WEBVTT - China, US Steel, Bitcoin, and Tekion (Podcast) 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day, we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets podcast called Apple Podcasts or wherever 0:00:17.400 --> 0:00:20.480 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:20.800 --> 0:00:24.000 Ridge Borky covers all the steel in speculating a little 0:00:24.000 --> 0:00:27.240 bit here. You were just speculating, you know, just spitballing here. Boy, 0:00:27.280 --> 0:00:28.680 I never thought we'd see a deal in there. I 0:00:28.760 --> 0:00:31.360 just I guess I wasn't expecting the deal in the 0:00:31.400 --> 0:00:33.479 steel industry. I don't know why, but it was an 0:00:33.520 --> 0:00:37.880 interesting transaction. What is Cleveland Cliffs really looking to do here? 0:00:38.600 --> 0:00:40.839 Why are they doing this steal? Why would they like 0:00:40.880 --> 0:00:41.480 to do this deal? 0:00:41.520 --> 0:00:43.680 I think they'd like to do this deal again. Like 0:00:43.760 --> 0:00:48.240 you touched on, it's back to nineteen twenties. Steel is 0:00:48.280 --> 0:00:52.040 cool again, right, let's make steel cool. Fortunately, Cleveland Cliffs 0:00:52.040 --> 0:00:53.880 most of their plants are from the nineteen twenties. 0:00:54.000 --> 0:00:55.600 Okay, so what. 0:00:55.480 --> 0:00:58.959 They're looking for is, obviously they're looking to get exposure 0:00:59.000 --> 0:01:02.720 Big River Steel, which is the EAF to US Steel. 0:01:02.480 --> 0:01:06.720 Is building what's what's e AF. EAF is electric arc furnace, 0:01:07.040 --> 0:01:08.600 electric arc furnace. 0:01:08.360 --> 0:01:09.520 Rather than the blast ferns. 0:01:10.280 --> 0:01:12.160 So this is newer technology to make steel. 0:01:12.240 --> 0:01:18.440 Newer technology, more flexible technology usually also non union technology, 0:01:18.760 --> 0:01:21.920 non union run. So if you look at kind of 0:01:21.920 --> 0:01:26.560 the math they're paying, they offer thirty five dollars this year, 0:01:26.760 --> 0:01:30.800 half cash, half stock. The cash portion comes to a 0:01:30.840 --> 0:01:35.280 little under four billion dollars. US Steel has three point 0:01:35.360 --> 0:01:37.720 one billion dollars of cash on the balance sheet in 0:01:37.800 --> 0:01:40.760 order to finish big River steel they bought. They bought 0:01:40.880 --> 0:01:43.760 Bigger River Steel when it was half built three lower 0:01:43.800 --> 0:01:48.080 three million tons of year. They're expanding to another three 0:01:48.080 --> 0:01:52.960 million tons of year to bought. To get three million 0:01:53.000 --> 0:01:56.160 tons a year of EAF capacity is around three to 0:01:56.240 --> 0:01:58.920 four billion dollars. So if you look at this way, 0:01:59.080 --> 0:02:05.000 we just offer stock and four billion dollars of cash 0:02:05.600 --> 0:02:10.280 to get six over six million tons of y capacity. 0:02:10.360 --> 0:02:13.720 That probably cost US seventy eight billion to go bill. 0:02:14.160 --> 0:02:16.640 And that's basically what they're what they're bidding, right. 0:02:16.919 --> 0:02:19.160 That's basically what they're bidding. 0:02:20.240 --> 0:02:21.240 Right on the EQUI. 0:02:21.880 --> 0:02:25.320 But US Steel apparently thinks they're worth more than that, 0:02:25.680 --> 0:02:27.800 although they were trading for twenty two dollars a share 0:02:27.840 --> 0:02:32.440 on Friday. Why do they Why do they fight this? 0:02:32.520 --> 0:02:35.440 It's a it's a decent premium. Can they get more elsewhere? 0:02:35.919 --> 0:02:38.320 I think you take the deal. You have forty three 0:02:38.360 --> 0:02:42.320 percent premium today you have out They US Steel House 0:02:42.320 --> 0:02:44.880 outlining is what they call their best for all plant. 0:02:45.600 --> 0:02:48.280 So part of it one one part of it is 0:02:48.520 --> 0:02:53.320 finished billion out Big Steel. Other parts are to upgrade 0:02:53.480 --> 0:02:59.000 our finishing capabilities. The other part is they're looking to 0:02:59.080 --> 0:03:03.639 expand in elect sure because electrical steals which flowing to evs, 0:03:03.680 --> 0:03:06.920 which you're gentlemen, we're talking a little about prior. So 0:03:06.960 --> 0:03:10.800 they've outlined this plan, but it's a multi year capital 0:03:10.880 --> 0:03:15.120 spend program and we don't see the success. You know, 0:03:15.280 --> 0:03:18.840 whether it would be successful doesn't play out for a 0:03:18.880 --> 0:03:19.639 few years now. 0:03:19.639 --> 0:03:22.080 Paul, we've been, uh, you know, we've been invited out 0:03:22.120 --> 0:03:24.280 to see Big River. I'd love to go see because 0:03:24.320 --> 0:03:26.200 David Stickler came in here. He sat right in that 0:03:26.280 --> 0:03:28.000 chair where you're sitting, and he said, you guys should 0:03:28.000 --> 0:03:29.560 come out and check out our new plant. 0:03:30.120 --> 0:03:32.680 So I guess the issue is, I mean, I'm looking 0:03:32.720 --> 0:03:35.120 at the capex I mean, for you a steal. They 0:03:35.160 --> 0:03:37.000 spend you know, a couple of billion dollars a year, 0:03:37.000 --> 0:03:38.800 two and a half billion dollars a year in capex. 0:03:39.040 --> 0:03:40.520 Is that money going just for the. 0:03:40.600 --> 0:03:43.480 New technology or are they still putting money into somebody's 0:03:43.480 --> 0:03:47.680 plants in Pittsburgh and Garyan Dan and Allentown, Allentown. 0:03:47.800 --> 0:03:50.000 Right, it's about two thirds one thirds, two thirds for 0:03:50.080 --> 0:03:52.960 the new technology, one third for old technology. 0:03:52.440 --> 0:03:54.880 And the old technology used to kind of keep it running. 0:03:54.720 --> 0:03:55.840 Try and keep it running. 0:03:55.840 --> 0:03:56.200 Wow. 0:03:56.240 --> 0:04:01.960 Correct, So the the thing here is you you have 0:04:02.120 --> 0:04:06.200 this plan to you know, both US Steel and Cliffs 0:04:06.280 --> 0:04:10.200 have been shining down, rationalizing capacity, you know, closing the 0:04:10.240 --> 0:04:12.200 old blastwarenesses and things like that. 0:04:12.200 --> 0:04:14.960 That's why environmental purposes are just because it costs too 0:04:15.040 --> 0:04:15.520 much to run. 0:04:15.520 --> 0:04:16.520 They're not getting enough. 0:04:18.200 --> 0:04:20.760 A product out of it really costs too much to run, right, 0:04:21.400 --> 0:04:24.200 and the technology in order to reinvest in the technology 0:04:24.360 --> 0:04:25.760 is just too expensive. 0:04:25.800 --> 0:04:28.159 Well, well, this is what Cleveland Cliffs is looking to 0:04:28.160 --> 0:04:30.400 do essentially, right, this is what US deal is doing 0:04:30.440 --> 0:04:32.400 at Big River, and Cleveland Cliffs wants to buy that 0:04:32.440 --> 0:04:32.800 from them. 0:04:32.920 --> 0:04:35.719 Right, if you look at this will take the pro 0:04:35.760 --> 0:04:38.919 former company clean cliffs probably is ninety three percent blast 0:04:38.920 --> 0:04:42.640 furnesses today seven percent eafs. The new technology this would 0:04:42.640 --> 0:04:47.320 take them to eighty twenty beyond that. You say, well, gee, 0:04:47.320 --> 0:04:49.680 that seems not that big of a deal, But it 0:04:49.680 --> 0:04:51.960 gives them a lot of flexibility because one of the 0:04:52.000 --> 0:04:54.599 other things about eafs is you can shut them off, 0:04:54.800 --> 0:04:56.760 turn them up, and turn them down a lot easier 0:04:56.760 --> 0:04:57.840 than you can't wait blastphemers. 0:04:57.880 --> 0:05:00.960 By the way, who who are there competitors? Who else 0:05:01.000 --> 0:05:03.760 in this market could make a bid? 0:05:03.760 --> 0:05:06.560 If you know US steel could be worth more. 0:05:06.760 --> 0:05:10.960 Well, you would have Newcorn Steel Dynamics, which are two 0:05:11.000 --> 0:05:13.679 other big players in the US. They're one hundred percent 0:05:14.279 --> 0:05:18.640 technology there, so they probably don't care for the blast 0:05:18.640 --> 0:05:20.440 furnace route. 0:05:20.520 --> 0:05:20.719 Right. 0:05:21.839 --> 0:05:25.680 You know you mentioned that David Stickler built inviting you 0:05:25.760 --> 0:05:29.320 guys out to see bigger or steel. He built bigger steel. 0:05:29.360 --> 0:05:31.600 Now he's moved on to another project, high Bar, which 0:05:31.640 --> 0:05:36.359 a rebar plant. But David Steckler also built some steel 0:05:36.440 --> 0:05:39.680 dynamics first plant or was it part of a group 0:05:39.720 --> 0:05:43.320 that built the first eas for steel dynamics. 0:05:43.600 --> 0:05:47.080 So are new steel mills in the United States being 0:05:47.120 --> 0:05:48.080 built today? 0:05:48.839 --> 0:05:51.840 Well, what's happened is Section two thirty two has really 0:05:51.839 --> 0:05:52.520 helped these guys. 0:05:52.560 --> 0:05:55.120 If you look at the US steel what a second two. 0:05:55.200 --> 0:05:59.520 Section two thirty two was the the Trump laws to 0:05:59.640 --> 0:06:03.120 prevent imports, putting a twenty five percent tariff. 0:06:02.760 --> 0:06:04.280 On steel import to the US. 0:06:04.480 --> 0:06:06.640 If you look at the US steel industry, US steel 0:06:06.720 --> 0:06:09.239 industry historically is about one hundred million tons of steel 0:06:09.240 --> 0:06:13.760 a year. Eighty percent is produced in the US, twenty 0:06:13.800 --> 0:06:19.720 percent is historically imported. With these tariffs, that's made the 0:06:19.760 --> 0:06:22.880 imports a little less competitive. What's happened is we've seen 0:06:23.720 --> 0:06:26.880 over the last few years capacity being added in the 0:06:27.120 --> 0:06:31.360 US to displace the tariffs once they finally to displace 0:06:31.600 --> 0:06:34.279 the import steel once the tariffs finally go away. 0:06:34.800 --> 0:06:37.800 So that so the enshoing is actually happening in the 0:06:37.800 --> 0:06:38.680 steel business. 0:06:39.000 --> 0:06:39.680 Okay, great, So. 0:06:39.720 --> 0:06:41.280 Are you put these If you were to put these 0:06:41.279 --> 0:06:43.920 two companies together, Cleveland Cliffs in the US steal, how 0:06:43.960 --> 0:06:46.320 big would they be kind of relative to the world 0:06:46.480 --> 0:06:47.599 order of steel makers. 0:06:47.640 --> 0:06:50.599 It wouldn't make it would make them a top ten 0:06:50.720 --> 0:06:54.359 in the world. Okay, I don't think scale helps you 0:06:54.480 --> 0:06:55.200 at all, But. 0:06:55.720 --> 0:06:58.800 That's why I thought manufacturing scale helps. I learned that 0:06:59.240 --> 0:07:00.839 I know you went to shout to go business school. 0:07:01.120 --> 0:07:02.600 You guys are good with the numbers, but. 0:07:03.160 --> 0:07:09.359 It's just the industry that's you know historic. You know, 0:07:09.400 --> 0:07:12.280 it costs a lot of ship So why would you 0:07:12.760 --> 0:07:16.239 why would it be cheaper to build a ton steal 0:07:16.280 --> 0:07:18.320 in the US put a boat to somewhere else? 0:07:18.720 --> 0:07:19.000 All Right? 0:07:19.040 --> 0:07:20.720 So what what's what's this steel call? 0:07:20.800 --> 0:07:21.080 Today? 0:07:21.080 --> 0:07:23.640 You talk to institutional investors in the the three guys 0:07:23.640 --> 0:07:27.000 in Pittsburgh that still invest in this stuff. What's the 0:07:27.040 --> 0:07:28.440 call here? Do I do I buy a new Core? 0:07:28.520 --> 0:07:30.760 Do I buy a US steal? What's what's the investment 0:07:30.840 --> 0:07:31.600 call for this group? 0:07:31.760 --> 0:07:33.320 I mean if you kind of look at New Core, 0:07:33.840 --> 0:07:37.040 Newcore and Steel Dynamics, that I'll perform these these two 0:07:37.080 --> 0:07:38.720 guys by wide margin. 0:07:38.800 --> 0:07:40.960 And that's the function of the technology. 