Speaker 1: Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence
Speaker 1: with Scarletfoo and Paul Sweeney.
Speaker 2: How do you think the FED is looking at tariffs?
Speaker 3: The uncertainty of terriffs. Let's take a look at the
Speaker 3: sectors and how they performed.
Speaker 4: A lot of investors getting whip saled every day by
Speaker 4: news events.
Speaker 1: Breaking market headlines, and corporate news from across the globe.
Speaker 3: Could we see a market disruption of market events?
Speaker 2: So people just too exuberant out there?
Speaker 3: You see some so called low quality stocks driving this
Speaker 3: short term rally.
Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio,
Speaker 1: YouTube and Bloomberg Originals.
Speaker 3: I'm Scarletfoo and I'm normal Inda, filling in for Paul
Speaker 3: Sweeney on today's Bloomberg Intelligence Show. We dig inside the
Speaker 3: big business stories impacting Wall Street and the global markets.
Speaker 5: Each and every week, we provide in depth research and
Speaker 5: data on some of the two thousand companies and one
Speaker 5: hundred and thirty industries are analysts cover worldwide.
Speaker 3: Today, we look at one of the biggest mining deals
Speaker 3: in over a decade.
Speaker 5: Plaus Well look at why the Danish drug maker Novo
Speaker 5: Nordist is cutting about eleven percent of its workforce.
Speaker 3: But first we begin with earnings from the computer tech
Speaker 3: company Oracle.
Speaker 5: This week, the company gave an aggressive outlook for its
Speaker 5: cloud business, causing the stock to surge the most since
Speaker 5: nineteen ninety two.
Speaker 3: For more, guest host Alexis Christophers and I were joined
Speaker 3: by anor Agrana, Bloomberg Intelligence technology analyst. We first asked
Speaker 3: on Aroan to break down Oracles earnings and the company's
Speaker 3: major stock jump.
Speaker 6: Oracle is a very unique company because it has your
Speaker 6: traditional software but also a few years ago it started
Speaker 6: a cloud business called Oracle Cloud Infrastructure, something very similar
Speaker 6: to what Aws Tells or Microsoft Azure. And one of
Speaker 6: the advantages it has is it just rents out it's
Speaker 6: you know, servers for people to go out and train
Speaker 6: their AI models or you know, run their applications on it.
Speaker 6: So this is really a new business for them, you know,
Speaker 6: just came up the last few years, and that's where
Speaker 6: the biggest growth is and that's what's driving the stock.
Speaker 3: What's happening with the rest of the company, its operations,
Speaker 3: it's software bil business. Is it still cutting costs for instance,
Speaker 3: and reducing headcount.
Speaker 6: The advantage Oracle has compared to let's say a company
Speaker 6: like core v for Nebus, is that it has a
Speaker 6: very high margin database business and very high margin application business.
Speaker 6: These businesses have gross margins, you know, let's say north
Speaker 6: of ninety percent. Now when you marry that with a
Speaker 6: massive AI infrastructure business where you need to spend a
Speaker 6: lot of money, that's problematic for somebody that doesn't have that.
Speaker 6: But Oracle has that luxury that it can spend billions
Speaker 6: of dollars. You know, before we were thinking they're going
Speaker 6: to spend you know, somewhere in the low thirty billion range,
Speaker 6: which was already higher than what they had guided, and
Speaker 6: you know, even the street was expecting. They came out
Speaker 6: and said they're going to spend over thirty five billion
Speaker 6: and you know the next financial year. So that's a
Speaker 6: lot of money going into expanding data center, buying chips
Speaker 6: by you know, creating a new infrastructure to fulfill this demand.
Speaker 7: When you look at the competition here, Microsoft, Amazon, Alphabet,
Speaker 7: what does Oracle or how does Oracle differentiate itself not
Speaker 7: only for the customer, the client, but for investors.
Speaker 6: Yeah, and one of the things I would say is
Speaker 6: everybody is having a good time in this particular party.
Speaker 8: It's not just you know, one company that's scaling it.
Speaker 6: It's just the size of their business is far smaller
Speaker 6: than it is for let's say AWS or Microsoft. You know,
Speaker 6: in the last financial year, the revenue was you know,
Speaker 6: roughly about ten billion or so. Aws's rund rate is
Speaker 6: one hundred and twenty five billion. Microsoft's business is seventy
Speaker 6: five billion. Google's business is fifty billion. So you know, please,
Speaker 6: you know, you've got to take that with the context
Speaker 6: of how big Oracle's cloud infrastructure is compared to some
Speaker 6: of the bigger vendors out there.
Speaker 3: You know, honrog it feels like Oracle kind of came
Speaker 3: from out of nowhere with its you know, contributions to
Speaker 3: the AI space and being such a big player. Certainly,
Speaker 3: the bookings of almost half a trillion dollars caught my eye,
Speaker 3: and it's more than four times what it was the
Speaker 3: same time last year. Are there any other kind of
Speaker 3: dark horses out there that you would be keeping your
Speaker 3: eye on that could be the next Oracle, which is
Speaker 3: already feels like it's the next in.
Speaker 6: VideA, Yeah, I think one of the things you have
Speaker 6: to think about it is it's not easy to come
Speaker 6: up with this structure. A lot of business like this
Speaker 6: because you need billions of dollars to create a data
Speaker 6: center or to lease out a data center, then buy
Speaker 6: equipment like in Vidia chips and computing equipment. There are
Speaker 6: a handful of companies like you know, core beav of Nebeus,
Speaker 6: which are smaller neo cloud players that specialize in renting
Speaker 6: and VideA GPUs to customers. Now, the bigger vendors have
Speaker 6: the capital that they are also expanding it. But again,
Speaker 6: as I said, given the size of the increment that
Speaker 6: they are seeing, you know, you're not getting that same
Speaker 6: growth rate.
