor market is still pretty
So yes, despite the Regional Bank stresses that you've mentioned leading into this, the labor market itself, the general macro economy is still in
pretty good shape. It leaves the Fed in a position of thinking it probably should raise rates today. We do think it will and I also think it keeps the
door open to rate hikes perhaps in June.
SOLOMON: So then what does that language look like if 25 is baked in today, but the Fed perhaps wants to keep the door open? What sort of change do you
think in language or messaging do we hear from Jay Powell in a few hours?
GAPEN: So in the statement itself, which is the committee's official communication with the public and markets, we think the language will say
something like, further policy rate firming may yet be appropriate? So the communication would be Hey, we did raise rates today, we think we're done.
We think monetary policy is sufficiently restrictive and in the right place to guide inflation back down to 2 percent but we can't rule out additional
hikes. So I think something that says, further hikes may yet be appropriate or may still be appropriate, as likely how that will be communicated.
SOLOMON: Can you walk me through the calculus because the counter point, of course to raising rates, again, is that the lag of monetary policy has not
yet been fully realized in the real economy? And as you know, of course, we have done a lot the Fed has already done a lot and most of that hasn't been
really reflected in the data yet. Can you walk me through sort of the balancing act of the Fed is walking here?
GAPEN: Yes, you're exactly right and so I would say if you look at the interest rate sensitive sectors in the economy. So here we would be talking
about things like housing and some components of business spending and in manufacturing production and even more recently, bank lending.
All of that suggests the economy is slowing down. But we're largely a consumer driven economy and consumer driven around services, consumption 70
percent of economic activity, that side of the economy is still kind of chugging along, more or less.
OK, so the Fed is kind of weighing these two signals, parts of the economy are certainly slowing down housing itself is in a recession, but the
consumer side of the economy is likely in their mind robust enough to suggest me one more hike, maybe two more hikes are where we should be
going. So that is exactly the balancing act of trying to weigh.
SOLOMON: In to that and Bank of America is in a unique position, because you have access to millions of accounts, millions of American consumer
accounts, what are you seeing in the data in terms of how people were spending, in terms of credit card balances? I mean, does it look still very
robust from your perspective?
GAPEN: I'm not we would say yes, I mean, card balances are rising. But we would expect that coming out of the pandemic, most how many households pay
down a lot of card balances. So some of this is just a normalization of spending patterns coming out of the pandemic.
So we don't take a major negative signal from that, the signal from our card data suggests consumer spending, at least its growth rate is slowing,
it's moderating, but it's not in danger of say, falling off a cliff, the consumer doesn't appear ready to take a major step back. So our card data
is mirroring what the remainder of the spending data suggests, which is a moderating economy, but one that -- is still in a pretty healthy position.
SOLOMON: With so many factors out there, the debt ceiling crisis, still unresolved interest rates, still not fully appreciated, borrowing costs
continuing to go up. Michael Gapen, what's the one thing that perhaps concerns you the most or dare I even say, keeps you up at night?
GAPEN: Sure, I think it was your lead into the segment, which is we always get concerned about a tightening and bank lending standards, certainly
capital markets, and what happens in equity and bond markets dominates the news. But the bank lending channel as economist would call it, that's still
a very important channel through which fed policy tightening works to slow down demand and bring inflation back down to the 2 percent target.
So our concern really would be excess tightening meaning of defense, lifting its policy rate, you would expect banks to tighten lending
standards, you would expect loan growth to slow but now there's a number of factors weighing on smaller in Regional Banks beyond just a tightening
cycle, which the risk is then banks pull back credit a lot more.
You get something that looks like a credit crunch and the economy slows more rapidly. To me that's the main concern at the moment.
SOLOMON: There are a lot of factors as you pointed out, and they seem to be all happening at once.
GAPEN: They are!
SOLOMON: Michael Gapen, thank you very much for being on the program. We appreciate the insights. He is the Managing Director and Chief U.S.
Economist at Bank of America. And straight ahead, thousands of writers in the U.S. are officially on strike and on the picket lines. What it means
for your favorite TV shows? What scars from the past?
