1 00:00:02,920 --> 00:00:10,840 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,840 --> 00:00:15,000 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:15,040 --> 00:00:17,520 Speaker 1: Eastern on Affo Car Playing and Broun Auto with the 4 00:00:17,520 --> 00:00:21,400 Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,640 --> 00:00:24,000 Speaker 1: or watch us live on YouTube. 6 00:00:25,000 --> 00:00:29,600 Speaker 2: Let's go back to the housing market. Here. Drew Redding 7 00:00:29,640 --> 00:00:31,080 Speaker 2: joins us. This is his job. 8 00:00:31,120 --> 00:00:32,960 Speaker 3: We hired him to be like the housing analysts. We 9 00:00:33,040 --> 00:00:36,000 Speaker 3: had an housing analyst like the very early first days 10 00:00:36,000 --> 00:00:36,600 Speaker 3: of Bloomberg. 11 00:00:36,720 --> 00:00:39,120 Speaker 2: He's not very good, so we had to upgrade. So 12 00:00:39,159 --> 00:00:39,960 Speaker 2: we got Drew reading. 13 00:00:40,000 --> 00:00:43,960 Speaker 3: You brought Drew in and he's been a great homebuilders analyst. 14 00:00:44,520 --> 00:00:45,879 Speaker 2: Drew, thanks so much for joining us here. 15 00:00:46,520 --> 00:00:48,200 Speaker 3: Give us kind of a snapshot of what you're seeing 16 00:00:48,280 --> 00:00:50,520 Speaker 3: out there in the US housing market. 17 00:00:51,840 --> 00:00:55,240 Speaker 4: Sure, so the US housing market continues to be a 18 00:00:55,320 --> 00:00:57,520 Speaker 4: tail two markets. We had some data on the existing 19 00:00:58,120 --> 00:01:01,080 Speaker 4: home sales front this morning. We saw which were roughly 20 00:01:01,120 --> 00:01:03,840 Speaker 4: in line with expectations at about four point one nine 21 00:01:03,840 --> 00:01:07,679 Speaker 4: million on an analyzed basis. Keep in mind, we're still 22 00:01:07,800 --> 00:01:11,200 Speaker 4: down about thirty five percent from you know, the peak 23 00:01:11,280 --> 00:01:13,240 Speaker 4: back in twenty twenty one, So this is a market 24 00:01:13,240 --> 00:01:16,000 Speaker 4: that is still extremely depressed. The other thing you have 25 00:01:16,040 --> 00:01:18,200 Speaker 4: to remember with the numbers we saw today is that 26 00:01:18,240 --> 00:01:21,880 Speaker 4: they represent closings. So these are contracts that were signed, 27 00:01:22,040 --> 00:01:24,679 Speaker 4: you know, thirty sixty days ago when rates were more 28 00:01:24,720 --> 00:01:27,240 Speaker 4: in the six and a half to seven percent range. 29 00:01:27,240 --> 00:01:29,360 Speaker 4: So we think that going forward, you're going to continue 30 00:01:29,360 --> 00:01:31,959 Speaker 4: to see a little bit of weakness on the existing 31 00:01:32,000 --> 00:01:33,440 Speaker 4: home side of things. 32 00:01:33,640 --> 00:01:36,600 Speaker 5: On existing homes, are we seeing it a buyer's market 33 00:01:36,720 --> 00:01:39,520 Speaker 5: or a seller's market? It basically, are the sellers willing 34 00:01:39,520 --> 00:01:40,679 Speaker 5: to finally come down in price. 35 00:01:41,959 --> 00:01:46,399 Speaker 4: Well, you know, surprisingly we haven't seen all that many 36 00:01:46,440 --> 00:01:51,160 Speaker 4: price corrections. We're still seeing medium prices rise. You're actually 37 00:01:51,200 --> 00:01:53,240 Speaker 4: seeing prices in the new home market come down a 38 00:01:53,280 --> 00:01:56,840 Speaker 4: little bit because builders are adjusting square footage and they're 39 00:01:56,880 --> 00:01:59,160 Speaker 4: also you know, trying to meet the market in order 40 00:01:59,200 --> 00:02:01,600 Speaker 4: to move their image, but not so much on the 41 00:02:01,640 --> 00:02:03,840 Speaker 4: existing home front. And you know, at the same time, 42 00:02:04,360 --> 00:02:06,400 Speaker 4: you know, one of the key stories on the existing 43 00:02:06,440 --> 00:02:08,160 Speaker 4: side has been that there's just not a lot of 44 00:02:08,160 --> 00:02:11,320 Speaker 4: inventory out there in the market. We are starting to 45 00:02:11,360 --> 00:02:14,200 Speaker 4: see that flip a little bit more recently, so that'll 46 00:02:14,240 --> 00:02:15,600 Speaker 4: be something to watch if we start to get a 47 00:02:15,639 --> 00:02:18,200 Speaker 4: lot of inventory coming to the market, you could see 48 00:02:18,240 --> 00:02:20,400 Speaker 4: more price adjustments from sellers, but. 49 00:02:20,960 --> 00:02:22,239 Speaker 2: I guess the reality is drew. 50 00:02:22,400 --> 00:02:24,800 Speaker 3: I mean, everybody thinks they're an expert on the homebuilding business, 51 00:02:24,840 --> 00:02:26,680 Speaker 3: so it must be frustrating for you because you actually 52 00:02:26,760 --> 00:02:30,000 Speaker 3: are an expert. But I mean the reality is house 53 00:02:30,040 --> 00:02:32,280 Speaker 3: comes on the market, boom, it's it sells in like 54 00:02:32,320 --> 00:02:36,080 Speaker 3: fifteen minutes. I mean, because there's nothing out there and 55 00:02:36,200 --> 00:02:38,239 Speaker 3: it doesn't really matter where the mortgage market is. 56 00:02:38,280 --> 00:02:38,840 Speaker 2: It seems like. 57 00:02:38,880 --> 00:02:42,320 Speaker 3: But you know, is that in fact the case where 58 00:02:42,320 --> 00:02:44,240 Speaker 3: you're seeing across the country or is it regional? 59 00:02:45,120 --> 00:02:47,520 Speaker 4: Yeah, it's a good question. I mean, the market is regional. 60 00:02:47,560 --> 00:02:49,720 Speaker 4: We had, you know, when we started to come out 61 00:02:49,760 --> 00:02:53,400 Speaker 4: of that initial interest rate spike in the back half 62 00:02:53,440 --> 00:02:55,560 Speaker 4: of twenty two, we saw that markets in the East, 63 00:02:55,600 --> 00:02:57,799 Speaker 4: which didn't rise as much during the boom time, we're 64 00:02:57,800 --> 00:03:00,400 Speaker 4: a little bit more stable, and markets on the west 65 00:03:00,400 --> 00:03:06,520 Speaker 4: coast California, Washington, the Southwest were comparatively harder hit. What 66 00:03:06,560 --> 00:03:09,680 Speaker 4: we've seen now is that the increase in themand has 67 00:03:09,720 --> 00:03:12,720 Speaker 4: started to be more broad based as buyers have kind 68 00:03:12,760 --> 00:03:15,640 Speaker 4: of started to get more accustomed to higher rates. I think, 69 00:03:16,000 --> 00:03:17,799 Speaker 4: you know, to some extent, if you need to move. 70 00:03:17,800 --> 00:03:20,120 Speaker 4: There's not a whole lot you could do. You start to, 71 00:03:20,840 --> 00:03:23,560 Speaker 4: you know, fine tune, you know, maybe what you can afford. 72 00:03:23,600 --> 00:03:24,960 Speaker 4: But at the same time, if you have to move, 73 00:03:25,000 --> 00:03:26,720 Speaker 4: you're gonna find a way to make it work. Now, 74 00:03:27,080 --> 00:03:29,919 Speaker 4: it's interesting that you said, you know, despite high rates, 75 00:03:30,040 --> 00:03:32,960 Speaker 4: homes are flying off the shelves. We had earnings results 76 00:03:32,960 --> 00:03:35,640 Speaker 4: this morning from d R Horton and they actually said 77 00:03:35,640 --> 00:03:38,320 Speaker 4: that despite the higher rates, they're still seeing a pretty 78 00:03:38,360 --> 00:03:42,520 Speaker 4: solid demand environment in early spring, which is encouraging. 79 00:03:43,280 --> 00:03:45,080 Speaker 5: What do you mean, I'm not a home building expert 80 00:03:45,080 --> 00:03:46,760 Speaker 5: because I look at Zillow and Street Easy all the 81 00:03:46,760 --> 00:03:50,200 Speaker 5: time in Brooklyn, exactly. Okay, that's just rude. That's just rude. 82 00:03:50,200 --> 00:03:50,400 Speaker 2: Paul. 83 00:03:50,840 --> 00:03:52,400 Speaker 5: Hey, Drew, I'm glad you brought up d R Horton 84 00:03:52,400 --> 00:03:54,760 Speaker 5: because you've also mentioned concessions that we've been seeing with 85 00:03:54,800 --> 00:03:56,840 Speaker 5: some of the new homes. What did R Horton say 86 00:03:56,840 --> 00:03:57,240 Speaker 5: about that? 87 00:03:59,000 --> 00:04:01,080 Speaker 4: Yeah, so their commentary was pretty much in line with 88 00:04:01,120 --> 00:04:03,640 Speaker 4: what it was last quarter, and that's that sales incentives 89 00:04:04,040 --> 00:04:07,520 Speaker 4: are going to remain at elevated levels over the near term. 90 00:04:07,640 --> 00:04:09,880 Speaker 4: And you have to keep in mind, you know, when 91 00:04:09,880 --> 00:04:13,000 Speaker 4: they started this quarter back in January rates for six 92 00:04:13,040 --> 00:04:14,960 Speaker 4: and a half. We're almost seven and a half now, 93 00:04:15,480 --> 00:04:18,800 Speaker 4: so their goal and builders as a whole are generally 94 00:04:18,920 --> 00:04:22,039 Speaker 4: trying to maintain a spread in mortgage rates versus you know, 95 00:04:22,080 --> 00:04:24,520 Speaker 4: what you see out there as a headline. So if 96 00:04:24,520 --> 00:04:26,359 Speaker 4: we're looking at seven and a half, they're trying to 97 00:04:26,360 --> 00:04:29,160 Speaker 4: offer their buyers something one hundred to one hundred and 98 00:04:29,160 --> 00:04:31,760 Speaker 4: fifty basis points below what you would get in the 99 00:04:31,800 --> 00:04:34,880 Speaker 4: resale market. So they do expect rates to remain elevate it. 100 00:04:35,960 --> 00:04:37,400 Speaker 4: You know, that was one of the main things coming 101 00:04:37,440 --> 00:04:40,680 Speaker 4: into the quarter is how would these elevated rates impact 102 00:04:40,720 --> 00:04:44,839 Speaker 4: the use of incentives and ultimately their gross margins, you know, 103 00:04:44,880 --> 00:04:47,919 Speaker 4: and encouragingly, their gross margins. Looking out into the third quarter, 104 00:04:48,000 --> 00:04:50,599 Speaker 4: we're only a touch below what consensus was looking for, 105 00:04:51,320 --> 00:04:53,800 Speaker 4: you know. And I think the fact that the bar 106 00:04:54,000 --> 00:04:55,520 Speaker 4: has been lowered, I mean, if you look at what 107 00:04:55,520 --> 00:04:57,400 Speaker 4: the stocks have done over the last month, the bar 108 00:04:58,080 --> 00:05:00,760 Speaker 4: was lowered coming into the print. So I think investors 109 00:05:00,760 --> 00:05:03,200 Speaker 4: were comfortable with the commentary they heard today. 