Speaker 7: Do you think there's a little over exuberance though in
Speaker 7: the market, especially with so much talk about whether or
Speaker 7: not we are in an AI bubble and what happens
Speaker 7: if it starts to deflate.
Speaker 8: Yeah.
Speaker 6: See, one of the things you have to remember is
Speaker 6: for Oracle, at least they have this backlock of ordos
Speaker 6: coming in and it's coming you know. For example, one
Speaker 6: of the biggest customers right now is open Ai. If
Speaker 6: Opening Eye continues to expand revenue at a good pace
Speaker 6: over the next several years, they are going to be
Speaker 6: spending a lot of money to train their models in
Speaker 6: order to stay ahead. So I think there is a
Speaker 6: lot of relationship over there. If let's say you and
Speaker 6: I don't use chat GPT as much, that would have
Speaker 6: an impact on open Aiy's revenue, That would have impact
Speaker 6: downstream revenue on all the other players, you know, whether
Speaker 6: that's in Verdiao Oracle.
Speaker 8: But frankly speaking, we are not there yet.
Speaker 3: It doesn't feel like this is a situation where it's
Speaker 3: a zero sum game Oracle wins and Microsoft, Google and
Speaker 3: Amazon lose, or is it.
Speaker 6: So there are a few companies that fall into this pocket,
Speaker 6: you know, and those include Amazon Web Services, Microsoft, Google
Speaker 6: Cloud Code, viv Oracle, and Nabius for example. So these
Speaker 6: are the ones that are seeing extra spending right now.
Speaker 6: But when you look at on the application side, you know,
Speaker 6: whether that's Salesforce or Workday, those guys are not seeing
Speaker 6: that benefit because they're not in that infrastructure game. So
Speaker 6: there's a huge difference between two vendors, or between the
Speaker 6: two category of vendors.
Speaker 8: Right now.
Speaker 6: We are more in the built phase of AI, not
Speaker 6: the implementation phase of AI.
Speaker 7: You know, it's hard to believe, Scarlett, but this stock
Speaker 7: and is now worth more than has a larger market
Speaker 7: cap than Walmart, Eli, Lilly, JP, Morgan Chase.
Speaker 3: Yeah, that is pretty remarkable, and again it feels like
Speaker 3: it kind of came from out of nowhere.
Speaker 7: You're right on that, which is why I brought up,
Speaker 7: you know, Amazon, Microsoft, right on your rog I mean,
Speaker 7: the fact that those were the names we were really
Speaker 7: talking about when it came to AI and then sort
Speaker 7: of Oracle comes out of out of the blue.
Speaker 6: Yeah, but that's the whole point this particular infrastructure. If
Speaker 6: you're going to run large models, it's very unlikely you
Speaker 6: going to do it in house. I mean, you can
Speaker 6: do it, but you required a lot of investment going in.
Speaker 6: You're better off renting out data center capacity or computing
Speaker 6: capacity from one of the cloud vendors. And Oracle has
Speaker 6: the money to spend it, and they have the relationship
Speaker 6: with Nvidia to get those GPUs. And on top of that,
Speaker 6: they're offering this to customers and saying here's my equipment,
Speaker 6: come and test it out the way you like it. Amazon,
Speaker 6: on the other hand, thought example sells it as a package,
Speaker 6: and that's where you're you're seeing some distinction. And also
Speaker 6: the size, as I mentioned, before our.
Speaker 5: Thanks to Honor Agrana, Bloomberg Intelligence technology analysts.
Speaker 3: We move next to news in the telecommunications space.
Speaker 5: This week, the space tech company SpaceX agreed to buy
Speaker 5: wireless spectrum from EchoStar for about seventeen billion dollars in
Speaker 5: cash and stock.
Speaker 3: And this comes weeks after EchoStar agreed to sell spectrum
Speaker 3: licenses to AT and T for about twenty three billion
Speaker 3: dollars in an all cash transaction.
Speaker 8: For more.
Speaker 5: Guest host Alexis Christopherus was joined by John Butler, Bloomberg
Speaker 5: Intelligence Senior telecom analysts. We first asked John how this
Speaker 5: deal will help SpaceX.
Speaker 9: So the key to this deal is a spectrum called
Speaker 9: AWS four. So if you look at Starlink and it's
Speaker 9: sprivals in the satellite space, they all hold spectrum, but
Speaker 9: they're not allowed to offer wireless spectrum, I'm sorry, wireless
Speaker 9: services over that spectrum. AWS four spectrum, according to the FCC,
Speaker 9: can be used flexibly. It's called flexible use spectrum, meaning
Speaker 9: the satellite providers can offer anything from mobile services to
Speaker 9: satellite data, downlinked services, video, whatever. It's open use spectrum
Speaker 9: if you want to think of it that way. And
Speaker 9: so Starlink getting its hands on this key spectrum will
Speaker 9: allow them at some point in the future to potentially
Speaker 9: enter the wireless market as a competitor to AT and T,
Speaker 9: Verizon and T Mobile.
Speaker 7: So EchoStar's shareholders seem to like this deal. What are
Speaker 7: they going to do with the proceeds? What will Echo
Speaker 7: Star do with the proceeds of the sale?