SOLOMON: Welcome back to "First Move", many of America's late night talk show hosts have been temporarily silenced. That's several TV networks
replace live shows with re-runs last night, more than 11,000 Film and Television writers are on strike after talks broke down with major studios
overpay and how profits are shared in the streaming era.
So this means that production on virtually all scripted movies and television shows has come to a screeching halt. It is the first Writers
Guild strike in 15 years, the last one lasted 100 days. CNN is Vanessa Yurkevich joins me now. So Vanessa, where do things stand with negotiations
VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: Well, Rahel, we know the two sides did not meet yesterday. So essentially, negotiations
have left off where they were before the strike even started. But I was on the picket line yesterday and speaking to the organization that represents
studios, this is really a strike about survival.
This is studios wanting to preserve profits and appease shareholders in a different era of streaming. And writers on the other hand, want to make
sure that they preserve the profession. They want a certain amount of jobs available for writers and they want equal pay amongst all writers and fair
And essentially, the two sticking points that we're still hearing about is the amount of writers in the writer's room and the residuals from
streaming. The studio saying that they feel like they do not they shouldn't have to staff a ton of writers if it's not needed for a particular show.
And on the other hand, you have the writer saying that they want that commitment to preserve the profession. And as I mentioned, I spent some
time on the picket line yesterday here in New York City in front of Peacock new front. And I spoke to writers exactly about what they're asking for. I
want you to listen to one gentleman who I caught up with yesterday.
(BEGIN VIDEO CLIP)
AMADOU DIALLO, WRITER: So there's writers who have worked on successful shows, and then they're having to drive Ubers in the meantime, waiting for
the next gig.
YURKEVICH: When you say there are people who have done that is that you?
DIALLO: That is not me, fortunately, but it's again, it's not about the you know, it's like the NBA. It's not making life better for LeBron James is
making life better for the third guy off the bench. And that's what we're trying to do it to make it fair and equitable for everybody so that you can
come into this profession and make a career.
(END VIDEO CLIP)
YURKEVICH: And we heard that a lot from folks on the picket line, we caught up with several people who were on strike in 2007, 15 years ago. They say
at that time, they were fighting for their positions within the age of the internet, and now they are fighting for their positions in the age of
A lot of those writers on the picket lines who were there in 2007 say that they're fighting for the next generation to set the next generation of
writers up for success. The studios have said that they have made increases in compensation, increases in residuals for writers. But according to the
Writers Guild, that's still not enough. We are entering day 2 of the strike. We'll see more writers on the picket line in California and New
York City today, Rahel.
SOLOMON: A lot more to come here, Vanessa, Yurkevich, thank you. We want to turn now to our back to our top story Russia claiming that Ukraine
attempted a drone strike on the Kremlin. Now CNN is aware of these videos we want to show you here they're circulating of what Moscow claims is an
attack on the Kremlin. Important to note here we cannot at this stage verify these images but Ukraine meantime denies any involvement.
I want to bring Nic Robertson on into this conversation. So, Nic, a lot of questions clearly a lot of skepticism but what do we actually know at this
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: We know that Russian state media has talked about and on social media in Russia, there has been
put out videos of what purported to be an explosion or to UAVs coming over the Kremlin at nighttime. The Kremlin, we know has said that this was an
assassination attempt on President Putin.
Even though we know that President Putin wasn't there at that time, he was at events in St. Petersburg, hundreds of miles away from the Kremlin the
day before that he was working today, not in the Kremlin, but it is residence, some long distance from the Kremlin just outside of Moscow.
So what we know, those are the details but it's, of course, what does it all mean, that's causing concern, and Ukrainians have been putting their
position very clearly and say that they use all means inside Ukraine to defend their territory. They're saying that they don't have any knowledge
of what happened at the Kremlin, and they're saying that they believe that this is a trick to be expected of our opponents.
They say that the Kremlin is trying to use this purported attack by what the Kremlin claims are to Ukrainian UAVs to build up more support for the
war in Ukraine, particularly ahead of the very important Mayday Parade on the 9th of May, just a few days away, where there are huge Victory Day
parades as they're known across citizen Russia most the biggest one at outside the Kremlin on the Red Square with a fly by.
