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Speaker 3: All right, let's get to Gena.
Speaker 4: Martin Adams, So Boomberg Intelligence Chief equity strategist, Gina, how
Speaker 4: much complacency at this point is still left in the market.
Speaker 5: Oh, I don't think there's too much complacency at all, Alex.
Speaker 5: It's pretty rare to see the VIC spike well north
Speaker 5: of sixty. Yes, we did on Monday morning and not
Speaker 5: have a full washout in sentiment.
Speaker 6: And I think we did see that.
Speaker 5: By the time we got to the point of Monday close,
Speaker 5: the vixlas above thirty. The fourteen day RSI momentum score
Speaker 5: for the S and P five hundred was just at thirty.
Speaker 5: That kind of oversoul momentum and extreme pop and vis
Speaker 5: has historically led to positive returns eighty percent of the
Speaker 5: time over the next three months, so we've generally sort
Speaker 5: of washed out.
Speaker 6: A lot of the complacency.
Speaker 5: I do think that to the degree that valuations are
Speaker 5: still a little bit too elevated. In tech that may
Speaker 5: be a space where complacency still exists. And you know, frankly,
Speaker 5: as much as we nitpick at these company earnings, the
Speaker 5: earnings have been very.
Speaker 6: Very strong.
Speaker 5: So there's not a lot in the earnings that you
Speaker 5: can say really sort of dismantled the confidence in the
Speaker 5: tech space. If there's any complacency, it might be there,
Speaker 5: but I'd say markets at large, you have gone a
Speaker 5: long way to pricing out any sort of elevated enthusiasm.
Speaker 7: So I'm still trying to figure out what happened, Like,
Speaker 7: what happened Monday, Tuesday and today?
Speaker 8: Was it technical?
Speaker 3: You forget Friday?
Speaker 8: Friday too? I wonder why I forgot Friday.
Speaker 7: It's on the beach, So is it a technical thing?
Speaker 7: Japan carried thing that people are telling me about the
Speaker 7: Nieck trading crazy?
Speaker 8: What was it?
Speaker 5: I think it's predominantly about Japan, and you can almost
Speaker 5: one for one mark all the way back to the
Speaker 5: middle of July when the market started weakening as the
Speaker 5: yen turned significant to made a significant turn in direction, right,
Speaker 5: So it's very much about an unwinded the carry trade.
Speaker 5: And then last week when we did get final confirmation
Speaker 5: from the Bank of Japan that they were raising interest
Speaker 5: rates for the first time in seventeen years. That created
Speaker 5: a lot of instability that was then exacerbated on Friday
Speaker 5: with some relatively weak economic data in the US. So
Speaker 5: it's that spread in interest rate differentials between the US
Speaker 5: and Japan that is really key to this market meltdown
Speaker 5: that clearly widened substantially over the weekend. US bond markets
Speaker 5: starting to price for fed ease, where the Japanese market
Speaker 5: is now starting to expect a tightening in Japan created
Speaker 5: tremendous weakness in the currency marks, which then exacerbated declines
Speaker 5: in the equity markets.
Speaker 6: I mean, I think that.
Speaker 5: There there is a link between all of these markets
Speaker 5: that is very, very notable. When you have this carry
Speaker 5: trade in place for nearly two decades and it's starting
Speaker 5: to unwine, it creates some issues of force selling, some
Speaker 5: liquidity issues broadly that generally impact the equity markets, and
Speaker 5: I think that's largely what's driven the instability. Thankfully, overnight
Speaker 5: we did get some news from the Bank of Japan
Speaker 5: that they have they've committed at the very least not
Speaker 5: to tighten during periods of general financial market distress going forward.
Speaker 5: But you know, frankly, we are in a different path
Speaker 5: for central bank policy than we have been in the
Speaker 5: points in the past, So we're going to have to
Speaker 5: be on guard for bouts of indigestion as we adjust
Speaker 5: to this new normal.
Speaker 7: All right, Gene, I've been doing a stock market thing
Speaker 7: for thirty five years. I have no idea what's going
Speaker 7: on at there, Gina Martin Adams.
Speaker 8: She's a pro.
Speaker 6: That's not helpful.
Speaker 8: I have no idea what's going on?
Speaker 7: Gena Martin Adams, chief equity strategist for Bloomberg Intelligence.
Speaker 8: Joining us.
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Speaker 3: And Alex Steel Pulse. We need is Bloomberg Intelligence Radio.
Speaker 4: We are broadcasting to you live from our rainy interactive
Speaker 4: broker studio right here in New York. Although I don't
Speaker 4: know if it's actually raining right now, but doesn't look
Speaker 4: pretty dark.
Speaker 3: It looks dark. It looks a little grim, looks a
Speaker 3: little dark.
Speaker 4: R Let's go to the bond market for a moment,
Speaker 4: because four years ago those twenty year bond auctions were
Speaker 4: a thing.
Speaker 3: Of the past.
Speaker 4: But Treasury Secretary at the time, Steve Manushan, reintroduced those
Speaker 4: twenty year bonds and monthly auctions. Their sale apparently, if
Speaker 4: you just do back in the envelope calculations tacked on
Speaker 4: roughly two billion dollars a year in interest expenses. And
Speaker 4: now Steve Manushan saying, you know what, guys, maybe we
Speaker 4: don't need them anymore, maybe they're too expensive. Well here
Speaker 4: joining us in studio. Yesha a Bloomberg Markets reporter. He
Speaker 4: is the lead on this story for Bloomberg. It's reading
Speaker 4: quite how you guys should definitely check it out on
Speaker 4: the terminal or on Bloomberg dot com.
Speaker 3: Yeah, what is he saying.
Speaker 9: He's saying, as you just said, just to kill it.
Speaker 9: It's expensive paper for the government to keep selling every month.
Speaker 9: It's almost like one trillion over the past four years
Speaker 9: they sold and based our calculation based on the average
Speaker 9: yields of tens and thirty year bonds, the government overpaid
Speaker 9: roughly two billion a year and it adds up to
Speaker 9: forty billing over the life of the bonds. So and
Speaker 9: if the government keeps selling it, it's just really costs
Speaker 9: a lot of money for taxpayers.
