Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Speaker 1: Wait inside from the reporters and editors who bring you
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Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hey, we want to get to one company, definitely on
Speaker 2: our radar. We're talking about Carnival. Shares were down as
Speaker 2: much as six and a half percent, the most intra
Speaker 2: day since early August. The cruise line operator forecasted adjusted
Speaker 2: EBIT up for the fourth quarter of about one point
Speaker 2: fourteen billion, slightly below consensus estimates of one point fifteen billion.
Speaker 2: Earning support also reflected a weaker outlook for netfields in
Speaker 2: the current quarter, although I will say analysts seem pretty
Speaker 2: upbeat about the outlook for this company, and I should
Speaker 2: say shares of Carnival right now, Tim just down about
Speaker 2: one point two percent.
Speaker 3: Well, great to be back with us.
Speaker 4: Josh Weinstein, President CEO, Chief Climate Officer of Carnival Corporation
Speaker 4: with us from Carnival HQ down in Miami. Josh, good
Speaker 4: to have you with us this afternoon. I want to
Speaker 4: talk about the bottom line. Eighth quarter of bottom line
Speaker 4: beats for you all, investors, still focusing on that slightly
Speaker 4: blow consensus outlook for adjusted IBAD stock not as down,
Speaker 4: not down as much now as it was earlier in
Speaker 4: the day. As Carol just mentioned, tell us about the
Speaker 4: quarter that was and perhaps most importantly, the outlook.
Speaker 3: What are you seeing?
Speaker 5: Yeah, hi, thanks for thanks for having me. I don't
Speaker 5: usually follow the fit chairman. This is a big this
Speaker 5: is a big thrill home to go check out Jack White,
Speaker 5: White and Nashville.
Speaker 2: Thank you for your patience. We so appreciate it.
Speaker 6: That always interesting.
Speaker 5: Well, we'll talk about the third quarter first, and as
Speaker 5: I've been able to say for the last several quarters,
Speaker 5: it's record you know, we just hit a record for revenues,
Speaker 5: for revenue, yields, for operating income, customer deposits, bookings two
Speaker 5: years out, so right up and down our business. It's
Speaker 5: it's records and strong demand. So we ended the third
Speaker 5: quarter up about eight point seven percent in our yield
Speaker 5: year over year, which was strong. And the same time,
Speaker 5: we held our cost flat, which was which is also
Speaker 5: good to note, and that resulted in, like I said,
Speaker 5: a record quarter. And as we were able to adjust
Speaker 5: our full year guidance. We did that for the third
Speaker 5: time this year, and it's going to take us up
Speaker 5: to about six billion dollars of EBITDA, which again, to
Speaker 5: use a broken record word, it's a record, and so
Speaker 5: we're expecting much more as we get into the fourth
Speaker 5: quarter and then beyond.
Speaker 6: You know, Ja.
Speaker 2: Powell Fed chair obviously that you just listened to. I
Speaker 2: am curious, Josh if in terms of macro, what matters
Speaker 2: in terms of FED policy for you and what's going
Speaker 2: on in terms of the interest rate environment. He did
Speaker 2: also talk about the savings rate, suggesting consumers can continue spending,
Speaker 2: which we want to get into too in terms of
Speaker 2: it seems like consumers are certainly still spending on cruises.
Speaker 2: But give us macro, give us consumer spending. How you
Speaker 2: would describe it all?
Speaker 5: Well, for us, the word's going to be robust, you know.
Speaker 5: I mean, we've been living through this cycle with everybody else.
Speaker 5: We've lived through the high inflation, We've lived in the
Speaker 5: high interest rate environment, and now we see inflation down,
Speaker 5: we see the FED taking action to start reducing that
Speaker 5: interest rate environment. And through all of it, what we've
Speaker 5: been seeing is robust demand, and because of our business.
Speaker 5: You know, first of all, it's a global business. As
Speaker 5: you know, we have a portfolio of brands that are
Speaker 5: really world class all over the all over the world.
Speaker 5: And what we see is strong demand depending no matter
Speaker 5: how you slice it, whether it's geographic, whether it's contemporary
Speaker 5: versus more premium. We're seeing that strength and we see
Speaker 5: it in the results. We see it in the on
Speaker 5: board spending levels. You know, as part of our third
Speaker 5: quarter results. It's not just about the ticket revenue which
Speaker 5: was taken anywhere from you know, six months to up
Speaker 5: to two years in advance, but what's the actual on
Speaker 5: board spending environment, which is much more real time.
Speaker 6: And the fact is our onboard spending.
Speaker 5: For this past quarter was up over six percent year
Speaker 5: over year, and that's actually an acceleration because in the
Speaker 5: second quarter it was up closer to four percent year
Speaker 5: over year.