110 00:05:03,480 --> 00:05:03,640 Speaker 2: Drew. 111 00:05:03,720 --> 00:05:05,640 Speaker 5: I have a super dumb question, but if the housing 112 00:05:05,720 --> 00:05:08,480 Speaker 5: market is still so tight and there is so much demand, 113 00:05:08,640 --> 00:05:10,040 Speaker 5: why do they need to offer incentives. 114 00:05:12,120 --> 00:05:14,480 Speaker 4: Well, there's not a lot of inventory in the resale market, 115 00:05:14,480 --> 00:05:16,640 Speaker 4: and they're trying to make their product more attractive. So 116 00:05:16,880 --> 00:05:19,200 Speaker 4: part of the business of a home builder is that 117 00:05:19,200 --> 00:05:21,760 Speaker 4: you need to turn your inventory over to make your 118 00:05:21,800 --> 00:05:24,400 Speaker 4: business work. So they're seeing a lot of demand for 119 00:05:24,480 --> 00:05:26,800 Speaker 4: spec homes. They want to move those speck hones because 120 00:05:26,839 --> 00:05:29,760 Speaker 4: the longer they say in inventory, the more likely they 121 00:05:29,760 --> 00:05:31,480 Speaker 4: are to come down in price or come down even 122 00:05:31,560 --> 00:05:35,480 Speaker 4: more significantly in margin. You know, just because there is 123 00:05:35,560 --> 00:05:37,760 Speaker 4: demand out there, it doesn't mean that affordability is not bad. 124 00:05:37,800 --> 00:05:40,120 Speaker 4: Affordability is still the you know, at some of the 125 00:05:40,160 --> 00:05:42,960 Speaker 4: worst levels in history, and a lot of buyers are 126 00:05:43,000 --> 00:05:45,080 Speaker 4: struggling out there, and they need these incentives to kind 127 00:05:45,080 --> 00:05:46,760 Speaker 4: of get buyers through the door and make the math 128 00:05:46,800 --> 00:05:48,000 Speaker 4: work for them. 129 00:05:48,160 --> 00:05:52,800 Speaker 3: Any markets showing signs of kind of peaking, and I'm 130 00:05:52,839 --> 00:05:54,560 Speaker 3: trying to I'm thinking of the Miami's of the world, 131 00:05:54,560 --> 00:05:57,840 Speaker 3: the Austin's of the world, of those markets peaked. 132 00:05:58,680 --> 00:06:01,360 Speaker 4: Yeah, those are two good names that you point out. 133 00:06:02,320 --> 00:06:05,280 Speaker 4: Florida has been one of the strongest markets. But interestingly, 134 00:06:05,320 --> 00:06:09,120 Speaker 4: what we're starting to see now is that inventory, particularly 135 00:06:09,200 --> 00:06:12,719 Speaker 4: in some of those Southwestern and you know, Western markets 136 00:06:12,760 --> 00:06:15,240 Speaker 4: like Tampa all down the coast, we're starting to see 137 00:06:15,279 --> 00:06:19,359 Speaker 4: pretty significant increases in inventories now by and large. You know, 138 00:06:19,400 --> 00:06:22,839 Speaker 4: across the US, inventories for the most part, are still 139 00:06:22,880 --> 00:06:25,440 Speaker 4: below where they were in twenty nineteen. But I think, 140 00:06:25,600 --> 00:06:28,880 Speaker 4: you know, as a builder, that's really been your advantage. 141 00:06:28,880 --> 00:06:31,559 Speaker 4: So every time inventories increased five ten percent, you're starting 142 00:06:31,600 --> 00:06:34,600 Speaker 4: to lose a little bit of that advantage. So one 143 00:06:34,640 --> 00:06:36,880 Speaker 4: of the main places we're seeing it is Florida. We're 144 00:06:36,880 --> 00:06:40,279 Speaker 4: also seeing it in Austin, as you mentioned. And you 145 00:06:40,320 --> 00:06:43,920 Speaker 4: know what's interesting with the Florida market is it's an 146 00:06:43,960 --> 00:06:46,599 Speaker 4: area where you've had a lot of single family housing 147 00:06:46,720 --> 00:06:49,640 Speaker 4: converted to short term rentals, so you're starting to see 148 00:06:49,680 --> 00:06:51,919 Speaker 4: maybe some of those come back to the market. But 149 00:06:51,960 --> 00:06:54,360 Speaker 4: you're also seeing a market that's suffering from high insurance 150 00:06:54,400 --> 00:06:56,760 Speaker 4: costs with you know, the storms and things like that. 151 00:06:57,920 --> 00:07:01,440 Speaker 4: HOA fees are going up, so it's becoming more unaffordable market. 152 00:07:02,520 --> 00:07:04,560 Speaker 3: Yeah, I mean, I don't know, It just seems like 153 00:07:04,600 --> 00:07:06,920 Speaker 3: some of those markets have to peak, if not now, 154 00:07:07,000 --> 00:07:08,520 Speaker 3: and we're gonna go down in June. We're gonna go 155 00:07:08,520 --> 00:07:11,239 Speaker 3: down to another hot market in Nashville, Tennessee. So Alex 156 00:07:11,280 --> 00:07:14,000 Speaker 3: and I will do some on the ground reporting home 157 00:07:14,000 --> 00:07:17,400 Speaker 3: builder analyst, Yes, exactly, how hard can it be? And 158 00:07:17,440 --> 00:07:19,800 Speaker 3: you just predict her into interest rates are going. Drew 159 00:07:19,840 --> 00:07:23,080 Speaker 3: Reading he is our top notch home building analyst at 160 00:07:23,080 --> 00:07:26,240 Speaker 3: Bloomberg Intelligence. Again, a significant upgrade from the first guy 161 00:07:26,240 --> 00:07:28,960 Speaker 3: we had in there, So very good for Drew Reading there. 162 00:07:29,040 --> 00:07:32,240 Speaker 3: Talking about the hazard market again, d R. Horton had 163 00:07:32,280 --> 00:07:34,720 Speaker 3: some some good numbers out this morning. 164 00:07:35,600 --> 00:07:39,520 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 165 00:07:39,560 --> 00:07:42,640 Speaker 1: weekdays at ten am Eastern on Apple card Play and 166 00:07:42,640 --> 00:07:45,560 Speaker 1: Android Auto with the Bloomberg Business App. You can also 167 00:07:45,640 --> 00:07:48,800 Speaker 1: listen live on Amazon Alexa from our flagship New York 168 00:07:48,840 --> 00:07:53,200 Speaker 1: station just say Alexa playing Bloomberg eleven thirty. 169 00:07:53,600 --> 00:07:56,200 Speaker 5: We did have some data coming out. We had housing data, 170 00:07:56,240 --> 00:07:59,760 Speaker 5: but also we had the conference board US leading in. 171 00:08:00,600 --> 00:08:02,480 Speaker 5: I'm not one hundred percent sure I know what that 172 00:08:02,520 --> 00:08:04,840 Speaker 5: even is. It came it was down by about three 173 00:08:04,880 --> 00:08:07,920 Speaker 5: tenths of one percent. That was worse than estimated. The 174 00:08:07,960 --> 00:08:11,000 Speaker 5: prior month was revised up to two tenths of one percent, 175 00:08:11,040 --> 00:08:13,400 Speaker 5: So it feels like that's a really big dip. Luckily, 176 00:08:13,600 --> 00:08:16,200 Speaker 5: we have Dana Peterson. She joins us now from the 177 00:08:16,240 --> 00:08:18,480 Speaker 5: conference board. This is her data. She can talk us 178 00:08:18,520 --> 00:08:22,360 Speaker 5: through it. Dano, what is this? How do I read 179 00:08:22,440 --> 00:08:23,160 Speaker 5: this information? 180 00:08:24,520 --> 00:08:24,680 Speaker 6: Sure? 181 00:08:24,680 --> 00:08:25,360 Speaker 5: Absolutely so. 182 00:08:25,520 --> 00:08:28,720 Speaker 7: The US Leading Economic Indicator is a measure that's been 183 00:08:28,760 --> 00:08:31,120 Speaker 7: out for a long time, and lots of people look 184 00:08:31,120 --> 00:08:33,600 Speaker 7: at it and see it as a gauge for where 185 00:08:33,640 --> 00:08:36,240 Speaker 7: the economy's going, whether there's a recession that's going to 186 00:08:36,280 --> 00:08:38,200 Speaker 7: happen over the next six to twelve months or not. 187 00:08:38,720 --> 00:08:42,040 Speaker 7: And basically, this measure did dip in the month, and 188 00:08:42,080 --> 00:08:44,120 Speaker 7: when we looked at what was actually good, it was 189 00:08:44,240 --> 00:08:48,800 Speaker 7: very little, just Leading Credit Index and also the stock index. 190 00:08:48,960 --> 00:08:52,040 Speaker 7: Everything else was either negative or flat. And indeed, when 191 00:08:52,040 --> 00:08:54,120 Speaker 7: we look at this gauge over the long run, it 192 00:08:55,320 --> 00:08:58,720 Speaker 7: has signaled recession. But the thing is that it's signaling 193 00:08:58,800 --> 00:09:01,800 Speaker 7: weakness in some parts of the US economy, but it 194 00:09:01,800 --> 00:09:03,560 Speaker 7: doesn't capture all parts. 195 00:09:04,280 --> 00:09:06,560 Speaker 3: All right, So talks about what we're seeing here again, 196 00:09:06,600 --> 00:09:08,880 Speaker 3: The Leading Index came in at negative zero point three 197 00:09:08,920 --> 00:09:12,520 Speaker 3: percent today. Consensus was a negative zero point one, so 198 00:09:12,520 --> 00:09:14,800 Speaker 3: weaker than expected. What's driving it? 199 00:09:16,160 --> 00:09:16,679 Speaker 8: Sure well? 200 00:09:16,760 --> 00:09:19,360 Speaker 7: Things that were down in the month were job as claims. 