0:07:40.400 --> 0:07:44.240 That I think one function of technology. And two you've 0:07:44.240 --> 0:07:50.560 also New Core and Steel Dynamics have over the last 0:07:50.600 --> 0:07:55.160 few years been more aggressive in moving further downstream. 0:07:55.360 --> 0:07:55.960 Part of this deal. 0:07:55.960 --> 0:07:58.040 And I could go to Jenrey because she's the expert 0:07:58.080 --> 0:07:59.880 in anti trust. What is generally telling you about any 0:08:00.080 --> 0:08:00.720 tit trust here? 0:08:00.960 --> 0:08:03.320 There's going to be I think there's gonna be an 0:08:03.320 --> 0:08:07.160 anti trust review here talking with Jen too. She was 0:08:07.200 --> 0:08:12.120 also so that's another element of YO, another reason whether 0:08:12.200 --> 0:08:13.400 the deal goes up. 0:08:13.600 --> 0:08:17.400 Yeah, I mean I look at the five year performance 0:08:17.480 --> 0:08:21.440 of as we mentioned earlier. You know, US steel has 0:08:21.440 --> 0:08:26.120 returned nothing negative one percent, but new core is has 0:08:26.200 --> 0:08:30.440 tripled over the last five years, and and Steel Dynamics 0:08:30.480 --> 0:08:32.360 is almost there. I mean they're up one hundred and 0:08:32.440 --> 0:08:33.080 seventy percent. 0:08:33.440 --> 0:08:34.880 Money and steel companies. 0:08:34.960 --> 0:08:36.560 Yeah, what are the contracts that you look at for 0:08:36.600 --> 0:08:38.640 the underlying and get ten seconds? 0:08:38.640 --> 0:08:40.120 What are the what are the steel contracts that. 0:08:40.080 --> 0:08:43.600 You look at for the price, the price if you 0:08:43.640 --> 0:08:46.559 look at S T A, N H HC. 0:08:47.800 --> 0:08:50.440 All right, all right, we'll get into the steel business. 0:08:50.440 --> 0:08:53.560 That's w is this hot rold steel? I got rolled 0:08:53.559 --> 0:08:54.600 steel steel? 0:08:54.640 --> 0:08:54.880 All right? 0:08:54.960 --> 0:08:56.440 Rich Richard Borg, thanks so much for joining us. 0:08:56.520 --> 0:08:58.680 Rich Board covers all the steel companies and all that 0:08:58.679 --> 0:09:00.760 good stuff for Bloomberg Intelligence. 0:09:01.800 --> 0:09:05.239 You're listening to the team Ken's are live program Bloomberg 0:09:05.280 --> 0:09:08.640 Markets weekdays at ten am Eastern on Bloomberg dot com, 0:09:08.720 --> 0:09:11.880 the iHeartRadio app and the Bloomberg Business app, or listen 0:09:11.920 --> 0:09:14.040 on demand wherever you get your podcasts. 0:09:16.080 --> 0:09:19.360 Matt, we like talking to Dan Ees equity als what 0:09:19.480 --> 0:09:20.200 Bush Security is. 0:09:20.200 --> 0:09:21.080 Pretty smart guy. 0:09:21.960 --> 0:09:23.880 We usually learn a thing or two when we talk 0:09:23.960 --> 0:09:26.480 to him, but I don't feel the need to interrupt 0:09:26.520 --> 0:09:30.319 his vacation, particularly when his vacation is increte. 0:09:30.360 --> 0:09:31.720 He's not down at the Jersey Shore. 0:09:31.760 --> 0:09:35.280 He's in crete, and we get a video zoom thing 0:09:35.360 --> 0:09:39.199 going of him right here. Because Bloomberg Markets is simulcast 0:09:39.320 --> 0:09:42.000 on YouTube, you can go to YouTube and search Bloomberg 0:09:42.040 --> 0:09:45.080 Global News. Dan, I hope you're having a great time 0:09:45.080 --> 0:09:48.560 and create it looks beautiful behind you. Give us a 0:09:48.600 --> 0:09:51.480 good sense of what you've kind of just observed just 0:09:51.559 --> 0:09:52.880 in your time over there. 0:09:54.440 --> 0:09:54.640 Yeah. 0:09:54.720 --> 0:09:56.920 No, it's great to be great to be with you, Matt. 0:09:56.960 --> 0:10:00.840 I am look, I mean to me, it's it's it's 0:10:00.960 --> 0:10:05.240 it's always great food, great music. You see some you 0:10:05.280 --> 0:10:08.080 know some obviously some maybe electric vehicles here and there, 0:10:08.200 --> 0:10:11.280 but it's it's been a great it's been great and uh, 0:10:11.559 --> 0:10:13.559 you know, I think it's just a good uh. 0:10:13.480 --> 0:10:16.000 Sort of rest going into what's gonna be an exciting fall. 0:10:16.320 --> 0:10:19.000 All right, Dan, So I'm just looking at the bring 0:10:19.000 --> 0:10:22.079 you back into reality here, the NASTAQ one hundred stock 0:10:22.160 --> 0:10:24.720 index Real Tech heavy here up thirty eight percent year 0:10:24.760 --> 0:10:28.600 to date. Put that stock price performance in context of 0:10:28.600 --> 0:10:31.080 what we've seen from these tech companies for the first 0:10:31.320 --> 0:10:33.200 you know, we just got through their second quarter earnings 0:10:33.280 --> 0:10:34.959 and kind of the outlook for the remainder of the year. 0:10:34.960 --> 0:10:36.200 Put that into into context. 0:10:36.200 --> 0:10:39.720 For US, I Mett, I view this as just a 0:10:39.760 --> 0:10:42.199 little sell off, a pause to what's going to be 0:10:42.240 --> 0:10:44.120 a rally second half of the year for tech. I 0:10:44.200 --> 0:10:47.240 think if you look at numbers overall, from cloud to 0:10:47.360 --> 0:10:51.120 digital media to what we're seeing across enterprise, I. 0:10:51.040 --> 0:10:53.160 Think we're actually it's stronger than expected. 0:10:53.240 --> 0:10:56.240 Now, granted the stocks have run significant, you've seen sell 0:10:56.280 --> 0:10:58.559 offs posed to Apple, Microsoft, Tessa. 0:10:58.880 --> 0:11:00.920 I think it's short lived because I think. 0:11:00.800 --> 0:11:05.200 Second half numbers were conservative and we're seeing upticks across 0:11:05.240 --> 0:11:05.680 the board. 0:11:05.720 --> 0:11:07.880 That's sort of our view going into the year end. 0:11:08.000 --> 0:11:10.040 Dan, where do you think they look most conservative? When 0:11:10.040 --> 0:11:13.000 you when you were going over these earnings reports before 0:11:13.040 --> 0:11:16.600 you jumped on the private jet decrete, where did you 0:11:17.800 --> 0:11:19.920 where did you think, Ah, this is these guys are 0:11:20.040 --> 0:11:20.880 sandbagging US. 0:11:22.160 --> 0:11:25.640 I think Microsoft is extremely conservative. 0:11:25.679 --> 0:11:27.560 I think that's probably the one that sticks out the 0:11:27.600 --> 0:11:31.880 most relative to what we've seen post quarters, especially what 0:11:31.920 --> 0:11:34.600 we see from a from a channel perspective, I think 0:11:34.679 --> 0:11:36.640 cloud actually see an acceleration. 0:11:36.760 --> 0:11:39.079 We saw that with AWS, we see I think as 0:11:39.240 --> 0:11:40.360 with Google as well. 0:11:40.840 --> 0:11:44.680 I think overall cybersecurity, that's probably the sub sector that 0:11:44.760 --> 0:11:48.400 I think sandbag i'll call it the most relative to estimates, 0:11:48.880 --> 0:11:51.679 you know, and that's one where we actually see strength 0:11:51.679 --> 0:11:54.160 going the second half of the year. And I look 0:11:54.200 --> 0:11:57.080 at Apple, I think that's one where everything we see 0:11:57.160 --> 0:12:00.319 from a supply chain perspective is going to be strength 0:12:00.360 --> 0:12:03.400 from this iPhone fifteen, not just into September, but in 0:12:03.520 --> 0:12:07.200 the year end. So that's where I really am looking. 0:12:07.240 --> 0:12:10.600 And I continue to think AI, and we're seeing that 0:12:10.679 --> 0:12:13.240 the mind isetion is gonna be a lot sooner than expected. 0:12:13.520 --> 0:12:14.920 All Right, That's kind of where I wanted to go 0:12:15.040 --> 0:12:17.640 dan AI, because that's been one of the if not 0:12:17.720 --> 0:12:20.360 the driving force behind some of the performers we've seen 0:12:20.360 --> 0:12:23.160 out of these the NASDAQ one hundred and big tech names. 0:12:23.720 --> 0:12:26.200 When you talk to the institutional investor clients, what's kind 0:12:26.200 --> 0:12:31.719 of the key question regarding AI that you get from them. 0:12:32.440 --> 0:12:35.520 I think the big question is within Nvidia's guidance heard 0:12:35.559 --> 0:12:38.800 around the world last quarter, the four billion dollaries. Okay, 0:12:38.840 --> 0:12:41.520 well we're not going to We're not seeing that ramp 0:12:41.559 --> 0:12:45.560 as quick across software. That's maybe the knee jerk disappointment 0:12:45.960 --> 0:12:48.400 from Microsoft to maybe some of the chip names. 0:12:49.000 --> 0:12:50.880 I think that's that's misplaced. 0:12:51.000 --> 0:12:53.160 I think this is really just the start of what 0:12:53.240 --> 0:12:56.640 I've used sort of fourth Industrial Revolution, almost AI goal rush, 0:12:56.760 --> 0:12:59.760 playing out a trillion dollars of incremental spend. 0:13:00.200 --> 0:13:01.840 And I just hit back of clients. 0:13:01.960 --> 0:13:04.160 You know, from everything we see next year it's eight 0:13:04.200 --> 0:13:07.400 to ten percent of budgets in terms of AI versus 0:13:07.440 --> 0:13:11.040 less than one percent today. That iView is really going 0:13:11.080 --> 0:13:13.839 to be the catalyst for this tech. What I view 0:13:13.920 --> 0:13:16.760 is really the new tech bull market that's already begun 0:13:17.160 --> 0:13:19.920 to continue well into twenty twenty four. 0:13:21.000 --> 0:13:25.760 We're where have markets or what have markets missed? Because 0:13:25.760 --> 0:13:29.120 in video we have all seen and everyone's impressed, and 0:13:29.120 --> 0:13:30.840 I think everyone even Paul has bought some. 0:13:31.280 --> 0:13:33.319 What what have we overlooked? 0:13:35.559 --> 0:13:35.760 Well? 0:13:35.800 --> 0:13:38.440 I think I think what's markets maybe missing the near 0:13:38.600 --> 0:13:41.480 term is just what a catalyst this is going to 0:13:41.559 --> 0:13:43.199 be for software. 0:13:43.520 --> 0:13:45.800 I think really it's the software when I look at. 0:13:46.040 --> 0:13:50.360 Names like Salesforce, Mango, dB, you look at AI names 0:13:50.400 --> 0:13:52.760 like Pou and Teer. I think it's the second, third, 0:13:52.840 --> 0:13:57.120 fourth derivatives that maybe market's missing out here and just 0:13:57.160 --> 0:14:00.000 maybe underestimating it because I believe this is a nineteen 0:14:00.080 --> 0:14:03.440 ninety five moment Star of the Internet nine nineteen ninety nine, 0:14:03.480 --> 0:14:07.160 two thousand moment. I think that dynamic is why we 0:14:07.240 --> 0:14:09.959 see tech stocks of fifteen percent second half of the year. 0:14:10.960 --> 0:14:13.319 Dan, you mentioned Palenteer, and I know you recently initiated 0:14:13.400 --> 0:14:16.600 coverage there. Not a lot of people know what Palenteer is. 0:14:17.559 --> 0:14:20.440 Give us just a quick description what Palenteer is, uh, 0:14:20.760 --> 0:14:21.960 and why you like this name? 0:14:23.200 --> 0:14:26.840 Yeah, and that's one you know, car create Palenteer really 0:14:26.880 --> 0:14:27.880 coming out of the government. 0:14:28.080 --> 0:14:30.480 You know, if you look at where their success has been. 0:14:30.720 --> 0:14:35.240 Really machine learning is who's who they are, and now 0:14:35.280 --> 0:14:38.400 it's happening from a use case perspective, they probably have 0:14:39.040 --> 0:14:43.080 the most robust pure play AI platform and use cases 0:14:43.120 --> 0:14:46.880 out there, so you're seeing across enterprise, across government. I 0:14:47.000 --> 0:14:49.720 look at it as a pure PLAYAI play of course 0:14:49.760 --> 0:14:53.920 in Nvidia, Microsoft, Google, Mango dB among others, but this 0:14:53.960 --> 0:14:55.120 is really front and center. 0:14:55.160 --> 0:14:55.960 I think it's a it's an. 0:14:55.960 --> 0:14:59.400 Undiscovered gem in my opinion relative to the broader. 0:14:59.440 --> 0:14:59.920 AI try. 0:15:00.840 --> 0:15:01.880 Let's get to Tesla. 0:15:02.000 --> 0:15:04.640 I want to ask you about the price cuts in China. 