Speaker 9: So for EchoStar, it's a very good deal as well.
Speaker 9: They have really struggled to get their wireless service off
Speaker 9: the ground. They've been building this five G wireless network
Speaker 9: and have a relatively weak prepaid brand called Boost and
Speaker 9: they've really struggled there. So this brings in much needed
Speaker 9: funds for them to pay down debt. They've been a
Speaker 9: bit stretched on that front, over leveraged, and you know,
Speaker 9: this deal, together with a deal a couple of weeks
Speaker 9: ago with AT and T, is going to bring in
Speaker 9: billions of dollars to reduce debt. That's number one. And
Speaker 9: number two, it brings in fresh capital for them to
Speaker 9: invest in the business. And I have a feeling they're
Speaker 9: probably going to take a step back and reevaluate the
Speaker 9: strategy here based on the fresh funding and decide what
Speaker 9: the best avenues of growth may be going forward.
Speaker 7: I'm wondering if this is going to satisfy the FCC
Speaker 7: this deal, because I know that they were sort of
Speaker 7: on EchoStar's case, if you will. They wanted them to
Speaker 7: sell some of their airwaves as the company looks to
Speaker 7: roll out it's five G technology. I know they sold
Speaker 7: some spectrum licenses to at and recently. So do you
Speaker 7: think this is going to sort of take the FCC
Speaker 7: off their backs?
Speaker 2: I do.
Speaker 9: I mean, I think Starlink was working with the FCC.
Speaker 9: They had written a letter about Echo Stars under use
Speaker 9: of this spectrum. Starlink obviously really wants to get their
Speaker 9: hands on it, and I think the FCC really took
Speaker 9: their side on this one. I think they understood that
Speaker 9: echo Star, being the only owner of this flexible use spectrum,
Speaker 9: had not really put it to use to date, so
Speaker 9: in their view it was being underutilized and being such
Speaker 9: a critical asset, felt that, you know, sale might make sense,
Speaker 9: and so they really EchoStar really got into it with
Speaker 9: the FCC trying to protect those licenses. But in the
Speaker 9: end here I think, if you want to think of
Speaker 9: it this way, the FCC won the day and net.
Speaker 9: I think it's a good deal for both Echo Stars
Speaker 9: and Starlink and the FCC.
Speaker 7: Now I know SpaceX or Starlink had a deal with
Speaker 7: T Mobile, right, how is this spectrum acquisition with EchoStar
Speaker 7: different if at all?
Speaker 9: So? I think ultimately Starlink could go from being a
Speaker 9: partner with T Mobile to being a competitor of T Mobiles.
Speaker 9: As I said a moment ago, this spectrum opens the
Speaker 9: door for them to get into wireless directly without having
Speaker 9: to partner with a terrestrial carrier. The current deal with
Speaker 9: T Mobile basically has Starlink. I think the best way
Speaker 9: to think about it is they're almost like a tower company.
Speaker 9: They're providing the space based cell sites if you will,
Speaker 9: to carry T Mobile traffic, and they get paid a
Speaker 9: fee for that, but they're not earning the level of
Speaker 9: profits that you could as as a direct carrier. So
Speaker 9: down the road, Starlink, understanding this, wants to enter the
Speaker 9: cellular business directly. They have a lot to do before
Speaker 9: that that happens, but I think it longer term puts
Speaker 9: the deal with T Mobile in jeopardy.
Speaker 7: The seventeen billion dollars a fair price for this for
Speaker 7: these spectrum licenses.
Speaker 6: Do you think you know?
Speaker 9: Spectrums a very liquid market, so it's tough to gauge valuations.
Speaker 9: But in my mind, I look at it as a
Speaker 9: fair price given the potential again for Starlink to enter
Speaker 9: this huge market. Down the road.
Speaker 3: Our thanks to John Butler, Bloomberg Intelligence, senior telecom analyst.
Speaker 5: Coming up, Well, look at how the US's ability to
Speaker 5: assess data on climate change is being impacted by the
Speaker 5: Trump administration.
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 3: depth research and data on two thousand companies at one
Speaker 3: hundred and thirty industries.
Speaker 5: You can access Bloomberg Intelligence via Bigo on the terminal.
Speaker 5: I'm Normal Indo.
Speaker 3: And I'm Scarlet Food. This is Bloomberg.
Speaker 1: Is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney on
Speaker 1: Bloomberg Radio.
Speaker 5: I'm Scarlet Foo and I'm normal in a filling in
Speaker 5: for Paul Sweeney. We move next to a major deal
Speaker 5: in the mining industry.
Speaker 3: This week, the global mining company Anglo American agree to
Speaker 3: acquire Canada's natural resource company tech Resources.
Speaker 5: It's a so called zero premium deal and this deal
Speaker 5: will create a more than fifty billion dollar company and
Speaker 5: one of the biggest mining deals in over a decade.
Speaker 3: So for more guest host Alexis Christophers and I were
Speaker 3: joined by Richard Burke, Bloomberg Intelligence senior basic materials analysts.
Speaker 3: We first asked Richard what a zero premium transaction actually is.
