Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moven news.
Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
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Speaker 1: Let's head down to Washington, DC. Nathan Dean. It's his
Speaker 1: task to follow and analyze all the shenanigans coming from
Speaker 1: our good friends in the halls of Congress. He's a
Speaker 1: senior analysts for US government for Bloomberg Intelligence. So, Nathan,
Speaker 1: you're joining us by zoom We appreciate that. My question
Speaker 1: is is this government going to be able to fund
Speaker 1: itself or we're going to get a shutdown at the
Speaker 1: end of this month. Can you give us a timeline
Speaker 1: and kind of where we are here?
Speaker 3: Yeah, so you know, the government's only back for you know,
Speaker 3: eight to ten days, you know, working days until this
Speaker 3: deadline of September thirtieth. And like you said, you know,
Speaker 3: we it's highly likely that we're going to end up
Speaker 3: with a government shutdown. Now, whether this is a thirty
Speaker 3: day shutdown. Look, under President Trump's administration probably not be
Speaker 3: the case.
Speaker 4: You know.
Speaker 3: The Speaker McCarthy says that he wants to kick the
Speaker 3: can to early December to give more time over negotiations.
Speaker 3: But the note that we just put out on the
Speaker 3: terminal this morning essentially states that if you do have
Speaker 3: a shutdown, both markets and defense contractors shouldn't be all
Speaker 3: that concerned. You know, during that thirty days shutdown under
Speaker 3: President Trump, the markets didn't react all that well in
Speaker 3: the first couple of days. But then once realized, once
Speaker 3: people realize the economic you know, impact isn't all that great,
Speaker 3: markets pretty much just moved beyond. Same thing with defense contractors.
Speaker 3: If you're Boeing or you know, raytheon and so forth
Speaker 3: like that, you know your contracts are already funded in.
Speaker 3: They're funded in on a long term basis. So the
Speaker 3: real big impact for a government shutdown, if it lasts
Speaker 3: more than a week or two, is that folks like
Speaker 3: me in Washington, DC can't take their kids to the zoo.
Speaker 2: Well what about federal employees? Will they still get paychecks
Speaker 2: every two weeks or however that works. I mean, if
Speaker 2: you work at the euro of Labor, and statistics putting
Speaker 2: together the CPI, for example, are you still going to
Speaker 2: get paid?
Speaker 3: So what they do is they deem employees to be
Speaker 3: essential and non essential. If you're an essential play it's
Speaker 3: about fifteen percent of the US workforce.
Speaker 5: Obviously, that's right, people.
Speaker 2: Only fifteen percent of the people that we employ are essential.
Speaker 2: Everybody else we could do without exactly.
Speaker 4: So.
Speaker 3: But you know, what's what's happened in the past is
Speaker 3: when the shutdown is over, the Congress will actually pass
Speaker 3: a resolution or pass a bill that provides retroactive back pay.
Speaker 3: So if you're shut down for a couple of weeks,
Speaker 3: obviously that's not going to be good if you're living
Speaker 3: paycheck to paycheck, but you will get that pay back.
Speaker 5: That is not the case for smaller contractors.
Speaker 3: So if you work for a contracting agency and your agency,
Speaker 3: you know, decides to shut down all of a sudden,
Speaker 3: you're not going to get that pay back unless the
Speaker 3: contractor and self pays you back.
Speaker 5: You're not going to get any recourse from the government.
Speaker 6: You know.
Speaker 3: I should also note that, you know, even though I
Speaker 3: took light of the situation with the Zoo, certain things
Speaker 3: like economic releases BLS, you know, so forth like that
Speaker 3: those eventually could be delayed, which and then also could
Speaker 3: cause some you know, can fusion and disruption to the
Speaker 3: traders that are relying on that information.
Speaker 1: Well, what about these things you guys, don't Washington DC
Speaker 1: called continuing resolutions or cr can't we use one of
Speaker 1: those thing that jigs?
Speaker 7: Yeah?
Speaker 3: Absolutely, And that's what I think is gonna happen here.
Speaker 3: You know, the Approachriate appropriations process is a twelve bill process,
Speaker 3: and they've only got an agreement on one. They have
Speaker 3: to pass eleven essentially in the next month. So what
Speaker 3: they're gonna do is they're gonna hit this continuing resolution.
Speaker 3: The challenge is is that Speaker McCarthy has had several
Speaker 3: people in the House Freedom Caucus just say, look, I'm
Speaker 3: not gonna vote for any continuing resolution unless you do
Speaker 3: fund the FBI or you you know, implement any of
Speaker 3: these policies. That has no chance whatsoever with President Biden
Speaker 3: in the Senate under Democratic control. So what's gonna happen
Speaker 3: here is Speaker McCarthy's in a hard place. He's got
Speaker 3: to figure out a way to pass up continuing resolution
Speaker 3: probably to early December, maybe next year. But probably early
Speaker 3: December using Democratic support, and that's just something that he's
Speaker 3: not gonna be able to get to until the last moment.
Speaker 3: So you're looking at either a shutdown will occur, you know,
Speaker 3: I'm guessing less than five days, but you know, negotiations
Speaker 3: are gonna go way up to the high wire and
Speaker 3: you're gonna see constant headlines over the next two to
Speaker 3: three weeks of shutdown inncs, shutdown angst, and more shutdown ancs.
Speaker 2: It's just kooky to me how much the far right
Speaker 2: and the far left have in common. You know, the
Speaker 2: lefties wanted to defund the police and now the Freedom
Speaker 2: Caucus wants to defund the FBI exactly. I mean, do
Speaker 2: we not need law enforcement in this country?
Speaker 1: I thought the FBI were the good guys, all right?
Speaker 1: What else besides the shutdown is Congress focused on here
Speaker 1: we go. They're gonna actually work for a solid eight days.
Speaker 1: Good for them, But what else do they have to
Speaker 1: get done here?
Speaker 3: So you know, you're gonna see a lot of negotiations
Speaker 3: or at least you know, we've heard the House Financial
Speaker 3: Services Chairman Patrick man Henry say that he wants to
Speaker 3: try and schedule a vote on crypto legislation, I'm not sure,
Speaker 3: and many of that's gonna get there in September. I mean,
Speaker 3: you have to reauthorize the FAA. The Farm Bill expiration
Speaker 3: is also in September thirtieth, So for the rest of
Speaker 3: the month, you're gonna see a lot of people try.
Speaker 5: Things, but it's going to be focused on this government shutdown.
Speaker 7: Now.
Speaker 3: One thing that came out last week that was interesting
Speaker 3: is that Bloomberg News reported that the Department of Health
Speaker 3: and Human Services is going to recommend changing marijuana from
Speaker 3: Schedule one to Schedule three.
Speaker 5: We are good, you know.
Speaker 3: That is a big deal for the marijuana industry, and
Speaker 3: so we're gonna be looking to see what steps come
Speaker 3: from the DEEA. They are the ones that are gonna
Speaker 3: have to make this decision, and really we're looking to
Speaker 3: see if they get this done in twenty twenty four
Speaker 3: or is this going to be a multi year process.
Speaker 3: That's really key for the marijuana stocks.
Speaker 2: Schedule one drugs include like heroin and Fenton myl and
Speaker 2: that's where marijuana is, and that's that's where they have
Speaker 2: had weed for decades now, you know, because you know
Speaker 2: Item nine, all right, So that's something that's probably not
Speaker 2: gonna happen salt, any any movement on salt at all. Nathan,
Speaker 2: I got to always ask ask you the state and
Speaker 2: local tax deduction question.
Speaker 3: Yeah, you know, I hit my phone always before these
Speaker 3: hits to see what's gonna happen with the salt folks
Speaker 3: around town.
Speaker 5: But this is laying the work.