0:15:05.400 --> 0:15:07.920 Paul brought this up already. Weren't they supposed to stop 0:15:07.960 --> 0:15:08.320 doing that? 0:15:10.080 --> 0:15:12.360 Yeah, look we've said that here and there you could 0:15:12.360 --> 0:15:15.120 see some price cuts, but this only impacts what fifteen 0:15:15.200 --> 0:15:19.200 percent of when you look at model wise impacted, it's 0:15:19.240 --> 0:15:21.920 really around the edges. I mean mostly you're really not 0:15:21.960 --> 0:15:23.840 seeing price cuts across in China. 0:15:24.000 --> 0:15:24.120 Now. 0:15:24.160 --> 0:15:27.240 Of course, headline it's gonna look negative, but if I 0:15:27.280 --> 0:15:30.480 look from a demand perspective, China continues to be strong. 0:15:30.840 --> 0:15:33.520 I think on track from one point e potentially higher 0:15:33.560 --> 0:15:36.640 in terms of million units for the year. And right 0:15:36.680 --> 0:15:39.600 now they are just I view, this is almost halftime 0:15:39.960 --> 0:15:42.960 of the super Bowl. But does this they're just gearing up. 0:15:43.120 --> 0:15:45.400 But does this kick off? Does this kick off another 0:15:45.440 --> 0:15:47.120 price war Dan in China? 0:15:48.320 --> 0:15:50.600 I don't think so, because Matt we've talked to, I mean, 0:15:51.000 --> 0:15:53.240 all the work that we've done the last two three weeks, 0:15:53.400 --> 0:15:55.360 we think ninety five percent of the price cuts are 0:15:55.360 --> 0:15:57.560 basically done in China. In terms of that price I 0:15:57.560 --> 0:16:00.760 don't see this igniting the next stage to the price war, 0:16:00.800 --> 0:16:03.400 which is why we're buyers here on weakness. I think 0:16:03.400 --> 0:16:04.920 this is Barkwurson bite. 0:16:05.520 --> 0:16:08.200 Hey, danis just looking at the PGeo function on the 0:16:08.240 --> 0:16:11.400 Bloomberg terminal, which gives you a breakdown of the company's 0:16:11.400 --> 0:16:14.320 businesses by measured by geography, by segment. And I'm looking 0:16:14.360 --> 0:16:16.240 at the bi geography and China is now up to 0:16:16.720 --> 0:16:20.400 you more than twenty percent of revenue for Tesla. How 0:16:20.440 --> 0:16:24.760 does Elon musk How does Tesla manage its relationship with 0:16:24.800 --> 0:16:26.680 such an important market like China? 0:16:26.680 --> 0:16:27.480 How do they manage it? 0:16:28.840 --> 0:16:31.000 I mean they take a page out of the playbook 0:16:31.040 --> 0:16:35.360 from Cook and Apple because it's ten percent political ninety 0:16:35.360 --> 0:16:37.600 percent business. But ultimately, I mean if you look at 0:16:38.000 --> 0:16:41.520 you President g and in China, they look at having 0:16:41.600 --> 0:16:45.160 Tesla in terms of Giga Shanghai potentially second. 0:16:44.840 --> 0:16:45.520 Factory as well. 0:16:45.560 --> 0:16:48.280 That's a that's a trophy case in terms of having 0:16:48.320 --> 0:16:51.120 Tesla as well as Apple there. It's a major part 0:16:51.160 --> 0:16:53.200 of production, a major part of the mand It's the 0:16:53.200 --> 0:16:54.880 hearts and lungs of the story. 0:16:55.240 --> 0:16:57.840 And that's been that tight groupe, that balancing act. 0:16:57.840 --> 0:17:00.640 It's been one of the key successes that has been 0:17:00.680 --> 0:17:04.800 able to navigate despite many worrying about the geopolitical and 0:17:04.840 --> 0:17:07.040 I think they continue to gain and share there along 0:17:07.080 --> 0:17:09.320 with Apple, and I think that's a story that's going 0:17:09.359 --> 0:17:10.320 to continue to play out. 0:17:10.600 --> 0:17:11.800 But to what. 0:17:11.840 --> 0:17:16.119 Extent do investors or do you view their exposure to 0:17:16.280 --> 0:17:17.960 China as a meaningful risk. 0:17:19.600 --> 0:17:24.000 I view it as a background noise, headline risk. 0:17:24.480 --> 0:17:26.320 I think they've been able to navigate that well. 0:17:26.359 --> 0:17:28.159 I think maybe some of the risks, the most of 0:17:28.200 --> 0:17:31.120 that was probably in the rear view mirror. It's still 0:17:31.119 --> 0:17:33.040 gonna you know, for here and there, just given the 0:17:33.119 --> 0:17:36.040 geopolitical but you know, we view a more as an 0:17:36.040 --> 0:17:39.240 opportunity than a risk for the likes of test on 0:17:39.240 --> 0:17:41.359 an Apple, and that that continues to be our view 0:17:42.000 --> 0:17:43.720 of China in terms of those stories. 0:17:44.359 --> 0:17:46.760 I just want to ask about the competition you see 0:17:46.800 --> 0:17:51.600 from GM and Ford. I was over looking at Cadillacs 0:17:51.640 --> 0:17:55.960 new Escalade IQ, which is awesome but expensive, so it's 0:17:56.000 --> 0:17:59.120 not going to compete really with anything Tesla makes other 0:17:59.160 --> 0:18:00.679 than I guess the X. 0:18:00.920 --> 0:18:02.480 I don't think that would be a fair fight. 0:18:02.560 --> 0:18:06.080 But are they gonna are the are the incumbent automakers 0:18:06.119 --> 0:18:08.200 going to really bring it Tesla in terms of affordable 0:18:08.200 --> 0:18:09.120 electric vehicles? 0:18:10.520 --> 0:18:11.359 Well, that's the key. 0:18:11.440 --> 0:18:13.040 I mean, if you what's come out of three win 0:18:13.160 --> 0:18:16.320 three area code more affordable evs. 0:18:16.520 --> 0:18:19.119 I think what Farley's doing to Ford or Mary's doing it, 0:18:19.680 --> 0:18:21.760 you know GM. I think it's the right strategy, and 0:18:21.800 --> 0:18:23.040 it's not a zero some game. 0:18:23.080 --> 0:18:26.160 I think they are going to really transform those companies 0:18:26.160 --> 0:18:28.600 in terms of four and GM, but Tesla in terms 0:18:28.640 --> 0:18:31.720 of electric vehicles, it's still Tesla's world. Everyone else is 0:18:31.720 --> 0:18:34.480 paying rent. And I think this is just start of 0:18:34.520 --> 0:18:37.520 this green tidle wave five trillion dour green tyway that's 0:18:37.560 --> 0:18:41.480 really going to transform autos across the board, from Tesla. 0:18:41.240 --> 0:18:44.359 To three win three area code Europe and of course China. 0:18:44.520 --> 0:18:46.679 Hey Dan, thanks so much for joining us. Well appreciate 0:18:46.720 --> 0:18:48.960 you taking a few minutes out of your holiday. Dan 0:18:49.040 --> 0:18:52.560 ives from Crete. He's a managing director senior equity analyst 0:18:52.560 --> 0:18:54.640 at web Busch Securities. I don't know that water behind 0:18:54.800 --> 0:18:56.439 is at the gen C or the Mediterranean. 0:18:56.680 --> 0:18:57.560 I mean there's both of there. 0:18:57.560 --> 0:18:59.840 I mean, what's what, I guess that's the med Yeah, 0:19:00.119 --> 0:19:03.080 both of them are. It's a completely random gas and 0:19:03.160 --> 0:19:03.920 I have no way. 0:19:04.080 --> 0:19:05.760 I'm looking at my Google maps here. It could be either. 0:19:05.760 --> 0:19:07.200 I don't know where one starts the other one begins. 0:19:07.240 --> 0:19:09.840 Don't see at the tree right off, right off? 0:19:09.880 --> 0:19:12.480 I guess the southern coast there of Greece, part of 0:19:12.560 --> 0:19:15.240 Greece's largest island and vacation spot in Greece. 0:19:15.400 --> 0:19:17.480 How about that? So Dan I was over there getting 0:19:17.480 --> 0:19:18.800 a little R and R. Good for him. 0:19:19.119 --> 0:19:22.200 You're listening to the tape catch are live program Bloomberg 0:19:22.320 --> 0:19:25.919 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:19:25.960 --> 0:19:27.920 tune in app, Bloomberg dot Com, and. 0:19:27.880 --> 0:19:29.200 The Bloomberg Business App. 0:19:29.240 --> 0:19:32.040 You can also listen live on Amazon Alexa from our 0:19:32.080 --> 0:19:42.400 flagship New York station, Just say Alexa, play Bloomberg eleven thirty. 0:19:40.080 --> 0:19:43.320 Lots going on today, Matt in kind of just geopolitics 0:19:43.359 --> 0:19:47.040 around the world. Argentina, they had a primary vote. I 0:19:47.040 --> 0:19:52.720 guess a populist leaning person, not just any populous. He 0:19:52.840 --> 0:19:56.920 looks like a cross between Elvis Presley and Johnny Cash. Nice. 0:19:57.080 --> 0:19:59.440 Maybe throw a little James Spader in there. U. 0:20:00.200 --> 0:20:02.320 He has I think five. 0:20:02.160 --> 0:20:05.960 Or six giant dogs, each one named after a different 0:20:06.440 --> 0:20:12.200 Austrian economist or I mean like liberal free market economists. 0:20:12.480 --> 0:20:14.000 One of them is called Milton Friedman. I know from 0:20:14.000 --> 0:20:18.480 the Bloomberg story, and I mean there's such a great 0:20:18.520 --> 0:20:20.280 story on the terminal that if you haven't read it, 0:20:20.320 --> 0:20:24.120 I highly recommend going to uh Bloomberg dot com on 0:20:24.000 --> 0:20:26.040 the on the computer or on your or on your 0:20:26.080 --> 0:20:27.760 terminal checking it out because it's really good. 0:20:27.800 --> 0:20:30.680 And we've got big moves in the currencies and the 0:20:31.240 --> 0:20:33.760 bonds and the treasure treasure of the government bonds there 0:20:33.760 --> 0:20:36.200 in Argentina as well. So let's get the latest reporting there. 0:20:36.280 --> 0:20:39.560 Manuela Tobias she joined us. She's the economy and government 0:20:39.600 --> 0:20:42.440 reporter for Bloomberg News. Menuel it's just let's just start 0:20:42.480 --> 0:20:46.880 off by just reframing what happened in this primary and 0:20:46.880 --> 0:20:49.080 and what has been the reaction in Argentina. 0:20:49.720 --> 0:20:51.639 Menuela is in Buenos As today. 0:20:53.119 --> 0:20:59.520 Hey, yeah, so yesterday it was just a complete upset. 0:21:00.280 --> 0:21:05.000 The economists you guys have been talking about. Outsider presidential 0:21:05.040 --> 0:21:09.480 bid was not expected to get more than twenty percent 0:21:10.000 --> 0:21:14.679 in this three way race. There was the incumbent, the 0:21:14.760 --> 0:21:18.400 main opposition block that everyone saw as winning, and the 0:21:18.480 --> 0:21:21.720 question mark was around you know what kind of margin 0:21:21.920 --> 0:21:25.159 they would be the incumbent buy and then Relay just 0:21:25.760 --> 0:21:30.200 completely surprised everyone and got thirty percent of the vote, 0:21:30.200 --> 0:21:33.840 becoming the most voted candidates as well as the most 0:21:33.920 --> 0:21:41.000 voted block, and that just sent everyone into panic mode. 0:21:41.160 --> 0:21:44.080 No one was expecting this on the political side, and 0:21:44.200 --> 0:21:48.440 much less on the market side. This was the least 0:21:48.560 --> 0:21:52.359 likely scenario and definitely the one that was going to 0:21:52.440 --> 0:21:56.240 see the most panic, and that's exactly what we're seeing today. 0:21:57.880 --> 0:22:02.240 The central Bank just raised its key rate from the 0:22:02.400 --> 0:22:05.840 already very high ninety seven percent to one hundred and eighteen, 0:22:06.520 --> 0:22:13.640 and he valued the bissal, which was treating to it's 0:22:13.760 --> 0:22:17.880 it's an officially set rate, from eighty seven to three 0:22:17.920 --> 0:22:19.680 point fifty today. 0:22:20.040 --> 0:22:23.800 I love the quote from your story, Manuela. 0:22:24.119 --> 0:22:26.919 He says, remember, a different Argentina is impossible with the 0:22:26.960 --> 0:22:29.000 same people as always, with the same people that have 0:22:29.119 --> 0:22:32.080 always failed. Uh, you got to get rid of all 0:22:32.080 --> 0:22:36.240 that old blood, right, I mean, does he really want 0:22:36.280 --> 0:22:39.160 to throw out everybody who's been there? 