Usually, a Russian aircraft overhead, a very big event on the Russian calendar, because it commemorates the loss of tens of millions of Russian
lives in the Second World War. So these are the pieces of information that we know. So Ukraine is saying that it believes that this is Russian
We have looked at the video yet, but cannot independently verify. We do know that witnesses near the Kremlin at the alleged time of this attack
have said that there was some kind of small explosion, a loud bang, a big clap that was heard. So at the moment, it's perhaps wise to take a pause on
the authenticity of this video.
Partly because we know the Kremlin has such a bad track record on what it claims to be the truth it was in the past often use what's called false
flag events. So to give it an excuse for another type of attack, a counter attack of their own description. All of this is unclear. The clear bits, as
we said there, Ukraine says, not us Russian trickery, the Russian say Ukrainian attempt to assassinate President Putin.
SOLOMON: And, Nic, I have to wonder, I mean, Ukraine could perhaps also argue look, I mean, we would know if Putin was in the Kremlin. And so why
perhaps would we even embark upon this assassination attempt this purported assassination attempt, if Putin wasn't there, I mean, what in Ukraine had
the capability of knowing whether he was or was not at the Kremlin?
ROBERTSON: You would be expected because Putin had three events in St. Petersburg, two of them, at least one of them was by video link, one was in
person. There was certainly evidence to support the fact that he wasn't in the Kremlin or hadn't been in that day. So you would imagine Ukraine would
have an awareness of that potentially.
But remembering that we have a number of things here. We have the suppose video, the alleged video of the UAVs over the Kremlin. We have the state
media's claimed that this was Ukrainian UAVs. And we have the Kremlin's claim that it was an assassination attempt on President Putin.
We only had the Kremlin's claim for that. We don't know if there were UAVs over the Kremlin. We don't know if there were whose UAVs they were. And we
certainly don't know why they may have been used that. There are many reasons it's only the Kremlin that saying that these were intended to
assassinate the President.
You know, Ukrainians believe that there is a partisan element. Well, they certainly talk a lot about the idea that there are partisans in Russia that
are trying to cripple Russia's supply lines we've had early on this week, two strikes on an important rail supply route inside Russia, just north of
Ukraine twice this week.
In one incident more than 20 of the carriages were down matched or destroyed in that attack this morning, there was an attack on a Russian
fuel dump inside Russia, over the border from the south of Ukraine some distance from there. So Ukraine never claims this alludes to the fact that
there could be partisans inside Russia perpetrating these attacks.
It's not saying why they're the partisans would be motivated, motivated because Ukraine ask them to or because they feel that this is the time that
the time is right for them. None of this is clear, but the idea that there could be non-Ukrainians acting of their own interests inside Russia is
something that Ukrainian officials will speculate about.
They certainly never claim any of these incidents that happen inside of Russia, with very, very rare exception. Perhaps we're talking here about
Crimea, which Ukraine and the rest of the world considers is there as anyway.
SOLOMON: Nic Robertson, still so many questions, but great to have your insights and context there. Live for us from Eastern Ukraine, Nic
Robertson, thank you. And stay with CNN, we have more after this.
SOLOMON: Welcome back. Earnings out today from the jewelry brand Pandora confirm a slow post-pandemic recovery in the Chinese market. Now, while
China only accounts for 3 percent of Pandora's revenue the company is going for growth by re-launching the brand there later this year.
Now, more broadly, it is reporting resilient growth. The world's biggest jewelry brand by volume no longer uses mined diamonds for any of its new
designs and said it sells man-made stones produced in laboratories. A few moments ago, the stock price was down about 1 percent, so let's discuss
with Alexander Lacik. He is the CEO of Pandora. You can see, shares were off about 1 percent.
Alexander, welcome to the program.
ALEXANDER LACIK, CEO, PANDORA: Hello.
SOLOMON: Walk me through earnings. So as we saw there, shares were lower. What don't investors like here? Walk me through some of the challenges this
LACIK: Well, I don't know why they don't like it. This is the fourth quarter that we deliver growth in, I would argue, a quite tough
macroeconomic environment. Consumer sentiment that we know is in a very low place, a category which is actually in the negative space. And despite
this, we keep growing. So I'm a little bit puzzled, I have to admit.