Speaker 3: Look, the salt deduction is going to expire when the
Speaker 3: Trump tax cuts expire. That's not going to be that's
Speaker 3: actually coming up fairly soon. But this is one of
Speaker 3: those situations where you have lawmakers from New New York
Speaker 3: and New Jersey going out there and saying, look, we're
Speaker 3: going to fight tooth and nail to try and get
Speaker 3: salt back. I mean they're even saying we would just
Speaker 3: love to take a pinch of salt. But ultimately what's
Speaker 3: gonna happen here is if you're going to you know,
Speaker 3: the salt deduction brought a lot of money back to
Speaker 3: the government, or getting rid of the salt deduction brought
Speaker 3: a lot of money back to the government.
Speaker 5: That is money that can be used elsewhere.
Speaker 3: And there are a lot of lawmakers like, ooh, we
Speaker 3: like this New York New Jersey money.
Speaker 5: We can use this for something else.
Speaker 3: So we're just I think the New York and New
Speaker 3: Jersey lawmakers, the Salt Caucus, if you will, are just
Speaker 3: planting the seeds so that when these negotiations come back
Speaker 3: closer to the expiration date, you know, they can fight
Speaker 3: tooth and nail at that point to get some relief
Speaker 3: back to the you know, the the homeowners of the
Speaker 3: New York City area.
Speaker 2: Is this is this yet another issue on which AOC
Speaker 2: and Marjorie Taylor Green or in agreement.
Speaker 3: You know, this is going to be one of those
Speaker 3: issues where it's essentially New York, New Jersey, California, and
Speaker 3: Illinois against the world against everybody.
Speaker 1: All right, all right, I understand we've got some generals
Speaker 1: and some admirals that need to be approved for senior
Speaker 1: leadership positions. I thought this stuff just gets done like
Speaker 1: rubber stamp. What's going on?
Speaker 3: So this is coming out of Alabama. This is Senator Tubberville,
Speaker 3: you know, coach, you know, of Auburn. He's actually holding
Speaker 3: up these promotions in response to a federal policy related
Speaker 3: to abortion. And this is a classic standoff between the
Speaker 3: White House and one senator. And so you know, we've
Speaker 3: seen statements from Bloomberg News, you know, their interviews with
Speaker 3: other Republican senators. They wish that Senator Tuberville wasn't doing this.
Speaker 3: But this is just a standoff that's going to continue.
Speaker 3: And you know, we've seen other statements from both the
Speaker 3: Department of Defense and so forth that you know, American
Speaker 3: security could be harmed.
Speaker 5: But I don't think we've seen any end in sight.
Speaker 3: Both sides are pretty ducked in and so this is
Speaker 3: just one of those is where I'm not exactly sure
Speaker 3: if there's a resolution anytime soon.
Speaker 1: I mean, poor Nathan Dean's got to analyze and focus
Speaker 1: on Congress like for a living.
Speaker 2: Yeah, that is, and a lot of other stuff, right,
Speaker 2: I mean, the Washington DC. The weed decision doesn't come
Speaker 2: from Congress. That's first gonna come from. Who's the weed
Speaker 2: decision come from? If they push it back to schedule
Speaker 2: three d DA?
Speaker 5: Right, the DA? Yeah, all right, he's got.
Speaker 4: To watch all those agencies. He's gotta be careful.
Speaker 2: You know, the FBI might be defunded, yep, exactly.
Speaker 1: Who knows? All right, Nathan, it's your you got to
Speaker 1: deal with this stuff. We appreciate it. You're demand Nathan Dean,
Speaker 1: senior policy analysts. He covers all the US government stuff
Speaker 1: for Bloomberg Intelligence. He is our go to person for
Speaker 1: all you know, kind of how the sausage is made
Speaker 1: down there.
Speaker 7: With you're listening to the team.
Speaker 6: Ken's are Live program Bloomberg Markets weekdays at ten am
Speaker 6: Eastern on Bloomberg dot com, the iHeartRadio app and the
Speaker 6: Bloomberg Business app, or listen on demand wherever you get
Speaker 6: your podcasts.
Speaker 1: Let's talk global economics year. We're gonna got it from China,
Speaker 1: might head over to Europe. Who knows where else?
Speaker 6: Will go?
Speaker 1: Eddie vnderwaldt you can go anywhere. He is a deputy
Speaker 1: Managing Deputy Managing editor of Market's Live team from Bloomberg News.
Speaker 1: I want to as him about bitcoin first.
Speaker 2: So Eddie is an expert on crypto as well. And Eddie,
Speaker 2: you know, I was off last week, but I still
Speaker 2: read the news and I thought it was so exciting
Speaker 2: for crypto when we found the Grayscale SEC decision overturned
Speaker 2: by an appeals court. So I thought, man, this is
Speaker 2: great news. Bitcoin spot, bitcoin ETFs are happening. I'm sure
Speaker 2: that the underlying ASCID is surgeon. I come back in
Speaker 2: this morning to see it under twenty six thousand.
Speaker 5: What gives Bigcore.
Speaker 8: Really is struggling, And it's really fascinating to see this happen,
Speaker 8: right because not only did you have that, you're also
Speaker 8: coming towards the harving of supply next year. Every four
Speaker 8: years or so, they have the amount of output in
Speaker 8: the amount of coin. And if you see that, you
Speaker 8: also see an ETF launch bringing in more retail investors,
Speaker 8: making it easier for people to invest. Bitcoin really should
Speaker 8: be garnering some momentum going into next year, but it
Speaker 8: just isn't. And I think part of the reason is
Speaker 8: that we are seeing higher real interest rates, right, We
Speaker 8: are seeing interest rates pushing higher, and therefore, you know,
Speaker 8: people probably don't have as much speculative money lying around
Speaker 8: yet are there speculative assets like you know, your your
Speaker 8: bids on Nvidia and so on are really doing well.
Speaker 8: So maybe it's a case of not so much that
Speaker 8: you know that that people don't have the money, but
Speaker 8: but perhaps a little bit more that they that the
Speaker 8: AI story has taken the shine off of cryptocurrencies. I
Speaker 8: think AI is the new shiny thing, and that's where
Speaker 8: investor money is going.
Speaker 1: That's interesting take and thought about that, but that probably
Speaker 1: makes a lot of sense. All right, Eddie, let's I
Speaker 1: want to just go to China here. How concerned are you?
Speaker 1: How concerned should the global economy be about just it
Speaker 1: seems like day after day, you know, kind of disappointing
Speaker 1: economic data coming out of China, weakening data coming out
Speaker 1: of China. How do you put that in prospective?
Speaker 9: Wait?
Speaker 2: I thought they were finally giving a stimulus, were now
Speaker 2: stick giving money to parents of kids and kids of parents?
Speaker 10: Yep?
Speaker 8: Yeah, And look it's it's been this machine gun of
Speaker 8: stimulus literally the way you know, day after day you're
Speaker 8: coming in and you're hearing more and more more stimulus
Speaker 8: coming towards the Chinese economy. And yet today when the
Speaker 8: moment we got in a little bit of bad data,
Speaker 8: we got that pm I numbers showing that the services
Speaker 8: sector is slowing down, which we would think would be
Speaker 8: something that would would lead to further stimulus in China.
Speaker 8: What do we see We see the market actually reacting,
Speaker 8: you know, to the downside and saying, well, this is
Speaker 8: bad news in China? Is everything that is bad?
Speaker 5: Now?
Speaker 8: You ask how, you know, how does it play for
Speaker 8: the world economy. It's bad for the world economy. It
Speaker 8: says something bad about the world economy. It says that
Speaker 8: we are not buying Chinese stuff and we're not exporting
Speaker 8: it elsewhere. But it is very bad for Europe, right
Speaker 8: because it's it's you know, and I think that's why
Speaker 8: we saw Mercedes Benz perhaps you know, reacting to the
Speaker 8: downside today, even though they've got this fairly positive story
Speaker 8: vis A Vitesla. And the reason is that a lot
Speaker 8: of their cars go to China. A lot of the
Speaker 8: high end equipment that's manufactured manufactured in Germany, and a
Speaker 8: lot of the French luxury goods go to China. So
Speaker 8: if they are not spending, if their services sectors lows down,
Speaker 8: that's real trouble for Europe.