0:22:39.200 --> 0:22:39.400 Well? 0:22:39.560 --> 0:22:42.160 Does he really want to start a revolution here? 0:22:44.200 --> 0:22:50.000 That is that's his proposal, and that's exactly why people 0:22:50.040 --> 0:22:54.080 support him, you know, talking to his voters, this was, 0:22:54.960 --> 0:22:58.280 you know, very much a question mark collection. No one 0:22:58.359 --> 0:23:02.400 knew what was coming, and all the Post has described 0:23:02.440 --> 0:23:06.240 it as one with high levels of apathy among voters. 0:23:06.240 --> 0:23:08.520 I mean, you know, we have inflation running at one 0:23:08.640 --> 0:23:12.840 hundred and sixteen percent, nearly forty percent of the population 0:23:13.080 --> 0:23:17.359 is below the poverty line. Things are pretty desperate here, 0:23:17.440 --> 0:23:23.600 and you know you need the thinking among his voters, 0:23:23.600 --> 0:23:26.800 which you know who turned out and droves, is you 0:23:26.880 --> 0:23:29.800 need someone just as crazy as a situation that that 0:23:29.920 --> 0:23:33.400 we're experiencing to get us out of this mess. And 0:23:33.600 --> 0:23:36.400 you know that was his campaign message. He said, I'm 0:23:36.440 --> 0:23:41.280 gonna blow it all up. In fact, during his the 0:23:41.640 --> 0:23:47.880 campaign closing event to get you know, his his fans 0:23:48.080 --> 0:23:52.640 riled up. Before coming on stage, he had a of 0:23:52.720 --> 0:23:57.399 videos of buildings blowing up h literally and people you know, 0:23:57.480 --> 0:24:00.720 going crazy in the crowd, you know, before he came 0:24:00.760 --> 0:24:04.760 on and just started singing his theme song and you 0:24:04.800 --> 0:24:14.720 know his his his big bontra is you know uh uh. 0:24:14.600 --> 0:24:17.480 So yeah, wait, what what is that? What's the translation 0:24:17.560 --> 0:24:17.880 of that? 0:24:21.600 --> 0:24:27.159 It basically means, uh sorry, I'm trying to translate in 0:24:27.200 --> 0:24:29.760 my head now we have it at the on the 0:24:29.840 --> 0:24:34.760 lead of the story. It's well, let's go liberty. 0:24:34.720 --> 0:24:40.240 Dam I see long lived freedom damn it exactly the translation. 0:24:40.320 --> 0:24:43.040 All right, So Menmuel, what's the next steps out here 0:24:43.280 --> 0:24:45.760 in Argentina on this political process? 0:24:47.440 --> 0:24:47.760 Uh? 0:24:48.280 --> 0:24:52.159 So, okay, So this was a primary election, very different 0:24:52.240 --> 0:24:54.840 from from the primaries you guys are probably used to, 0:24:56.080 --> 0:24:59.639 where you know, there's different different parties have their own votes. 0:24:59.760 --> 0:25:03.160 This is kind of like a general because everyone, all 0:25:03.200 --> 0:25:08.320 the candidates are on the ballot and so and polls, 0:25:08.520 --> 0:25:13.360 as we just went over, are completely unreliable, and so 0:25:13.560 --> 0:25:16.359 this was kind of a thermometer of what's to come 0:25:16.720 --> 0:25:21.240 in the general. This knocked out one of the two 0:25:22.760 --> 0:25:28.239 candidates in the pro market business coalition. Uh, and you know, 0:25:28.440 --> 0:25:33.560 left the incumbent party pretty knocked down. It's a historically 0:25:34.480 --> 0:25:39.000 poor election for the parentist left wing party. So what 0:25:39.040 --> 0:25:42.760 this means is we have an October election coming up 0:25:42.840 --> 0:25:47.800 that's a general. In order to win that election, the 0:25:48.119 --> 0:25:50.760 winning candidate needs to get forty five percent of the 0:25:50.840 --> 0:25:56.720 vote or forty percent with a ten percentage point ten 0:25:56.840 --> 0:26:00.320 ten points above you know, the runner up. If we 0:26:00.600 --> 0:26:04.160 don't get to that, which is looking increasingly likely. With 0:26:04.640 --> 0:26:09.000 you know this this free literally divided in three, we 0:26:09.080 --> 0:26:12.639 could go to a runoff, which would come in November. 0:26:13.520 --> 0:26:16.440 So uncertainty is is certainly the. 0:26:17.400 --> 0:26:20.680 So just just to circle back to Javier Malai here 0:26:22.640 --> 0:26:26.920 he I mean, in the story we say that he's 0:26:27.200 --> 0:26:31.240 kind of radical with some far out ideas, and I 0:26:31.280 --> 0:26:33.520 think the term crazy was was thrown in there. 0:26:33.920 --> 0:26:36.360 But his dog's name Milton Friedman. 0:26:36.560 --> 0:26:39.679 So for those of us in this country, Manuela Milton 0:26:39.720 --> 0:26:47.360 Friedman is a pretty sound thinking free market capitalist economists, Like, uh, 0:26:47.880 --> 0:26:54.080 what's the crazy part of Milly's propositions here, because it 0:26:54.119 --> 0:26:56.760 seems like I don't see anything that that far out 0:26:56.760 --> 0:26:57.720 there for us. 0:26:57.920 --> 0:27:02.840 Yeah, of course, okay, So that you know, I think 0:27:02.840 --> 0:27:07.760 that's part of the nuance here is that his his reforms, 0:27:07.800 --> 0:27:10.040 you know, the policy ideas that he has, which is, 0:27:10.320 --> 0:27:12.960 you know, cutting public spending. In fact, he says, you know, 0:27:13.040 --> 0:27:17.560 bringing a chain saw to public spending. These are you know, 0:27:17.680 --> 0:27:20.560 the kind of ideas that that could support that the 0:27:20.600 --> 0:27:25.800 Pro Business Coalition is proposing. But he has a certain 0:27:26.240 --> 0:27:29.920 in you know, eccentricity to him. We're talking about his dog. 0:27:30.440 --> 0:27:34.359 This uh, this dog, he refers to him as his son. 0:27:34.880 --> 0:27:38.840 And then the four the four kids that this dog 0:27:38.920 --> 0:27:44.680 had are his grandkids. That that that oldest dog died 0:27:45.000 --> 0:27:49.719 and he actually had it cloned. He had another another 0:27:49.800 --> 0:27:54.000 dog and was you know, talking about him again. 0:27:54.040 --> 0:27:56.040 I'm again, I'm totally understanding all of this. 0:27:57.400 --> 0:27:59.520 All right, Matt Manuel. You've got a lot going on 0:27:59.600 --> 0:28:02.680 down there. We're gonna look forward to some more reporting 0:28:02.720 --> 0:28:07.080 down there, but a big, big surprise in the primary 0:28:07.080 --> 0:28:09.680 election down there, which is royling the financial markets down 0:28:10.200 --> 0:28:11.800 in Argentina. 0:28:12.600 --> 0:28:16.040 You're listening to the team Ken's our live program, Bloomberg 0:28:16.080 --> 0:28:19.439 Markets weekdays at ten am eastering on Bloomberg dot com, 0:28:19.520 --> 0:28:22.680 the iHeartRadio app and the Bloomberg Business App, or listen 0:28:22.760 --> 0:28:24.880 on demand wherever you get your podcasts. 0:28:26.800 --> 0:28:28.560 A hotspot to another, that being China. 0:28:28.560 --> 0:28:30.280 We got a lot of economic data coming out of 0:28:30.359 --> 0:28:33.280 China which was we're not economic but more just some 0:28:33.280 --> 0:28:35.919 financial data going on about the economy and some of 0:28:35.920 --> 0:28:39.040 the businesses there. Tom Orlock joins his chief economists and 0:28:39.120 --> 0:28:43.200 chief ASA economists for Bloomberg Economics. Tom, you lived and 0:28:43.240 --> 0:28:46.120 worked in Beijing four years. You know what's going on there. 0:28:47.360 --> 0:28:49.240 You know, I think twenty twenty three people went into 0:28:49.320 --> 0:28:51.240 saying this is gonna be a good year for China. 0:28:51.280 --> 0:28:55.040 The economy's reopening, We're gonna be a good year for China. 0:28:55.040 --> 0:28:56.840 It's not turning out to be that way. 0:28:56.840 --> 0:28:59.560 What are some of the key headwinds that we've been 0:28:59.600 --> 0:29:01.920 reading in the last couple of days. 0:29:02.720 --> 0:29:06.840 So the really big challenge for China's economy this year, Paul, 0:29:07.000 --> 0:29:09.880 is what's happening in real estate. Real estate is a 0:29:10.000 --> 0:29:15.120 critically important driver of China's economic growth. It's also where 0:29:15.160 --> 0:29:18.960 households have most of their wealth. Chinese households, they haven't 0:29:18.960 --> 0:29:20.600 got a lot in stocks, they haven't got a lot 0:29:20.600 --> 0:29:25.040 in bonds. It's all in their houses. And what's happening 0:29:25.120 --> 0:29:29.200 right now is there's just been massive overbuilding in the 0:29:29.200 --> 0:29:31.840 real estate sector, and there as a consequence of that, 0:29:31.920 --> 0:29:36.640 we're now seeing property sales falling, property investment falling, and 0:29:36.720 --> 0:29:41.520 property prices, especially in some smaller cities falling. Now, that 0:29:41.720 --> 0:29:44.400 was already part of the narrative in twenty twenty two, 0:29:44.920 --> 0:29:48.520 what's happening in twenty twenty three is getting worse. We've 0:29:48.560 --> 0:29:51.880 now got news that Country Garden, one of China's biggest 0:29:51.920 --> 0:29:56.280 property developers, is struggling to repair its debt, and we've 0:29:56.320 --> 0:29:59.360 got some alarming signs that this is now tipping over 0:29:59.640 --> 0:30:03.520 into the financial sector. One of China's biggest trust companies 0:30:03.760 --> 0:30:05.760 struggling to make its investors whole. 0:30:06.960 --> 0:30:12.320 So what happens here, I mean, if one of their 0:30:12.360 --> 0:30:16.000 biggest trust companies starts defaulting on payments, doesn't the government 0:30:16.120 --> 0:30:19.200 just come in take it over and make those payments 0:30:19.240 --> 0:30:21.480 in lieu of the failed company. 0:30:22.120 --> 0:30:26.400 So the strength that China still has is that the 0:30:26.480 --> 0:30:30.640 savings rate within China is really high. It's hard to 0:30:30.680 --> 0:30:33.280 take money out of the country. And if you look 0:30:33.320 --> 0:30:36.000 at not the shadow banking system, not the shadow banks 0:30:36.000 --> 0:30:39.480 like the trusts, but the banking system proper, it's all 0:30:39.520 --> 0:30:42.800 owned by the government. And what that means is that 0:30:42.880 --> 0:30:46.360 China's government has a lot of tools they can use 0:30:46.640 --> 0:30:51.920 to prevent real estate stress, even extreme real estate stress, 0:30:52.120 --> 0:30:56.280 tipping over into a financial crisis. The question is where 0:30:56.320 --> 0:31:00.640 do they draw the light right, A trust company, even 0:31:00.680 --> 0:31:03.480 a really big trust company, is not what you would 0:31:03.520 --> 0:31:07.360 consider a core part of China's financial system. If a 0:31:07.360 --> 0:31:11.040 trust company goes down, some rich investors are going to 0:31:11.080 --> 0:31:14.000 lose some money. It's going to be a bit painful 0:31:14.040 --> 0:31:16.200 for a sort of that group, but it's not going 0:31:16.280 --> 0:31:19.480 to be a trigger for a systemic crisis. The question 0:31:19.560 --> 0:31:22.760 for Beijing in the days and weeks ahead is are 0:31:22.760 --> 0:31:26.320 they okay with big trust companies going down. If big 0:31:26.320 --> 0:31:30.040 trust companies go down, are they okay with small banks 0:31:30.080 --> 0:31:33.200 going down? If small banks go down? Are they okay 0:31:33.200 --> 0:31:35.760 with city banks going down? Where do they draw the line? 0:31:36.280 --> 0:31:40.320 My instinct is the trusts, the shadow banks, they might 0:31:40.360 --> 0:31:42.520 have to get through this on their own. When we 0:31:42.560 --> 0:31:46.360 start to see problems trickling into the banking system, even 0:31:46.400 --> 0:31:49.200 the smaller city level banks, that's where Beijing steps in. 0:31:50.280 --> 0:31:53.480 So Tom, how much of a political headwind is this 0:31:53.640 --> 0:31:56.880 for President Xi, who just recently secured another I don't 0:31:56.920 --> 0:32:00.400 think it's five year term, if not more of an 0:32:00.440 --> 0:32:01.960 issues is for him politically. 0:32:02.800 --> 0:32:08.480 So China does not have elections, but China does have politics. 