SOLOMON: OK, walk me through geographically -- I mean, China, we'll get to in just a moment.
Geographically, where are you seeing a rebound and strong growth and geographically maybe where aren't you?
LACIK: So if we start in the U.S., this market has been kind of in negative territory already last year. So Q4 into Q1 this year, it's -- we're
delivering a minus 7 like-for-like and minus 3 organic growth. And it appears that in the last few months, we've actually been gaining share with
that type of performance.
Europe has sequentially improved, it was minus 3 in Q4 last year. Now it's flat. So we can also sense that there's some more -- you know, a little bit
of tiny, more positive sentiment amongst -- in some of the countries in Europe. And then we have Australia, which is somehow gone a little bit
backwards, they might be one chapter behind, maybe, the European situation. So there's a couple of points negative.
And then China, which somehow has come out of this lockdown situation, starting January is sequentially improving, to the point where in April, we
actually recorded a positive like-for-like growth. And that was honestly a while ago that -- since we saw that. But again, it's versus the pre-
pandemic type of traffic in our stores, we still have some ways to go but, you know, it's at least moving in the right direction.
SOLOMON: In terms of the consumer, what trends are you starting to see? And I wonder if you're starting to see a bit of a divergence in terms of the
income spectrum, right? I mean, I think about LVMH, for example, which not too long ago posted a record quarter. China was part of that.
That is obviously the ultra-wealthy, the -- the higher end of the spectrum. Are you seeing any trends start to emerge between perhaps the lower end of
the spectrum and the higher end of the spectrum?
LACIK: Well, first of all, we operate in the middle of the spectrum, contrary to what some people believe. And frankly speaking, the -- if I
look at the macro economists, they are kind of saying the same thing today that they said, let's say six months ago, so no major change there.
If I look a little bit at what's going on inside our own stores, if I look at our core retail metrics, I don't necessarily see any major shift. We --
what we do experience is a slightly lower conversion rate. But on the other hand, we are managing to pull more people into Pandora store on average,
therefore, we can post the type of numbers that we just did for this quarter. So no major shift in that sentiment where we can see it.
SOLOMON: And I know you believe, because you operate in the middle of the spectrum, that Pandora is in some ways recession-proof because you could
argue it is a bit more of us a smaller luxury, a less expensive splurge. That said, are you and is Pandora preparing for the potential of a
LACIK: Well, I think already last year, when we saw that the jewelry market was starting to be slower, we prepared for this scenario. So if you look at
our guidance for the year, we've guided initial -- the initial guidance was from minus 5 to flat in the like-for-like guidance. We've upped the bottom
end of that, but we still kind of are -- now we're guiding minus 4 to 0 like-for-like. So we did expect that the year would be a little bit more
difficult than last year.
Now, having said that, as I mentioned, it seems that despite us being in that spectrum, the markets are down a little bit more. So, therefore, we
are building market share. And in this environment, I think we have to be very pleased with that outcome.
SOLOMON: In terms of demographics of your consumers, what are you seeing in terms of growth opportunities? I was really stunned -- I noticed an
advertisement from one of your competitors, and most of the models were women. It was women buying other women jewelry for a variety of occasions.
Do you see that as a growth opportunity for the jewelry business in general? Walk me through that.
LACIK: Well, if I look at my customer base, which is not necessarily my consumer base, so we have 50 to 60 percent of the customers buying jewelry
in the Pandora shops are men buying jewelry to women. Now, the final consumer is essentially female. So we actually kind of move our advertising
around, depending on which period of the year we're moving through.
So if you're in Valentine's, there's a certain type of consumer (ph) there, which is different from the type of, let's say, characters that we depict
in the Mother's Day advertising. Then we have, of course, the Christmas, which is a bit more family involved in that. So it actually moves depending
on which key consumption period that we're trying to address.
SOLOMON: Oh, that's interesting. And I know the last time you spoke, granted it -- you and I spoke, it was -- granted it was in November, but
you talked about raising prices and the consumer was willing to absorb that. Are you finding that the consumer is still willing to absorb higher
costs? Or are you starting to see a bit more friction there in terms of the consumer?