Speaker 8: Why why is it costing more money?
Speaker 9: Yeah, because you are selling the most expensive bonds on
Speaker 9: the trairie Yo cuve. You would sell the bonds cheaply
Speaker 9: raise the money cheaply for the governments if you sell
Speaker 9: the ten years for example. And the two billion doesn't
Speaker 9: sound a lot of money, and just considering in the
Speaker 9: context of the government's spanning is almost seven trillion a year,
Speaker 9: So two billion is not a big deal in big
Speaker 9: scheme of things. But at the same time, it's not
Speaker 9: small money. Right, we look at the budget of the governments.
Speaker 9: It's roughly equal to the annual cost for running the
Speaker 9: national parks. It's also equal to the subsidy for the
Speaker 9: veteran housing. So it's real money.
Speaker 3: Why did he like it to begin with?
Speaker 5: Then?
Speaker 9: So the government and it's two twenty. The government's looking
Speaker 9: for new ways to diversive that by their funding and
Speaker 9: try to raise a lot of money because the it's pandemic.
Speaker 9: The government spanning is really ramping up and they try
Speaker 9: to find a new source of the funding, and they
Speaker 9: studied a lot of ways, including selling fifty year bounds
Speaker 9: or one hundred year bonds. The government have a committee
Speaker 9: they try to convince that MANUSI that it's not a
Speaker 9: good deal to sell really long bounds fifty one hundred
Speaker 9: year bounds because it's even more expensive. Nobody's going to
Speaker 9: buy buy it. So the Mnusian took the idea and
Speaker 9: sell the twenty year bounds. Remember, in the past, as
Speaker 9: you mentioned earlier, the government sold the twenty year bounds
Speaker 9: in the nineteen eighties, but it only lasted four years
Speaker 9: because they run the same problem as we run now.
Speaker 9: There are no sufficient demand for the twenty year bonds,
Speaker 9: and at that time the government also have the limit
Speaker 9: of how much long term bonds they can sell with.
Speaker 9: So at that time the US Treasury decided to just
Speaker 9: abandon the twenty year bounds in favor of keeping selling
Speaker 9: the thirty year bounds. Thirteen bonds has more demand at
Speaker 9: least it looks like now that because a lot of
Speaker 9: the pensions insurance company realize these long duration, long interest
Speaker 9: and sensitive security to match their balance sheet liability. So yeah,
Speaker 9: there we.
Speaker 8: Are one of the things.
Speaker 7: If it's more expensive sell in the twenties, why isn't
Speaker 7: the Treasury just not sell any than just auction off
Speaker 7: tens and thirties.
Speaker 9: Yeah, So the Treasury in their debt management principle, they
Speaker 9: really want to make the debt issuance more predictable, more reliable.
Speaker 9: So once they start issuing new bonds, they want to
Speaker 9: see it stick for a while, so everyone have the
Speaker 9: same expectations. So you just can't turn it on and
Speaker 9: turn it off on a whim. So that's the argument
Speaker 9: for keep doing it. And the the other argument is
Speaker 9: that if you're looking down in the next few years,
Speaker 9: the deficity is going to continue grow very quickly and
Speaker 9: they need every help from every part of the curve
Speaker 9: since you have already this new instry instrument, so they
Speaker 9: like to stick with it. And also that the argument
Speaker 9: is that if you don't sell the twenty year bonds,
Speaker 9: you have to sell more ten years, thirty years, then
Speaker 9: you're going to increase the cost for that part of
Speaker 9: the curve as well.
Speaker 4: An argument are they issuing more front end or back end?
Speaker 9: Yeah, so the so there's some academic study the most
Speaker 9: cost efficient way is sell in the middle of the curve,
Speaker 9: in the badley of the curve, like five years, ten years,
Speaker 9: anything beyond that. It's costs a lot of money. But
Speaker 9: they also want a more diversified of the case. So
Speaker 9: if you sell, like all of a sudden, sell lots
Speaker 9: of the ten year bonds in one auction, you could
Speaker 9: see that auction fair fairly poorly, And this is something
Speaker 9: they want to avoid. So that's the argument to just
Speaker 9: keep doing that.
Speaker 7: Yeah, these deficits are they're becoming a thing here. I
Speaker 7: mean the annual de it's almost two trillion dollars.
Speaker 8: That's per year.
Speaker 7: Kids, that's double the level of just five years ago.
Speaker 7: What is What does your bond markets say about that?
Speaker 9: Yeah, that's there's a lot of a debate on that.
Speaker 9: We saw that last summer, the law and the curve
Speaker 9: really kind of keep rising. Remember at the time, the
Speaker 9: federal was raising interest rates, so a lot of people
Speaker 9: were concerned that we are don't have a sufficient demand
Speaker 9: for these bonds. And I think I think this is
Speaker 9: still the concern in the market, the this talk of
Speaker 9: bond vigilanty. It becomes a thing nowadays that the idea
Speaker 9: that that we are going to have a bier strikes
Speaker 9: all these auctions because think about it, some of the
Speaker 9: foreign investors, especially central bank in China, Japan, they are
Speaker 9: not going to they are not coming to the US
Speaker 9: treasure market anymore. And uh, the it's really the private
Speaker 9: sectors buying all these bonds and they're there price sensitive.
Speaker 9: They want to buy the price. They're not going to
Speaker 9: buy the price that's really low. They want to be
Speaker 9: compensated for the risks. So there's a term in the
Speaker 9: BOMBA called the term premium. This is how much actual
Speaker 9: compensation you wanted for holding the long term bonds. And
Speaker 9: we see it backed up a little bit over the
Speaker 9: course of the year, but now there's recession consuming the market,
Speaker 9: especially over the last couple of days. That term premium
Speaker 9: is capture at bay at the moment, but at some
Speaker 9: point there's some has to be some confrontation between the
Speaker 9: markets and all the supply coming to the market at
Speaker 9: some point.
Speaker 4: Totally, all right, Yashan, thanks a lot, Yasha his Bloomberg
Speaker 4: Markets reporter. Definitely check out everything that he writes because
Speaker 4: that's where I learn all my stuff. Just thank you
Speaker 4: very much for all your hard work and you're writing.