0:32:08.600 --> 0:32:11.400 And if you're in charge of an economy with a 0:32:11.440 --> 0:32:16.360 youth unemployment rate of twenty percent and with prices for housing, 0:32:16.600 --> 0:32:19.120 which is where most Chinese people have stored their wealth 0:32:19.360 --> 0:32:23.760 either flat or falling, then you've got a political problem. 0:32:24.120 --> 0:32:27.480 How does that play out in a single party state. Well, 0:32:27.920 --> 0:32:30.479 the first thing to say is it plays out behind 0:32:30.560 --> 0:32:31.120 the scenes. 0:32:31.440 --> 0:32:31.640 Right. 0:32:32.000 --> 0:32:34.960 If She's hand is weakened, that's going to be something 0:32:34.960 --> 0:32:37.840 which is evident to people in the backroom deals in Beijing. 0:32:38.200 --> 0:32:41.120 It's not going to be so evident to us here 0:32:41.160 --> 0:32:45.640 in the United States. Still, that additional political stress is 0:32:45.680 --> 0:32:48.600 an additional constraint on policy makers room for maneuver. 0:32:49.840 --> 0:32:53.960 Thomas Sir, I know there's not an easy fix here, 0:32:54.000 --> 0:32:57.120 But is there is there a solution that a lot 0:32:57.160 --> 0:33:00.680 of economists like yourself see there is, or is this 0:33:00.800 --> 0:33:02.880 just something that the Chinese ecindress can have to deal 0:33:02.880 --> 0:33:05.320 with for a long time let a play out. 0:33:06.120 --> 0:33:11.480 So there's a big structural problem here right. China has 0:33:11.600 --> 0:33:16.239 massively overbuilt its real estate sector, and that means there 0:33:16.280 --> 0:33:18.960 isn't an easy fix. There just has to be a 0:33:19.080 --> 0:33:23.800 period where real estate construction, real estate prices come down 0:33:24.120 --> 0:33:28.000 in order to realign supply and demand. There's no getting 0:33:28.000 --> 0:33:31.880 away from that. Now, what does a kind of a 0:33:31.920 --> 0:33:36.120 big fix, a kind of grand solution look like. Well, firstly, 0:33:36.400 --> 0:33:39.640 it's a grand solution which doesn't make things better. It's 0:33:39.640 --> 0:33:43.360 a grand solution which stops things tipping over into catastrophe. 0:33:44.360 --> 0:33:46.520 What are the moving parts of it? Well, I think 0:33:46.600 --> 0:33:50.600 it has to combine an element of reform, an element 0:33:50.640 --> 0:33:54.960 of increased transparency, an element of increased market control. So 0:33:55.040 --> 0:33:58.280 investors think that the underlying problems here aren't going to 0:33:58.320 --> 0:34:02.880 repeat and an l of stimulus, more significant stimulus than 0:34:02.920 --> 0:34:04.640 the government has so far been willing to put on 0:34:04.720 --> 0:34:05.120 the table. 0:34:05.680 --> 0:34:08.480 And that's we still expect that base case that China's 0:34:08.520 --> 0:34:11.840 going to stimulate the economy, so they're. 0:34:11.719 --> 0:34:13.040 Drip feeding the stimulus. 0:34:13.160 --> 0:34:13.359 Right. 0:34:13.440 --> 0:34:16.680 We've had a mini rate cut by the PBAC. We've 0:34:16.680 --> 0:34:20.480 had the PBAC guiding banks to move mortgage rates lower. 0:34:20.840 --> 0:34:24.680 We've had Lee Chang the premiere saying to China cities, Okay, 0:34:25.000 --> 0:34:28.359 we want you to reignite the property sector. We want 0:34:28.360 --> 0:34:31.960 you to stoke the healthy development of the property sector. 0:34:32.440 --> 0:34:33.279 They need to do more. 0:34:33.400 --> 0:34:35.759 All right, Tom, thank you very much for taking a 0:34:35.800 --> 0:34:39.600 few minutes. Tom Orlick. He's a chief economist for Bloomberg Economics. 0:34:39.920 --> 0:34:44.520 He's also author of the book Understanding China's Economic Indicators 0:34:44.560 --> 0:34:47.160 and China The Bubble That Never Pops. 0:34:47.520 --> 0:34:50.640 You're listening to the tape Cancher our live program, Bloomberg 0:34:50.680 --> 0:34:54.279 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:34:54.320 --> 0:34:56.279 tune in app, Bloomberg dot Com, and. 0:34:56.239 --> 0:34:57.560 The Bloomberg Business App. 0:34:57.600 --> 0:35:00.440 You can also listen live on Amazon Alexi from our 0:35:00.480 --> 0:35:04.799 flagship New York station. Just Say Alexa playing Bloomberg eleven. 0:35:06.600 --> 0:35:08.480 Matt much to bring on a next quest and hopefully 0:35:08.480 --> 0:35:09.759 we'll get the sunit back on that track. 0:35:09.800 --> 0:35:10.080 All right. 0:35:10.120 --> 0:35:13.279 So my old producer, Matt Siegel is here. For a 0:35:13.320 --> 0:35:15.480 few ill fated years. 0:35:15.280 --> 0:35:17.000 He worked at Bloomberg, but then he moved. 0:35:16.719 --> 0:35:23.640 On and is now covering crypto, running crypto coverage for 0:35:23.760 --> 0:35:26.520 Van Eck. And we're glad to have him here in 0:35:26.560 --> 0:35:31.640 the studio to talk about all things bitcoin ETF. Really, 0:35:31.680 --> 0:35:37.840 because on Friday, the twenty one shares and arc ETF 0:35:37.920 --> 0:35:41.200 proposal was punted by the SEC. They were due to 0:35:41.239 --> 0:35:44.279 decide I think by today was the deadline, and they 0:35:44.320 --> 0:35:49.440 pushed that off. Now they've got even more bitcoin proposals 0:35:49.520 --> 0:35:52.319 to decide on. One of them is black Rock. So 0:35:52.960 --> 0:35:57.840 everybody is paying attention on the street, and Matt Siegel 0:35:57.960 --> 0:36:01.040 is the man to ask what's going on at the SEC. 0:36:02.880 --> 0:36:05.000 What's going on is there's it seems to be a 0:36:05.000 --> 0:36:09.720 political objection to a bitcoin ETF, which is coming from 0:36:10.040 --> 0:36:12.759 the very top. President Biden, if you recall January twenty 0:36:12.760 --> 0:36:16.279 twenty two, put out an executive order instructing all agencies 0:36:16.440 --> 0:36:21.719 to use kind of maximum levels of enforcement to bring 0:36:21.760 --> 0:36:25.880 this market to heal, and the arguments against a bitcoin 0:36:26.160 --> 0:36:32.040 ETF have become increasingly haphazard and incoherent, and now there 0:36:32.080 --> 0:36:34.879 are there's a gray scale lawsuit against the SEC. We're 0:36:34.880 --> 0:36:39.000 expecting a decision any day on that which could kind 0:36:39.000 --> 0:36:44.680 of reveal the illogical the illogical nature of the SEC's objections. 0:36:44.800 --> 0:36:47.239 So now it's a delay. No bitcoin ETF for now. 0:36:47.320 --> 0:36:49.120 So what you know. 0:36:49.840 --> 0:36:54.560 Proponents of the SEC will say the concerns are around 0:36:54.680 --> 0:36:58.319 fraud and manipulation, and certainly there's no shortage of that 0:36:58.520 --> 0:37:01.080 in the crypto world, not that there's any shortage of 0:37:01.120 --> 0:37:05.799 that in the plain vanilla Wall Street world, but you've 0:37:05.840 --> 0:37:10.120 seen some firms make moves to try and alleviate those concerns, right, 0:37:10.239 --> 0:37:13.640 including with surveillance sharing agreements. 0:37:13.880 --> 0:37:15.399 Is that not far enough? 0:37:15.600 --> 0:37:15.800 Has it? 0:37:15.920 --> 0:37:15.960 Not? 0:37:16.080 --> 0:37:16.319 One far? 0:37:16.560 --> 0:37:19.000 Let's start with the original objection, as you note, fraud 0:37:19.040 --> 0:37:22.480 and manipulation and the underlying market. Well, there are plenty 0:37:22.520 --> 0:37:26.520 of commodities like gold and silver and oil where the 0:37:26.719 --> 0:37:30.520 underlying commodity trading is not regulated. But once you wrap 0:37:30.560 --> 0:37:34.640 that commodity in a vehicle like an ETF, then that 0:37:34.880 --> 0:37:37.960 vehicle needs to trade on a regulated exchange. So we 0:37:38.000 --> 0:37:42.080 don't think SEC's being consistent in how they're applying that logic. 0:37:42.840 --> 0:37:48.680 Why what's the basis from your understanding of this decision 0:37:48.680 --> 0:37:51.200 coming now from the top from President Biden about crypto? 0:37:51.239 --> 0:37:54.239 What's the what is their size's fundamental issue? 0:37:55.160 --> 0:37:57.720 I think it's an issue of control right now, which 0:37:57.760 --> 0:38:01.400 is playing out across the political spectrum on a range 0:38:01.400 --> 0:38:04.960 of issues, not just crypto. But it plays into the 0:38:05.880 --> 0:38:09.759 potential threat against the dollar as a reserve currency. You know, 0:38:09.760 --> 0:38:11.879 the IMF had a blog just last month they say 0:38:11.880 --> 0:38:14.840 that the way to protect against the substitution of sovereign 0:38:14.840 --> 0:38:18.360 currencies is by having legitimate institutions, and frankly, there's just 0:38:18.400 --> 0:38:21.080 an increasing number of people around the world who are 0:38:21.120 --> 0:38:23.640 doubting the legitimacy of those institutions. 0:38:23.719 --> 0:38:26.560 If Blackrock comes and says they want an ETF, aren't 0:38:26.560 --> 0:38:28.120 they going to get an ETF it's Blackrock? 0:38:29.360 --> 0:38:33.080 Well maybe eventually, but the final decision on the Blackrock 0:38:33.120 --> 0:38:36.600 ETF isn't DOE until next March. And before then, there's 0:38:36.600 --> 0:38:38.440 a lot of phone calls that are going around which 0:38:38.440 --> 0:38:40.960 are not being done in a transparent manner, And you 0:38:41.080 --> 0:38:43.239 have all these ETF issuers like Vanak and I think 0:38:43.239 --> 0:38:45.080 we have some authority to speak on this matter because 0:38:45.080 --> 0:38:47.279 we were the first TRADFY managers to first file for 0:38:47.280 --> 0:38:50.560 a physically backed ETF in twenty seventeen, and we spent 0:38:50.600 --> 0:38:53.920 the last six years trying to figure out what exactly 0:38:53.960 --> 0:38:56.480 are the conditions that the regulator is looking for that 0:38:56.560 --> 0:38:59.239 will allow for the approval of such a product. Those 0:38:59.239 --> 0:39:01.759 conditions have not been laid out in any systematic way, 0:39:02.040 --> 0:39:04.200 and we're going to see the result of this lawsuit 0:39:04.239 --> 0:39:06.800 Gray Scale versus the SEC, which we think will reveal 0:39:07.080 --> 0:39:09.239 that the SEC has been acting in an arbitrary and 0:39:09.280 --> 0:39:11.800 capricious manner in denying Whether or not that leads to 0:39:11.840 --> 0:39:14.160 an immediate approval, we'll have to see. But we have 0:39:14.239 --> 0:39:17.280 until next March to get the answer to your question. 0:39:18.280 --> 0:39:20.920 All right, So, I guess. 0:39:23.120 --> 0:39:27.279 You're putting this at President Biden's on President Biden's desk, 0:39:27.360 --> 0:39:29.560 But if we take it a level lower, right, Gary 0:39:29.560 --> 0:39:32.919 Gensler seems to be the one that's holding things back, 0:39:32.920 --> 0:39:34.520 at least from our perspective. 0:39:34.560 --> 0:39:35.040 Is that wrong? 0:39:36.680 --> 0:39:39.600 No, at the SEC because he has recently or the 0:39:39.640 --> 0:39:43.120 SEC has recently I'm going to say, lost a case 0:39:43.360 --> 0:39:49.120 in the Ripple trial. Although I think they might claim 0:39:49.120 --> 0:39:52.440 that they partially won right because the judge declared Ripple 0:39:52.480 --> 0:39:55.840 to be a security when it was marketed to a 0:39:55.880 --> 0:39:58.360 bunch of institutions, but not a security when it was 0:39:58.400 --> 0:40:02.440 sold to I guess retail investors on an exchange. Is 0:40:02.480 --> 0:40:06.920 that maybe the first crack in the SEC's you know, 0:40:07.120 --> 0:40:08.320 wall against crypto. 