201 00:09:19,360 --> 00:09:22,480 Speaker 7: This is for March, not for April. So job as 202 00:09:22,520 --> 00:09:28,079 Speaker 7: claims were down, consumers expectations for business conditions was down. Also, 203 00:09:28,120 --> 00:09:30,720 Speaker 7: the yield curve was more negative, so you had a 204 00:09:30,720 --> 00:09:32,880 Speaker 7: lot of things that just weren't really working well, and 205 00:09:32,920 --> 00:09:36,079 Speaker 7: also permits weren't doing well. And certainly we know that 206 00:09:36,120 --> 00:09:39,440 Speaker 7: the housing sector remains weak, as mortgage rates have actually 207 00:09:39,440 --> 00:09:42,440 Speaker 7: ticked back up and are quite high relative to what 208 00:09:42,480 --> 00:09:45,760 Speaker 7: people experienced during the pandemic. And of course that's because 209 00:09:45,760 --> 00:09:48,520 Speaker 7: the Fed has raised interest rates and is keeping them 210 00:09:48,679 --> 00:09:50,160 Speaker 7: pretty elevated for some time. 211 00:09:50,720 --> 00:09:53,600 Speaker 5: Danny, before we let you go, can you overlay a 212 00:09:53,720 --> 00:09:56,520 Speaker 5: five percent two year and a talk of a five 213 00:09:56,559 --> 00:09:59,400 Speaker 5: percent ten year onto this kind of data. 214 00:10:00,880 --> 00:10:03,120 Speaker 7: Well, the thing is that we know that the two 215 00:10:03,160 --> 00:10:06,360 Speaker 7: year yield is probably you know, it's reflecting what's going 216 00:10:06,400 --> 00:10:08,720 Speaker 7: on more so in the FED funds rate. Meanwhile, you 217 00:10:08,840 --> 00:10:12,440 Speaker 7: still have an outsized balance sheet and uncertainty kind of 218 00:10:12,480 --> 00:10:14,200 Speaker 7: weighing on the ten year and so that's why the 219 00:10:14,240 --> 00:10:17,560 Speaker 7: yeal curve is still negative. And for some folks that 220 00:10:17,600 --> 00:10:20,840 Speaker 7: signals recession, but it's not the only measure. And certainly 221 00:10:20,920 --> 00:10:22,760 Speaker 7: we don't think a recession is going to happen in 222 00:10:22,800 --> 00:10:26,080 Speaker 7: the US, but certainly we could see some moderation and 223 00:10:26,160 --> 00:10:29,760 Speaker 7: growth as consumers kind of pull back after spending tons 224 00:10:29,760 --> 00:10:32,200 Speaker 7: of money and pulling up a lot of debt. But 225 00:10:32,280 --> 00:10:34,160 Speaker 7: we don't think that the labor market's going to crash. 226 00:10:34,200 --> 00:10:36,679 Speaker 7: It's probably still going to do well, and the Fed 227 00:10:36,880 --> 00:10:38,920 Speaker 7: is still going to be looking at inflation gauges to 228 00:10:38,920 --> 00:10:41,600 Speaker 7: see can they get back to two percent and can 229 00:10:41,640 --> 00:10:43,440 Speaker 7: the Fed start cutting interest rates this year? 230 00:10:44,200 --> 00:10:46,240 Speaker 3: All right, Dana Peterson, thank you so much for joining us. 231 00:10:46,280 --> 00:10:49,160 Speaker 3: Data Peterson chief economists at the conference board, breaking down 232 00:10:49,160 --> 00:10:51,360 Speaker 3: some of the data coming out of the board. The 233 00:10:51,480 --> 00:10:54,240 Speaker 3: leading Economic Innator indicator came in a little bit weaker 234 00:10:54,240 --> 00:10:54,920 Speaker 3: than expected. 235 00:10:55,120 --> 00:11:01,440 Speaker 1: Today, you're listening to the Bloomberg Intelligence Podcast. Catch us 236 00:11:01,480 --> 00:11:04,439 Speaker 1: live weekdays at ten am Eastern on Apple car Playing 237 00:11:04,480 --> 00:11:07,079 Speaker 1: and broud Otto with the Bloomberg Business app. Listen on 238 00:11:07,200 --> 00:11:10,439 Speaker 1: demand wherever you get your podcasts, or watch us live 239 00:11:10,559 --> 00:11:11,240 Speaker 1: on YouTube. 240 00:11:12,480 --> 00:11:14,640 Speaker 3: Alex Steele, Paul Sweeney, we're live here in our Bloomberg 241 00:11:14,720 --> 00:11:15,800 Speaker 3: Interactive Brokers studio. 242 00:11:15,840 --> 00:11:16,920 Speaker 2: We're also streaming. 243 00:11:16,600 --> 00:11:18,560 Speaker 3: Live on YouTube, so you can head over to YouTube 244 00:11:18,600 --> 00:11:21,600 Speaker 3: dot com search Bloomberg Podcast and that's where you'll find us. 245 00:11:21,840 --> 00:11:23,280 Speaker 2: Let's talk a little airlines to air. 246 00:11:23,160 --> 00:11:26,280 Speaker 3: Alaska Airlines had some good earning stock US up four 247 00:11:26,400 --> 00:11:31,880 Speaker 3: percent today. You know, for the longest time, until just recently, 248 00:11:32,320 --> 00:11:34,400 Speaker 3: when I looked at an Alaska Airlines plane in the 249 00:11:34,640 --> 00:11:39,000 Speaker 3: tail the tail fin have the image of an individual. 250 00:11:38,720 --> 00:11:40,560 Speaker 2: You know who I thought that was, until just recently, 251 00:11:41,200 --> 00:11:41,920 Speaker 2: Jerry Garcia. 252 00:11:42,880 --> 00:11:44,400 Speaker 4: Who is it? Well? 253 00:11:44,480 --> 00:11:47,960 Speaker 3: I was sitting Okay, so Alaska Airlines on the tailfin, 254 00:11:48,040 --> 00:11:50,320 Speaker 3: go google it. There's an image of an Eskimo. Up 255 00:11:50,440 --> 00:11:52,480 Speaker 3: until just recently, I thought that was Jerry Garcia. And 256 00:11:52,480 --> 00:11:54,959 Speaker 3: I was sitting in a Seattle airport talking to a 257 00:11:55,040 --> 00:11:57,480 Speaker 3: pilot from Alaska Airlines. I said, boy, you guys are 258 00:11:57,640 --> 00:12:01,319 Speaker 3: so cool. You have image of Gerry Garcia on every plane. 259 00:12:01,320 --> 00:12:04,320 Speaker 3: He says, no, numb nuts, it's not Jerry Garcia. It's 260 00:12:04,320 --> 00:12:06,360 Speaker 3: an Eskimo or a Lesque Airlines. 261 00:12:06,480 --> 00:12:09,079 Speaker 2: How stupid can you be? So that's something My bubble 262 00:12:09,160 --> 00:12:11,959 Speaker 2: was bopped. Pop. George Ferguson, he covers all the airlines 263 00:12:12,000 --> 00:12:14,320 Speaker 2: and airspace companies. So I guess, George, we. 264 00:12:14,320 --> 00:12:18,760 Speaker 3: Look at Alaska Airlines, the Jerry Garcia airline, what's happening? 265 00:12:18,800 --> 00:12:19,679 Speaker 2: And they have some good numbers? 266 00:12:20,760 --> 00:12:24,120 Speaker 6: Yeah, so pretty nice, you know, very nice numbers. Actually 267 00:12:24,200 --> 00:12:27,720 Speaker 6: pretty surprised. It's all about strength and revenue right now. 268 00:12:27,840 --> 00:12:31,320 Speaker 6: The surprises we're seeing, like United in Alaska, if your 269 00:12:31,360 --> 00:12:35,559 Speaker 6: revenue line, you know, has coming better than expected, yields 270 00:12:35,600 --> 00:12:38,679 Speaker 6: are doing better at these airlines, and again we expected 271 00:12:38,760 --> 00:12:41,720 Speaker 6: going in, then you're getting a nice beat on earnings. 272 00:12:41,840 --> 00:12:48,200 Speaker 6: And Alaska cited return of corporate travel, continued, strong leisure trends, 273 00:12:49,160 --> 00:12:52,040 Speaker 6: and you know, we were kind of looking for a 274 00:12:52,120 --> 00:12:55,599 Speaker 6: slightly down yield number, and you know, they had a 275 00:12:56,040 --> 00:12:59,160 Speaker 6: definitely with the adjustment for the panel blowout from Boeing, 276 00:12:59,800 --> 00:13:03,160 Speaker 6: they would have had five percent unit revenue increase, so 277 00:13:04,040 --> 00:13:05,280 Speaker 6: very strong, very impressive. 278 00:13:05,440 --> 00:13:07,720 Speaker 5: So I'm confused. I thought that the business airlines were 279 00:13:07,840 --> 00:13:11,080 Speaker 5: like United, An American, and Delta, not Alaska air. 280 00:13:12,520 --> 00:13:15,760 Speaker 6: So Alaska does have premium you know, premium seats in 281 00:13:15,800 --> 00:13:19,080 Speaker 6: the front of the airplane, so they are business airline. 282 00:13:19,720 --> 00:13:21,600 Speaker 6: I don't see them as sort of a big corporate 283 00:13:21,640 --> 00:13:25,720 Speaker 6: airline because they're they're pretty regional right there, very West 284 00:13:25,800 --> 00:13:29,280 Speaker 6: coast focus, very Alaska focused, as it seems like Paul's 285 00:13:29,280 --> 00:13:32,440 Speaker 6: become more aware of recently. Then they do a bit 286 00:13:32,520 --> 00:13:34,880 Speaker 6: of transcon right into the East coast. You've got to 287 00:13:34,880 --> 00:13:38,079 Speaker 6: be able to provide your customer service into the other 288 00:13:38,160 --> 00:13:41,400 Speaker 6: important population center of the US, but they lack a 289 00:13:41,480 --> 00:13:45,200 Speaker 6: lot of i would say, the middle of the country routes, 290 00:13:45,240 --> 00:13:48,160 Speaker 6: and they don't have any international. They partner up or 291 00:13:48,200 --> 00:13:50,040 Speaker 6: they have a little bit of international. They go into 292 00:13:50,120 --> 00:13:53,200 Speaker 6: Mexico and some of those leisure markets, but they partner 293 00:13:53,320 --> 00:13:56,240 Speaker 6: up with the other airlines to provide that international. And 294 00:13:56,320 --> 00:13:59,040 Speaker 6: it's hard to be a big business airline if you 295 00:13:59,080 --> 00:14:00,920 Speaker 6: can't get your customers all the way around the world, 296 00:14:01,040 --> 00:14:03,080 Speaker 6: So that kind of keeps them to smaller businesses. 297 00:14:03,679 --> 00:14:06,640 Speaker 3: Hey, George, John Tucker was just telling me that gasoline 298 00:14:06,679 --> 00:14:09,360 Speaker 3: prices to fill up his hummer. They're up almost seventy 299 00:14:09,400 --> 00:14:12,920 Speaker 3: percent off of those lows three cfty at the wall 300 00:14:12,960 --> 00:14:13,920 Speaker 3: wall exactly. 301 00:14:14,160 --> 00:14:16,319 Speaker 2: How about jet fuel prices? Is that an issue for 302 00:14:16,520 --> 00:14:17,280 Speaker 2: the airlines here? 303 00:14:18,640 --> 00:14:20,240 Speaker 6: It is, It's going to be an issue in two 304 00:14:20,320 --> 00:14:23,480 Speaker 6: Q So in one queue it was a tailwind compared 305 00:14:23,480 --> 00:14:26,680 Speaker 6: to the one queue last year. But if it stays 306 00:14:26,760 --> 00:14:29,360 Speaker 6: on this trajectory or just stays up these levels, it's 307 00:14:29,400 --> 00:14:31,480 Speaker 6: going to be a bit of a headwind. Question will 308 00:14:31,520 --> 00:14:34,800 Speaker 6: be you know, if demand is so strong, i'd expect 309 00:14:34,840 --> 00:14:37,160 Speaker 6: the airlines to be able to push it through in 310 00:14:37,280 --> 00:14:39,720 Speaker 6: pricing to the customers, and we're going to see that. 311 00:14:40,200 --> 00:14:42,760 Speaker 6: I think the other big question here too is, you know, 312 00:14:42,800 --> 00:14:45,200 Speaker 6: we're kind of into earning season. We've seen Delta, we've 313 00:14:45,240 --> 00:14:49,240 Speaker 6: seen United, we've seen Alaska, We've seen airlines with again 314 00:14:49,360 --> 00:14:52,600 Speaker 6: premium product in the front of the airplane. We still 315 00:14:52,680 --> 00:14:56,160 Speaker 6: have to see the low cost carriers come through, because 316 00:14:56,160 --> 00:14:58,360 Speaker 6: I'm not convinced that this strength is in the back 317 00:14:58,360 --> 00:14:59,000 Speaker 6: of the airplane. 