Speaker 6: So what we're.
Speaker 5: Seeing is is consumers that are healthy, that still want
Speaker 5: to spend on experiences.
Speaker 6: And as you've probably heard me say before, we.
Speaker 5: Are an unparalleled value, right, we are a better value
Speaker 5: to land. I remember being in the offices with you
Speaker 5: in December talking about my hotel stay. Not only are
Speaker 5: we unparalleled in the value. We are unparalleled in the
Speaker 5: experience that we give to people. You get value for
Speaker 5: what you pay for, and we deliver on that guest
Speaker 5: experience like nobody else.
Speaker 4: So, Josh, are you seeing any weakness across any part
Speaker 4: of the portfolio of brands right now from any segment.
Speaker 3: Of the consumer?
Speaker 5: Now, we're really not no pullback whatsoever now, you know.
Speaker 5: I mean, as a matter of fact, if you look
Speaker 5: at our twenty twenty five booked position, it's higher in
Speaker 5: price and occupancy than it's ever been at the same
Speaker 5: point in time. When you look at twenty twenty five,
Speaker 5: we're higher in every single quarter price and occupancy. So
Speaker 5: things are moving in continuing to move in the right direction.
Speaker 6: And I think it's I think you know, cruise is
Speaker 6: cruises tiny.
Speaker 5: Right at the end of the day, we're the biggest
Speaker 5: cruise company in the world, but if you take the
Speaker 5: whole cruise industry, it's only about two percent of the
Speaker 5: overall vacation market.
Speaker 6: So we are a.
Speaker 5: Very tiny segment in a huge market with a lot
Speaker 5: of room to grow. Because we're getting the word out,
Speaker 5: we are being more effective in communicating the value and
Speaker 5: communicating the experience and really differentiating our brands so that
Speaker 5: they get a cut through and it means something to people,
Speaker 5: and that's paying dividends.
Speaker 2: Talk to us about the cost side of the equation,
Speaker 2: as you just said, and I read too that nearly
Speaker 2: half of twenty twenty five bookings are done at record
Speaker 2: ticket prices. The cost equation. You guys are a floating
Speaker 2: city once you're at on the water, are food you know,
Speaker 2: meals labor. Tell us what you're seeing in terms of
Speaker 2: the cost side of the equation.
Speaker 5: Josh, yeah, So it's good news there too. You know,
Speaker 5: we are seeing that deacceleration of deceleration part of me
Speaker 5: of inflation, and we're actually just today able to take
Speaker 5: our cost guidance for the full year down from up
Speaker 5: four and a half percent on a unit basis to
Speaker 5: up three and a half percent on a unit basis,
Speaker 5: So we're making good progress there. We are seeing the
Speaker 5: benefit of a lot of hundreds and hundreds of activities
Speaker 5: that we're doing across our brands, taking little bits of efficiency,
Speaker 5: better sourcing savings when we can, and it adds up
Speaker 5: given our scale, So all things are starting to move
Speaker 5: in the right direction on the cost side, which is
Speaker 5: very different, obviously than what we've been experiencing along with
Speaker 5: everybody else as we went through that inflationary cycle.
Speaker 4: Speaking of the inflationary cycle, I'm wondering about the pricing
Speaker 4: power from your perspective. If you're going to be able
Speaker 4: to continue to raise prices in your view next year
Speaker 4: and year after year.
Speaker 5: You know, that's certainly the goal. You know, at the
Speaker 5: beginning of this year, when we were talking about our
Speaker 5: guidance for the first time, there were a lot of
Speaker 5: folks that were saying, oh, yeah, but you know, when
Speaker 5: you get to the fourth quarter of twenty twenty four.
Speaker 5: You took your pricing up in twenty twenty three ten
Speaker 5: and a half percent. That was our results last fourth quarter.
Speaker 5: You're not going to be able to top that. And
Speaker 5: we just came out with guidance today for the fourth
Speaker 5: quarter where our yields are going to be up five percent,
Speaker 5: the majority of which is more price. So we feel
Speaker 5: very good about what we're doing in our ability to
Speaker 5: manage the booking curve, increase our demand profile, and ultimately
Speaker 5: deliver on board as we always do.
Speaker 2: What keeps you up at night, barring another global pandemic, No,
Speaker 2: but seriously, you've been rosy for a while, and I'm
Speaker 2: just curious. It does sound like some really strong metrics,
Speaker 2: And I said, reading some of the analysts commentary, they
Speaker 2: feel the same way. But I'm just curious, what's the
Speaker 2: difficult part of what you guys do. I mean, you're
Speaker 2: ordering new ships, you're adding to that. Tell us, Josh, like,
Speaker 2: where is it that you get concerns? Is it the
Speaker 2: election outcome? I'm just curious.