0:40:09.320 --> 0:40:11.040 I think it very well could be. And there have 0:40:11.120 --> 0:40:14.000 been multiple examples in the last two decades of SEC 0:40:14.080 --> 0:40:17.680 chairs who have had to step down after an embarrassing loss, 0:40:17.840 --> 0:40:21.439 like you know, Bloomberg's former board member Arthur Levitt comes 0:40:21.440 --> 0:40:25.600 to mind. So there's also a great history of a 0:40:25.719 --> 0:40:28.240 change in leadership at these agencies ahead of an election, 0:40:28.320 --> 0:40:30.480 which we have next year as well. So my personal 0:40:30.520 --> 0:40:32.479 call is that Gensler will be gone before the next 0:40:32.520 --> 0:40:35.919 election and that will facilitate a change in policy here. 0:40:35.960 --> 0:40:38.680 But there's a lot of steps between here and there. 0:40:39.040 --> 0:40:43.600 Is there a physically traded ETF bitcoin ETF in Canada. 0:40:43.760 --> 0:40:47.680 Yes, Canada, Europe, multiple jurisdictions on Canada. 0:40:47.719 --> 0:40:49.920 What have we learned, what have we observed about the 0:40:49.920 --> 0:40:53.360 pros and cons of that that maybe the SEC could 0:40:53.640 --> 0:40:54.080 learn from. 0:40:54.120 --> 0:40:58.360 Maybe there have been no comms because ETFs are a 0:40:58.880 --> 0:41:02.800 time tested, well regulated, liquid and cost effective. 0:41:02.840 --> 0:41:05.720 Whether they treated US whole security in Canada? Yes, okay? 0:41:06.120 --> 0:41:07.120 And here the. 0:41:07.160 --> 0:41:09.440 ETF is not the bitcoin underlying. 0:41:09.400 --> 0:41:12.759 Okay, Right, So the ETF is not the bitcoin can 0:41:12.800 --> 0:41:15.080 that structure and that's the structure that the SEC is 0:41:15.080 --> 0:41:15.960 not comfortable with here? 0:41:16.600 --> 0:41:19.240 Correct? They object to the well, they have a number 0:41:19.239 --> 0:41:21.160 of objections and as I said, each one of them 0:41:21.160 --> 0:41:24.200 has kind of been proven to be logically incoherent. But 0:41:24.560 --> 0:41:27.280 we're stuck in this mandate, whether it's coming from the President, 0:41:27.280 --> 0:41:28.400 whether it's coming from Genzler. 0:41:28.400 --> 0:41:31.640 All right, So what does this all mean for innovation 0:41:31.840 --> 0:41:34.719 in crypto in the US. My concern, if if I 0:41:34.840 --> 0:41:38.080 were in senior political levels, it would be I want 0:41:38.120 --> 0:41:41.360 to make sure that whatever this crypto thing evolves into, 0:41:42.400 --> 0:41:42.839 I want the. 0:41:42.840 --> 0:41:43.680 US to be a leader. 0:41:44.360 --> 0:41:47.200 And now I feel like, just knowing what I know, 0:41:47.239 --> 0:41:50.520 that perhaps we're not going to take a leadership position 0:41:50.520 --> 0:41:54.400 because we don't have a well defined regulatory framework. Whether 0:41:54.440 --> 0:41:56.000 you like it or not, it doesn't seem like we 0:41:56.040 --> 0:41:58.520 have a one. Is there a risk that the US 0:41:59.000 --> 0:42:01.320 maybe is not a leader in this business? 0:42:01.640 --> 0:42:05.600 That's definitely the path of direction. So we can track 0:42:05.680 --> 0:42:07.879 the number of developers who are working on these open 0:42:07.880 --> 0:42:10.000 source blockchains, and we can track them by country, and 0:42:10.000 --> 0:42:11.840 what we can see is that the US is losing 0:42:11.920 --> 0:42:15.160 market share of crypto developers, so the innovators are looking 0:42:15.160 --> 0:42:17.200 to work elsewhere. The other thing that we can see 0:42:17.239 --> 0:42:20.240 is that stable coins like USDC, which is the coinbas 0:42:20.280 --> 0:42:23.160 Circle JV, are losing market share to Tether, which is 0:42:23.239 --> 0:42:27.440 an offshore, less regulated model on the same on the 0:42:27.480 --> 0:42:28.120 same Now. 0:42:28.040 --> 0:42:31.439 I feel like asking a political question, should Americans care? 0:42:31.520 --> 0:42:37.719 And if so, why Americans should care? Because every currency 0:42:38.920 --> 0:42:43.240 has there's been no currency that has been the global 0:42:43.280 --> 0:42:46.800 store of value for multiple centuries, and at some point 0:42:47.040 --> 0:42:49.560 the world is looking for an alternative. And here you 0:42:49.640 --> 0:42:54.920 have a decentralized money where the creation schedule is transparent, 0:42:55.239 --> 0:42:58.120 and that's very different from what's happening with the Federal Reserve. 0:42:58.160 --> 0:43:01.000 So what's going on in our concern? 0:43:01.120 --> 0:43:03.160 I don't want a dollar to be at risk if 0:43:03.200 --> 0:43:04.360 I'm President Biden or anything. 0:43:04.480 --> 0:43:06.640 I think what Matt's saying is that the dollars at risk. 0:43:06.800 --> 0:43:09.239 So even though you don't like it, we need to 0:43:09.360 --> 0:43:13.160 prepare for the reality that that turns around. We're still 0:43:13.160 --> 0:43:15.880 a long way off from that, right I want to 0:43:16.040 --> 0:43:20.520 wanted to ask you about other tokens because other than Bitcoin, 0:43:20.880 --> 0:43:24.799 you know, people may know Ether, but beyond that they 0:43:24.840 --> 0:43:28.440 don't really I mean dogecoin, right, what else is serious? 0:43:28.480 --> 0:43:30.439 And you think really important in crypto that we should 0:43:30.480 --> 0:43:31.279 be paying attention to. 0:43:32.000 --> 0:43:36.520 Yeah, So, there are a number of smart contract protocols. 0:43:36.560 --> 0:43:41.399 These are blockchain software that enable more complex transactions than 0:43:41.440 --> 0:43:44.280 Bitcoin can enable. So with Bitcoin, it's just very difficult 0:43:44.280 --> 0:43:47.400 to program in a bunch of if then conditions and 0:43:47.440 --> 0:43:52.000 make your bitcoin move around programmatically. With ethereum, because of 0:43:52.040 --> 0:43:55.520 the architecture of the blockchain, that is possible. And there 0:43:55.600 --> 0:43:59.320 are you know, a handful of similar layer one smart 0:43:59.320 --> 0:44:03.080 contract platforms to Ethereum. We're thinking of like a Solana, 0:44:03.719 --> 0:44:10.080 which make different trade offs on decentralization and speed. The 0:44:10.120 --> 0:44:12.640 history of these digital platforms is that they tend to 0:44:12.680 --> 0:44:16.280 be winner take all businesses. We're seeing that in Web two, Amazon, Google, 0:44:16.280 --> 0:44:18.600 et cetera. So one of the big challenges for digital 0:44:18.640 --> 0:44:22.160 investors right now is balancing those winner take all characteristics 0:44:22.160 --> 0:44:25.960 of these digital platforms with the extreme price disparity year 0:44:25.960 --> 0:44:28.520 to date, because year to date Bitcoin and Ether are outperforming. 0:44:28.760 --> 0:44:30.440 Part of the reason why they're out performing because the 0:44:30.440 --> 0:44:33.799 regulator is coming down on all these other innovative platforms. 0:44:34.000 --> 0:44:37.480 The more that the regulator cracks down, the greater these winner. 0:44:37.200 --> 0:44:39.440 Take all characteristics will be, the faster they will be. 0:44:39.560 --> 0:44:41.839 In a way, it's government picking winners. We don't want that. 0:44:41.880 --> 0:44:43.520 We want innovation to win out. 0:44:44.400 --> 0:44:46.279 Sounds reasonable to me. Matt Siegel, thanks so much for 0:44:46.360 --> 0:44:48.120 joining us here. A Matt Siegel, He's head of digital 0:44:48.120 --> 0:44:51.880 asset research for at van Neck. He's joins us live 0:44:51.880 --> 0:44:54.759 here in a Bloomberg Interactor broker's studio. Just looking at 0:44:55.280 --> 0:44:58.239 bitcoin because it's on my monitor for whatever reason. It's 0:44:58.280 --> 0:45:00.280 up six tens of one percent here twenty ninth, thousand 0:45:00.280 --> 0:45:02.280 and five eighty one for bitcoin. 0:45:02.520 --> 0:45:05.640 You're listening to the tape Cat's are Live program Bloomberg 0:45:05.680 --> 0:45:09.279 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:45:09.360 --> 0:45:11.359 tune in app, Bloomberg dot Com, and. 0:45:11.280 --> 0:45:12.560 The Bloomberg Business app. 0:45:12.600 --> 0:45:15.440 You can also listen live on Amazon Alexa from our 0:45:15.440 --> 0:45:20.480 flagship New York station. Just say Alexa play Bloomberg eleven thirty. 0:45:21.040 --> 0:45:25.120 Joining us here in our Bloomberg Interactive workers studio. Matthew Palosola. 0:45:25.160 --> 0:45:27.920 He's a senior insurance analyst with Bloomberg Intelligence. 0:45:28.080 --> 0:45:29.960 But whenever I see this guy, I know that a 0:45:30.040 --> 0:45:31.360 disaster has happened. 0:45:32.080 --> 0:45:34.719 Is exactly ifa things have happened. So we call on 0:45:34.960 --> 0:45:38.800 Matthew Palazola. So, Matthew, we seen the destruction in Bermuda, 0:45:38.840 --> 0:45:41.520 the loss of life. It's just horrific as some of 0:45:41.560 --> 0:45:46.040 the images that we saw. From the insurance perspective, What 0:45:46.080 --> 0:45:49.400 are you hearing from the companies as to perhaps exposure 0:45:49.440 --> 0:45:50.440 and all that type of thing. 0:45:50.440 --> 0:45:53.799 Right, So, nothing from the company specifically. We're looking at 0:45:54.520 --> 0:45:59.200 industry data data from the ground. In these cases, you'll 0:45:59.200 --> 0:46:02.279 hear about economic losses first, So we're hearing numbers like 0:46:02.480 --> 0:46:04.719 five six it can I just saw one for eight 0:46:04.760 --> 0:46:06.760 billion dollars economic damages? 0:46:07.120 --> 0:46:08.120 What's that actually? 0:46:08.400 --> 0:46:09.080 So that could be. 0:46:09.239 --> 0:46:14.719 Lost wages that it encompasses insured values, but insured values 0:46:14.719 --> 0:46:16.680 would be much less, so they could be even half 0:46:16.719 --> 0:46:19.000 of that. So the work that I'm doing now is 0:46:19.120 --> 0:46:23.040 kind of coming around low single digit billions for the 0:46:23.080 --> 0:46:25.920 insurance companies, which is a pretty manageable. 0:46:25.560 --> 0:46:26.000 Number, right. 0:46:26.840 --> 0:46:31.080 So but the thing is, these payouts are probably going 0:46:31.120 --> 0:46:33.200 to get bigger and bigger every year, right, not just 0:46:33.440 --> 0:46:37.160 what's happening in Hawaii. Not just you know what the 0:46:37.200 --> 0:46:41.359 Anino's brought, but every year did natural disaster payouts climb 0:46:41.440 --> 0:46:42.160 higher and higher. 0:46:42.480 --> 0:46:43.680 That has been happening, right. 0:46:43.760 --> 0:46:46.560 So it was thought of years ago that one hundred 0:46:46.600 --> 0:46:49.479 billion dollars and insured losses was something we'd never see, 0:46:49.560 --> 0:46:53.400 and now we've seen it for several years. So this 0:46:53.400 --> 0:46:57.200 this year so far is running above average catastrophe losses. 0:46:58.239 --> 0:47:01.080 It's climate change is kind of the big boogeyman in 0:47:01.120 --> 0:47:03.799 the whole thing. No one's saying it's not happening, but 0:47:04.160 --> 0:47:06.160 the insurance companies will tell you that a lot of 0:47:06.200 --> 0:47:11.319 this is driven by density of population building in catastrophe 0:47:11.360 --> 0:47:14.600 prone areas. It's kind of moral hazard where we keep building, 0:47:14.680 --> 0:47:17.280 we keep rebuilding, and you know it did. The cycle 0:47:17.320 --> 0:47:19.840 goes on and on. So it's not all climate change. 0:47:19.960 --> 0:47:21.719 I wrote down the stat I did want to tell 0:47:21.760 --> 0:47:25.480 you though. This is according to a catastree modeling company. 0:47:25.680 --> 0:47:31.840 They said, over the past century Hawaii, the average burning 0:47:31.880 --> 0:47:35.160 there has increased four hundred percent due to man made factors. 0:47:35.239 --> 0:47:38.880 So obviously something's happening there's I also thought this was interesting. 0:47:38.920 --> 0:47:44.120 There's a non native grass species that was introduced to Hawaii, 0:47:44.239 --> 0:47:46.799 which actually is feeding a lot of this because it's 0:47:47.520 --> 0:47:48.120 fire prone. 