318 00:14:59,480 --> 00:15:00,560 Speaker 8: But we're going to see right. 319 00:15:00,480 --> 00:15:02,880 Speaker 6: As we start to see the real sort of low 320 00:15:03,000 --> 00:15:06,040 Speaker 6: cost leisure carriers report, then we're going to know how 321 00:15:06,160 --> 00:15:07,480 Speaker 6: broad based this strength is. 322 00:15:07,920 --> 00:15:10,920 Speaker 5: I mean, having to be buyerpurcated would make sense because 323 00:15:10,960 --> 00:15:12,640 Speaker 5: that's what we're seeing in the broader economy. 324 00:15:12,760 --> 00:15:12,880 Speaker 8: Right. 325 00:15:13,360 --> 00:15:15,080 Speaker 5: One part of the economy is doing well and the 326 00:15:15,160 --> 00:15:17,560 Speaker 5: other this is not. Delinquency's are rising for credit cards. 327 00:15:17,560 --> 00:15:19,920 Speaker 5: You're seeing more money being spent on credit cards, et cetera. 328 00:15:20,000 --> 00:15:22,200 Speaker 5: We heard that from banks in terms of charge offs, 329 00:15:22,560 --> 00:15:25,160 Speaker 5: So that were the case. Where are we in terms 330 00:15:25,200 --> 00:15:28,480 Speaker 5: of valuation for say the front of the plane back 331 00:15:28,520 --> 00:15:29,720 Speaker 5: of the plane carriers. 332 00:15:31,760 --> 00:15:35,640 Speaker 6: Well, I mean, first of all, airlines are always sort 333 00:15:35,680 --> 00:15:37,960 Speaker 6: of valued lowly, right, They're not there if you go 334 00:15:38,080 --> 00:15:41,760 Speaker 6: for a pe multiple, you're in the mid single digits. So, 335 00:15:41,960 --> 00:15:45,440 Speaker 6: I mean airlines are kind of perennially a pretty cheap, 336 00:15:45,800 --> 00:15:49,000 Speaker 6: pretty cheap stock. But I mean what we saw with 337 00:15:49,160 --> 00:15:51,720 Speaker 6: United the other day, that big jump. Part of that 338 00:15:51,880 --> 00:15:54,960 Speaker 6: is them starting to close that gap with Delta, which 339 00:15:55,040 --> 00:15:58,760 Speaker 6: is an upper single digits, you know, kee valued airline. 340 00:15:59,720 --> 00:16:02,840 Speaker 6: So but again they're always kind of they're always kind 341 00:16:02,880 --> 00:16:05,440 Speaker 6: of cheap because when things go bump in the night, 342 00:16:05,560 --> 00:16:09,280 Speaker 6: airlines have a hard time with demand. Right, if we 343 00:16:09,400 --> 00:16:14,120 Speaker 6: had a geopolitical problem, like the war really raged up 344 00:16:14,120 --> 00:16:16,560 Speaker 6: in the Middle East, you probably start to see less 345 00:16:16,560 --> 00:16:19,240 Speaker 6: demand going internationally all of a sudden. You can't feel 346 00:16:19,280 --> 00:16:22,600 Speaker 6: airplanes a lot of operating leverage in this business, and 347 00:16:22,680 --> 00:16:24,280 Speaker 6: so when that demand falls off hard. 348 00:16:24,160 --> 00:16:24,760 Speaker 8: It really hurts. 349 00:16:25,000 --> 00:16:25,640 Speaker 2: All right, George. 350 00:16:25,720 --> 00:16:27,520 Speaker 3: On the YouTube feed, I can see that you are 351 00:16:27,640 --> 00:16:30,920 Speaker 3: in yet again another hotel room, which reminds me you're 352 00:16:31,000 --> 00:16:35,400 Speaker 3: at another boondoggle that we are financing here. You're at 353 00:16:35,400 --> 00:16:39,000 Speaker 3: the corporate I guess aircraft kind of thing out there 354 00:16:39,040 --> 00:16:40,840 Speaker 3: in Arizona. If I want to go out there and 355 00:16:40,920 --> 00:16:44,320 Speaker 3: get the latest golf stream, I don't know, six. 356 00:16:44,560 --> 00:16:46,560 Speaker 2: What's that going to set me back? Is a competition 357 00:16:46,680 --> 00:16:47,880 Speaker 2: out there. How is that market? 358 00:16:48,760 --> 00:16:50,640 Speaker 6: So the latest is going to be the seven hundred 359 00:16:50,680 --> 00:16:52,760 Speaker 6: and the eight hundred pace and you're going to be 360 00:16:52,880 --> 00:16:55,000 Speaker 6: up in the seventy millions. 361 00:16:54,680 --> 00:16:58,400 Speaker 8: Range to own one of those. They're very long range. 362 00:16:59,040 --> 00:17:01,200 Speaker 6: You sorry, seventy five million US. 363 00:17:01,320 --> 00:17:01,520 Speaker 4: Yes. 364 00:17:03,280 --> 00:17:07,480 Speaker 6: And what we're hearing out here from these folks is, look, 365 00:17:07,760 --> 00:17:11,239 Speaker 6: private aviation was very, very strong in the pandemic. Right 366 00:17:11,359 --> 00:17:13,960 Speaker 6: as the very well healed. Some of them were flying 367 00:17:14,000 --> 00:17:16,919 Speaker 6: in the front of the airplane for Delta and United. 368 00:17:17,440 --> 00:17:20,200 Speaker 6: They moved to private aviation. And what we're starting to 369 00:17:20,280 --> 00:17:23,200 Speaker 6: see is some of those you know, those people that 370 00:17:23,680 --> 00:17:26,879 Speaker 6: were flying private, unfortunately, they're moving back to the airlines. 371 00:17:26,880 --> 00:17:29,320 Speaker 6: And that's part of the trend. Those poor folks have 372 00:17:29,440 --> 00:17:31,399 Speaker 6: to get back on a tube for the rest of 373 00:17:31,480 --> 00:17:34,200 Speaker 6: us other people in the world. So that's part of 374 00:17:34,240 --> 00:17:36,200 Speaker 6: the trend too. That's helping the airlines, especially in the 375 00:17:36,280 --> 00:17:39,240 Speaker 6: premium seats. They're seeing a little bit of an ebbing 376 00:17:39,280 --> 00:17:42,200 Speaker 6: of demand of some of that really that those high 377 00:17:42,280 --> 00:17:46,159 Speaker 6: end travelers. But this business is still pretty strong. Backlogs 378 00:17:46,200 --> 00:17:49,959 Speaker 6: are two years for most of the manufacturers, better than 379 00:17:50,000 --> 00:17:52,400 Speaker 6: they've been in a long time. Pricing was pretty good 380 00:17:52,400 --> 00:17:55,120 Speaker 6: in the pandemic. It's softening a little bit. So maybe 381 00:17:55,160 --> 00:17:57,200 Speaker 6: you're getting that golf stream now for I don't know, 382 00:17:57,359 --> 00:17:57,880 Speaker 6: seventy two. 383 00:17:58,680 --> 00:18:00,800 Speaker 5: Hey no, So I mean he's gotten excited. 384 00:18:00,800 --> 00:18:03,360 Speaker 3: Bloomberg televisions are putting up there on our YouTube feed, 385 00:18:03,720 --> 00:18:06,040 Speaker 3: isn't that, Jerry Garcia? If you look at Alaska Airlines, 386 00:18:06,520 --> 00:18:06,960 Speaker 3: I mean. 387 00:18:07,320 --> 00:18:10,520 Speaker 2: It's got to be we don't call them. 388 00:18:13,280 --> 00:18:15,080 Speaker 5: Yeah, all right, Paul still focused on that. 389 00:18:15,880 --> 00:18:17,680 Speaker 2: I just feel bad, Jerry Garcia. 390 00:18:19,600 --> 00:18:22,919 Speaker 5: I just feel bad that those people who fly private 391 00:18:23,040 --> 00:18:24,840 Speaker 5: now have to come back. I mean, that's that's a 392 00:18:24,920 --> 00:18:28,560 Speaker 5: tough stuff. That's a tough rating on that. George. I 393 00:18:28,600 --> 00:18:30,360 Speaker 5: couldn't help, but notice that your backdrop is the same 394 00:18:30,400 --> 00:18:32,800 Speaker 5: as yesterday, which means you've clearly been working really hard 395 00:18:32,840 --> 00:18:34,760 Speaker 5: in and out of that hotel room. What else are 396 00:18:34,800 --> 00:18:35,919 Speaker 5: people talking about right now? 397 00:18:37,920 --> 00:18:40,359 Speaker 6: Well, I mean there's always talk in the marketplace about Boeing. 398 00:18:40,440 --> 00:18:44,440 Speaker 6: Right we've had this whistle blower go through DC. I'm 399 00:18:44,520 --> 00:18:47,440 Speaker 6: not sure you know what we're learning there yet, but 400 00:18:47,480 --> 00:18:50,080 Speaker 6: we're still kind of waiting on the Boeing report on 401 00:18:50,119 --> 00:18:53,119 Speaker 6: how they're going to stabilize their manufacturing. So that's one 402 00:18:53,119 --> 00:18:55,560 Speaker 6: of the things we're talking about. Everybody in the industry 403 00:18:55,640 --> 00:18:58,359 Speaker 6: is talking about supply chain. These folks are talking about 404 00:18:58,359 --> 00:19:01,360 Speaker 6: supply chain here too as well. Supply chain is still 405 00:19:01,400 --> 00:19:04,200 Speaker 6: in a deficit for workers. That means that, you know, 406 00:19:04,600 --> 00:19:08,560 Speaker 6: in the aerospace business, there's aspirations for a number of 407 00:19:08,680 --> 00:19:12,800 Speaker 6: building increases every year. Those aspirations are always harder to 408 00:19:12,880 --> 00:19:17,359 Speaker 6: achieve given these supply chain labor problems, and there's inflation. Right, 409 00:19:17,480 --> 00:19:20,479 Speaker 6: So again the very real, well healed. They're finding out 410 00:19:20,560 --> 00:19:23,200 Speaker 6: that pilots cost more because the airlines paid them more. 411 00:19:23,640 --> 00:19:25,199 Speaker 6: So now for their private jet they got to pay 412 00:19:25,240 --> 00:19:28,160 Speaker 6: pilots more. So, pity them as well. There the front 413 00:19:28,160 --> 00:19:32,760 Speaker 6: of their airplanes costing them some fuel prices, arising, interest 414 00:19:32,840 --> 00:19:35,760 Speaker 6: rates are higher. A lot of these people don't finance airplanes, 415 00:19:35,800 --> 00:19:38,520 Speaker 6: but some of them do. That effects end a little bit. 416 00:19:39,000 --> 00:19:41,720 Speaker 6: Same sort of problems are seeing throughout commercial aerospace, right, George. 