Speaker 4: So what they've done is it's a merger of equals,
Speaker 4: and it's kind of interesting even though it's it's labeled
Speaker 4: mergers equal that American Angle shareholders are going to end
Speaker 4: up owning Butts two thirds of company roughly, and tech
Speaker 4: is shareholders going to end up owning a third company. Well,
Speaker 4: it's gonna be headquarter in Canada, the board is going
Speaker 4: to be fifty to fifty the city, and the management's
Speaker 4: gonna be fifty to fifty. So even though it's kind
Speaker 4: of you know, no premium merger equals kind of you know,
Speaker 4: the the governance issues kind of point to merger of
Speaker 4: equals and that's really probably structured in order to get
Speaker 4: approved by the Investment Act Kada Investment Act. And also
Speaker 4: the Kevil family that owns Tech has two classes shore olders,
Speaker 4: class Class A and Class B. Class A is super
Speaker 4: voting rights. He's owned, he owns majority of those shares,
Speaker 4: so he has to approve this deal. In the past,
Speaker 4: he you know, Glenn Corter, when Glencourt tried to buy
Speaker 4: them about two years ago, he kind of vetoed the deal.
Speaker 4: So the deal and go through. So there's kind of
Speaker 4: a unique structure this deal to kind of you know,
Speaker 4: fitted through final approval makes sense.
Speaker 3: Okay. So there was also language in the statement of
Speaker 3: this so called merger of equals that would allow both
Speaker 3: firms to con that are unsolicited proposals and for the
Speaker 3: deal to end if there's a better offer. Does that
Speaker 3: mean they're angling for some counter offer from someone else.
Speaker 4: Well, I think it would be a hard press, I doubt,
Speaker 4: in order to get it through the Canadian Investment Act,
Speaker 4: which you know, copper is now being considered a critical
Speaker 4: material critical mineral. Canada has said they don't want to
Speaker 4: see any of their mining companies go away. So would
Speaker 4: somebody come in who can pay that much, be willing
Speaker 4: or to PHP or Rio Tinto, be willing to move
Speaker 4: their headquarters from where they're at to Canada. I highly
Speaker 4: doubt it. So, but I think you have to put
Speaker 4: that language in the deal that hey, we're open to.
Speaker 10: So it's like boilerplate, language plate and also prevent that
Speaker 10: you know't get sued by shareholders that you have to
Speaker 10: go out and looked at for all deals.
Speaker 8: Right.
Speaker 7: Do you think that this deal though, between Anglo American
Speaker 7: and Tech is going to be the thing that sort
Speaker 7: of ignites more M and A in this industry?
Speaker 4: I think you know, they used to be saying I
Speaker 4: used to cover oil and gas industry years ago before
Speaker 4: more focused on Melson mining. There's you used to be
Speaker 4: on saying it's cheaper draw on Wall Street and then
Speaker 4: drill up in the field. And that seems to be
Speaker 4: happening in If you look at how much it costs
Speaker 4: to you know, get a new copper, deposit up and
Speaker 4: writing also how many years were permitting and all the
Speaker 4: other things that happens, you can see that maybe you
Speaker 4: sit down and look at this and say, Okay, maybe
Speaker 4: cheaper draw out, you know, mine on Wall Street, then
Speaker 4: go out and make the.
Speaker 5: Mine our Thanks to Richard Bork Bloomberg Intelligence Senior Basic
Speaker 5: materials analysts.
Speaker 3: We now moved to some news in the pharmaceutical space.
Speaker 5: This week, the Danish drug maker Novo Nordis announces it's
Speaker 5: cutting nine thousand jobs globally. This equals about eleven percent
Speaker 5: of its workforce. The company also cut its profit forecast
Speaker 5: for the third time this year as it fights to
Speaker 5: recover ground in the obesity dry market.
Speaker 3: For more on this, guest host Alexis Christophers and I
Speaker 3: turned to Sam Fazzelli, Bloomberg Intelligence, Director of Research for
Speaker 3: Global Industries and senior pharmaceuticals analysts. We began by asking
Speaker 3: Sam to talk about the larger changes taking place at NOVO.
Speaker 11: The story here is that this is not the first
Speaker 11: time they've lowered guidance for the year. I mean this
Speaker 11: time there's an impact on the EPs front from obviously
Speaker 11: the cost of restructuring, assuming they can get it all
Speaker 11: done this year, but it's a pretty chunky one. Nine
Speaker 11: thousand people, about eleven percent of the workforce, and a
Speaker 11: lot of that.
Speaker 8: Coming from Denmark.
Speaker 11: If you read the essence of the press release that
Speaker 11: they put at there's a couple of things that they
Speaker 11: bring out.
Speaker 8: They want to invest more on R and D Well.
Speaker 11: What I think this is telling you is that the
Speaker 11: growth that they had planned for the next five years,
Speaker 11: they may be thinking maybe that won't come as test
Speaker 11: as we were expecting it because of competition from Lily,
Speaker 11: compounders and other products potentially coming to market to the
Speaker 11: pace that they were hoping. So if you want to
Speaker 11: keep investing in R and D, you need to liberate
Speaker 11: some cash. And also it looks like that they're also
Speaker 11: thinking about changing the world that they're doing their marketing
Speaker 11: because of the different channels that they're getting involved with
Speaker 11: now direct to consumer, that is not something that Prauma
Speaker 11: has done very often before. In fact, only Lily had
Speaker 11: done it prior to this, also for obesity drugs, So
Speaker 11: maybe the costs of that are different. And there's an
Speaker 11: element that they keep that they've referred to in there,
Speaker 11: which is a culture of performance related reward, and you
Speaker 11: think to yourself, well, what was it before? So it
Speaker 11: seems like that they want to make it much harder
Speaker 11: focus on you've got to deliver because we need the growth.
Speaker 8: So that's the interesting wle to.