0:47:48.440 --> 0:47:51.399 Right, So, I mean there's all kinds of drivers here 0:47:51.560 --> 0:47:53.799 go into that issue of the kind of the moral hazard. 0:47:54.160 --> 0:47:58.320 I mean, a hurricane comes along, hits take your place, Florida, 0:47:58.440 --> 0:48:02.000 North Carolina said, you know where reverer it hits wipes. 0:48:01.640 --> 0:48:06.040 Out a part of the coast, The insurance guys pay 0:48:06.120 --> 0:48:07.919 up and people build houses right back there. 0:48:07.920 --> 0:48:09.319 Again, I forget about that. I'll take that to my 0:48:09.840 --> 0:48:12.759 Jersey Shore super sore Sandy. You get down a man 0:48:12.920 --> 0:48:14.640 looking which have some of the nicest homes on a 0:48:14.719 --> 0:48:18.920 Jersey Shore, they have rebuilt monster homes. And then the 0:48:18.960 --> 0:48:23.080 next lot, for whatever reason, completely blank, nothing's been rebuilt. 0:48:23.120 --> 0:48:25.040 So I don't know if there's a money's held up 0:48:25.040 --> 0:48:25.200 with the. 0:48:25.200 --> 0:48:28.600 Family or whatever. But is that person who rebuilt the 0:48:28.760 --> 0:48:32.440 monster house again, is he or she getting insured? 0:48:34.080 --> 0:48:37.279 Look, depending on the monstrosity of the house, may you 0:48:37.520 --> 0:48:38.640 might not be insured. 0:48:38.680 --> 0:48:40.920 And yeah, my experience with Chubb is after you take 0:48:40.960 --> 0:48:42.279 a big hit, they don't come back. 0:48:42.480 --> 0:48:42.680 Yeah. 0:48:42.719 --> 0:48:44.640 So I mean, if you have enough money where you 0:48:44.680 --> 0:48:46.560 built that house on your own, you don't have a mortgage, 0:48:46.560 --> 0:48:48.640 you don't have anything. I guess theoretically you could not 0:48:48.680 --> 0:48:51.600 have insurance. What's happening though in these states is a 0:48:51.640 --> 0:48:54.680 lot of it's falling on the state. So when you 0:48:54.719 --> 0:48:58.439 can't get insurance in Florida, in California, there's a state 0:48:58.520 --> 0:49:01.120 fund that you get insurance from. So ultimately it comes 0:49:01.160 --> 0:49:04.040 back to the taxpayer. So it's not the insurance companies 0:49:04.800 --> 0:49:05.520 have wised up. 0:49:05.560 --> 0:49:06.879 They don't just keep paying out. 0:49:06.960 --> 0:49:09.520 They will step back and drop these people. But what 0:49:09.600 --> 0:49:12.799 happens is or charge higher rates. They'll definitely charge higher rates, 0:49:12.800 --> 0:49:14.799 so they'll they'll charge you such a high rate that 0:49:14.880 --> 0:49:16.440 you'll go to the state fund. 0:49:17.040 --> 0:49:18.440 Does the state fund lose money? 0:49:19.320 --> 0:49:20.160 Hand over fists? 0:49:20.880 --> 0:49:21.400 I see? 0:49:21.600 --> 0:49:24.719 And funds that we do you okay, okay, yeah, you 0:49:24.800 --> 0:49:28.600 gut did. And but that's again at some point. Again, 0:49:28.680 --> 0:49:30.640 my good friends at the Jersey Shore, I'm just picking 0:49:30.680 --> 0:49:33.120 on them because that that that's where I crip these days. 0:49:33.680 --> 0:49:37.800 I mean, I don't feel like they should be insured. 0:49:37.920 --> 0:49:40.320 I mean, if it's given what's happened, But I guess 0:49:40.960 --> 0:49:42.640 it's up to the companies and if maybe they can 0:49:42.840 --> 0:49:44.040 decline to have insurance. 0:49:44.080 --> 0:49:46.040 Right And this question may be beyond the scope of 0:49:46.040 --> 0:49:47.480 Matthew Powis no, no. 0:49:47.320 --> 0:49:49.920 No, I don't know if we can get the situation 0:49:50.040 --> 0:49:54.479 in here from Jersey. But no, I mean, like I said, 0:49:54.520 --> 0:49:56.319 you if you have a mortgage on your property, you 0:49:56.360 --> 0:49:57.719 need you have to have insurance. 0:49:57.800 --> 0:49:59.600 Yes, and that's it right. 0:50:00.000 --> 0:50:03.320 The state is not going to let people be completely 0:50:03.360 --> 0:50:05.560 unhappy and not have insurance and it'd be too expensive. 0:50:05.600 --> 0:50:07.439 So that's where this kind of comes in, and people 0:50:07.480 --> 0:50:09.759 don't realize that the taxpayers are ending up funding that. 0:50:09.880 --> 0:50:11.719 It's also it's not the Jersey shore that takes the 0:50:11.719 --> 0:50:13.720 big losses, right, it's Florida's Florida. 0:50:13.800 --> 0:50:17.240 Yeah, it's Florida, and it's California. It's Texas to some degree. 0:50:17.280 --> 0:50:20.120 I mean, we had Sandy that was kind of an 0:50:20.120 --> 0:50:22.919 odd off event, but I mean we also had last 0:50:23.040 --> 0:50:24.520 was I don't remember if it was last year where 0:50:24.520 --> 0:50:27.440 we had these significant rain events repeatedly and it was 0:50:27.520 --> 0:50:29.920 the most rain ever. And then the next week it 0:50:29.920 --> 0:50:31.920 was the most rain ever again in you know, the 0:50:31.960 --> 0:50:32.680 tri state area. 0:50:32.719 --> 0:50:33.600 So it is happening, all right. 0:50:33.640 --> 0:50:38.520 So we're August fourteenth here, what's the hurricane call this year? 0:50:38.640 --> 0:50:41.520 I mean, so far, I don't recall nothing big as 0:50:41.600 --> 0:50:42.399 hit here has it? 0:50:42.440 --> 0:50:42.960 So it hasn't been. 0:50:43.000 --> 0:50:46.719 It started off quick and hot, right, and I was 0:50:46.960 --> 0:50:49.240 pretty worried that it was going to be above average season. 0:50:50.040 --> 0:50:54.040 So you've got to countervailing forces. You've got the Onino 0:50:54.040 --> 0:50:57.680 effect which you brought up before, that actually suppresses hurricane 0:50:57.760 --> 0:50:59.200 activity in the Atlantic. 0:50:59.560 --> 0:51:01.400 That just and it's blowing somewhere. 0:51:01.440 --> 0:51:02.440 It's a hot current, right. 0:51:02.960 --> 0:51:06.040 Essentially, I'm just an amateur meteor I'll just so you know, 0:51:06.080 --> 0:51:07.719 I'll have to take a step back and say, yes, 0:51:07.760 --> 0:51:12.120 it's basically just winds moving right that usually suppresses hurricane 0:51:12.120 --> 0:51:15.360 activity here. But then you have these record sea surface 0:51:15.440 --> 0:51:19.720 temperatures which feed hurricane activity. So this has netted itself 0:51:19.760 --> 0:51:23.600 out to be from the forecasts. Forecast is to be 0:51:23.680 --> 0:51:26.960 in above average season, but we haven't seen that much yet. 0:51:27.120 --> 0:51:29.680 The peak is about mid September. 0:51:30.560 --> 0:51:33.040 By the way, hell Nino is it is a warm 0:51:33.120 --> 0:51:36.000 current of water, ocean water that develops in the central 0:51:36.000 --> 0:51:38.520 and east central Equatorial Pacific. 0:51:38.600 --> 0:51:41.560 And do you know the opposite La Nina. 0:51:41.680 --> 0:51:44.440 La Nina, the girl sorr Helinos, the boys. 0:51:44.680 --> 0:51:47.080 We've been in La Nina for a while, which is 0:51:47.120 --> 0:51:49.239 actually fed hurricane activity. 0:51:48.880 --> 0:51:49.160 All right. 0:51:49.200 --> 0:51:51.920 The S and P five hundred property and casually insurance 0:51:52.080 --> 0:51:54.759 sub index down five percent this year. 0:51:55.280 --> 0:51:59.439 Yes, so insurance is gonna be suffered from. I think 0:51:59.440 --> 0:52:01.920 that the risk on environment in the beginning of the year, 0:52:02.000 --> 0:52:05.160 the defensive stocks they can sell off with that rotation. 0:52:06.880 --> 0:52:10.200 I think unfairly they suffered with the bank turmoil, they 0:52:10.200 --> 0:52:13.960 weren't really exposed. Another concern is commercial real. 0:52:13.800 --> 0:52:15.560 Li I mean, the concern there is that they hold 0:52:15.600 --> 0:52:19.920 a lot of long term for example, treasuries, you know, 0:52:19.960 --> 0:52:21.719 and maybe they haven't marked to market either. 0:52:21.920 --> 0:52:23.920 So they did that last year. That was a big impact, 0:52:23.960 --> 0:52:26.440 so they still do. It's it's kind of reversing this year. 0:52:26.480 --> 0:52:28.239 They have They hold a lot of commercial real estate, 0:52:29.080 --> 0:52:31.120 more specifically maybe the life insurance companies. 0:52:31.680 --> 0:52:32.880 We did analysis on that. 0:52:32.920 --> 0:52:35.319 It seemed to be very magicable exposure for them in 0:52:35.360 --> 0:52:38.200 a bad case. It hasn't really reared its head, but 0:52:38.200 --> 0:52:40.000 I think those things were dragging them down. 0:52:40.040 --> 0:52:43.200 And otherwise, how are they doing making returns because that's 0:52:43.239 --> 0:52:45.719 the idea, right we all put in our premiums and 0:52:45.719 --> 0:52:47.759 then they take that money and they go invest it 0:52:47.800 --> 0:52:49.759 and hopefully they make more than they lose on these 0:52:49.800 --> 0:52:51.360 natural disasters exactly. 0:52:51.440 --> 0:52:53.839 So fundamentals are good. 0:52:53.920 --> 0:52:56.719 They've been you know, earning that we're at it could 0:52:56.760 --> 0:52:59.120 be peak roes for this pricing cycle, could be this 0:52:59.239 --> 0:53:03.880 year or next year. Typically valuations peak before the rois, 0:53:04.040 --> 0:53:06.600 So if it's this year, then maybe they peaked already, 0:53:06.640 --> 0:53:07.680 but it could be next year. 0:53:07.719 --> 0:53:08.960 Are there any hot you know? 0:53:09.120 --> 0:53:11.719 We're the best managed insurance companies that you cover. 0:53:13.640 --> 0:53:16.680 I love Chubb, right, It's it's the biggest and it's 0:53:16.719 --> 0:53:21.000 still growing a lot. Evan Greenberg's CEO, I mean, of 0:53:21.040 --> 0:53:23.960 this giant company, and he kind of knows all the 0:53:24.000 --> 0:53:25.120 ins and out details. 0:53:26.000 --> 0:53:29.080 You know. They they have the best. 0:53:28.840 --> 0:53:32.719 Commercial underwriting of their peer group and they're the biggest ones. 0:53:32.760 --> 0:53:36.560 So I mean, I love Chubb's management and strategy. 0:53:36.719 --> 0:53:38.440 It will take me. It will take me as a client. 0:53:38.480 --> 0:53:40.279 They wouldn't take you, of course they did once. 0:53:40.400 --> 0:53:42.920 But I guess too many losses, too many claims. 0:53:43.080 --> 0:53:47.319 You have like motorcycle, there's no way may have been 0:53:47.320 --> 0:53:47.759 a part of that. 0:53:48.239 --> 0:53:50.799 Do you have your Picasso in the basement when flood. 0:53:50.640 --> 0:53:54.040 No, I didn't have any really big problems, just I 0:53:54.080 --> 0:53:56.920 think there was a small issue with a Portia nine 0:53:56.920 --> 0:53:59.360 to eleven and and the motorcycle accsent. 0:53:59.280 --> 0:54:01.560 Motorcycle acts and in the jump out of planes and 0:54:01.560 --> 0:54:04.080 all that kind of stuff. What's the area of insurance 0:54:04.120 --> 0:54:06.319 that you just are staying away from it right right 0:54:06.360 --> 0:54:06.839 now in your. 0:54:06.760 --> 0:54:12.160 Space, staying away from so you know what's interesting. Cyber insurance, 0:54:12.239 --> 0:54:16.160 right Cyber insurance is a big growing line of business. 0:54:16.480 --> 0:54:20.319 A lot of companies are getting into it. They've been 0:54:20.480 --> 0:54:25.080 very cautious on it. But you don't know what you're underwriting. 0:54:25.080 --> 0:54:27.960 And I think the world is not getting anymore any 0:54:28.000 --> 0:54:30.960 It's not gonna getting less risky, right, and it's getting 0:54:31.000 --> 0:54:31.439 more risky. 0:54:31.480 --> 0:54:33.680 And these are things that companies don't know about. 0:54:33.719 --> 0:54:35.919 So be a little wary of someone who's talking about 0:54:35.960 --> 0:54:38.319 growing a lot in cyber insurance right now, all. 0:54:38.280 --> 0:54:40.640 Right, Matt, good to have you in our Bloomberg Interactive 0:54:40.640 --> 0:54:43.400 Broker studio. Matthew Palosola. He's a senior al is covering 0:54:43.440 --> 0:54:47.960 all the property and casualty insurance for Bloomberg Intelligence. 