417 00:19:41,840 --> 00:19:44,119 Speaker 3: If you know all this stuff, if you were to 418 00:19:44,160 --> 00:19:45,720 Speaker 3: go out money in the object and you were going 419 00:19:45,760 --> 00:19:47,840 Speaker 3: to buy a private jet for yourself, what would you get? 420 00:19:49,640 --> 00:19:49,880 Speaker 4: Wow? 421 00:19:50,240 --> 00:19:53,639 Speaker 6: Wow, you know, I think I would be one of 422 00:19:53,680 --> 00:19:56,320 Speaker 6: those golf streams seven hundred, eight hundred folks, right, because 423 00:19:57,040 --> 00:20:00,720 Speaker 6: that aircraft the ticky across the Pacific without a stop, 424 00:20:00,760 --> 00:20:03,240 Speaker 6: and so the world is kind of truly your oyster 425 00:20:03,359 --> 00:20:03,840 Speaker 6: at that point. 426 00:20:04,359 --> 00:20:06,119 Speaker 5: So are you asking for a friend or asking for 427 00:20:06,160 --> 00:20:06,480 Speaker 5: a friend. 428 00:20:06,560 --> 00:20:08,760 Speaker 2: Yeah, I don't know. I mean, you know, you know, 429 00:20:08,840 --> 00:20:10,320 Speaker 2: it's interesting. I mean there's a lot out there. 430 00:20:10,440 --> 00:20:12,879 Speaker 9: I'll stick with the Falcon jet. You like the Falcon 431 00:20:13,160 --> 00:20:15,399 Speaker 9: If you go up to Teeterborough in New Jersey, the 432 00:20:15,560 --> 00:20:19,080 Speaker 9: work at airport there, that's that's where many many Falcon 433 00:20:19,160 --> 00:20:21,840 Speaker 9: jets aren't. Well, we go, It's Taylor Swift jet too. 434 00:20:22,040 --> 00:20:23,120 Speaker 2: Is that what Swift? 435 00:20:23,200 --> 00:20:23,320 Speaker 4: Now? 436 00:20:23,359 --> 00:20:23,600 Speaker 5: You got? 437 00:20:24,080 --> 00:20:26,040 Speaker 3: Now you got your Atten Swift is flying that. But 438 00:20:26,280 --> 00:20:28,639 Speaker 3: you can got the Marshtown as well. I hear some 439 00:20:28,800 --> 00:20:30,320 Speaker 3: private jets out there as well. 440 00:20:30,440 --> 00:20:33,000 Speaker 5: So I flew on one once like twenty years ago. 441 00:20:33,520 --> 00:20:34,520 Speaker 5: It was cool. 442 00:20:34,720 --> 00:20:35,399 Speaker 2: We'll let George go. 443 00:20:35,760 --> 00:20:39,040 Speaker 3: George Ferguson covers all the airlines and aerospace for Bloomberg Intelligence. 444 00:20:39,280 --> 00:20:40,800 Speaker 3: Back in the day on Wall Street, it was so 445 00:20:41,000 --> 00:20:45,600 Speaker 3: crazy that these aircraft companies were giving us aircraft to 446 00:20:45,720 --> 00:20:48,560 Speaker 3: try out and just take on road shows and giving 447 00:20:48,600 --> 00:20:49,600 Speaker 3: it to us for a week. 448 00:20:50,440 --> 00:20:51,760 Speaker 2: And we're like, sure, thank you. 449 00:20:52,359 --> 00:20:55,360 Speaker 5: Just don't want to be Paul Like sometimes past. 450 00:20:55,160 --> 00:20:58,639 Speaker 2: I say the nineties, particularly the early with us. 451 00:21:02,320 --> 00:21:04,119 Speaker 3: I mean you would get a plane. Hey, Paul, do 452 00:21:04,119 --> 00:21:05,399 Speaker 3: you need a plane for a week. I call up 453 00:21:05,400 --> 00:21:07,040 Speaker 3: on my companies and we'd go out and see clients 454 00:21:07,080 --> 00:21:09,360 Speaker 3: for a week in europeor and the West Coast. 455 00:21:09,440 --> 00:21:11,720 Speaker 2: Okay, crazy time me up. That's why I was asking George. 456 00:21:11,720 --> 00:21:12,800 Speaker 2: I mean, if you're gonna go out and buy one, 457 00:21:12,880 --> 00:21:14,399 Speaker 2: what would it be. Yeah, I guess it would be 458 00:21:14,400 --> 00:21:14,720 Speaker 2: a coult. 459 00:21:14,920 --> 00:21:17,159 Speaker 5: Oh George, all right, you go buy that plane. You 460 00:21:17,240 --> 00:21:18,720 Speaker 5: can borrow, let us borrow it. 461 00:21:20,200 --> 00:21:24,040 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 462 00:21:24,160 --> 00:21:27,080 Speaker 1: weekdays at ten am Eastern on Apple car Play and 463 00:21:27,200 --> 00:21:30,440 Speaker 1: Android Auto with the Bloomberg Business. You can also listen 464 00:21:30,600 --> 00:21:33,680 Speaker 1: live on Amazon Alexa from our flagship New York station 465 00:21:34,080 --> 00:21:36,760 Speaker 1: Just Say Alexa, playing Bloomberg eleven. 466 00:21:36,560 --> 00:21:40,880 Speaker 5: Thirty Alexi alongside Paul Sweeney. This is Bloomberg Intelligence Radio. 467 00:21:41,000 --> 00:21:43,240 Speaker 5: We bring you all the top analysis from our top 468 00:21:43,280 --> 00:21:46,240 Speaker 5: analysts that we have at Bloomberg Intelligence. They cover two 469 00:21:46,280 --> 00:21:49,240 Speaker 5: thousand companies and one hundred and thirty industries around the world. 470 00:21:49,320 --> 00:21:52,159 Speaker 5: We're back live in our interactive broker studio right here 471 00:21:52,160 --> 00:21:55,520 Speaker 5: at Bloomberg Headquarters in Midtown Manhattan, and Lisa was just 472 00:21:55,600 --> 00:21:59,000 Speaker 5: talking about Netflix and password crackdowns, sharing and all that. 473 00:21:59,600 --> 00:22:02,479 Speaker 5: They're also do the sports thing, right or maybe are 474 00:22:02,520 --> 00:22:04,520 Speaker 5: they doing any gambling stuff or no, no, I don't know. 475 00:22:04,720 --> 00:22:07,240 Speaker 5: Maybe video games. You'll do the video games. So there's 476 00:22:07,240 --> 00:22:10,040 Speaker 5: opportunities here. So we wanted to get more with Mark Douglass, 477 00:22:10,080 --> 00:22:13,159 Speaker 5: President and CEO of Mountain to get a perspective of 478 00:22:13,280 --> 00:22:14,959 Speaker 5: what to look at. Mark, what are you looking at 479 00:22:15,160 --> 00:22:16,359 Speaker 5: when Netflix reports today? 480 00:22:17,359 --> 00:22:20,440 Speaker 8: Well, I think everyone's expecting it to be great news 481 00:22:20,520 --> 00:22:24,840 Speaker 8: because Netflix gave great guidance, So the near term looks 482 00:22:24,920 --> 00:22:27,760 Speaker 8: like it's going to be spectacular. I think they'll probably, 483 00:22:28,480 --> 00:22:30,720 Speaker 8: you know, really beat on earnings. That the thing about 484 00:22:30,800 --> 00:22:34,560 Speaker 8: Netflix right now, virtually all their growth is flowing directly 485 00:22:34,600 --> 00:22:36,680 Speaker 8: at the bottom line. So this is a where it 486 00:22:36,800 --> 00:22:38,600 Speaker 8: used to be a company I never made money. Now 487 00:22:38,640 --> 00:22:41,639 Speaker 8: it's a company that's just spitting off profits, and I 488 00:22:41,720 --> 00:22:44,600 Speaker 8: think that's going to actually start to take over as 489 00:22:44,840 --> 00:22:47,320 Speaker 8: like the key thing investors look at rather than just 490 00:22:47,440 --> 00:22:49,080 Speaker 8: looking at subscriber growth. 491 00:22:49,560 --> 00:22:51,920 Speaker 3: So Mark talked to us about some of these revenue 492 00:22:52,000 --> 00:22:54,000 Speaker 3: drivers that I know the street's been talking about for 493 00:22:54,040 --> 00:22:56,760 Speaker 3: the last couple of years. One of which is passwords 494 00:22:56,760 --> 00:22:58,440 Speaker 3: sharing cracking down on that. The other one is the 495 00:22:58,520 --> 00:23:01,320 Speaker 3: ad supported aspect of the vision. To what extent are 496 00:23:01,320 --> 00:23:04,760 Speaker 3: those two issues contributing well? 497 00:23:04,840 --> 00:23:08,720 Speaker 8: I think the password sharing, clearly, it's easy. It is 498 00:23:08,840 --> 00:23:11,000 Speaker 8: highly leverage. You just give a few engineers in a 499 00:23:11,080 --> 00:23:13,440 Speaker 8: room and they just make it harder to use it 500 00:23:13,520 --> 00:23:17,160 Speaker 8: to share passwords, and it creates huge amount of growth. 501 00:23:17,200 --> 00:23:19,480 Speaker 8: And I think Netflix always knew they had that in 502 00:23:19,560 --> 00:23:24,120 Speaker 8: their back pocket. The part about it where they're doing, 503 00:23:24,200 --> 00:23:27,680 Speaker 8: you know, kind of discounted memberships in order and you 504 00:23:27,760 --> 00:23:31,080 Speaker 8: get ads with them, that part is working well in 505 00:23:31,240 --> 00:23:33,280 Speaker 8: terms of selling the discounts. I think in terms of 506 00:23:33,359 --> 00:23:35,639 Speaker 8: selling the ads, it's going a lot slower for them, 507 00:23:36,040 --> 00:23:38,480 Speaker 8: but they do have a ton of upside there. So 508 00:23:38,600 --> 00:23:41,800 Speaker 8: I think again that that is I think where you 509 00:23:41,880 --> 00:23:45,119 Speaker 8: should be looking the future growth is how do they 510 00:23:45,200 --> 00:23:48,720 Speaker 8: actually monetize those ads as opposed to just looking at 511 00:23:49,000 --> 00:23:50,000 Speaker 8: subscriber numbers. 