Speaker 2: I will say Ola Hellenius is now a little bit more.
Speaker 2: He's not as bullish on China as he wants. They
Speaker 2: have a great story, the CEO of Mercedes Benz on
Speaker 2: the terminal, even though they have you know, a concept
Speaker 2: car that has long range. Any takeaways I mean you well,
Speaker 2: my takeaway is that GM already has that kind of range,
Speaker 2: you know, the Cadillac Escalade IQ or the Silverado ev
Speaker 2: they already have.
Speaker 1: Four h fifteen miles of range.
Speaker 2: It's great to see it in a smaller package. And
Speaker 2: I think it's cool that Mercedes is doing it, but
Speaker 2: they're not as bullish on as they once were. Also,
Speaker 2: the pm I data on China, this is backwards. If
Speaker 2: they come out on Sunday or Monday and say, hey,
Speaker 2: we're going to give money to everybody with kids under
Speaker 2: three and everybody with parents over three, you know, and
Speaker 2: we're going to cut the foreign reserve requirements at banks
Speaker 2: from six percent to four percent. So that's all spec
Speaker 2: this will stimulut of going forward. Why do we care
Speaker 2: so much about the backward looking data release?
Speaker 7: Yeah?
Speaker 8: Absolutely? And and you know, so the PMI number being
Speaker 8: focused on the services sector, which is more important for
Speaker 8: the Chinese economy than the manufacturing, is because they want
Speaker 8: to put it away a little bit towards the services sector, right,
Speaker 8: So I think as long as we that should be
Speaker 8: a net positive because it should mean that they are
Speaker 8: more likely to deliver even more stimulus if more.
Speaker 5: Is needed down the road.
Speaker 8: Right, it shows that this this hurts the part of
Speaker 8: the the part of the economy that they're most concerned
Speaker 8: about is under pressure, and as long as that's the case,
Speaker 8: you know, stimulus will keep coming.
Speaker 5: But I think that.
Speaker 2: Drap the machine gun, eddie and grab a bazooka.
Speaker 8: You know, right, absolutely, But but but this, And you
Speaker 8: know what, if they did bring the bazuka, if they
Speaker 8: did say, hey, here's this massive stimulus package, all of
Speaker 8: these things that we've talked about over the last few
Speaker 8: weeks and they delivered all of that in one day,
Speaker 8: the markets would have said wow, shock and awe, and
Speaker 8: would have responded accordingly. But because it's a kind of
Speaker 8: drip feed, it just doesn't have that momentous feel to it.
Speaker 8: But I do think that this is more of what
Speaker 8: we're seeing today is more about reading what the market
Speaker 8: sentiment on China is than about what the outlook is,
Speaker 8: because I don't think the outlook has changed today. What
Speaker 8: you're saying is true, right, The PMI data is slightly
Speaker 8: more backward looking than the than than the fresh stimulus.
Speaker 8: But we are we asked, we are seeing something about
Speaker 8: the market wants to be negative because the market doesn't
Speaker 8: buy the China story.
Speaker 2: At the moment.
Speaker 1: Well, I mean, one of the things that I think
Speaker 1: we're trying to get a grip of is how bad
Speaker 1: is the real estate issue and the financing and of
Speaker 1: the real estate economy and China? How bad is it?
Speaker 1: How bad could it get?
Speaker 5: Yeah?
Speaker 8: And it is really bad? Right, And I think most
Speaker 8: of the stimulus has been targeted at that sector. Now,
Speaker 8: we had a Country Garden, which is one of their
Speaker 8: big property developers, who was very much distressed and still
Speaker 8: owes something like one hundred and eighty seven billion dollars
Speaker 8: worth of outstanding bonds. Now they met payment on a
Speaker 8: part two of their outstanding bonds today, but still you know,
Speaker 8: several billion are coming due in the next few months,
Speaker 8: and it's unclear whether they'll be able to meet most
Speaker 8: or any of that. The market currently pricing their bonds
Speaker 8: at something like, you know, nine cents to the dollar
Speaker 8: or fourteen cents of the dollar, depending, But you know,
Speaker 8: so this is but the authorities have targeted a lot
Speaker 8: of stimulus at that sector. What is interesting that they've
Speaker 8: done of late is that they pivoted also to things
Speaker 8: like the stock market. Right, So clearly stimulating the stock
Speaker 8: market by removing some of the costs and some of
Speaker 8: the taxes a social with that, and if you see
Speaker 8: the authorities really targeting the stock market. It tells you
Speaker 8: something about what they want to do to sentiment. It
Speaker 8: tells you something that they you know, when they're targeting
Speaker 8: the building sector, that tells you something about what they
Speaker 8: want to do to the economy when they when they're
Speaker 8: targeting the stock market, it tells you that they really
Speaker 8: worried about sentiment too.
Speaker 1: Hey, Eddie, you know everybody, I know, it seems like
Speaker 1: with a notable excession of John Tucker vacationed in Europe
Speaker 1: this summer, what's the economy like in Europe these days?
Speaker 8: Yeah, it's mixed, right, I mean, Europe is slowing down,
Speaker 8: no doubt. Europe is struggling.
Speaker 1: At the moment.
Speaker 8: We're seeing our manufacturing you know, deep below below fifty
Speaker 8: and on the PMIS, and we're seeing now with the
Speaker 8: latest revisions that we got in today, numbers in Europe
Speaker 8: have all been below fifty. Europe has really been struggling
Speaker 8: and it just hasn't been able to get gain that traction. Now,
Speaker 8: the situation in Europe is a little bit a little
Speaker 8: bit different from the from the from the US. Whereas
Speaker 8: the FED has a dual mandate growth and and inflation,
Speaker 8: in Europe, the central banks are supposed to be. The
Speaker 8: ECB is supposed to be focused on inflation, and that
Speaker 8: means that that that that you know, they're probably putting
Speaker 8: more pressure on the economy than they would have otherwise. Now,
Speaker 8: whether they will keep that line if they, you know,
Speaker 8: coming to see real trouble, real structural trouble.
Speaker 5: In the Eurozone.
Speaker 8: None of that we're seeing yet. But if that's the case,
Speaker 8: I think, I think the ECB will will start to
Speaker 8: rethink their policy despite inflation.
Speaker 1: Right, I don't know. I mean all those us I
Speaker 1: mean vacation dollars being spent in.
Speaker 2: The y Well, hotel prices are very high. You know,
Speaker 2: restaurants have been able to get a high ticket price.
Speaker 1: All right, I stayed on the Jersey shore. Did just
Speaker 1: find Eddie vanderwallt wut Managing Editor of Markets Life Team
Speaker 1: at Bloomberg News. Next so much.
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Speaker 1: In September's we head towards the end of the year.
Speaker 1: Part of that is the IPO space, and there is
Speaker 1: one of note that recently hit the tape. ARM is
Speaker 1: coming up with a big IPO, so let's get the
Speaker 1: latest on that. Bailey Lipschal Tease covers all the markets,
Speaker 1: including IPOs and spin offs and all that kind of
Speaker 1: fun stuff, and for a time they're even SPACs. He
Speaker 1: does that stuff for Bloomberg News. I'm psyched about this conversation.
Speaker 1: I know, well, I've got a lot of questions heare me.
Speaker 1: First of all, ARM, what is ARM? And tell us
Speaker 1: about the deal.