LACIK: Well, so the history of Pandora is that for the last 10 years, we essentially did not launch any price increases that stuck, so they always
had to be rolled back. What we did last year was a bit more analytical in the approach. We assessed kind of where in the portfolio we sensed that
there was elasticity that would allow for some price to move.
So actually, on average, we moved up pricing up by four points in Q4 of last year. That's sticking. So what we're seeing though is the elasticity
is 1.0. So mathematically what you gain on the top, you're losing volume. But what you're left with is a structurally improved profit and loss
statement, and that's what we've experienced.
So it means that, you know, we ended up with an interesting component that we can use to offset some inflationary costs. Contrary to other high-end
luxury plays (ph) that use pricing as a revenue driver, that is not our case. And we -- we're going to stay away from that because we're an
affordable luxury item and, therefore, we need to be very sharp on the value equation.
SOLOMON: Yeah. Also interesting to see how the charms really factor into earnings. Alexander Lacik, a lot more to discuss, but we'll have to leave
it here. Thank you. He is the CEO of Pandora.
LACIK: Thank you.
SOLOMON: Thank you for the time. And coming up from luxury jewelry sales to Central Bank policy details, latest on today's February decision just
SOLOMON: Welcome back to "First Move", a big decision day for the Fed just ahead less than five hours from now and the U.S. Central Bank is expected
to raise rates for the 10th straight time. A hike today will take the Fed funds rate to its highest level since 2007. And as investors await the
announcement we've got a modestly higher open on Wall Street shares of Regional Banks that.
Remember fell sharply on Tuesday, they're actually taking part they're bouncing back today. That said Former Dallas Fed President Robert Kaplan
says we are only in the early stages of the banking turmoil concerns about slowing growth amid all of this uncertainty also putting fresh pressure on
You can see WTI and BRENT both of more than 3 percent right now. Crude falling to five week lows on fears of weakening demand WTI trading at about
69 bucks a barrel. Christine Romans CNN Chief Business Correspondent joins me now. So Christine, look, I think there's risk on both sides here for the
But it does appear that the chorus of voices suggesting that the Fed maybe take a beat here is growing walk me through the calculus for the Fed?
CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Yes, the hike and hold group or the pause patrol, as some people have been calling it pause. But
the Fed has been so careful about, you know, telegraphing what it's going to do. And you know, markets are reflecting 80 or 82 percent chance of the
Fed raising rates by 25 basis points and then sort of reviewing the situation.
But a lot of people are saying look, it seems like a really weird moment in the U.S. to have the second biggest bank failure in American history. And
then three days later have the Fed announced it was raising interest rates again, for the 10th time in a row when we know that so much of that
tightening has even worked its way through the system yet.
So I think that's the crux of that pause debate here right now. But you know, if the Fed were to pause Rahel, I don't know, quite know how markets
would react to it.
Maybe they would think it was signaling that was something worse out there, you know, the banking crisis was worse than the inflation crisis. So it's
hard to know, hard to tell if the Fed doesn't go 25 basis points. You know how the markets would react?
I think that's a big uncertainty, the most important thing really will be what the Fed Chief says what he says about banking stability and about just
when they think the bulk of all this tightening that we've had over the past year will finally start to be felt through the economy.
SOLOMON: Christine, I think that's a great point in terms of what they've already signaled 25 was baked in at this point. So anything other than that
might really spook markets. We don't have much time left, but just telling me in terms of language, the wording that we hear from Jay Powell, what do
you think we might hear today?
ROMANS: You know I think he's going to still be talking about data dependence. I'm going to be very, very keyed into what he says about the
banking system and the health of the banking system. And the supervisory role of the Fed in some of these banks that have shown some weakness, at
least in the markets.
I mean, watching some of these Regional Banks fall yesterday for no other reason than just a kind of a lack of confidence is a little unnerving. I'd
like to know more about what the Fed thinks about that.
SOLOMON: Yes, a lot to watch for a lot to listen for. Christine Romans, thank you.
ROMANS: You are welcome.
SOLOMON: That's it for this show, I'm Rahel Solomon. Thanks for watching.