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 4: Let's get more to the equity moves Lift also moving
Speaker 4: in the market. Airbnb though just really struggling, Man deep saying,
Speaker 4: Bloomberg Intelligence in your tech industry. Analyst joins us on Airbnb.
Speaker 4: So is this Airbnb misjudging something or is this just
Speaker 4: the US consumer surprisingly slowing?
Speaker 10: I think with Airbnb, the biggest concern has been the
Speaker 10: saturation in their core market. And you know, we are
Speaker 10: coming off of pandemic where the tailwind was behind them
Speaker 10: in terms of people traveling more. But now everyone realizes
Speaker 10: that their room night growth is tapering off. And the
Speaker 10: reason why it's tapering off is because they are highly
Speaker 10: penetrated in their core markets, whether it's in the US, Europe,
Speaker 10: and with any marketplace business, you got to grow supply.
Speaker 10: If you're not growing supply, then it becomes a problem
Speaker 10: because then your demand is sort of limited by how
Speaker 10: much supply you can grow. So what they told us
Speaker 10: last night is they're going to spend more in terms
Speaker 10: of acquiring new supply outside their core markets in Latin America,
Speaker 10: in Asia pack and there will be ROI down the line,
Speaker 10: but for the next two to three quarters, they're gonna
Speaker 10: be growing mid single digit. And that's where I think.
Speaker 10: When you're trading at eight nine time sales, the highest valuation,
Speaker 10: you get this kind of response.
Speaker 7: It looks like we're surrounded here in our studio by
Speaker 7: these bi anals. We got man Deep, we got Jonathan
Speaker 7: Palmer on the healthcare. It's almost like there's not a
Speaker 7: management team in there keeping tabs on where all the animals.
Speaker 3: Are for because they're all here. We make them come here.
Speaker 7: On the beach at the moment, I mean most of
Speaker 7: the management team, all right, So Man Deep Airbnb. To me,
Speaker 7: it feels like we're just kind of getting.
Speaker 8: Back to a new normal. I mean, if I like
Speaker 8: this story and I like the concept, I buy the
Speaker 8: stock on the weakness, what are some of the Are
Speaker 8: people concerned about the model.
Speaker 7: Per se or they just saying, Hey, I just don't
Speaker 7: like the cops, I don't like the numbers of stores.
Speaker 10: Yeah, it's more about the estimates getting revised lower. So
Speaker 10: if you were hoping you will see upward revisions. That's
Speaker 10: not happening with this stock. And the reason that's the
Speaker 10: case is when what they told us last night is
Speaker 10: even though they are talking about new products, you know,
Speaker 10: rooms and experiences, nothing is adding in terms of the
Speaker 10: incremental top line growth or the margins. In fact, the
Speaker 10: margins would take a hit because they talked about expenses
Speaker 10: being on the higher side. So if you are looking for,
Speaker 10: you know, a next one to two year investment, there
Speaker 10: isn't a lot to look forward to in Theirbnb story.
Speaker 10: And plus, there is a cyclical element to this stock,
Speaker 10: given you know, the economy is slowing down, consumer spending
Speaker 10: is slowing down. They had the best tailwind in terms
Speaker 10: of Olympics, you know, summer travel. Still they guide it
Speaker 10: to mid single digit room night growth, So that wasn't
Speaker 10: music to investors.
Speaker 3: Is the demand there still demand? That's the other side, right.
Speaker 10: So if you look across the in terms of how
Speaker 10: the marketplace travel marketplaces have done, booking, Uber Lift, every
Speaker 10: company has suggested that they are seeing some softness. Now
Speaker 10: nobody is saying we are seeing recessionary trends. And when
Speaker 10: you know, people pare down in terms of their travel spend.
Speaker 10: Maybe they're not going to take you know, three vacations
Speaker 10: as opposed to they'll trade down and take two. And
Speaker 10: you know, same thing with type of uber rights, they're
Speaker 10: not taking the most expensive. So there is that trading
Speaker 10: down that's happening right now. But nobody is calling for
Speaker 10: an outright recession yet.
Speaker 8: Lift, is there any future for this company?
Speaker 3: Can Lift get a lift?
Speaker 8: Can Lift get a lot? Sorry at all?
Speaker 10: I mean scale is your friend when it comes to
Speaker 10: marketplace is given how tough marketplace businesses are. And in
Speaker 10: Lift's case, they need to partner with somebody who's rolling
Speaker 10: out autonomous vehicles, whether it's Vemo or Tesla.
Speaker 8: That's the hope.
Speaker 10: They need a part or even a door dash.
Speaker 8: That's the enough place to be. Now, what's management saying.
Speaker 8: Are they open to a partnership?
Speaker 5: They are.
Speaker 10: They said their fleet network is the best to roll
Speaker 10: out these autonomous and robotaxis. But clearly, you know, we
Speaker 10: know Tesla's ambitions or they want to do it on
Speaker 10: their own. They don't want to use any of the
Speaker 10: intermediary So time will tell if Lift will be partnering
Speaker 10: with them.
Speaker 8: All right, that's amazing.
Speaker 7: I just can't believe the different how those two companies
Speaker 7: have diverged since their IPOs.
Speaker 10: One reflected in the valuation. I mean, look at lifts valuation.
Speaker 7: It's a monster, just ten x in terms of market cap.
Speaker 7: Mandeep Cheing thinks so much. We appreciate technology channel somehow
Speaker 7: it covers all those marketplace things. I think it's all
Speaker 7: kind of a scam.
Speaker 8: But I don't know. People love the Airbnb. My kids
Speaker 8: use them all the time. Oh yeah, so good, good
Speaker 8: for them.
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Speaker 4: Let's go to the other thing that I love, and
Speaker 4: that's energy. How to store energy is huge, and it's
Speaker 4: huge because if you want to diversify what energy you're using,
Speaker 4: like wind and solar and even hydrogen, you need batteries,
Speaker 4: and you need really big batteries to be able to
Speaker 4: store it. Now, you can maybe do it for a
Speaker 4: couple hours, maybe a day or two, but doing that
Speaker 4: longer has proved really difficult and really expensive, and one
Speaker 4: company is trying to change that. The company is called
Speaker 4: energy Vault now. It's backed back in twenty twenty one.