Speaker 4: ARM is a chip designer, so they essentially sell chip
Speaker 4: blueprints to customers like Nvidia, AMD, Apple, you name it, Samsung.
Speaker 4: So when they sell a chip, they pay a royalty
Speaker 4: fee to ARMS. So ARM they can just pulls together
Speaker 4: those royalties. It'll be it's expected to be, based on
Speaker 4: the term they laid out this morning, the largest IPO
Speaker 4: on a US exchange since Rivian in late twenty twenty one,
Speaker 4: so large than ken View, which was the consumer health
Speaker 4: spinoff split off from J and J earlier this year,
Speaker 4: which raised about four point four billion dollars. So ARM
Speaker 4: expected now to raise his up to four point eight
Speaker 4: seven billion, But we know, uh, that'll probably get higher,
Speaker 4: just based on how most of these ipeos go.
Speaker 2: Right, you got to add in the green shoe eventually.
Speaker 2: I don't even know where I say that.
Speaker 5: You know, we have to. We didn't.
Speaker 4: We weren't used to be able to write that. Oh
Speaker 4: really it was too jargoning.
Speaker 2: Anyway, it doesn't matter. I've been hearing a lot of
Speaker 2: people today say ARM wanted to raise more. Now Arm's
Speaker 2: gonna raise this And the fact is, I imagine ARM
Speaker 2: isn't gonna be getting any of this money, right.
Speaker 4: ARM doesn't care. ARM is just a pawn for soft Bank.
Speaker 4: Is that right? That's one way to put it.
Speaker 2: ARM is any is any are any of these proceeds
Speaker 2: gonna be invested by ARM?
Speaker 8: No, it is.
Speaker 4: Soft Bank is selling about a ten percent.
Speaker 1: None of the shares are primary shares, they are secondary shares.
Speaker 2: Is kind of so and and and and soft Bank
Speaker 2: recently bought twenty five per percent of ARM from the
Speaker 2: Vision Funds, which Sauce Bank owns. So soft Bank, at
Speaker 2: a higher valuation, took out a quarter of this company
Speaker 2: from a fund that it owns why.
Speaker 4: The view from the street and the view from soft
Speaker 4: Bank is that they wanted to have this all under
Speaker 4: one umbrella. When you look at the terms laid out
Speaker 4: in the filing as it detailed, that sixteen billion dollar
Speaker 4: deal buying back that twenty five percent stake held by
Speaker 4: its Vision fund was part of a bigger switch up,
Speaker 4: so not really clear kind of what was real.
Speaker 2: Well, they were like, we'd like to hold this all
Speaker 2: under one asset that we own rather than spread out,
Speaker 2: and we're gonna punish ourselves by paying a price much
Speaker 2: higher than it's worth. I don't buy that, Bailey. Are
Speaker 2: there other people who have stakes in the Vision Fund?
Speaker 2: Because it sounds to me like soft Bank is trying
Speaker 2: to pacify some of these other shareholders that have been
Speaker 2: walloped by huge losses.
Speaker 4: Yeah, that's the way that you could. The Cynic or
Speaker 4: the Matt Miller view is that you're basically satisfying those LPs. Okay,
Speaker 4: because it's just never explained, right.
Speaker 2: We always say, oh, SoftBank bought twenty five percent of
Speaker 2: ARM from its own Vision fund, and then we move
Speaker 2: on and the rest of the story and never say why,
Speaker 2: which is like what I will say that My favorite
Speaker 2: thing on social media was the spider Man meme where
Speaker 2: was pointing at each other and it was kind of
Speaker 2: like arm Vision Fund one and Masa Son basically like
Speaker 2: where this money is moving from one fund to the
Speaker 2: other fund to satisfy the underlying investors. But nonetheless it
Speaker 2: still will be a massive IPO key for the overall
Speaker 2: IPO sentiment, all things aside, which I know there are
Speaker 2: a number of skeptics as it relates to SoftBank, given
Speaker 2: the history of investing Big Road, the Big Wave with
Speaker 2: Ali Baba, but had more underwhelming IPOs, the likes of
Speaker 2: Uber obviously we work as one that comes to mind,
Speaker 2: and a number of other investments that went public Viaspac
Speaker 2: that I wrote about quite.
Speaker 4: A bit when the well and not just soft Bank.
Speaker 2: I mean you said yourself, this is the first IPOs
Speaker 2: and Drivian how'd that go for investors?
Speaker 4: So, I mean it's from the office question, No exactly Rivian.
Speaker 4: Rivian looked quite a bit like Vinfest where just pulling
Speaker 4: up the chart on the old terminal priced at where
Speaker 4: did the price at? I mean, was trading up got
Speaker 4: up to?
Speaker 1: Right now?
Speaker 4: It's at twenty three bucks?
Speaker 6: All right?
Speaker 7: All right?
Speaker 1: So here we are with arm Every underwriter based on
Speaker 1: Wall Street is on this deal.
Speaker 8: What's that?
Speaker 1: What's up with that?
Speaker 4: Pretty much everyone except for Morgan stands okay?
Speaker 1: Which liable exception.
Speaker 4: A notable exception. It's interesting, a lot of that being
Speaker 4: kind of the view in my colleague game you will
Speaker 4: report on this. The view kind of is that if
Speaker 4: you've done business with soft Bank in the past, whether
Speaker 4: it was related to loans or other kind of your basis,
Speaker 4: you're getting cut in on the deal. So when you
Speaker 4: look at those big four banks that are leading the IPO,
Speaker 4: you've got Goldman, JP, Morgan, Barclays, and Mazoo home Zoo
Speaker 4: obviously a little bit surprising, but based in Asia relationship
Speaker 4: with soft Bank, that's all kind of where the comes.
Speaker 1: So let's look at ARMED company and the fundamentals of
Speaker 1: the company.
Speaker 4: It's not growing, no, it's actually slowing. It is more
Speaker 4: and we wrote about it in.
Speaker 9: A few weeks.
Speaker 1: Chip company aren't chips and AI kind of the thing.
Speaker 4: This year, but they're so heavily based in smartphones, so
Speaker 4: smartphone sales have been weaked.
Speaker 1: So this is not an AI play.
Speaker 4: They're pitching it as an AI play, but it's still
Speaker 4: a question of how that fits in and what kind
Speaker 4: of premium will be baked in. Analysts from New Street
Speaker 4: kind of laid out their expectations that this thing could
Speaker 4: be worth, you know, eighty two billion dollars in three years,
Speaker 4: which is quite the pie and the sky view. But
Speaker 4: when you look at kind of as you mentioned, the
Speaker 4: underlying growth has slowed. It's pretty much flat year over
Speaker 4: year based on their last annual sales, pointing to the
Speaker 4: global semiconductor kind of glut that we've been working through.
Speaker 4: They are exposed us to smartphones and home devices and
Speaker 4: not quite yet really penetrating that AI.
Speaker 1: So the pitch when they go on the road, the
Speaker 1: pitches we're a chip company for the phones, but we
Speaker 1: are going to be an AI chip company in the
Speaker 1: future and that's what you should be buying today exactly.
Speaker 4: And they're pitching it as we're getting into data centers,
Speaker 4: which we know with Nvidia has been so lucrative and
Speaker 4: is where a lot of that money comes from. So
Speaker 4: that's kind of the view of yes, we've done smartphones,
Speaker 4: but this is where it.
Speaker 1: Was not a clean deal. I mean, they got to
Speaker 1: do some heavy lifting here, which it just feels like
Speaker 1: cause I got slow in growth. I've got to buy
Speaker 1: off on this leap towards AI, which I don't really
Speaker 1: have much in the in the numbers right now, you know,
Speaker 1: I can't really look at the as Matt was pointing out,
Speaker 1: the soft Bank valuation, because that's probably not a good
Speaker 1: comp even though it just happened. So there's some headlines
Speaker 1: it just happened.