0:54:48.239 --> 0:54:51.360 You're listening to the tape cans Are Live program Bloomberg 0:54:51.400 --> 0:54:55.000 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:54:55.080 --> 0:54:57.000 tune in app, Bloomberg dot Com, and. 0:54:57.000 --> 0:54:58.279 The Bloomberg Business App. 0:54:58.320 --> 0:55:01.160 You can also listen live on Mazon Alexa from our 0:55:01.160 --> 0:55:05.879 flagship New York station. Just say Alexa play Bloomberg eleven thirty. 0:55:07.440 --> 0:55:08.160 Javia Giant. 0:55:08.239 --> 0:55:11.239 He is the founder and CEO of Techian and he 0:55:11.320 --> 0:55:15.480 was the former chief information officer at Tesla. So let's 0:55:15.520 --> 0:55:17.879 talk a little bit what's happening in the EV space. Jay, 0:55:17.880 --> 0:55:20.400 Thanks so much for joining us here. First, let's just 0:55:20.400 --> 0:55:22.120 start off real quick. Tell us what you guys are 0:55:22.120 --> 0:55:23.280 doing at Techian. 0:55:24.800 --> 0:55:28.560 Hi, Paul, Thanks thanks for having me here. You're looking 0:55:28.600 --> 0:55:32.719 forward to to our conversation. Yeah, at Techian, as you know, 0:55:33.000 --> 0:55:36.960 the automotive industry is going through some major fans everything 0:55:37.040 --> 0:55:42.360 from EV to autonomous vehicles, from selling models. 0:55:43.520 --> 0:55:44.880 Tekan is right in the center. 0:55:44.960 --> 0:55:49.120 So we've created a platform to bring together the major 0:55:49.200 --> 0:55:57.080 stakeholders in one seamless and technology platform. Manufacturers, the retailers, 0:55:58.080 --> 0:56:01.800 the ecosystem players being soft where are be functional industry 0:56:01.840 --> 0:56:04.640 players like insurance providers, lenders and others. 0:56:05.080 --> 0:56:07.520 And then of course the beneficiary is the consumer. 0:56:07.600 --> 0:56:10.880 So the end of the day, the consumer really needs 0:56:10.920 --> 0:56:13.799 to get what they're looking for in terms of their 0:56:13.800 --> 0:56:18.440 automotive buying experience. We are delivering that through the technology 0:56:18.640 --> 0:56:23.719 as an operating platform for retailers, manufacturers, and then the 0:56:23.760 --> 0:56:27.160 participants are the industry software ecosystem players. 0:56:27.719 --> 0:56:30.040 So it gives a sense Jay, I mean if I'm 0:56:30.040 --> 0:56:32.920 a I mean, Tesla has obviously a different distribution model, 0:56:33.120 --> 0:56:36.680 does not rely on dealerships, kind of goes direct to consumer. 0:56:37.440 --> 0:56:38.480 How do you think. 0:56:38.480 --> 0:56:43.480 The the original OEMs, the Fords, the Gms of the world, 0:56:43.520 --> 0:56:45.640 the Volkswagens of the world, how do you think or 0:56:45.640 --> 0:56:48.040 how do you think they should make this evolution to 0:56:48.360 --> 0:56:49.960 selling these electric vehicles? 0:56:51.120 --> 0:56:54.120 Great question, you know it's a I don't know if 0:56:54.239 --> 0:56:56.160 I should say it's a trillion dollar question, right. So 0:56:56.480 --> 0:57:00.200 the way we see it, we are deep into the industry. 0:57:00.600 --> 0:57:04.520 Techon works with you know, many of the retailers. In fact, 0:57:04.560 --> 0:57:08.480 the world's largest automountive retailer runs on Techion, and we 0:57:08.520 --> 0:57:12.279 work with multiple manufacturers as well. So the bottom line is, 0:57:12.320 --> 0:57:15.480 as you know, trends go through different phases, and they 0:57:15.520 --> 0:57:18.240 go through a big hype face where everything is like, oh, 0:57:18.320 --> 0:57:21.440 for example, I can give you a simple example. Before COVID, 0:57:22.040 --> 0:57:25.080 everyone said the car ownership is going away, and after 0:57:25.720 --> 0:57:27.479 COVID we all realize it hasn't gone away. 0:57:27.480 --> 0:57:30.160 People are still buying cars now. 0:57:30.440 --> 0:57:33.480 The other trend is people are thinking about everything will 0:57:33.520 --> 0:57:39.080 go online, people will buy cars online. I don't ever 0:57:39.160 --> 0:57:42.080 see that happening for the same reason why you know 0:57:42.160 --> 0:57:45.400 Tesla is still opening retail stores. Apple is still opening 0:57:45.440 --> 0:57:49.520 retail stores. What consumers are looking for again, putting myself 0:57:49.600 --> 0:57:52.200 in consumer shoes, the way I shop versus the way 0:57:52.240 --> 0:57:55.480 my twenty year old daughter shops for cars versus my 0:57:55.560 --> 0:57:58.760 wife shops for cars would be different. What consumers are 0:57:58.800 --> 0:58:02.960 looking for is give me the choice, give me the experience. 0:58:03.040 --> 0:58:06.480 Seamless experience doesn't matter how I choose to shop. If 0:58:06.480 --> 0:58:10.920 I want to do an online, majority of the tasks 0:58:10.960 --> 0:58:14.880 which I don't like, which is signing documents or negotiating price. 0:58:15.560 --> 0:58:19.720 But there are specific tasks I want to do it in, 0:58:20.200 --> 0:58:23.320 like experiencing the product itself, test driving, Like I walk 0:58:23.360 --> 0:58:25.960 into an Apple store and touch and feel my iPhone 0:58:26.040 --> 0:58:26.960 or a Mac. 0:58:27.720 --> 0:58:29.919 I think that is the fundamental. 0:58:30.080 --> 0:58:33.440 So what I see the industry evolving as the retail 0:58:34.480 --> 0:58:37.920 model not going away, but the business will evolve to 0:58:38.000 --> 0:58:41.920 provide the seamless experience for consumers, be if they start 0:58:42.000 --> 0:58:45.480 at a manufacturer website or they start shopping at a 0:58:45.520 --> 0:58:46.600 retailer website. 0:58:47.280 --> 0:58:48.960 Today, the experience is disconnected. 0:58:49.680 --> 0:58:52.880 That's exactly what we are solving from Technion perspective. Why 0:58:52.920 --> 0:58:55.800 not use that as an advantage because consumers need to 0:58:55.880 --> 0:58:58.680 go into a retail location to shop. 0:59:00.640 --> 0:59:01.040 Or whatever. 0:59:01.160 --> 0:59:04.400 Yeah, what are you finding from some of these existing OEMs? 0:59:04.440 --> 0:59:09.200 Do they have that mindset to be flexible about using technology? 0:59:09.200 --> 0:59:11.520 Maybe in ways they haven't done it before. Number one, 0:59:11.760 --> 0:59:12.400 Are they flexible? 0:59:12.480 --> 0:59:15.120 Number two? Are they willing to make whatever investment is required? 0:59:16.480 --> 0:59:18.080 Yeah, you see a full spectrum. 0:59:18.480 --> 0:59:20.920 Some of them are quite flexible, want to do it, 0:59:21.040 --> 0:59:23.720 and they didn't have a very clear path to do it. 0:59:24.080 --> 0:59:27.240 And I think fortunately, I think Techion is helping because 0:59:27.240 --> 0:59:29.360 as you know, we are a new generation company started 0:59:29.400 --> 0:59:33.240 in twenty sixteen, so most modern tech platform from a 0:59:33.280 --> 0:59:37.720 cloud native versus also using machine learning and AI inherently 0:59:37.760 --> 0:59:39.680 part of the platform. So it was not an afterthought 0:59:39.760 --> 0:59:42.080 where we went ahead and built something like that. 0:59:42.520 --> 0:59:43.840 So now we are helping that. 0:59:44.320 --> 0:59:47.320 And you see there are another spectrum where not a 0:59:47.360 --> 0:59:50.040 lot of flexibility is there. There's willingness from the you know, 0:59:50.920 --> 0:59:54.640 senior management at the working level, there is not enough incentive. 0:59:54.240 --> 0:59:55.440 Or push to go change. 0:59:55.480 --> 1:00:00.440 So we see a full spectrum of automotive manufacturers willing 1:00:00.520 --> 1:00:04.600 to change again. We all know the answer is anyone 1:00:04.640 --> 1:00:09.120 who's truly changing will continue to be in the middle 1:00:09.200 --> 1:00:11.640 or be in the front in some cases, and anyone 1:00:11.680 --> 1:00:14.160 who's not changing will be left behind over a. 1:00:14.080 --> 1:00:14.760 Period of time. 1:00:15.080 --> 1:00:17.160 So Jay, just give us a sense of what product 1:00:17.240 --> 1:00:20.120 or what service that you guys are tech on provide, 1:00:20.520 --> 1:00:24.320 say a dealer or the OEM dealer relationship that's proving 1:00:24.360 --> 1:00:25.760 I guess the most popular at the moment. 1:00:27.240 --> 1:00:30.960 Absolutely there are you know two, so three we have 1:00:31.000 --> 1:00:34.920 a three offerings. Retail cloud all interconnected. Retail cloud is 1:00:34.920 --> 1:00:39.920 for retailers. Runs the entire retail operations of retailer everything 1:00:40.160 --> 1:00:42.960 you know if you look at from selling cars online, 1:00:43.120 --> 1:00:49.080 shopping experience, selling cars online, customer engagement, selling cars in store, 1:00:49.480 --> 1:00:51.800 and the complete back office if you would call it 1:00:51.840 --> 1:00:55.080 as a ERP like General Ledger ap AR running their 1:00:55.240 --> 1:00:58.280 entire business and payments because it needs to come together 1:00:58.360 --> 1:01:01.040 to give the best experience. So that's automotive retail cloud 1:01:01.520 --> 1:01:04.920 seamlessly connected to the manufacturer's back end system so to 1:01:05.080 --> 1:01:09.200 track vehicle inventory, to order parts and receive it seamlessly, 1:01:09.280 --> 1:01:12.480 have with civility. And then we have enterprise cloud, which 1:01:12.520 --> 1:01:16.640 is focused as an e commerce engine for manufacturers but 1:01:16.760 --> 1:01:19.560 having a seamless connection to its dealers. So we have 1:01:19.640 --> 1:01:24.600 some of the largest manufacturers in the world using Techion, 1:01:24.720 --> 1:01:29.200 like for example, General Motors is our customer, so we 1:01:29.760 --> 1:01:33.160 have a white liveled platform for them to sell their evs, 1:01:33.480 --> 1:01:36.520 but seamlessly really connecting to their dealers as well. 1:01:36.600 --> 1:01:37.800 So that's retail cloud. 1:01:38.280 --> 1:01:40.600 The last one is we need to bring the ecosystem 1:01:40.640 --> 1:01:45.400 together partner cloud where we have technology APIs and you 1:01:45.440 --> 1:01:49.080 have like insurance providers lenders. So if you sell a car, 1:01:49.160 --> 1:01:51.080 you need to sell an insurance So how do you 1:01:51.120 --> 1:01:53.680 make that process simple and easy? See how do you 1:01:53.800 --> 1:01:59.560 bring the providers through technology seamlessly exchanging data and securely? 1:02:00.880 --> 1:02:01.959 All right, fascinating stuff. 1:02:02.000 --> 1:02:05.040 I mean, it's an industry that is evolving with the 1:02:05.080 --> 1:02:07.560 times and with the technology, and you kind of think 1:02:07.600 --> 1:02:11.400 about the whole stack there. Jay Vagian is the founder 1:02:11.440 --> 1:02:13.640 and CEO of tech Young, joining us here to talk 1:02:13.680 --> 1:02:15.919 to us about evs and how you kind of bring 1:02:15.960 --> 1:02:19.800 it all together from the OEM manufacturer right down through 1:02:19.800 --> 1:02:21.000 the dealer and to the consumer. 1:02:23.040 --> 1:02:26.080 Thanks for listening to the Bloomberg Markets podcast. You can 1:02:26.160 --> 1:02:29.960 subscribe and listen to interviews at Apple Podcasts or whatever 1:02:30.040 --> 1:02:33.760 podcast platform you prefer. I'm Matt Miller. I'm on Twitter 1:02:33.960 --> 1:02:35.880 at Matt Miller nineteen seventy three. 1:02:36.320 --> 1:02:38.760 And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 1:02:38.840 --> 1:02:41.520 Before the podcast, you can always catch us worldwide at 1:02:41.520 --> 1:02:43.240 Bloomberg Radio