Speaker 4: Before it's backed, SoftBank was an investor. It's a Swiss
Speaker 4: startup basically that is trying to find different ways of
Speaker 4: storing energy. And the CEO joins us now, Rob Paconi,
Speaker 4: CEO of Energy Vault. He joins US from Switzerland. Rob,
Speaker 4: we appreciate the time. Can you just describe a little
Speaker 4: bit in dumb down language what it is that you
Speaker 4: guys do.
Speaker 11: Sure.
Speaker 12: So we broadly focus on energy storage, and we focus
Speaker 12: on it with varying technologies and software. So we do
Speaker 12: shorter duration energy storage using latimion. We do long duration
Speaker 12: energy storage meaning things to get sort of in a six, eight, twelve,
Speaker 12: even twenty four hours, so full day types of storage
Speaker 12: with a unique gravity solution where we lift in.
Speaker 11: Lower blocks or will shift water from different heights. And
Speaker 11: we also do ultralong.
Speaker 12: Duration meaning multi day storage using green hydrogen and microgrids.
Speaker 13: Who are your customers, Rob, Our main customers are first
Speaker 13: and foremost utility, so we can sell directly to utilities,
Speaker 13: and we also sell to independent power producers so the
Speaker 13: ones that will, for example, build out solar wind and
Speaker 13: pair storage with that and have long term contracts with utilities.
Speaker 11: And the third group are the large industrial users.
Speaker 12: So our investors include people like Saudi Aramco HP, the
Speaker 12: largest mining group in the world, and groups that are
Speaker 12: looking to make their own clean energy transition or that
Speaker 12: have desires to make streen hydrogen for example, where you
Speaker 12: can make that using solar an electoralizer, but you need.
Speaker 11: Long duration storage. So because our technology is focus.
Speaker 12: Across a series of durations, we can actually meet a
Speaker 12: lot of those needs and hence serving those three market segments.
Speaker 4: So let's go back to the gravity storage solution thing.
Speaker 4: So this is from an article here at bo boomer
Speaker 4: from a few years ago, but it describes it and
Speaker 4: I feel like accurately and pretty well. An electric crane
Speaker 4: hoists up blocks of concrete and stacks them into a
Speaker 4: tower when power is plentiful. When power is needed, it
Speaker 4: uses gravity to take the structure apart brick by brick,
Speaker 4: and the weight of the descending blocks converts kinetic energy
Speaker 4: into electricity. That sounds really hard and complicated.
Speaker 12: You know what, gravity has been around for a while.
Speaker 12: I tell people it's not an idea, it's the law.
Speaker 12: So the whole physics of moving weights up and down,
Speaker 12: it's been around, but you're right to do that in
Speaker 12: a way that's economical to do that now with software
Speaker 12: where we can automate that entire process and dynamically look
Speaker 12: at the timing and dynamically accelerate and accelerate that lifting
Speaker 12: and lowering. And also we actually don't use concrete, so
Speaker 12: we avoid it because it's not really sustainable. It's one
Speaker 12: of the contributors I think seven to eight percent to
Speaker 12: greenhouse gases. So we actually have a material science team
Speaker 12: and worked with SEMX to use dirt and even waste
Speaker 12: materials like coal ash, even concrete debris are the things
Speaker 12: that would go into landfills. We can utilize that to
Speaker 12: make these large blocks that are twenty five metric tons,
Speaker 12: So we try and avoid materials that are not sustainable
Speaker 12: to make those very same blocks.
Speaker 7: So, how is I guess your business changing to try
Speaker 7: to meet the changing sources and uses of energy these days.
Speaker 12: It's a great question and it is one of the challenges.
Speaker 12: It's definitely focused globally on countries wanting to achieve energy independence,
Speaker 12: and to do that, you need to be able.
Speaker 11: To produce locally.
Speaker 12: Hence our gravity solution that's more long duration, of course
Speaker 12: is ideal because you can produce most of that from
Speaker 12: local materials with the labor I mean it's construction, you're
Speaker 12: building a building. When you get to the short duration,
Speaker 12: which is most of the market today, and if we
Speaker 12: know about lithium ion, so that's two to four hours,
Speaker 12: that's this time shifting people trying to manage you're relying
Speaker 12: on the rare earth metals, which I believe Paul what
Speaker 12: you're referring to, and that's where through mechanisms like the
Speaker 12: IRA that was put in place in the US, they're
Speaker 12: trying to get that localized.
Speaker 11: And to deal with that, you have to.
Speaker 12: Come up with mechanisms to try to bring some of
Speaker 12: that production local as much as you can in terms
Speaker 12: of getting content, and that's been a big focus area
Speaker 12: and of leveraging technologies like hydrogen. For example, green hydrogen
Speaker 12: can be made sustainably. We're using that to back up
Speaker 12: the city of Calistoga in northern California and near Napa
Speaker 12: to provide a sustainable backup solution for two to four
Speaker 12: days that otherwise would have taken natural gas. So it's
Speaker 12: a combination of technologies you really have to use to
Speaker 12: solve this issue of reliance on either a few countries
Speaker 12: in the world or a few rare word metals.
Speaker 4: So if I just look at your stock, it's ninety
Speaker 4: three cents. It's had a tough road since it's a spack, right,
Speaker 4: I mean, clearly there was a lot of enthusiasm in
Speaker 4: the beginning. You had a nice pop, and that's been
Speaker 4: really tough. In the last earnings estimate and the last
Speaker 4: earnings for second quarter, the headline is revenue missing estimates.
Speaker 4: How how do you manage this at this time? It's
Speaker 4: expensive to probably get all this done, even though the
Speaker 4: demand we know is still there.