Speaker 2: The soft Bank valuation was for like sixty four billion,
Speaker 2: right yep, And they're going to come to market at
Speaker 2: what kind of valuation.
Speaker 4: Fifty four and a half right now as the current
Speaker 4: high end.
Speaker 1: Yeah, that's that's crazy.
Speaker 4: Well, the other risk that a lot of investors have
Speaker 4: pointed out is China. They generate about a quarter of
Speaker 4: their revenue from China through a ARM called ARM Technology,
Speaker 4: which isn't actually controlled by ARM or soft Bank, so
Speaker 4: it's kind of this standalone subsidiary with arms shareh So
Speaker 4: there is kind of a bit of a headwind not
Speaker 4: only with pitching that future vision, but also exposure to.
Speaker 1: All Right, so what's the timing of this thing is
Speaker 1: There're gonna be a traditional road show and September thirteenth, right,
Speaker 1: road shows kicked off, Okay.
Speaker 4: So we're gonna see about a week long road show
Speaker 4: pricing expected post So.
Speaker 1: They're not doing any virtual stuff. They're going the rubber
Speaker 1: Chicken in New York and London and so on.
Speaker 4: So what we're hearing, we're hearing there hitting the road,
Speaker 4: no more, no more zoom calls. So interesting to me.
Speaker 2: The more interesting IPO talk is around a Ramco, even
Speaker 2: though it kind of comes and goes. They could do
Speaker 2: not an IPO, but they could raise I guess in
Speaker 2: the secondary another fifty billion dollars.
Speaker 1: Wait, So a Ramco's talking about doing more stock.
Speaker 2: Well, I saw a story in the Journal, sorry Bailly,
Speaker 2: a couple of days ago that said A Ramco may
Speaker 2: come back to market now. To be fair, they in
Speaker 2: the Journal, I think, cited another story from Bloomberg back
Speaker 2: in March. Well bred story comes and goes, but it
Speaker 2: could be a massive.
Speaker 1: Capital race with brinkrud at ninety bucks a bottle I
Speaker 1: issue more stock, wouldn't you?
Speaker 4: They really want to.
Speaker 2: But the thing is they can't do it on other
Speaker 2: exchanges because they don't want that regulations.
Speaker 1: They have to do it in riod.
Speaker 4: Yeah, that's definitely an interesting, interesting company and kind of
Speaker 4: that the prospects of raising cash. Obviously there is kind
Speaker 4: of the push. Broadly speaking, for Saudi you're able to diversify,
Speaker 4: and that's why we've seen.
Speaker 2: All big numbers that would be the biggest amount of
Speaker 2: money ever raised selling shares, right, I mean stock is
Speaker 2: the biggest IPO is like ant Group or something, right, Yeah,
Speaker 2: like thirty four billion.
Speaker 1: Yeah, all right, we got so, we got so from
Speaker 1: your perspective, we've got ARM. How's the rest of the
Speaker 1: calendar look In the next four or five six weeks.
Speaker 4: We've got Instacart. Expectations will be bubbling. They filed their
Speaker 4: S one a few days after ARM, as did Clavio,
Speaker 4: which is another tech company. So these are two real
Speaker 4: tests of what IPO demand will look like. When I
Speaker 4: talk to a lot of investors in bankers, they kind
Speaker 4: of see ARM as a one off, just given it's
Speaker 4: a big company, it's profitable, it's was public at one song,
Speaker 4: whereas now you have Instacart hasn't been public, was really
Speaker 4: expected to go during the pandemic, but has taken quite
Speaker 4: some time. In Claviyow, which is another one which will
Speaker 4: be closely watched just to see how investors are valuing
Speaker 4: some of these technology companies, especially those that are primarily
Speaker 4: owned by venture capitalists, again as opposed to SoftBank, take private,
Speaker 4: bring back public.
Speaker 1: Yep, all right, lots of stuff. Bailly, thanks so much.
Speaker 4: Just stop it in.
Speaker 1: Billy Lipsholt season markets reporter for Bloomberg News, bringing us
Speaker 1: the latest on the deal calendar. One of the notable
Speaker 1: names is a Ramca is arm arm so that that
Speaker 1: chip maker, so be inchating to see how that plays
Speaker 1: in this market.
Speaker 6: You're listening to the Team ken'shur Live program Bloomberg Markets
Speaker 6: weekdays at ten am Eastern on Bloomberg dot com, the
Speaker 6: iHeartRadio app and the Bloomberg Business app, or listen on
Speaker 6: demand wherever you get your podcasts.
Speaker 1: All right, we were talking about oil again, Brent. I'll
Speaker 1: just quote the Brent stuff, ninety one dollars per barrel.
Speaker 1: It's up two and a quarter percent. I don't know
Speaker 1: what's going on. I guess it's supply and demand. But
Speaker 1: let's bring on Fernando Valley. He knows what's going on
Speaker 1: because we pay him to know what's going on. He
Speaker 1: is the energy analyst for Bloomberg Intelligence. Fernando, is it
Speaker 1: just the SADIS and OPEC buddies talking tough. Is is that
Speaker 1: what's driving this crewe to oil higher.
Speaker 11: Well, it's been a little bit of a better demand improvement,
Speaker 11: and then people like you, Paul, who think we're going
Speaker 11: to have a soft lending and lower interest rates creating
Speaker 11: some momentum behind oil, which frankly, I think is a
Speaker 11: little misplaced considering that the Chinese real estate market continues
Speaker 11: to deteriorate. And I'm with Matt, I think that the
Speaker 11: higher interest rates are here to stack.
Speaker 2: The Chinese did start a little bit of stimulus, a
Speaker 2: little bit more, I.
Speaker 1: Should say, right with.
Speaker 2: Foreign reserves cut at their banks, and they're giving money
Speaker 2: to people to pay for their kids and for their parents.
Speaker 2: And it's been this, as Eddie Vanderwold said, kind of
Speaker 2: a drip drip drip of stimulus. But is this part
Speaker 2: of part of the run up in the oil price?
Speaker 2: People think China's going to come back?
Speaker 11: Absolutely China. I mean China has come back, and in
Speaker 11: a lot of ways. If you look at just their imports,
Speaker 11: they are much stronger than they were during the COVID
Speaker 11: zero policy in twenty twenty two. But even then, we're
Speaker 11: seeing some declines in the US inventories and global inventories,
Speaker 11: but we're not seeing the pace of demand that you
Speaker 11: would expect in an oil bull market, especially in the
Speaker 11: Western hemisphere. And then you know, we can talk about
Speaker 11: how higher rates are going to affect investments elsewhere, and
Speaker 11: then the employment picture. All of those will be the
Speaker 11: ultimate determinant of oil for the remainder of the year,
Speaker 11: and we see cracks in that window.
Speaker 10: But I think in the short term it's.
Speaker 11: Been as you mentioned this, Muli, the supply cuts, Saudi
Speaker 11: extending supply cuts to September, and then some positive momentum
Speaker 11: on the US inventory sign.
Speaker 1: So, Fernando, how about our buddies in the fracking space.
Speaker 1: How come they're not out there drilling or fracking whatever
Speaker 1: they do to If I if I saw Wtech Crudel
Speaker 1: with eighty bucks eighty seven dollars a bottle, I'd be
Speaker 1: pumping more out.
Speaker 10: Well, I think it's one thing you mentioned interest rates.
Speaker 11: Yes, you're higher, so your cost to drill is significantly higher,
Speaker 11: especially for the private players. Data availability is much smaller
Speaker 11: as well. And then we've talked about this, but the
Speaker 11: efficiency and shale has really peaked. You know, our colleagues
Speaker 11: at Bloomberg, and you have just put out a report
Speaker 11: with the productivity per well and they're down versus twenty
Speaker 11: twenty two levels.