Speaker 7: Watch, you know, Sam, I think to a lot of
Speaker 7: casual investors who don't deep dive into you know, Novo
Speaker 7: Nordisk the way you might say, would look at this
Speaker 7: and say, listen, they have the most popular weight loss drugs, right,
Speaker 7: will go vi Ozempek. Why is this company having these
Speaker 7: problems when you drill down or is it just a
Speaker 7: problem with having to scale too quickly? Is it that
Speaker 7: the company isn't nimble enough, just sort of change with
Speaker 7: the times.
Speaker 11: Well, Nobodordisk has been a poster child of how you
Speaker 11: grow from a small company selling to a relatively basic
Speaker 11: set of products twenty thirty years ago to one that's
Speaker 11: become essentially one of the innovators in this space. They
Speaker 11: brought the first JL we want to market, so we
Speaker 11: can't fault them for that. It's just that I think
Speaker 11: this growth that they had to go through where the
Speaker 11: planning was done, you know a lot of I mean,
Speaker 11: we have one hundred billion dollar market potential for more
Speaker 11: obesity as a whole, right, So it's just difficult, I think,
Speaker 11: to judge into this space. And maybe the previous CEO
Speaker 11: had looked and said, I'm pretty sure we're going to
Speaker 11: be fifty percent of that market. We need to plan
Speaker 11: for that growth. And then two things changed. Competition from
Speaker 11: really is superintense. They have what I would call it
Speaker 11: a better drug in terms of the efficacy profile that's
Speaker 11: been shown in head to her trials. And then of
Speaker 11: course you've got on top of that compounders that don't
Speaker 11: seem to be don't seem to be going way, they
Speaker 11: keep taking cheaper generics or generics manufactured, they'll try to
Speaker 11: making the drugs. So that's where I think the new
Speaker 11: Area issue is in that we all expected the FDA
Speaker 11: to really clump hard down on that and they haven't
Speaker 11: made issue, you know, statements, but they're allowing them. They
Speaker 11: even found areas outside the US where these compound compounders
Speaker 11: can get their drugs from, which is counterintuitive.
Speaker 5: Our thanks to Sam Fazelli, Bloomberg Intelligence, Director of Research
Speaker 5: for Global Industries and senior pharmaceuticals analysts.
Speaker 3: This week we focus on a Bloomberg Big Take story
Speaker 3: entitled Trump is Unwinding Climate Science at a Dangerous Pace.
Speaker 3: You can find it on Bloomberg dot Com and the Terminal.
Speaker 5: The story looks at how mass firings, regulatory rollbacks, program closures,
Speaker 5: and funding cuts across agencies have threatened the US's ability
Speaker 5: to gather and says data on climate change, and this
Speaker 5: is under the current Trump administration.
Speaker 3: For more guestos, Alexis Christophers and I were joined by
Speaker 3: Eric Roston, Bloomberg Climate reporter. We began by asking Eric
Speaker 3: to explain how President Trump's policies are impacting the ability
Speaker 3: to gather data.
Speaker 2: Whether you are a mayor of a city, or head
Speaker 2: of an insurance company or head of an agriculture company,
Speaker 2: everyone throughout the economy, public and private sector needs good
Speaker 2: information to make good decisions, and the US in recent
Speaker 2: decades has had the global leadership role in developing the
Speaker 2: kinds of data that everybody needs in order to see
Speaker 2: what's coming, to set insurance rates, to understand whether we
Speaker 2: should build a house here, to understand if this floodplane
Speaker 2: is going to be like a bad place to build houses.
Speaker 2: And so that's the data we're talking about here, is
Speaker 2: actionable data that people in the economy have come to
Speaker 2: rely on to make decisions. To cite one of the
Speaker 2: many examples we talk about it in in the story,
Speaker 2: the US produces it's supposed to be not more than
Speaker 2: every four years national Climate Assessment, which is a huge
Speaker 2: amount of time, a huge amount of time, and they take,
Speaker 2: you know, years to develop, hundreds of people to write,
Speaker 2: and thousands of papers that they're based on. And you
Speaker 2: see these reports. Cite it in Travelers earning calls and
Speaker 2: Chipotle earning calls and reports in Marriott, you know, brands
Speaker 2: we see every day understand the material and understand the
Speaker 2: needs of this material. I'm not putting words in their mouth.
Speaker 2: I'm just pointing out that they say things like this,
Speaker 2: those were taken away from public view. So I think
Speaker 2: that's an interesting place to start on because like, yeah,
Speaker 2: the government, like any government, can be cut right and
Speaker 2: save money, and it's just the nature of bureaucracy. But
Speaker 2: why are some of the most authoritative and well vetted
Speaker 2: scientific reports ever written being taken away from public view
Speaker 2: where they've been for many years?
Speaker 3: All good questions, and I'm sure that we won't get
Speaker 3: answers to them right away either. So what does it
Speaker 3: mean if you're a company like Travelers and you're relying
Speaker 3: on that data? Do you can you go to private
Speaker 3: sources for that kind of information? Does that exist?
Speaker 2: It's that's a great question. And if we had like
Speaker 2: another two hours, I'd love to, you know, because we've
Speaker 2: spent a lot of time in the last few years
Speaker 2: on the private sectors, you know, filling a hole in
Speaker 2: useful climate data that that businesses the businesses needs. So
Speaker 2: the short answer is, yes, some of this this this data,
Speaker 2: A lot of it is like translated into the language
Speaker 2: of risk for companies, it does exist. The bigger concern is, like,
Speaker 2: that's a tiny fraction of what we're talking about here.