Speaker 12: Yeah, the demand is high, and the capital markets have
Speaker 12: been very challenging in particular if you go back to
Speaker 12: mid twenty twenty two, when the interest rate environment changed
Speaker 12: and really fundamentally, I think the risk appetite for new
Speaker 12: emerging growths like ours really soured and changed. And for us,
Speaker 12: we focused on execution and our you know, we had
Speaker 12: one hundred and forty eight million in our first year
Speaker 12: revenue twenty twenty two, our second year almost three hundred
Speaker 12: and fifty millions. We more than doubled the size of
Speaker 12: the company, but at the end, investors are really focused
Speaker 12: on cash flow and minimizing risk. We've guided that that's
Speaker 12: going to happen next year. So in our first I
Speaker 12: guess would be our first third, our third full year
Speaker 12: of revenue, we're going to be cash flow positive and
Speaker 12: even at positive. And I think until that happens, a
Speaker 12: lot of investors are on the sidelines. And what we
Speaker 12: can do is what we're doing, which is executing for
Speaker 12: customers and in different regions of the world. We announced
Speaker 12: new deals in Australia, we announced a large gravity project
Speaker 12: in Italy had a coal mine, and I think filling
Speaker 12: up that order book alex is going to be fundamental,
Speaker 12: so investors see it's not about if, it's just about
Speaker 12: when and as we feel that order book, then when
Speaker 12: that cast flow roadmap becomes very clear, which we're getting
Speaker 12: there to twenty twenty five, which is what we guided,
Speaker 12: I think then we'll see investors re entering the stock.
Speaker 8: In the interim, how do you fund your growth?
Speaker 7: Because I'm looking at the FA function, which gathers up
Speaker 7: all the anaals estimate it's still no free positive free
Speaker 7: cash flow in sight here, So how do you fund
Speaker 7: that growth?
Speaker 12: Well, we're in a great cast position, so we're well
Speaker 12: north of one hundred million no debt. Unlike a lot
Speaker 12: of the companies that pursued this backgroute, they've done diluted
Speaker 12: convertible notes and really at high cost and also that
Speaker 12: hurt investors.
Speaker 11: We've done none of them.
Speaker 12: So we have no debt as a company, well over
Speaker 12: one hundred million in cash, and we've reduced our burn
Speaker 12: rate to about fifteen million at quarter, and in the
Speaker 12: meantime we're ramping up now that revenue we've guided five
Speaker 12: hundred to seven hundred million between this year and next year.
Speaker 12: We do have a second half ramp, so that's not
Speaker 12: unusual when we're relying on EPC projects and the timing
Speaker 12: of these projects starts. So that's from a cash perspective
Speaker 12: and being good stewards of the shareholder money and cash.
Speaker 12: We've actually done a very good job of that and
Speaker 12: that's going to be playing out as we get into
Speaker 12: our growth period where we don't have a need to
Speaker 12: take on debt.
Speaker 4: All right, Rob, we really appreciate it, Thank you so much.
Speaker 4: It's such an important space, and particularly with all the
Speaker 4: money flowing into it from private equity companies as well
Speaker 4: as governments. We appreciate that insight. Arabiconi, CEO of Energy Vault,
Speaker 4: joining us on energy storage, which we definitely definitely need.
Speaker 3: I think the question also becomes, you.
Speaker 4: Know, we just had sun Power file for bankruptcy yesterday
Speaker 4: as a solar company based in California, and there were
Speaker 4: it is syncratic issues, to be sure, but what happens
Speaker 4: when someone else or whoever takes the White House in November,
Speaker 4: if it's President Trump, what areas of this gets rolled
Speaker 4: back of the IRA? Maybe nothing, I mean money's already
Speaker 4: been spent, but maybe something. And I think that must
Speaker 4: be very difficult to kind of manage in this business
Speaker 4: right now right And if.
Speaker 7: Your investor, do you want to stick around? And why
Speaker 7: you have that level of uncertainty? So yeah, we'll have
Speaker 7: to see. So certainly one of the industries that is
Speaker 7: paying close attention to the national elections.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 8: Alex Steel, Paul sweeneing. We're live here in our Bloomberg
Speaker 8: and Active broke the studio.
Speaker 7: We're streaming live on YouTube as well, so you can
Speaker 7: see us YouTube dot Com search Bloomberg Podcast. All right,
Speaker 7: you know, commercial real estate, this is the way I
Speaker 7: frame it for everybody. Third Avenue, New York City, between
Speaker 7: Grand Central and our hqu here at fifty eighth Street.
Speaker 7: When those buildings trade there, what are they going to
Speaker 7: trade at? I mean, what discount to the market. Bloomberg
Speaker 7: News did a great story on about a year ago,
Speaker 7: saying that's really a risky area and it's emblematic of
Speaker 7: some of the problems in urban real estate.
Speaker 8: Lisa Nee joins us.
Speaker 7: She's a managing partner and head of real estate at
Speaker 7: Eisner Amper. I don't pick a building there seven to
Speaker 7: fifty Third Avenue when that thing trades ten percent discount,
Speaker 7: twenty forty fifty percent discount?
Speaker 8: Where is the market these days?
Speaker 6: Yeah?
Speaker 1: Hi, thank you for having me. So that's a really
Speaker 1: great question as to where the valuation sits and where
Speaker 1: people are willing to have the buyers and the sellers
Speaker 1: agree to that price. So seven fifty third Avenue.
Speaker 8: Which is just to pick one ount of the blue.
Speaker 1: It wasn't my old office space. We currently moved to
Speaker 1: where I was seven thirty three now, so it was
Speaker 1: our old space there. But looking at there and sort
Speaker 1: of looking a Class A office building is going to
Speaker 1: trade differently than a B and C and the curtain's
Speaker 1: going to trade differently. So last year, if you would
Speaker 1: have had me here at this time, things where people
Speaker 1: weren't willing to make those price adjustments. And now when
Speaker 1: you're looking at valuations, are they're looking to make some
Speaker 1: of the adjustments. Now how much of a decrease is
Speaker 1: really the key there?
Speaker 8: And looking at the.
Speaker 1: Leases in place too, is it a long term lea
Speaker 1: short term? And so the valuation is the key of
Speaker 1: what everything is going to be driving at. Now we
Speaker 1: finally have some buyers and sellers who are willing to
Speaker 1: bridge that gap because the sellers are obviously waiting for
Speaker 1: the higher pricing. The buyers really want those deeper, deeper
Speaker 1: discounts that they're willing to do.
Speaker 8: Do we have a market?
Speaker 7: Could you say, you know what I understand is Class
Speaker 7: A in New York or Boston or San Francisco holding
Speaker 7: its value correct and doing well B and C. Some
Speaker 7: of the discounts we're hearing, I'm hearing fifty percent plus correct.