Speaker 4: Why is that, Well, it's.
Speaker 11: A combination of a drilled some of your best acredge b.
Speaker 11: You are not making the same advances if you go
Speaker 11: back just you know, over ten years, we've been drilling
Speaker 11: longer and longer wells. We've been increasing how many fracts
Speaker 11: stages as we call them, are placed in each well,
Speaker 11: and we kind of peaked because we've realized that the
Speaker 11: cost benefit of adding more going longer is not worth
Speaker 11: the price anymore.
Speaker 10: We kind of hit that sweet spot and then we're
Speaker 10: drilling out.
Speaker 11: We're going to further and further out regions that don't
Speaker 11: have the same positive geology as the core of the place.
Speaker 2: By the way, in terms of the spr which we
Speaker 2: ran down, I guess to save Americans from higher gas prices,
Speaker 2: maybe to win the midterm elections, whatever, are we gonna
Speaker 2: build that back up because it seems like we certainly
Speaker 2: missed the chance in terms of price.
Speaker 11: Well, there could be more chances. One thing that's certainly
Speaker 11: in oil is the cyclicality, So there will be chances,
Speaker 11: but we don't really need to consuming. We are, you know,
Speaker 11: thirteen million barrels a day of oil output. Our neighbors
Speaker 11: to North and Canada four million barrels. That all gives
Speaker 11: you a significant cushion that when we started growing the
Speaker 11: SPR to the levels that they were now, we didn't
Speaker 11: have the US was not the biggest oil producer in
Speaker 11: the world. When we built the SPR to those levels.
Speaker 11: They're also commercial inventory, so we have available crew to Still,
Speaker 11: the bigger concern is really some regions like the Northeast
Speaker 11: and their lack of diesel inventory, rather than crude itself.
Speaker 1: All right, does it surprise you or is it surprising
Speaker 1: to the market that OPEC plus, I guess has this
Speaker 1: level of impact on the market. I kind of there's
Speaker 1: a time when I thought OPEQ would maybe I had
Speaker 1: lost some of its power. OPEC plus I don't.
Speaker 10: Think that they are having that big impact.
Speaker 11: I think it's really China right now and the expectations
Speaker 11: of a soft landing that are driving. Of course they
Speaker 11: can in a market that is so teetering on supply
Speaker 11: in balances, cutting as much supply as they have will
Speaker 11: have a significant impact, but over the long term they
Speaker 11: can't fight the FED. They don't have the balance sheet
Speaker 11: and they don't have the unity required for them to
Speaker 11: fight the FED. If rates remain higher for a long
Speaker 11: period and drives lower investment.
Speaker 1: All right, If I'm an investor here, I kind of
Speaker 1: thought that the energy game was played out. I had
Speaker 1: my run in twenty twenty one, twenty two, kind of
Speaker 1: thought the game was played out. But no, the stocture
Speaker 1: rolling here. How do I play it? Do I just
Speaker 1: go out and buy Exxon Mobile or what are you know?
Speaker 1: Energy investors that you talked to, how are they playing this?
Speaker 1: Did this run up here?
Speaker 10: Well, that's one way there.
Speaker 11: You can also look at oil services because as we
Speaker 11: said that we are a bit more bearish in the
Speaker 11: short term because of the demand picture, but in the
Speaker 11: long term this underinvestment and the high rates are leading
Speaker 11: to further on their investment. You can't find that more
Speaker 11: areas will become commercial. So oil services and exploration might
Speaker 11: start coming back in twenty twenty four to twenty twenty five,
Speaker 11: And it might even be as your earlier conversations on
Speaker 11: Man United, it might be why the glaziers are waiting
Speaker 11: till twenty twenty five. If oil prices get to one hundred.
Speaker 11: Maybe the Saudi's will give him a better offer.
Speaker 1: Yeah, it's a good point, Yep, Saudi's are everywhere these days.
Speaker 5: Mo money.
Speaker 11: Also, they lost in my arsenal this weekend, so that's
Speaker 11: probably why they're down.
Speaker 1: That's right. Wait, what's arsenal?
Speaker 7: Is that?
Speaker 4: Are you a gunner?
Speaker 1: Yes?
Speaker 10: Yes, okay, see look at you.
Speaker 2: Well I've been listening to surveillance, so you know, I'm
Speaker 2: learning more and more about British soccer from Tom Keane.
Speaker 1: All right, so what's what's kind of the bear case here?
Speaker 1: Because I know if I talked to Mike mcgloon, your
Speaker 1: your colleague of Bloomberg Intelligence, he follows all commodities, including oil.
Speaker 1: He's bearish on oil. He thinks we go to fifty.
Speaker 1: What is the fundamental bear case for global energy?
Speaker 11: I think the fundament case is bearish for the global economy.
Speaker 11: And that's Mike's point, is that the Chinese real estate
Speaker 11: market could collapse and that would drag along a lot
Speaker 11: of different industries, from petrochemicals to oil. I still think
Speaker 11: that at the end of the day, the oil chain
Speaker 11: looks very attractive in a long term basis, But I
Speaker 11: agree with Mike the short term, demand will be the
Speaker 11: biggest driver. And you know, you just can't raise rates
Speaker 11: as quickly and as sharply as we did without an
Speaker 11: impact on consumption. And we're starting to see that. You know,
Speaker 11: it's just a matter of how if China gets the
Speaker 11: soft landing, that's the biggest variables. Not even the US
Speaker 11: is because we're already not having that grade of a
Speaker 11: soft landing. As far as gasoline consumption, diesel consumption, those
Speaker 11: numbers are already kind of dismal.
Speaker 2: Wow, yeah, all right, not for us, like for you
Speaker 2: and me and Tucker right right, we're still buying as
Speaker 2: much gas as we can.
Speaker 1: Yep, regular unleaded. That's a role for an end of value,
Speaker 1: you guys a little bit more. Yeah, all right, Fernando,
Speaker 1: we appreciate it for an end of all. Senior analyst
Speaker 1: covers all the energy space for Bloomberg Intelligence.
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Speaker 2: Now we've been promising to talk to you about more
Speaker 2: about cars. Nice all, but from chips perspective. Nicole Dougal
Speaker 2: joins US senior VP and General manager for Automotive over
Speaker 2: at Qualcomm, and Nicole, thanks so much for your time.
Speaker 2: I'm guessing that Qualcom is one of the biggest automotive
Speaker 2: chip suppliers in the world.
Speaker 1: Lay out the market for us.
Speaker 12: You know, the card is going through a tremendous amount
Speaker 12: of disruption. It is becoming a software defined platform.
Speaker 9: And a big shift that is happening in.
Speaker 12: In the car, especially as it become electric, is the
Speaker 12: entire electrical architecture of the vehicle is changing. Bigger chips,
Speaker 12: more complicated chips, all software driven, and that has created
Speaker 12: a significant opportunity for us to be able to bring
Speaker 12: our technology, our differentiation.
Speaker 9: Into the space.
Speaker 1: I've been going to go ahead and Nicole.
Speaker 12: We are an autonomous driving we are driving the cockpit
Speaker 12: of the vehicle.
Speaker 9: We connect the car to the cloud. Big opportunity.
Speaker 1: So I was just saying to Matt, you know, I've
Speaker 1: been going to the Consumer Electronics show for about thirty
Speaker 1: years and it's really not even that anymore. It's basically
Speaker 1: an auto show in Vegas in Vegas with some electronics
Speaker 1: around it. That's really the auto industry is really take
Speaker 1: it over and it shows how technology is coming into
Speaker 1: the automobile. So, Nicole, from your perspective, from the Chips perspective,
Speaker 1: is the industry capable to meet the demand that this industry,
Speaker 1: that auto industry is going to really drive over the
Speaker 1: next five to ten years.
Speaker 9: Absolutely.