Speaker 2: You know, we're talking about, you know, very sophisticated computer
Speaker 2: models that like the entire world relies on to make
Speaker 2: sense of you know, observations we see and weather stations
Speaker 2: and in you know, in other sources and a particularly
Speaker 2: you know, I don't know, I'll get in trouble for
Speaker 2: saying this, but this could be described as like the
Speaker 2: most boring kind of data is also some of the
Speaker 2: most important, and that is unsexy data. Unsexy data. It's
Speaker 2: like continuous monitoring data. It's you know, it's very important
Speaker 2: for some kinds of data that you have a complete,
Speaker 2: unbroken record. The most iconic one in this space is
Speaker 2: the CO two measurements from Hawaii and Mauna Loa that
Speaker 2: have been going on since the late nineteen fifties and
Speaker 2: are largely responsible for the discovery of global warming. Like
Speaker 2: that data set, one of the most famous data sets
Speaker 2: ever collected, was slated for closure in the recent White
Speaker 2: House budget.
Speaker 5: Hard thanks to Eric Roston Bloomberg Climate Reporter, Coming up,
Speaker 5: look Ahead to a potentially big m and a deal
Speaker 5: in the banking sector.
Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 3: depth research and data on two thousand companies and one
Speaker 3: hundred and thirty industries.
Speaker 5: You can access Bloomberg Intelligence via Bigo on the terminal.
Speaker 3: I'm normal Linda, and I'm Scarletfoo. This is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlettfoo and Paul Sweeney on
Speaker 1: Bloomberg Radio.
Speaker 3: I'm Scarletfoo and I'm normal Linda, filling in for Paul Sweeney.
Speaker 3: We moved to some news in the banking sector this week.
Speaker 3: PNC Financial Services agreed to buy First Bank for about
Speaker 3: four point one billion dollars, adding more than twenty six
Speaker 3: billion dollars in assets and branches in Colorado and Araa, Arizona.
Speaker 5: The acquisition will triple the number of P and C
Speaker 5: branches in Colorado, and it will give the combined company
Speaker 5: more than fifteen percent of deposits in the state.
Speaker 3: Guest hosts Alexis Christophers and I were joined by Herman Chen,
Speaker 3: Bloomberg Intelligence, senior analysts for US regional banks. We first
Speaker 3: asked Herman if bank regulators are going to be okay
Speaker 3: with the deal of this size.
Speaker 10: The regular toory landscape has been really great for banking
Speaker 10: and getting bank deals done. That's why you've seen some
Speaker 10: more bank deals over the past couple of months. You
Speaker 10: saw Huntington, which is based in Ohio, go into Texas
Speaker 10: for Vera Techs. And you've see an emerging of vehicles
Speaker 10: in the Southeast with so Novas and Pinnacle. And this
Speaker 10: is sort of like the third large regional bank deal
Speaker 10: over the past couple months. So it just sort of
Speaker 10: signals that the bank the Trump administration is really open
Speaker 10: it for a bank of an am.
Speaker 3: And this is not PNC's first attempt at real expanding
Speaker 3: its Colorado presence. It had previously sought to open sixteen
Speaker 3: locations in Colorado. Why is Colorado such a hot market
Speaker 3: for P ANDC?
Speaker 10: Right, I would take step back and sort of highlight
Speaker 10: that the P and C, which is mostly in the Northeast,
Speaker 10: mid Atlantic Midwest, that they've expanded across the Sun Belt
Speaker 10: states in Colorado with the twenty twenty one deal for
Speaker 10: BBVA USA, and they sort of double down on those
Speaker 10: markets with this expansion plan to grow organically by opening
Speaker 10: up new branches and this deal that they announced really
Speaker 10: sort of supports that growth and accelerates it in Colorado
Speaker 10: and in Arizona.
Speaker 7: So I'm just wondering, as you look out onto the
Speaker 7: landscape now, who might be the next takeover candidate. Who
Speaker 7: might we be talking about in the not too just
Speaker 7: in future.
Speaker 10: Yeah, So you've seen some of these deals where these
Speaker 10: slower growth Midwest banks grow into areas like Texas, Florida, Colorado.
Speaker 10: So the banks are sort of smaller in size, and
Speaker 10: we're talking about the first banks about twenty billion in assets,
Speaker 10: so banks of slimmer of that size, these higher growth
Speaker 10: markets are really attractive to some of these larger institutions.
Speaker 3: So with this purchase, PNC's total assets approaches six hundred
Speaker 3: billion dollars. It will bring it closer to the number
Speaker 3: one regional bank, which is US Bank Corp. Is Uanrup
Speaker 3: still a regional bank, Yeah.
Speaker 10: I would say there are three super regional banks, and
Speaker 10: that will put p and C, US Bank Corp and
Speaker 10: Truest where they're sort of below that seven P fifty mark,
Speaker 10: but larger than your typical regional bank. And they PNC
Speaker 10: now is a coast to coast lender, so and have
Speaker 10: operations all from the Northeast all the way down to Florida, Texas, California,
Speaker 10: So you can't really call them a regional bank at
Speaker 10: this point. I would view them as more super regional.
Speaker 7: And I want to tie it back to the FED
Speaker 7: in interest rates, because don't all roads really lead there
Speaker 7: at this point, And I want to talk about what again,
Speaker 7: if this is going to be an environment of lower
Speaker 7: interest rates for the foreseeable future, what is this going
Speaker 7: to mean for the banks, but especially these smaller regional banks,
Speaker 7: because I'm thinking it may even squeeze their profitability more.