Speaker 1: And it's also where how far are you along on
Speaker 1: that cycle? Where are you you with your debt on that?
Speaker 1: And so what are the banks pressuring you? I mean,
Speaker 1: the banks at this point have been doing the pretend
Speaker 1: and extent, which because they want to keep it on
Speaker 1: their balance sheet. Now they're looking at some of those
Speaker 1: v's and c's and looking to say, do we have
Speaker 1: to get those off our balance sheets? And they're pressuring
Speaker 1: the owners of the borrowers of the buildings to really
Speaker 1: go and do some due diligence and making sure to
Speaker 1: see how long they can last with those buildings and
Speaker 1: seeing if they really need to start getting those off
Speaker 1: their balance sheets. And so the banks are putting some
Speaker 1: pressure regulatory reasons, I mean, the whole host of things
Speaker 1: for those buyers to start looking and making some adjustments
Speaker 1: for the sellers.
Speaker 4: We also saw I think it was yesterday, I think
Speaker 4: Goldman Sachs took one of the big buildings in Time
Speaker 4: Square and sl Green is going to be the property developer.
Speaker 3: But basically, the guys.
Speaker 4: Who owned it defaulted on loans and then banks had
Speaker 4: taken control of it. Is that are we going to
Speaker 4: see that over and over now or is this going
Speaker 4: to be like a one off?
Speaker 1: So those are great headlines. That's what people want to read,
Speaker 1: is those headline stories. You're not going to read the
Speaker 1: portfolios that we're able to work itself out through the
Speaker 1: news because no one cares. But those are happening. And
Speaker 1: so those behind the scenes stories are happening day after day.
Speaker 3: How do they get worked out?
Speaker 1: So the banks will work with the the borrowers and
Speaker 1: they'll put in some provisions in there for plans, they'll
Speaker 1: look at their rent roles. They're making sure that they
Speaker 1: can make those payments and trying to make modifications within
Speaker 1: those debts to make sure that the borrowers really can
Speaker 1: can make the properties work. The banks don't want to
Speaker 1: see those headlines undistressed. I mean, the banks don't want
Speaker 1: to go out of business, so they really want to
Speaker 1: make sure that they're working and if they can make
Speaker 1: the cash flow work, they are going to work to
Speaker 1: modify those those debt instruments for the lenders or for
Speaker 1: the borrowers.
Speaker 7: I should say, you know, I have yet to have
Speaker 7: or we have yet to have because we focus on
Speaker 7: commercial real estate. Maybe we think about office too much,
Speaker 7: and we think about New York City, San Francisco office
Speaker 7: too much because.
Speaker 8: Commercial is so much broader. But I want the person
Speaker 8: to come in here.
Speaker 7: Maybe it's a family business been in New York real
Speaker 7: estate for one hundred and fifty years and said we're
Speaker 7: done too many of our We had B and C
Speaker 7: buildings on Third Avenue and the banks are forces and
Speaker 7: we're only getting fit fifty cents in the dollar. My
Speaker 7: one hundred and fifty year family business is done well.
Speaker 1: We never want that to happen, right, so we want
Speaker 1: to make sure well working it is not happening. Most
Speaker 1: of those are very lower they're low leverage, holding those
Speaker 1: buildings for a long time, and those are smart cash
Speaker 1: flowing assets, and so they've been working those assets for
Speaker 1: quite a long time. You're not going to see a
Speaker 1: flood of deals.
Speaker 5: You're not.
Speaker 1: You're going to see the here off bigger deals that
Speaker 1: you're going to be able to read about in the paper.
Speaker 1: But the floods that people were waiting for with all
Speaker 1: the capital to come in and rescue hasn't happened yet,
Speaker 1: and now have we hit the bottom? You know, I
Speaker 1: was away with a bunch of really really smart owners
Speaker 1: and operators last week and they couldn't agree if we've
Speaker 1: hit the bottom yet, And so it's just trying to
Speaker 1: figure that out.
Speaker 4: So to that point, I guess it's twofold question, why
Speaker 4: haven't we seen this flood of defaults like we are
Speaker 4: all kind of waiting for? And if we imply it's
Speaker 4: more on like a rolling basis where there's going to
Speaker 4: be these one off buildings, et cetera, one off deals,
Speaker 4: how long can that last for forever?
Speaker 5: Great?
Speaker 6: Great question?
Speaker 1: Wish I knew most of that, but again it's hard
Speaker 1: to deal with what the banks are willing to tolerate
Speaker 1: and how they can go in and do the modifications
Speaker 1: from a cash flow perspective. What people also are talking
Speaker 1: about is when you're looking to go in and purchase
Speaker 1: those deals and bring in the distress capital, the distress
Speaker 1: isn't there, so it's really not as dire, and so
Speaker 1: really getting the people to understand what the valuations of
Speaker 1: those properties are and wanting to infuse capital to make
Speaker 1: those properties work. And so I think we're going to
Speaker 1: keep seeing the one off for a little bit until
Speaker 1: we really hit that equilibrium where the buyers and the
Speaker 1: sellers can and we're almost there can start making some
Speaker 1: real meaningful trades.
Speaker 8: What are the good stories out there? And commercial real estate, there's.
Speaker 1: A lot of good thank you, there's a lot of
Speaker 1: good stories. So industrial is doing really well. Data centers
Speaker 1: are hot, Hospitality come back, hotels great, people are traveling.
Speaker 8: And doing that.
Speaker 1: You know, maybe a little bit nervous about consumer spending
Speaker 1: people with that fear and what's going to happen with
Speaker 1: the report that just came out, But hospitality industry is
Speaker 1: doing remarkably while considering where we were, you know, a
Speaker 1: few years ago. So there are some great stories and
Speaker 1: there's some great opportunities. But in every asset class, there's
Speaker 1: always a great opportunity for a great property with a
Speaker 1: really good vision. Why not take a great opportunity for that.
Speaker 1: So there are some exciting moments in commercial real estate.
Speaker 4: So Paul has a six percent or over six percent
Speaker 4: of Morgan right, he had straight up six. So the
Speaker 4: big question is like, you know, when does he refine?