Speaker 12: I think, you know, the the pandemic definitely highlighted gap
Speaker 12: in the resilience of the supply chain, but I think
Speaker 12: every automaker and their suppliers.
Speaker 9: Have understood how to go deal with that.
Speaker 12: We now have direct relationships with pretty much all of
Speaker 12: our major automotive customers, and you know, supply chain is
Speaker 12: a very complex part of the automaker's overall business, so
Speaker 12: a deep understanding of that part of the.
Speaker 9: Business is needed.
Speaker 12: It has actually allowed us to build very intimate, very
Speaker 12: approximate relationship with our automaker customers.
Speaker 2: So talk to us about the products that you make,
Speaker 2: what they actually enable in a vehicle. You know, I've
Speaker 2: been seeing I go to all the auto shows r
Speaker 2: I did before I moved back here. To the US
Speaker 2: and I have been seeing Qualcomm at every one What
Speaker 2: do you make possible that we enjoy doing in cars?
Speaker 9: So we've been connecting the car to the cloud for
Speaker 9: over twenty years.
Speaker 12: That's been our core business, you know, wireless communications, and
Speaker 12: we entered the telematics market back.
Speaker 9: In two thousand and two.
Speaker 12: Most cars that are connected to the cloud today use
Speaker 12: a lot of Fi wireless technology. We have everything from
Speaker 12: five G Wi Fi navigation systems, powerline communication, Bluetooth. We
Speaker 12: entered the in car experience market.
Speaker 9: As we like to call it, which is the cockpit,
Speaker 9: which is the in car.
Speaker 12: Navigation, and this is a big business that has grown
Speaker 12: over the last decade or so. That's about creating an
Speaker 12: experience for the consumer that is owned by the automaker.
Speaker 12: So automakers are always looking to find a way to
Speaker 12: connect to their consumers, to be able to find differentiators
Speaker 12: that pull the consumers in. As cars have gone electric,
Speaker 12: you know, you can see all of the new vehicles
Speaker 12: being launched. There is a complete change in terms of
Speaker 12: how the in car experiences evolved.
Speaker 9: Ray at I here in Munich, we announced a partnership.
Speaker 12: We have cars now with BMW that are running our
Speaker 12: technologies for both the cockpit and connectivity.
Speaker 9: Same with Mercedes.
Speaker 12: Their latest E class is running our cockpit technology and chips.
Speaker 12: So this is a trend that has started to really
Speaker 12: take off globally. In a market like China, we are
Speaker 12: one of the largest suppliers of cockpit chips just because
Speaker 12: of the pace at which we can move the technology.
Speaker 12: And then we entered the air ass business driver assistance
Speaker 12: and automated driving about five years ago. We announced a
Speaker 12: partnership with the BMW theres a few years ago we
Speaker 12: were going.
Speaker 9: To go commercial with them in twenty five.
Speaker 12: So the amount of silicon and semiconductor tech that is
Speaker 12: going into vehicles that is really expanding, and we are
Speaker 12: the partner part of all of that growth.
Speaker 1: All Right, You have to ask you about, just because
Speaker 1: it seems like we have to everywhere artificial intelligence AI.
Speaker 1: How does that kind of weave into your business and
Speaker 1: the products you're providing to the auto industry.
Speaker 12: You know, AI is very much part of everything that
Speaker 12: we do in driver assistance.
Speaker 9: That is underlying technology.
Speaker 12: But the big opportunity that we are seeing as generative
Speaker 12: AI starts to become very relevant is how cockpits become
Speaker 12: more intelligent. Something that we are showing here at the
Speaker 12: show is how is an automaker as they make their
Speaker 12: enterprise much more intelligent. How do they define products that
Speaker 12: are natively intelligent? For example, if you were to design
Speaker 12: the next generation cockpit, would you be able to bring
Speaker 12: the user manual, which is typically something that you have
Speaker 12: as a physical copy in your vehicle. Can they just
Speaker 12: be downloaded into the vehicle. Is that something that the
Speaker 12: user can interact with. We started to have those conversations
Speaker 12: really fascinating how many different things an automaker can actually do.
Speaker 9: If they're able to go embrace AI across the board.
Speaker 12: The consumer experience inside the car is extremely different as
Speaker 12: you think about AI, because the car is used not
Speaker 12: just going not just to go from A to B,
Speaker 12: but also the experience that the.
Speaker 9: Consumer wants within the vehicle.
Speaker 12: What are they trying to do, What is the context
Speaker 12: around which they're trying to do that specific thing.
Speaker 9: You have camera input, you have voice input that it
Speaker 9: can provide with the vehicle.
Speaker 12: That lends to the possible to create a wide variety
Speaker 12: of experiences.
Speaker 9: And the silicon that we put into.
Speaker 12: Vehicles is already defined to actually have enough AI capability
Speaker 12: that customers can just start to go build on top
Speaker 12: of that and k and these experiences.
Speaker 2: So who are your competitors and where do you stand
Speaker 2: in this market? I mean, there are a lot of
Speaker 2: other uses for chips besides connecting to the cloud and
Speaker 2: talking on your phone and watching TV. I think of
Speaker 2: you know, throttle by wire, electronic steering, all the advanced
Speaker 2: driving assistance systems.
Speaker 1: Do you do that stuff as well?
Speaker 12: There is a wide variety of opportunity inside the automotive space,
Speaker 12: and we compete across, you know, So our primary focus
Speaker 12: areas are connectivity, cockpit system and driver assistant systems. That's
Speaker 12: where we see more most of our competitors. Outside of that,
Speaker 12: we are not participating in the powertrain space or in
Speaker 12: you know, the domain controller space today. So our focus
Speaker 12: area are basically those three areas that I described.
Speaker 1: How about you know, driverless driving? I mean, yeah, I
Speaker 1: was gonna ask the same thing.
Speaker 2: When are we going to Actually I know that in
Speaker 2: San Francisco right there are you know, autonomous vehicles operating
Speaker 2: as like.
Speaker 5: Ubers or whatever.
Speaker 4: But when are we going to start seeing this everywhere?
Speaker 4: Is it like ten years out or is it like
Speaker 4: two years out to look.
Speaker 12: The technology around robot taxis I think is well prog
Speaker 12: and waymore and crews have had this deployed for many
Speaker 12: years in San Francisco and also in many other parts
Speaker 12: of the world.
Speaker 9: I think it's really a combination of the business case
Speaker 9: and I think it's.
Speaker 12: A conversation around societal adoption off of rover taxi. I think,
Speaker 12: you know, this is something that is definitely going to
Speaker 12: take a little bit of time. There is a cultural
Speaker 12: adjustment that people have to get used to. Cities have
Speaker 12: to be able to understand what it means for robotaxi,
Speaker 12: something that is driverless to apply in terms of the
Speaker 12: utility value, in terms of the benefit, there are certainly
Speaker 12: many use cases where I could see a robotaxi making
Speaker 12: a huge difference in terms of its mass deployment in
Speaker 12: all of our cities. I think it is going to
Speaker 12: be a slower journey because there is really going to
Speaker 12: be a question of consumer adoption, city adoption.
Speaker 9: How do you get the.
Speaker 12: Changes that you have to make to infrastructure, changes that
Speaker 12: you have to make to regulation to be able to
Speaker 12: make this technology takeaway. But the great thing is that
Speaker 12: the underlying technology is actually quite mature, and now it
Speaker 12: is at a stage where as you start to go
Speaker 12: deploy it, you have to be able to figure out
Speaker 12: what the kings are and keep controlling so that journey
Speaker 12: is started, and I think the pace will vary depending
Speaker 12: upon which part of the world you're in.
Speaker 1: All Right, fascinating stuff, Nicole, Thank you so much for
Speaker 1: joining us. Nicole DeGale, Senior VP and general manager in
Speaker 1: the automotive business for all Calm the chip Maker.