Speaker 8: Yeah.
Speaker 10: Yeah, it's interesting because we had a few FED rate
Speaker 10: cuts at the end of last year, and the regional
Speaker 10: banks that I cover were able to navigate that pretty well.
Speaker 10: They're able to keep their net interest margins, which is
Speaker 10: a key metric for profitability, fairly stable. And that's one
Speaker 10: of the reasons why they've been able to do that
Speaker 10: is they've been able to lower their deposit costs, which
Speaker 10: was one of the things that really is a key
Speaker 10: metric for banks to really show top line growth. On
Speaker 10: top of that, lower interest rates could help loan growth.
Speaker 10: You've seen some companies like Rockets Mortgage be very abuiliant
Speaker 10: for lower interest rates, and so that could help improve
Speaker 10: some of the demand for lending, and that's something that
Speaker 10: we're seeing so far over the first half of the year.
Speaker 3: So they'll make it up in volume what they lose
Speaker 3: in profitability, they plan.
Speaker 10: To we can make it in volume. You'll see some
Speaker 10: dents in like the rates that they charge for loans,
Speaker 10: but they'll also make it up in volume and lowering
Speaker 10: their funding costs.
Speaker 3: When you look at the landscape overall of M and
Speaker 3: A in the banking sector, it feels like we've been
Speaker 3: waiting for something to happen for a long time, and
Speaker 3: maybe this is kind of the domino, the first domino
Speaker 3: that falls. Yeah, well, the big banks and I'm here,
Speaker 3: I'm talking about the JP Morgans, the Bank of America's,
Speaker 3: Wells Fargo's. Will they play any role in this consolidation.
Speaker 10: They're already too big, So there's that they are prohibited
Speaker 10: from from doing such deals because they just have dominant
Speaker 10: market share in their markets. One thing that we did
Speaker 10: see during the height of the regional banking crisis a
Speaker 10: couple of years back is that JP Morgan bought First
Speaker 10: Republic in an FDIC failed bank acquisition. So if we
Speaker 10: in the sense that if there we do get to
Speaker 10: a place like that, that's when the big banks can play,
Speaker 10: but in a straight man a type scenario.
Speaker 3: To clean up messes.
Speaker 2: They can clean They can.
Speaker 10: Clean up messes, but they can't outworthy buy a bank
Speaker 10: at this point, they're just way too big.
Speaker 7: And just what about the consumer out there only shopping
Speaker 7: for the best deal. You know, it used to be
Speaker 7: that these smaller regional banks would be the place to
Speaker 7: go for the better CD rates, right or a more
Speaker 7: friendly friendly mortgage terms. Is that still the case?
Speaker 8: Yeah?
Speaker 10: Sure, So that's what really great about these markets that
Speaker 10: P and C is going to where they can have
Speaker 10: really dominant market share in Denver and Arizona, and just
Speaker 10: having that marketing and having the branches really helps with
Speaker 10: deposit taking and helping your consumer.
Speaker 5: Out our Thanks to Herman Chan, Bloomberg Intelligence senior analysts
Speaker 5: for US regional banks.
Speaker 3: This week we focus on another Bloomberg Big Take story
Speaker 3: entitled Tesla's dangerous store design can trap people inside. You
Speaker 3: can find it on Bloomberg dot Com and The Terminal.
Speaker 5: This story looks at how some of Tesla's design features,
Speaker 5: like door handles are confusing occupants and first responders, and
Speaker 5: this worsening injuries and damage caused by survivable crashes.
Speaker 3: So for more on this guest host Alexis Christophers and
Speaker 3: I were joined by Craig Tdrudell, Bloomberg Global Autos Editor.
Speaker 3: We began by asking Craig to give us his main
Speaker 3: takeaways from this story.
Speaker 12: This is a company that you know from the from
Speaker 12: the beginning, you've heard Musk talk about, you know, just
Speaker 12: how safe his vehicles are, and you know, even just
Speaker 12: very recently, the company has posted on X if you
Speaker 12: love them, put them in a Tesla. That's the kind
Speaker 12: of language that you see and hear from from Tesla
Speaker 12: and from Musk. I think what happened here with the
Speaker 12: doors is, you know, sort of from the beginning, an
Speaker 12: attempt to kind of innovate what I think Tesla's critics
Speaker 12: would say didn't need innovating. We didn't need to change
Speaker 12: the way that you know, a door opens and closes.
Speaker 12: It's it's intuitive. Everyone knows how to do it. You
Speaker 12: sort of know how to do it when you're three
Speaker 12: or four years old and you know the company wanted
Speaker 12: to go to this, you know, new different sort of
Speaker 12: path breaking approach of handles that would be flushed to
Speaker 12: the to the doors for better aerodynamics. And and also
Speaker 12: you know, if you think about a battery powered car,
Speaker 12: it's it's very quiet, right, you don't have engine noise
Speaker 12: to drown out any sort of you know, whistles or
Speaker 12: anything like that. So the smoother the surfaces, the flatter everything,
Speaker 12: the better in terms of not just aerodynamics, but also uh,
Speaker 12: you know, this sort of getting rid of any any noise.
Speaker 12: And so while while those all you know, are understandable
Speaker 12: reasons to sort of make some design changes, what we
Speaker 12: found in the course of reporting of this story is just,
Speaker 12: you know, some sort of tragic consequences of those decisions
Speaker 12: in terms of, you know, how difficult it is both
Speaker 12: for you as an occupant to get out and also
Speaker 12: for first responders to get to you, to open the
Speaker 12: doors and get to you, and in situations where maybe
Speaker 12: you're incapacitated or you're having trouble with the doors.