Speaker 4: And he's like in the fives, he'll consider it. I'm
Speaker 4: guessing it has to be in the lower fives tree
Speaker 4: to really consider it. What kind of FED cutting cycle
Speaker 4: do we need for things to make a lot more
Speaker 4: sense in your world.
Speaker 1: So we're all anticipating, we talked about this before the session.
Speaker 1: We're all anticipating about fifty basis points in September for
Speaker 1: the FED to reduce. We saw in Alarming what people
Speaker 1: wanted an emergency, which is not going to happen again
Speaker 1: to do the refinance is much different than the buyer market.
Speaker 1: So that refinance, I'm not sure Paul's going to get
Speaker 1: where he wants to.
Speaker 3: Go so quickly.
Speaker 1: But what should happen is that hopefully for people who
Speaker 1: are looking to sell, with the lowering of the interest rates,
Speaker 1: it'll make it a little bit easier for the buyers
Speaker 1: to come in and purchase, so that purchase those assets.
Speaker 1: With respect to home building, now, remember there's a lot
Speaker 1: more inventory now, believe it or not, than there were
Speaker 1: a year ago. With there's been a surge recently of
Speaker 1: used homes, which are the homes that we've all lived in,
Speaker 1: and the home builders are having a little bit more
Speaker 1: of an influx of inventory for new units. What's interesting though,
Speaker 1: is there was a study done for the median home purchase.
Speaker 1: The disparity disparity now between rental and that mortgage payment
Speaker 1: is still thirteen hundred dollars a month. Ten year average
Speaker 1: was three to four hundred a month, So we got
Speaker 1: to get that a little bit lower to be able
Speaker 1: to make a meaningful difference there.
Speaker 7: So our banks lending, like, if I want to I'm
Speaker 7: in Poughkeepsie and I want to build an office park,
Speaker 7: or maybe it's maybe not an office park, probably like
Speaker 7: a just a warehouse or something, will my local bank
Speaker 7: lend to me at reasonable terms?
Speaker 1: They're making the regulatory is making it harder. It's making
Speaker 1: harder for them to go on their balance sheets and
Speaker 1: do it. Creative financing is a little bit more so
Speaker 1: whether it's a debt fund, and even in the insurance
Speaker 1: companies aren't running to do those lens. Sellar financing has
Speaker 1: really had an uptick in those types of projects. Again,
Speaker 1: that's land and you're building a warehouse. If you're building,
Speaker 1: if you're renovating and existing, you might get seller financing.
Speaker 1: But the debt funds and some familieve it or not,
Speaker 1: those families that we spoke about, they're looking to do
Speaker 1: some creative financing too for people in the real estate space.
Speaker 1: So it's going to be not if your debt might
Speaker 1: not look the way it had historically, but there is
Speaker 1: money out there for those investments.
Speaker 4: All right, Lisa, really great stuff. Really appreciate that perspective.
Speaker 4: Please come back. Liason, the managing partner and head of
Speaker 4: real estate over at Eisner Amper. And finally enough we
Speaker 4: got Brookfield coming on with earnings today and just they
Speaker 4: were expecting deal activity to pick up now that central
Speaker 4: banks are going to be cutting interest rates and that
Speaker 4: they think that there'll be some large scale transactions happen
Speaker 4: and they're able to exit some of their investments. But
Speaker 4: that's like a behemoth, and they're an asset manager, so
Speaker 4: that's a whole different kind of even ship.
Speaker 8: I've seen them walk away from.
Speaker 7: I mean some of the big names, like I would
Speaker 7: just think from a reputational perspective, I wouldn't.
Speaker 8: Walk away from the building and take loss like a professional, like.
Speaker 3: A like a like a thing.
Speaker 8: Yeah, but it's something I.
Speaker 7: Don't know, but I guess there are these big funds
Speaker 7: and they can do it.
Speaker 4: I guess they do say that the real estate market
Speaker 4: it is improving. I guess the question is like how
Speaker 4: fast does it improve? And then where we kind of
Speaker 4: go from there.
Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Auto with the Bloomberg Business app. You can also listen
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Speaker 2: Just say Alexa play Bloomberg eleven thirty.
Speaker 4: From alex See alongside Paul Sweeney. This is Bloomberg Intelligence
Speaker 4: Radio could bring you all the top news in business
Speaker 4: and finance and economics. There are lens of our Bloomberg
Speaker 4: Intelligence analysts. They cover two thousand companies and one hundred
Speaker 4: and thirty industries worldwide. We also love earnings, We love companies.
Speaker 4: We love to dig deep into some of the ones
Speaker 4: you may not have heard of and from. One of
Speaker 4: that is Nayax. It's ticker and y ax on the Nasdaq.
Speaker 4: It is classified as an other financial services It's a
Speaker 4: vending payment solution company. The stock is up almost five
Speaker 4: percent of reported earnings. This morning, they reported a loss
Speaker 4: of about eight cents a share on revenue of As
Speaker 4: I go ahead and try and bring it up on
Speaker 4: my computer on revenue about seventy eight point one million dollars.
Speaker 4: The CFO joins us, Now SAGI te manor joins us.
Speaker 3: Sagi tell us more about your company. What do you
Speaker 3: guys do?
Speaker 6: Good morning.
Speaker 14: So Nayax is the only global company in the unattended space.
Speaker 14: And what do I mean by d You usually think
Speaker 14: about going into a store and paying with a cashier.
Speaker 14: We're exactly the outside of the store in the automated
Speaker 14: self service.
Speaker 6: So think about as the.
Speaker 14: Vending machine, a massagere as you might see in the
Speaker 14: JFK airport, laundromat, EV charging stations and whatnot. We are,
Speaker 14: as I said, the only global company in that space,
Speaker 14: selling to more than one hundred and twenty countries. We
Speaker 14: have one point two million devices around the world with
Speaker 14: eighty five thousand customers, and we are very happy with
Speaker 14: the positioning that we have today in order to because
Speaker 14: this space is early stages, so very excited.
Speaker 7: So SAGI, talk to us about your relationship with the
Speaker 7: EV business. How does your technology interface with the EV
Speaker 7: charging business?