512 00:23:50,680 --> 00:23:53,280 Speaker 5: Here's my question, what is already priced in? Like you 513 00:23:53,359 --> 00:23:55,520 Speaker 5: mentioned the whole they guided it to be good. So 514 00:23:55,640 --> 00:23:58,760 Speaker 5: are we in like buy the rumor sell the news 515 00:23:58,880 --> 00:24:00,840 Speaker 5: kind of thing at this point, which is unusual for 516 00:24:01,080 --> 00:24:02,840 Speaker 5: what we would think is like a mag seven company, 517 00:24:02,840 --> 00:24:04,720 Speaker 5: even though it's not technically in the mags, even. 518 00:24:05,680 --> 00:24:08,560 Speaker 8: Yeah, they I'm not sure it would sell the news, 519 00:24:08,720 --> 00:24:12,240 Speaker 8: but I certainly wouldn't expect the password sharing to be 520 00:24:12,920 --> 00:24:15,200 Speaker 8: you know, it's not an endless number of people that 521 00:24:15,359 --> 00:24:18,240 Speaker 8: was sharing passwords. At some point that that's going to 522 00:24:18,320 --> 00:24:20,320 Speaker 8: start to tail off. And so what kind of has 523 00:24:20,359 --> 00:24:23,359 Speaker 8: to happen is the AD revenue has to come on 524 00:24:23,680 --> 00:24:27,400 Speaker 8: strong at some point. Right now, it's it's pretty weak. 525 00:24:28,040 --> 00:24:30,600 Speaker 8: I think people see numbers and they're over a billion, 526 00:24:31,200 --> 00:24:34,280 Speaker 8: but you know, given the number of people watch Netflix, 527 00:24:34,359 --> 00:24:37,200 Speaker 8: it's not actually a huge number. So it's a lot 528 00:24:37,280 --> 00:24:39,479 Speaker 8: of upside, but there's a lot of execution for them 529 00:24:39,600 --> 00:24:42,320 Speaker 8: still to do. So if I you know, actually I 530 00:24:42,400 --> 00:24:44,080 Speaker 8: was gonna say if I were holding stock, I do 531 00:24:44,280 --> 00:24:47,560 Speaker 8: actually hold Netflix stock. I've done very well on it 532 00:24:47,680 --> 00:24:50,600 Speaker 8: the last few years, and I would continue to hold 533 00:24:50,600 --> 00:24:52,119 Speaker 8: the stock. I think it still has a way to 534 00:24:52,160 --> 00:24:53,080 Speaker 8: go in terms of growth. 535 00:24:53,400 --> 00:24:55,280 Speaker 3: Hey, Mark, I'm just looking at the financials here and 536 00:24:55,359 --> 00:24:58,040 Speaker 3: for county year twenty four, the street's got almost you know, 537 00:24:58,119 --> 00:25:02,720 Speaker 3: almost forty billion of revenue, EBO margins twenty six percent, 538 00:25:03,000 --> 00:25:05,680 Speaker 3: free cash flow six point three billion. That is a 539 00:25:05,920 --> 00:25:09,760 Speaker 3: good good business model. How about the rest of the 540 00:25:09,840 --> 00:25:12,080 Speaker 3: streamers out there? How about the rest of them? I mean, 541 00:25:12,560 --> 00:25:16,200 Speaker 3: how many streamers can have a similar type of performance 542 00:25:16,240 --> 00:25:18,000 Speaker 3: in the streaming business Because you look at the stocks 543 00:25:18,040 --> 00:25:20,800 Speaker 3: of the traditional media companies other than Disney, it's it's 544 00:25:20,800 --> 00:25:21,800 Speaker 3: a disaster out there. 545 00:25:22,760 --> 00:25:25,440 Speaker 8: Yeah. So you know, there's two things that work here. 546 00:25:25,600 --> 00:25:28,320 Speaker 8: One is you have to reach a break even point, 547 00:25:28,880 --> 00:25:32,040 Speaker 8: which Netflix is clearly done, where you know, kind of 548 00:25:32,080 --> 00:25:35,560 Speaker 8: the costs of the content and the number of users 549 00:25:35,640 --> 00:25:37,960 Speaker 8: then you know kind of really line up. And then 550 00:25:38,119 --> 00:25:43,040 Speaker 8: every incremental user is incremental profit and incremental cash flow. 551 00:25:43,520 --> 00:25:46,320 Speaker 8: And so for Netflix, they're there. I mean we're talking 552 00:25:46,400 --> 00:25:48,840 Speaker 8: over a quarter billion world wide, and by the way, 553 00:25:49,000 --> 00:25:51,240 Speaker 8: I mean, why can't that be a half a billion worldwide? 554 00:25:51,280 --> 00:25:54,880 Speaker 8: So so you know, they're there, and for everyone else, 555 00:25:54,920 --> 00:25:57,720 Speaker 8: they're just not quite there yet. I mean they struggle 556 00:25:57,800 --> 00:26:01,800 Speaker 8: to keep the SUBSCRIBERSFLI I always said is like when 557 00:26:01,880 --> 00:26:04,680 Speaker 8: you turn on your TV, it's the first place you go. 558 00:26:04,880 --> 00:26:07,399 Speaker 8: It's like it's like the new cable guide. Let me 559 00:26:07,480 --> 00:26:09,440 Speaker 8: go see what's on Netflix, rather than let me just 560 00:26:09,480 --> 00:26:13,000 Speaker 8: see you know, what's scrolling on the cable guides. And 561 00:26:13,400 --> 00:26:15,359 Speaker 8: it's something to watch and they can't lose them, and 562 00:26:15,440 --> 00:26:17,639 Speaker 8: people just won't let go of that, And so I 563 00:26:17,720 --> 00:26:20,560 Speaker 8: think the other folks what's going to happen is going 564 00:26:20,640 --> 00:26:23,240 Speaker 8: to be a lot of consolidation. If you don't know 565 00:26:23,400 --> 00:26:25,320 Speaker 8: why you would go to c like I could. If 566 00:26:25,520 --> 00:26:27,840 Speaker 8: you go Netflix, gonnay have everything. Go Disney because they 567 00:26:27,880 --> 00:26:30,240 Speaker 8: have children's d to tame, and you go ESPN because 568 00:26:30,280 --> 00:26:33,120 Speaker 8: of sports. Why do you go to CBS? Like nobody 569 00:26:33,240 --> 00:26:35,760 Speaker 8: can name that? And if you can't name it, it's 570 00:26:35,840 --> 00:26:38,240 Speaker 8: not going to exist. It's going to be consolidated and 571 00:26:38,400 --> 00:26:42,400 Speaker 8: just just essentially bought for as a library to fill 572 00:26:42,520 --> 00:26:44,600 Speaker 8: Netflix essentially and maybe Disney. 573 00:26:45,240 --> 00:26:47,600 Speaker 5: Wait, do you really have a TV Guide subscription? Tucker? 574 00:26:48,200 --> 00:26:52,119 Speaker 9: No, I don't, but I will tell you that I 575 00:26:52,240 --> 00:26:54,439 Speaker 9: was cleaning out the attic and I found my TVO 576 00:26:54,840 --> 00:26:56,159 Speaker 9: and it's just like, I don't what to do with it. 577 00:26:56,240 --> 00:26:58,879 Speaker 5: I don't want to throw it out, but I think 578 00:26:58,880 --> 00:27:07,840 Speaker 5: you're going to throw it out. Yeah, yeah, if. 579 00:27:04,359 --> 00:27:07,560 Speaker 9: Anybody wants a free TVO, Caul John Tucker. 580 00:27:08,560 --> 00:27:11,600 Speaker 5: Here's my very silly question, Mark, is that who is 581 00:27:11,760 --> 00:27:14,399 Speaker 5: actually a true competitor to Netflix. We can name a 582 00:27:14,440 --> 00:27:16,520 Speaker 5: bunch of the streamers, right, but they have so many 583 00:27:16,560 --> 00:27:19,240 Speaker 5: other business models too. Like, if I'm an advertiser and 584 00:27:19,320 --> 00:27:22,200 Speaker 5: you're pitching me, why would I go anywhere but Netflix? 585 00:27:23,240 --> 00:27:26,400 Speaker 8: Well, I think the consolidation that you kind of start 586 00:27:26,480 --> 00:27:29,160 Speaker 8: to see happening with you know, Paramount being on the block, 587 00:27:29,760 --> 00:27:31,600 Speaker 8: I think what you have to do is you have 588 00:27:31,720 --> 00:27:35,480 Speaker 8: to build a big library and they and have a 589 00:27:35,600 --> 00:27:39,119 Speaker 8: lot of original content and the ability to match that exists, 590 00:27:39,200 --> 00:27:41,280 Speaker 8: but you have to piece together the right assets, like 591 00:27:41,359 --> 00:27:45,359 Speaker 8: you need HBO combines with buying you know, everything from 592 00:27:45,480 --> 00:27:48,120 Speaker 8: CBS and ABC that they have in their old library, 593 00:27:48,240 --> 00:27:50,600 Speaker 8: and like you kind of have to piece that together. 594 00:27:50,760 --> 00:27:52,800 Speaker 8: So the question is who has the ambition to do 595 00:27:52,960 --> 00:27:56,040 Speaker 8: it at the moment, no one, But I don't think 596 00:27:56,119 --> 00:27:58,119 Speaker 8: that will lasts forever. I think someone will step up 597 00:27:58,160 --> 00:27:59,320 Speaker 8: to the plate. They're gonna have to do it with 598 00:27:59,359 --> 00:27:59,960 Speaker 8: a lot of money. 599 00:28:00,080 --> 00:28:00,240 Speaker 4: Though. 600 00:28:00,920 --> 00:28:03,200 Speaker 3: All right, Mark, let's just step away and take a 601 00:28:03,240 --> 00:28:07,560 Speaker 3: look at TV advertising in general. Is does any advertiser 602 00:28:07,720 --> 00:28:10,399 Speaker 3: merit even go on broadcasting cable television anymore? Or is 603 00:28:10,440 --> 00:28:13,800 Speaker 3: it just the healthcare advertisers telling me some selling me 604 00:28:13,880 --> 00:28:16,960 Speaker 3: some drug for some ailment I didn't even know existed. 605 00:28:18,359 --> 00:28:22,600 Speaker 8: Well, you know, the linear TV it's broadcasts. I think 606 00:28:22,640 --> 00:28:25,720 Speaker 8: a lot of advertisers. The industry has split. Let me 607 00:28:25,760 --> 00:28:28,760 Speaker 8: say another way, the industry has split in the two sections. 608 00:28:29,200 --> 00:28:31,720 Speaker 8: So in one you have reaching frequency. That's why people 609 00:28:31,880 --> 00:28:35,119 Speaker 8: like the Final four, the NBA Finals, you know, the 610 00:28:35,280 --> 00:28:37,240 Speaker 8: NFL and stuff like that, and you just want to 611 00:28:37,280 --> 00:28:40,560 Speaker 8: reach a big audience at once. The Olympics and that 612 00:28:40,720 --> 00:28:43,080 Speaker 8: still plays a role. And there are you know, twenty 613 00:28:43,120 --> 00:28:44,840 Speaker 8: five percent of this market is not going to let 614 00:28:44,920 --> 00:28:48,800 Speaker 8: go a cable anytime soon at least. And so if 615 00:28:48,840 --> 00:28:51,800 Speaker 8: you're an advertiser and that reaching frequency is your goal, 616 00:28:51,960 --> 00:28:55,800 Speaker 8: that's still attractive. I think for everyone else, you know, 617 00:28:56,120 --> 00:28:59,960 Speaker 8: they want to do digital advertising, targeted, measured things like that. 618 00:29:00,080 --> 00:29:02,760 Speaker 8: That's what my company does, Mountain. You know, we have 619 00:29:02,880 --> 00:29:06,040 Speaker 8: more customers advertising customers than Netflix. You know, we're at 620 00:29:06,640 --> 00:29:09,080 Speaker 8: and so you know, that's what everyone else wants, and 621 00:29:09,920 --> 00:29:13,400 Speaker 8: there's room for both of them. But clearly you can't 622 00:29:13,520 --> 00:29:16,880 Speaker 8: sustain a TV network just on linear anymore. And that's 623 00:29:17,080 --> 00:29:19,840 Speaker 8: you know, that's why Prior Mountain is on the block 624 00:29:19,960 --> 00:29:23,040 Speaker 8: and because they can't get the viewers on streaming that 625 00:29:23,160 --> 00:29:23,640 Speaker 8: they need to. 626 00:29:24,160 --> 00:29:26,240 Speaker 5: All right, great stuff, really appreciate it, Mark, Thank you 627 00:29:26,520 --> 00:29:29,640 Speaker 5: very much. Mark Douglass, President and CEO of Mountain just 628 00:29:29,720 --> 00:29:33,560 Speaker 5: looking at the stock here doing some coick math. We 629 00:29:33,560 --> 00:29:36,200 Speaker 5: can look to the October low and Netflix is up 630 00:29:36,280 --> 00:29:37,240 Speaker 5: seventy eight percent. 