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Speaker 1: Well, if you're the big media companies out there in Hollywood,
Speaker 1: you've got a lot of big issues ahead of you,
Speaker 1: most notably the transition from the traditional distribution system of
Speaker 1: cable TV and satellites to now that this new technology
Speaker 1: called streaming, and that has a lot of long term
Speaker 1: challenges for the industry. More near term is you got
Speaker 1: some strikes on your hands.
Speaker 7: You got your.
Speaker 1: Writers striking, some actors striking, big, big challenge for Hollywood
Speaker 1: right now, Let's see kind of what the legal issues
Speaker 1: are and how they might be resolved. Katie Charleston joins us.
Speaker 1: She's a founder of Katie Charleston Law. Katie, thanks so
Speaker 1: much for joining us here. Can you just frame out
Speaker 1: what the big issues there are between the writers in
Speaker 1: the big then the studios absolutely thank you.
Speaker 13: For having me. The main issues that we're looking at
Speaker 13: between the writers and the actors and the production companies
Speaker 13: are AI. For one, the writers and actors are concerned
Speaker 13: with the use of artificial intelligence, which could potentially replace them,
Speaker 13: at least that's the fear. They are also concerned with residuals,
Speaker 13: which is a payment structure where typically they would receive
Speaker 13: residual payments every time a rerun was shown on broadcast television,
Speaker 13: which is different than what we have today in streaming.
Speaker 13: And the last main issue is that of compensation. They're
Speaker 13: looking for complete, a better and complete compensation package with
Speaker 13: higher salaries and health benefits included.
Speaker 1: So I can see I can understand both sides here.
Speaker 1: I mean, certainly from the creator's perspective, the actors, the
Speaker 1: writers this AI risk is just really you could paint
Speaker 1: it as existential. Here be that as I made though,
Speaker 1: I would think this is something that smart lawyers like
Speaker 1: yourself could create some language to protect them, no matter
Speaker 1: how the technology.
Speaker 13: Changes exactly, and that is really what should be happening.
Speaker 13: Artificial intelligence and its use in copying or duplicating the
Speaker 13: likeness of an individual will generally not fly. State law
Speaker 13: prohibits using the likeness of someone without their permission in general,
Speaker 13: But there are contract provisions right Each one of these
Speaker 13: writers and actors are able to negotiate their contracts and
Speaker 13: make sure that terms are in the contract that protects
Speaker 13: them from the use of their voice or likeness without
Speaker 13: their consent.
Speaker 1: Talk to us about copyright because I thought copyright is
Speaker 1: really for something to get copyright protection, I thought it
Speaker 1: has to be created by a human. Is that the
Speaker 1: case and how's AI fit into that?
Speaker 13: That is correct, and in fact, there was a recent federal
Speaker 13: court ruling that upheld a copyright the Copyright Office registration
Speaker 13: rejection and a piece of art that was generated by AI.
Speaker 13: And basically the general rule is that you can only
Speaker 13: get copyright registration if a work is created by a
Speaker 13: human and the production companies themselves are not going to
Speaker 13: want to use artificial intelligence like chat GPT or chasp
Speaker 13: dot AI or any of these other tools to basically
Speaker 13: replace the actors or writers themselves, because if there is
Speaker 13: not human authorship of these works, then the studios will
Speaker 13: not be able to make any money, right because they
Speaker 13: will not be able to get a copyright, which would
Speaker 13: then allow them to protect any kind of duplication or
Speaker 13: derivatives of their works, which brings them profit.
Speaker 1: So how about get the stuff that I mean writers
Speaker 1: and actors. They care about the compensation, of course, but
Speaker 1: they also care about awards, oscars and think things like that.
Speaker 1: Can artificial intelligence? You can't? You know, something written by
Speaker 1: AI is not eligible for any awards?
Speaker 7: Is it not?
Speaker 13: As of today? However, I suppose that could change in
Speaker 13: the future. But as of now, I mean, it is
Speaker 13: these actual writers and actors, the humans involved, that are
Speaker 13: nominated and given the awards.
Speaker 1: So again, it just seems to this outsider that this
Speaker 1: is also something that can be negotiated. Why do you
Speaker 1: think we got to this point where a they went
Speaker 1: on strike on strike for such a getting to be
Speaker 1: a long period of time.
Speaker 13: Now, well, there's some things that have happened over the
Speaker 13: last several months. I think that basically emotionally charged several
Speaker 13: groups of people. One being that there were some background
Speaker 13: actors that have come forward and said that they've been
Speaker 13: asked to be scanned completely so that they can be
Speaker 13: really duplicated and used without permission in perpetuity, meaning these actors,
Speaker 13: their identities will be used without any kind of compensation
Speaker 13: or terms involved. And so I think that's an emotion
Speaker 13: charge trigger point. And I think, well, it's it's a
Speaker 13: real fear for these people. You can see the genuine
Speaker 13: nature of the fear. It's unlikely that that will ever
Speaker 13: be something that's upheld, especially without the consent of the individual.
Speaker 13: And again it goes back to contract terms. But there
Speaker 13: there's also you know, these unions have tend to strike
Speaker 13: regularly over the years, and I think we're at a
Speaker 13: point where overall the nation's been touched by inflation, right,
Speaker 13: and these actors, group of actors that are sort of
Speaker 13: at the beginning stages of their career, really are being
Speaker 13: hit with the emotional charge and the lack of resources
Speaker 13: and the inflation all at one time. And they are
Speaker 13: being brought together by a larger group of individuals who
Speaker 13: are more established in the industry, if you will, these
Speaker 13: big name actors that are out there that really they're
Speaker 13: sort of out of touch what compensation with what compensation
Speaker 13: should look like. And so when you have these two
Speaker 13: forces together, along with the emotional triggers, it really will
Speaker 13: create something like we're facing today with this strike.
Speaker 1: Is there I mean, again, we're multiple weeks into the
Speaker 1: strike here. Is there any sense in Hollywood how long
Speaker 1: this will go when it can be resolved? Because now
Speaker 1: you're getting to the point where you know, shooting schedules
Speaker 1: are being materially adjusted here and it's real money for
Speaker 1: both sides.
Speaker 13: Sure, I mean, it could go on for quite a while.
Speaker 13: Warner Brothers Discovery announced this morning that their outlook for
Speaker 13: profits for the year are down by a projected five
Speaker 13: hundred million based on the strikes, and that sort of
Speaker 13: would assume that they're predicting that this will go through
Speaker 13: the end of the year, so you know, this could
Speaker 13: continue on. Really the two sides need to come together
Speaker 13: and talk. There are viable and reasonable arguments on both
Speaker 13: sides to be made. You've got these movie studios and
Speaker 13: production companies on one side, where you know, this is
Speaker 13: a business that's changing. It's an evolving industry where we're
Speaker 13: no longer looking at broadcast television where ads are generating
Speaker 13: these residual payments. We're looking at streaming services like Netflix
Speaker 13: and Hulu that allow subscription low payment subscription options without commercials,
Speaker 13: so they are not generating that ad revenue to pay
Speaker 13: these residual payments. And you know that overall, the industry
Speaker 13: just needs to come up with a better type of
Speaker 13: contract and that could take a while to negotiate.
Speaker 1: All right, we'll have to stay on top of this
Speaker 1: story again, major major news for the media companies and
Speaker 1: all the folks that work with them, all the stakeholders
Speaker 1: quite frankly involved in entertainment and content creation. Katie Charleston,
Speaker 1: she is the founder of Katie Charleston Law, getting us
Speaker 1: up to speed on some of the legal issues here.
Speaker 1: Again it's we saw as Katie was mentioning Warner Brothers,
Speaker 1: Discovery warns of five hundred million dollars hit to profit.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
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