Speaker 7: Yeah, I mean the stories that you highlight, Craig were
Speaker 7: really popping and disturbing. I mean, one a little eighteen
Speaker 7: month old girl was stuck in the car her parents
Speaker 7: couldn't get her out, and that was one of the
Speaker 7: better stories. It had a better ending. They were able
Speaker 7: to get her out. I mean, I'm surprised that the
Speaker 7: National Highway Traffic Safety Administration isn't really cracking down on Tesla.
Speaker 7: What are they saying about all of this?
Speaker 12: I think that was one of the more interesting, you know,
Speaker 12: issues with this story is is that Nit's a you know,
Speaker 12: a lot of complaints, a lot of safety concerns come
Speaker 12: across their their proverbial desk, if you will, and at
Speaker 12: times it will take all of a single complaint or
Speaker 12: you know, a handful of owner surveys that that will
Speaker 12: sort of get its attention and lead to communication with
Speaker 12: manufacturers of hey, you need to take a look at this,
Speaker 12: and sort of, you know, the agency will sort of
Speaker 12: put its thumb on the scale in terms of, you know,
Speaker 12: a potential recall. In the case of this story, what
Speaker 12: NITSA told us is that they are in communication with
Speaker 12: Tesla to gather additional data and determine whether a quote
Speaker 12: full investigation unquote is warranted. That does allude to this
Speaker 12: idea that there may be some sort of initial investigating
Speaker 12: going on, but in terms of a formal probe that
Speaker 12: has not been initiated at least as of yet.
Speaker 3: Okay, so that's where the regulators stand. What's interesting to
Speaker 3: me as well is that other ev makers have kind
Speaker 3: of taken Tesla's design and copied it. They are also
Speaker 3: doing the same thing. So this now goes beyond Tesla vehicles,
Speaker 3: doesn't it.
Speaker 12: Yeah. And I think what was interesting to us and
Speaker 12: sort of you know, kind of trying to get a
Speaker 12: sense for just how problematic this is for other manufacturers.
Speaker 12: I think, you know, there was nothing that stood out
Speaker 12: more for me was, you know, looking at JD Powers
Speaker 12: study that they do every year. It's called the Initial
Speaker 12: Qualities the IQs. You might be familiar from with you know,
Speaker 12: car companies you know, put making this, you know, a
Speaker 12: point of emphasis in their ads or their commercials when
Speaker 12: they do well in that. In that study, and in
Speaker 12: twenty twenty three, uh, they had a record high number
Speaker 12: of problems per US vehicle in the US market and
Speaker 12: one of the things that they pointed to as a
Speaker 12: reason for this was was doors. And they kind of
Speaker 12: poked fun a little bit at the industry that they
Speaker 12: you know, researched by saying, this wasn't something that we
Speaker 12: needed to change, you know it was working. We weren't
Speaker 12: getting complaints from people that we survey for this study,
Speaker 12: and you know, now this is a percolating problem area
Speaker 12: was the phrasing that they used. And seven of the
Speaker 12: ten most problematic models in this respect were EV. So
Speaker 12: what we're seeing is a lot of sort of you know,
Speaker 12: taking after Tesla in terms of door design. And for
Speaker 12: the most part, what we're seeing is is sort of
Speaker 12: you know, copycatting or taking after EV for EV right,
Speaker 12: you know, trying to feel a model Wi Fighter that
Speaker 12: also has you know, doors that are similar to the
Speaker 12: model Y.
Speaker 7: I'm wondering, I don't think your story got into the
Speaker 7: story got into this, Craig, But what's the legal ramifications
Speaker 7: here for for Tesla? You know, I would imagine the
Speaker 7: lawsuits are piling up. I mean if certainly, if my
Speaker 7: child was stuck in a Tesla and I couldn't get
Speaker 7: him out, I might be suing Tesla.
Speaker 12: We are aware of a handful of lawsuits and I
Speaker 12: think you know, one of the complicating factors here is
Speaker 12: is Tesla uh pushes its its customers into arbitration for
Speaker 12: for these sorts of of suits that this is part
Speaker 12: of the sort of purchase agreement when you buy it
Speaker 12: a Tesla, that is something that you know, liigans are
Speaker 12: going to have to sort of overcome because of that
Speaker 12: sort of policy on the part of the company. I
Speaker 12: think another sort of complicating factor here is that you know,
Speaker 12: one of the uh you know, uh a couple that
Speaker 12: that we speak with in the story, they had no
Speaker 12: inclination to sue Tesla immediately after the crash. It took
Speaker 12: one of the first responders coming to them after the
Speaker 12: fact and saying, hey, we really had a hard time
Speaker 12: getting to you, and it was because of your vehicle.
Speaker 12: That is part of the issue here. You don't necessarily
Speaker 12: know right off the bat, Hey something wasn't right here.
Speaker 12: I need to do some investigating hard.
Speaker 5: Thanks to Craig Trudell, Bloomberg Global Autos Editor.
Speaker 3: That is this week's edition of Bloomberg Intelligence on Bloomberg Radio,
Speaker 3: providing in depth research and data on two thousand companies
Speaker 3: and one hundred and thirty industries.
Speaker 5: And remember you can access Bloomberg Intelligence via Bigo on
Speaker 5: the terminal. I'm normal Inda, and I'm Scarlet Foo.
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