631 00:29:37,320 --> 00:29:38,479 Speaker 2: Yeah, yeah, just amazing. 632 00:29:38,520 --> 00:29:40,760 Speaker 3: I mean the volatility in that stock and the volatility 633 00:29:40,760 --> 00:29:42,760 Speaker 3: of the stock around earnings is always a good one. 634 00:29:42,800 --> 00:29:44,960 Speaker 3: So you feel like a plus or minus eight nine 635 00:29:45,040 --> 00:29:47,480 Speaker 3: percent on when that release earned. It's a big volatility, 636 00:29:47,720 --> 00:29:49,479 Speaker 3: it's a little bit less so because it's become, as 637 00:29:49,640 --> 00:29:52,320 Speaker 3: Mark was saying, a little bit less of a subscriber story, 638 00:29:52,320 --> 00:29:53,320 Speaker 3: maybe a little bit more of a profit. 639 00:29:55,960 --> 00:29:59,800 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 640 00:30:00,000 --> 00:30:02,840 Speaker 1: week days at ten am Eastern on applecar Play and 641 00:30:02,960 --> 00:30:05,880 Speaker 1: androyd Otto with the Bloomberg Business App. You can also 642 00:30:05,960 --> 00:30:09,160 Speaker 1: listen live on Amazon Alexa from our flagship New York 643 00:30:09,200 --> 00:30:12,600 Speaker 1: station Just Say Alexa playing Bloomberg eleven thirty. 644 00:30:14,160 --> 00:30:15,160 Speaker 2: Blackstone m M. 645 00:30:16,080 --> 00:30:19,400 Speaker 3: I just I kind of don't remember just how huge 646 00:30:19,440 --> 00:30:21,160 Speaker 3: they are, and I go look at the market cap, 647 00:30:21,200 --> 00:30:24,440 Speaker 3: I look at their assets on their management So but anyway, 648 00:30:24,480 --> 00:30:28,600 Speaker 3: we spoke with a Blackstone COO, Jonathan gray Lader today. 649 00:30:29,320 --> 00:30:32,720 Speaker 3: He's concerned about higher rates are headwind for Blackstone's key 650 00:30:32,800 --> 00:30:37,080 Speaker 3: business units, limiting evaluations and making borrowing costs more costly. 651 00:30:37,560 --> 00:30:40,360 Speaker 3: And Blackstone COO Jonathan Gray thinks that the FED may 652 00:30:40,480 --> 00:30:43,120 Speaker 3: not be as quick to cut rates as investors hope. 653 00:30:43,280 --> 00:30:45,600 Speaker 2: Let's listen in. I think the FED has had some 654 00:30:45,760 --> 00:30:47,240 Speaker 2: real success on inflation. 655 00:30:47,440 --> 00:30:49,440 Speaker 8: You know, we had inflation north of nine. 656 00:30:49,920 --> 00:30:53,560 Speaker 3: The pace of disinflation has slowed, but the path is 657 00:30:53,680 --> 00:30:54,560 Speaker 3: still downward. 658 00:30:55,080 --> 00:30:58,000 Speaker 5: That was Jonathan Gray, Blackstone COEO. But all the hubbabaloo, 659 00:30:58,240 --> 00:31:00,440 Speaker 5: the stock was down like five percent earlier. Pre market 660 00:31:00,480 --> 00:31:03,760 Speaker 5: trading collected more fees from big retail funds and credit 661 00:31:03,840 --> 00:31:05,840 Speaker 5: strategies during the first quarter and that really helped to 662 00:31:05,880 --> 00:31:09,400 Speaker 5: compensate for that slower pace of deal exits. But like 663 00:31:09,480 --> 00:31:12,120 Speaker 5: some of those numbers are huge. Distributable earnings increased one 664 00:31:12,160 --> 00:31:14,200 Speaker 5: percent from a year earlier to one point two seven 665 00:31:14,560 --> 00:31:17,360 Speaker 5: billion dollars. Yep, that's a ginormous kind of number. 666 00:31:18,120 --> 00:31:19,719 Speaker 2: Let's get all they paid executive as well. 667 00:31:19,760 --> 00:31:23,560 Speaker 5: I understand I've heard such things. Yes, Joining us never 668 00:31:23,640 --> 00:31:26,440 Speaker 5: more is Paul Goldberg, Bloomberg Intelligence senior equity analyst. He 669 00:31:26,520 --> 00:31:29,880 Speaker 5: covers all these big asset managers as well as golobal banks. Hey, Paul, 670 00:31:30,360 --> 00:31:31,520 Speaker 5: what did you make of the numbers? 671 00:31:33,480 --> 00:31:36,200 Speaker 10: I thank you for having me the numbers. I would 672 00:31:36,200 --> 00:31:38,920 Speaker 10: break them up in three buckets. One the fee growth, 673 00:31:39,680 --> 00:31:43,280 Speaker 10: which was fairly decent, but not the double digit Bracknate 674 00:31:43,360 --> 00:31:48,600 Speaker 10: growth that we've seen in years prior to the painful 675 00:31:48,960 --> 00:31:52,160 Speaker 10: twenty twenty three in late twenty twenty two. The second 676 00:31:52,200 --> 00:31:54,560 Speaker 10: one is key themes and those things are getting better. 677 00:31:54,800 --> 00:31:57,680 Speaker 10: So you do get a private credit business that was 678 00:31:58,120 --> 00:32:02,320 Speaker 10: working pretty well. You have a wealth management business that 679 00:32:02,480 --> 00:32:05,360 Speaker 10: you mentioned that's working pretty well. They've reached two hundred 680 00:32:05,360 --> 00:32:08,280 Speaker 10: and forty billion dollarsand assets in the wealth management with 681 00:32:08,400 --> 00:32:10,800 Speaker 10: their goal of to fifty, so they're pretty much at 682 00:32:10,840 --> 00:32:15,440 Speaker 10: their goal. And lastly, the painful part is the deal 683 00:32:15,480 --> 00:32:19,440 Speaker 10: activity in terms of deployments and particularly realizations that produce 684 00:32:19,520 --> 00:32:23,120 Speaker 10: performance fees, and that sort of becomes still a pain 685 00:32:23,240 --> 00:32:27,600 Speaker 10: point for Blackstone and that's a drag on their earnings. 686 00:32:28,120 --> 00:32:30,120 Speaker 2: What's Paul, what have they been saying about that? 687 00:32:30,280 --> 00:32:32,280 Speaker 3: Because again, you're right, we haven't seen a lot of 688 00:32:32,400 --> 00:32:33,880 Speaker 3: M and A activity, we haven't seen a lot of 689 00:32:34,000 --> 00:32:37,400 Speaker 3: IPO activity, the you know, types of exit events that 690 00:32:37,520 --> 00:32:40,240 Speaker 3: would allow them to realize some returns on their investments. 691 00:32:40,560 --> 00:32:42,760 Speaker 3: What are they saying about the next six to twelve months. 692 00:32:43,880 --> 00:32:46,160 Speaker 10: Well, I would actually look a little bit beyond that, 693 00:32:46,360 --> 00:32:49,120 Speaker 10: because on the call they were really talking about twenty 694 00:32:49,200 --> 00:32:52,760 Speaker 10: twenty four and before they were really hopeful for the 695 00:32:52,800 --> 00:32:55,120 Speaker 10: second half of twenty four to get better. But then 696 00:32:55,200 --> 00:32:58,320 Speaker 10: Jonathan Gray was actually on plumber Tivity a little bit 697 00:32:58,480 --> 00:33:01,480 Speaker 10: after the call in the last hour or so, and 698 00:33:01,600 --> 00:33:05,280 Speaker 10: he kind of mentioned the more activity, return of activity 699 00:33:05,360 --> 00:33:07,440 Speaker 10: is probably going to be more of a late twenty 700 00:33:07,520 --> 00:33:10,640 Speaker 10: four and into twenty five matter. So I would, yeah, 701 00:33:10,640 --> 00:33:13,200 Speaker 10: I would look a little bit beyond the next six months, 702 00:33:13,240 --> 00:33:15,000 Speaker 10: maybe the next twelve, nine to twelve. 703 00:33:15,480 --> 00:33:19,040 Speaker 5: If they have a hard time exiting investments, how do 704 00:33:19,120 --> 00:33:21,160 Speaker 5: they then raise more money for new funds? How does 705 00:33:21,200 --> 00:33:21,560 Speaker 5: that work? 706 00:33:23,000 --> 00:33:25,920 Speaker 10: Well, I think it's the issue not just we're kind 707 00:33:25,960 --> 00:33:28,160 Speaker 10: of very focused on the private equity when we talk 708 00:33:28,200 --> 00:33:31,160 Speaker 10: about that, but the third of their business is private equity. 709 00:33:31,200 --> 00:33:35,200 Speaker 10: The third of their business is real estate, and there 710 00:33:35,200 --> 00:33:38,040 Speaker 10: are still there are some opportunities, and performance in real 711 00:33:38,160 --> 00:33:41,160 Speaker 10: estate gotten a little bit better. So the fundraising came 712 00:33:41,240 --> 00:33:43,800 Speaker 10: back to some extent, the b read b cred the 713 00:33:44,440 --> 00:33:48,520 Speaker 10: retail funds. The outflows kind of stopped there so perpetual 714 00:33:48,640 --> 00:33:53,320 Speaker 10: vehicles are doing pretty well for them. And the last category, 715 00:33:53,440 --> 00:33:56,640 Speaker 10: the credit category, that has just been a very strong 716 00:33:56,720 --> 00:33:59,280 Speaker 10: grower and that's reached out about a third of their 717 00:33:59,320 --> 00:33:59,880 Speaker 10: assets at. 718 00:33:59,760 --> 00:34:02,960 Speaker 3: This Paul, Yeah, you mentioned real estate, and of course 719 00:34:03,640 --> 00:34:07,160 Speaker 3: historically Blackstone's been a big, big player in the real 720 00:34:07,280 --> 00:34:10,080 Speaker 3: estate business. What is their call on office A? Do 721 00:34:10,160 --> 00:34:12,640 Speaker 3: they have a lot of exposure there? And B how 722 00:34:12,719 --> 00:34:13,680 Speaker 3: concerned are they about it? 723 00:34:15,680 --> 00:34:19,239 Speaker 10: That there was nothing discussed in terms of office really 724 00:34:19,360 --> 00:34:22,680 Speaker 10: on the cold this morning. They have about one or 725 00:34:22,760 --> 00:34:26,720 Speaker 10: two percent of total assets in commer in office space, 726 00:34:27,080 --> 00:34:29,640 Speaker 10: maybe even less than that, so it's a fairly small amount. 