Speaker 14: So we're actually selling our product in forty four different verticals.
Speaker 14: I've mentioned the vending machine, Nostasche, kid ride, laundromat, parking
Speaker 14: as well as the EV charging stations, which it's a
Speaker 14: very interesting vertical and we are very excited about the
Speaker 14: opportunity there. So if you think about today, there's literally
Speaker 14: payment device on an electric vehicle charging station. So what's
Speaker 14: happened is the user needs to download and up in order.
Speaker 6: To pay for the electricity.
Speaker 14: And what we see right now in the in all
Speaker 14: markets is we see regulational changing. We saw that in California,
Speaker 14: we see that in Germany, in the UK and many
Speaker 14: most states like that where you they we have you
Speaker 14: have to have a device, a payment device on those machines.
Speaker 14: So we see retro fit and we are we actually
Speaker 14: work with all of the electric vehicle charging manufacturers and
Speaker 14: we have the only solution today to have a car
Speaker 14: present solution as we call it, being able to pay
Speaker 14: with your credit card in a station everywhere you go.
Speaker 3: How easy would it be there to have that disrupted?
Speaker 4: Like if I just go to the gas station, I
Speaker 4: can use any credit card, I want payment system easy.
Speaker 3: How quickly could that part of your business be disrupted?
Speaker 14: Well, it's actually it's a great opportunity for us right
Speaker 14: because even today when you think about gas station some
Speaker 14: of it you have to go into the store in
Speaker 14: order to pay with a credit card. So that was
Speaker 14: one same is you think about it the same with
Speaker 14: electric vehicles? Well instead of downing an app, and by
Speaker 14: the way, sometimes you need sixteen different apps because there's
Speaker 14: sixteen different companies.
Speaker 6: That allowing electric vehicle charging.
Speaker 14: So now you're going to be able with the Nix device,
Speaker 14: with our yellow Nix device, to be able to pay
Speaker 14: with a credit card. So you have that opportunity users
Speaker 14: and people that have an electric vehicle, they have an
Speaker 14: anxiety if they need to drive, especially in the US
Speaker 14: where it's so big, if.
Speaker 6: You don't have enough stations out there.
Speaker 14: So now think about the ability to pay with your
Speaker 14: credit card is changing the entire business.
Speaker 7: How do you differentiate your company versus others like Block
Speaker 7: or Toast that are out there there in the payment business.
Speaker 6: It's a great question.
Speaker 14: So if you think about Toast and Block and Square
Speaker 14: for that matter, they're inside the store.
Speaker 6: So there we will be.
Speaker 14: We call it the attended space where you have a
Speaker 14: cashier in front of you. We are actually in the
Speaker 14: automated self service, as I said, where you actually outside
Speaker 14: there's no one in front of you. So this is one.
Speaker 14: We also have the end to end solution. So you
Speaker 14: have the device, you have the payment, and you have
Speaker 14: the software. And so what we are providing every customer
Speaker 14: that we have, and as I said, we have eighty
Speaker 14: five thousand customers. Most of them, by the way, are
Speaker 14: small businesses where they cannot allow themselves too much of
Speaker 14: a hassle. We are allowing them two things. Enablement of
Speaker 14: payment and to manage their business better. What does it mean,
Speaker 14: manage their employee, manage employees, manage their inventory, really look
Speaker 14: at the transaction value and be able to see how
Speaker 14: they can manage their business better.
Speaker 4: I see, what are you hearing from your customers right now?
Speaker 4: We talk a lot about the state of the economy.
Speaker 4: We talk about people in companies investing or not investing.
Speaker 4: What are you hearing from your clients?
Speaker 6: So I'll give you an example.
Speaker 14: In Q two, one point two billion dollars transactions went
Speaker 14: through our devices. But when you look at out the
Speaker 14: number of transactions that happened, it's six hundred million. My
Speaker 14: point is, at the end of the day, in our business,
Speaker 14: it's a very small transaction value. The everlet transaction value
Speaker 14: for us it's two dollars and in that space. We
Speaker 14: don't see much of a change in the economy.
Speaker 6: Like maybe retail is seeing. We actually continue to grow
Speaker 6: this quarter. We grew thirty nine percent a quarter of
Speaker 6: a quarter with forty.
Speaker 14: Seven percent increase on our recurring revenue. Our area, which
Speaker 14: is again the unattended space, is really in its early
Speaker 14: stage and we don't really see any headwinds coming in.
Speaker 6: We haven't seen that for the last four years.
Speaker 7: All right, thank you saying so much for joining a
Speaker 7: segee monor chief financial officer for Nayaks the.
Speaker 8: Company, the electronic payments company here.
Speaker 7: You know, and you go to like the places in
Speaker 7: your self service, so you get a sandwich, you know,
Speaker 7: a drink and maybe at an airport, tap your card
Speaker 7: and ask for a tip.
Speaker 3: Yeah, what's up at that zero?
Speaker 7: But now it's harder to do that when it's somebody
Speaker 7: standing behind the count It is true.
Speaker 3: And also like if they're making new stuff.
Speaker 8: Yeah, but I'm that's a tough one.
Speaker 7: The hope tipping when I'm old enough to be set
Speaker 7: in my ways and say I've never done that for
Speaker 7: fifty plus years, why would I start now?
Speaker 3: I mean, it's it's a fair point.
Speaker 8: I mean the young folks. They're being trained to tip
Speaker 8: for things that we were not.
Speaker 4: But if you think of like Starbucks, like you guys
Speaker 4: work hard, drink orders are complicated.
Speaker 3: Yes, should I give a dollar? It is a new thing.
Speaker 8: It is a new thing.
Speaker 4: But like somebody just ringing up my stuff at a store,
Speaker 4: I don't know about that one.
Speaker 3: That's a tough one.
Speaker 4: But then I feel torn, and then you feel guilt,
Speaker 4: and then like should you do that?
Speaker 7: But you know, and then if you come from another
Speaker 7: part of the world where you don't tip, you're like,
Speaker 7: what what is that?
Speaker 5: Yeah?
Speaker 4: Yeah, And I used to be a waitress, so I
Speaker 4: know the tips and ceiling so it's like, I feel you.
Speaker 4: I want to do that for you.
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