727 00:34:30,640 --> 00:34:33,839 Speaker 10: They are super focused on the multifamily. During the quarter 728 00:34:33,960 --> 00:34:36,839 Speaker 10: they made it ten billion dollar deal for air communities 729 00:34:37,320 --> 00:34:40,200 Speaker 10: that take private deal, so they're still very focused on that. 730 00:34:40,560 --> 00:34:43,799 Speaker 10: That've been for over the last ten fifteen years. They 731 00:34:43,920 --> 00:34:49,920 Speaker 10: also tooked gave some specific numbers around the logistics and infrastructure, 732 00:34:50,239 --> 00:34:53,000 Speaker 10: So there's about fifty billion dollars of investments in that 733 00:34:53,160 --> 00:34:56,920 Speaker 10: already we're talking about that's five percent of the total 734 00:34:56,960 --> 00:34:57,800 Speaker 10: assets just in that. 735 00:34:58,600 --> 00:35:00,560 Speaker 5: So I have brought up the how did they raise 736 00:35:00,600 --> 00:35:02,200 Speaker 5: more money they can exit? Did you read the big 737 00:35:02,239 --> 00:35:05,759 Speaker 5: take article, Paul uh Sweeney, it was about this. It 738 00:35:05,920 --> 00:35:10,040 Speaker 5: was basically that private equity executives have had all the 739 00:35:10,160 --> 00:35:13,320 Speaker 5: power in terms of fundraising, and then now the tables 740 00:35:13,360 --> 00:35:15,160 Speaker 5: have turned a bit and the dealmakers are being told 741 00:35:15,200 --> 00:35:17,479 Speaker 5: to put more of their own assets on the line 742 00:35:17,600 --> 00:35:21,240 Speaker 5: as they struggle to ring cash from their increasingly wary backers. 743 00:35:21,480 --> 00:35:23,160 Speaker 5: And that did some of the junior guys have to 744 00:35:23,280 --> 00:35:26,040 Speaker 5: like put up a home or like you know, put 745 00:35:26,120 --> 00:35:28,480 Speaker 5: up a car their second home or something in order 746 00:35:28,480 --> 00:35:30,480 Speaker 5: to get these loans with like very high rates in 747 00:35:30,600 --> 00:35:32,920 Speaker 5: order to do that. Paul Goldberg, did you read that? 748 00:35:33,000 --> 00:35:33,719 Speaker 5: What did you think of that? 749 00:35:34,680 --> 00:35:38,120 Speaker 10: I did read that. There are some of that, But 750 00:35:38,400 --> 00:35:40,920 Speaker 10: on the that basis, there's still a lot of demand 751 00:35:41,640 --> 00:35:45,440 Speaker 10: for all sorts of alternative investments, especially in the areas 752 00:35:45,440 --> 00:35:48,319 Speaker 10: if you go into wealth where the growth is much 753 00:35:48,640 --> 00:35:51,680 Speaker 10: faster and the opportunities bigger. Because the wealth is a 754 00:35:51,800 --> 00:35:57,040 Speaker 10: portion of the private investments, the portion of alternatives is 755 00:35:57,160 --> 00:36:00,040 Speaker 10: much smaller, So there's a lot of opportunity there, and 756 00:36:00,520 --> 00:36:04,239 Speaker 10: I think there's not as much power from the investors 757 00:36:04,280 --> 00:36:05,120 Speaker 10: in those areas. 758 00:36:05,800 --> 00:36:06,440 Speaker 2: There's a lot of. 759 00:36:06,480 --> 00:36:09,919 Speaker 10: Demand coming from insurance companies. Blackstone has about two hundred 760 00:36:09,960 --> 00:36:13,239 Speaker 10: billion dollars of their assets are coming from insurance, they 761 00:36:13,320 --> 00:36:15,960 Speaker 10: earn them a little bit of extra spread. So I 762 00:36:16,040 --> 00:36:20,560 Speaker 10: think there are different areas of fundraising and different areas 763 00:36:20,600 --> 00:36:23,719 Speaker 10: of assets and clients that come to them, rather than 764 00:36:23,920 --> 00:36:27,640 Speaker 10: just what we've kind of got from that article. 765 00:36:28,600 --> 00:36:32,400 Speaker 3: Private credit, Paul, what's Blackstone say about this business? 766 00:36:33,320 --> 00:36:35,160 Speaker 2: It's obviously just a booming business. 767 00:36:35,200 --> 00:36:38,759 Speaker 3: Assets under management is skyrocketing. There's some calls for maybe 768 00:36:38,800 --> 00:36:41,279 Speaker 3: some greater transparency, maybe in some regulation of the private 769 00:36:41,320 --> 00:36:41,880 Speaker 3: credit business. 770 00:36:41,920 --> 00:36:44,120 Speaker 2: What's the Blackstone take on that part of the business. 771 00:36:45,640 --> 00:36:48,600 Speaker 10: It's been very strong. As I mentioned, it reached about 772 00:36:49,040 --> 00:36:53,160 Speaker 10: third of their assets three hundred plus billion dollars. They 773 00:36:53,239 --> 00:36:56,080 Speaker 10: do have a lot of different vehicles there that do 774 00:36:56,320 --> 00:36:58,800 Speaker 10: a lot of direct lending, but they're also have the 775 00:36:58,960 --> 00:37:02,360 Speaker 10: largest business develop company which is geared towards retail b 776 00:37:02,520 --> 00:37:06,480 Speaker 10: cred so's that's a huge vehicle for them. There was 777 00:37:06,520 --> 00:37:08,800 Speaker 10: a lot of growth first quarter. There are actually some 778 00:37:09,000 --> 00:37:12,840 Speaker 10: questions because you had a syndicated loan market with blending 779 00:37:12,920 --> 00:37:15,759 Speaker 10: from the banks. Come back to some extent reclaim in 780 00:37:15,840 --> 00:37:19,000 Speaker 10: some of the module that the private credit got last year. 781 00:37:20,320 --> 00:37:23,239 Speaker 10: But it's a long term game. So over time, there's 782 00:37:23,239 --> 00:37:25,719 Speaker 10: still a lot of opportunity for private credit. We ran 783 00:37:25,840 --> 00:37:28,680 Speaker 10: some numbers, but think if you think of investment credit 784 00:37:28,800 --> 00:37:32,640 Speaker 10: potential for replacement, especially for those insurance companies, it could 785 00:37:32,680 --> 00:37:36,720 Speaker 10: be a forty trillion dollars addressable market. When private credit 786 00:37:36,920 --> 00:37:39,919 Speaker 10: is we're talking about one point six one point seven 787 00:37:40,000 --> 00:37:43,680 Speaker 10: trillion right now, So there's a lot of opportunities still 788 00:37:43,760 --> 00:37:46,320 Speaker 10: to take the incremental one two three percent of that 789 00:37:46,520 --> 00:37:48,080 Speaker 10: market still before we. 790 00:37:48,120 --> 00:37:48,400 Speaker 2: Let you go. 791 00:37:48,560 --> 00:37:50,800 Speaker 5: So Blackstones at the tone, what do you think the 792 00:37:50,880 --> 00:37:52,640 Speaker 5: other big asset managers are going to come out with. 793 00:37:54,800 --> 00:37:57,440 Speaker 10: It's a little bit difficult because the earnings for them 794 00:37:57,520 --> 00:38:01,080 Speaker 10: kind of idiosyncratic to some extent because these private investments 795 00:38:01,120 --> 00:38:05,600 Speaker 10: they're large and sometimes they move in different different directions. 796 00:38:05,800 --> 00:38:08,200 Speaker 10: There's about two weeks until the next one report, so 797 00:38:08,440 --> 00:38:11,040 Speaker 10: there's most of them reports over the end of April 798 00:38:11,120 --> 00:38:16,000 Speaker 10: and early May. I think from what we've seen from Blackstone, 799 00:38:16,040 --> 00:38:18,439 Speaker 10: the private credit is going to hold fairly well, which 800 00:38:18,520 --> 00:38:22,640 Speaker 10: is a positive for companies like Apalla and Aarris. Private 801 00:38:22,719 --> 00:38:25,840 Speaker 10: equity realizations exits is still a little bit more difficult, 802 00:38:25,960 --> 00:38:28,759 Speaker 10: so it might give some pain to the guys like 803 00:38:28,840 --> 00:38:35,319 Speaker 10: Carlisle KKR. They actually pronounced their realizations a few weeks 804 00:38:35,360 --> 00:38:36,840 Speaker 10: before the end of the quarter, so we know the 805 00:38:36,920 --> 00:38:40,320 Speaker 10: numbers were pretty light, so that's not going to be 806 00:38:40,360 --> 00:38:42,799 Speaker 10: a surprise. But on the other hand, rates has stained 807 00:38:42,840 --> 00:38:45,719 Speaker 10: higher for longer. They brought out the Global the rest 808 00:38:45,760 --> 00:38:48,400 Speaker 10: of the business from Global Atlantic, so the insurance business 809 00:38:48,520 --> 00:38:51,320 Speaker 10: is going to do well and provide them some earniences 810 00:38:51,560 --> 00:38:52,200 Speaker 10: in that area. 811 00:38:53,280 --> 00:38:54,719 Speaker 2: All right, Paul, thanks so much for joining us. 812 00:38:54,719 --> 00:38:57,640 Speaker 3: Paul Gilberg, he's a senior equityanas of Bloomberg Intelligence, following 813 00:38:57,719 --> 00:39:00,920 Speaker 3: all the alternative asset managers then in our Princeton, New 814 00:39:01,000 --> 00:39:04,880 Speaker 3: Jersey office. So Blackstone is just so huge and the 815 00:39:04,960 --> 00:39:07,160 Speaker 3: private credit business has just been an amazing business. No 816 00:39:07,280 --> 00:39:09,520 Speaker 3: surprise that Blackstones got a big presence there. 817 00:39:09,560 --> 00:39:10,640 Speaker 5: You know, I was thinking about it. I was like, 818 00:39:10,760 --> 00:39:12,279 Speaker 5: I don't know if I'm one hundred percent clear of 819 00:39:12,320 --> 00:39:15,080 Speaker 5: what Blackstone is anymore. Yeah, Like, because it's so big. 820 00:39:15,680 --> 00:39:17,840 Speaker 2: I used to have a lot of luncheon remember Blackrock 821 00:39:17,920 --> 00:39:19,000 Speaker 2: used to be a part of that. To give you 822 00:39:19,040 --> 00:39:20,920 Speaker 2: a sense of how big it originally was. 823 00:39:21,120 --> 00:39:25,600 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apples, Spotify, 824 00:39:25,840 --> 00:39:29,000 Speaker 1: and anywhere else you get your podcasts. 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