Speaker 6: No, I think those types of things are temporal.
Speaker 5: And you know, I mean, truthfully, after living through what
Speaker 5: we lived through in twenty twenty and twenty twenty one
Speaker 5: and getting getting back from literally a pause to where
Speaker 5: we are today, there's really not much that that keeps
Speaker 5: me up at night. Truthfully, that's within our control. I mean,
Speaker 5: at the end of the day, you know, in a
Speaker 5: two year period we went from negative ibadata up over
Speaker 5: six billion in EVA da Son. I don't see much
Speaker 5: within our control that we can't we can't push forward,
Speaker 5: and you know that's showing. I mean, just just in
Speaker 5: this year alone, we came out with guidance in December
Speaker 5: for the first time and we said our yields will
Speaker 5: be up about eight and a half percent. Now we're
Speaker 5: saying up close to ten and a half percent. We
Speaker 5: said costs would be up four and a half percent,
Speaker 5: now they're going to be up three and a half percent.
Speaker 5: We said our return on investing capital will be up
Speaker 5: nine percent, and now we're saying, no, it's ten and
Speaker 5: a half percent, which is a five improvement year over year.
Speaker 5: So I think we're making real good decisions. We've got
Speaker 5: an amazing team all over the world with all of
Speaker 5: our world class brands really driving the business forward, and
Speaker 5: you know, I just think we're just starting to scratch
Speaker 5: that potential. We are really focused on just doing the
Speaker 5: basics better and better, and it's working.
Speaker 4: Hey, Josh, you're also chief Climate Officer at Carnival Corporation.
Speaker 4: You mentioned things that we're in your control. One thing
Speaker 4: that's not in your control is the weather. Is the climate.
Speaker 4: The connection between weather and climate. The two are not
Speaker 4: the same, but the two are certainly linked. Many Americans,
Speaker 4: millions of Americans are still cleaning up after Helene in
Speaker 4: multiple states. It's killed more than one hundred people. Many
Speaker 4: are still missing at this point. How do you think
Speaker 4: about climate change in your role? How do you think
Speaker 4: about planning for an uncertain future.
Speaker 5: Well, first of all, our heart, our sympathy goes out
Speaker 5: to all those impacted by Helene. I mean, it is
Speaker 5: a tragedy unfolding, and we have a lot of connections
Speaker 5: to a lot of those local communities.
Speaker 6: So that's first and foremost.
Speaker 5: As far as the bigger picture goes, you know, we
Speaker 5: understand that the world is evolving rapidly. We need to
Speaker 5: do our part, and we need to plan for the future.
Speaker 5: And when it comes to doing our part, we are
Speaker 5: we are steadfast in our in our in our drive
Speaker 5: to reduce our own carbon footprint and do what we
Speaker 5: can to make the world.
Speaker 6: A better place.
Speaker 5: We have We are thirty five percent bigger today than
Speaker 5: we were in twenty eleven, and we admit this year
Speaker 5: we will emit ten percent less absolute greenhouse gas emissions
Speaker 5: than we did in twenty eleven. Even though we are
Speaker 5: thirty five percent bigger today, it's because we understand the
Speaker 5: importance of doing what we can to drive that sustainability agenda.
Speaker 5: And as far as preparing for the future, that goes
Speaker 5: into all of our decision making. You know, when we're
Speaker 5: talking about the ships that we're building, when we're talking
Speaker 5: about the destinations that we develop, how can we develop
Speaker 5: them in a way that they can deal with whatever
Speaker 5: that environmental landscape is not five years from now, but
Speaker 5: twenty years from now, in thirty years from now, And
Speaker 5: keep leaning into technology, keep doing our part to figure
Speaker 5: out how we can we can we can reduce our
Speaker 5: consumption every single year.
Speaker 6: That's the goal.
Speaker 2: And I'm assuming that's incorporated to when you guys build out,
Speaker 2: whether it was Grand Turk or I'm thinking about Celebration
Speaker 2: Key right that opens up in summer of twenty twenty five.
Speaker 2: Just the revenue and cost impact of that debut tell
Speaker 2: us attle bit about the dynamics around that one.
Speaker 5: Yeah, it is going to be It is going to
Speaker 5: be pretty special, you know, twenty twenty five. We open
Speaker 5: up in July of twenty twenty five, and then we atause.
Speaker 5: You go through a ramp up phase as we as
Speaker 5: we learn and we figure out what works, what doesn't work,
Speaker 5: and how we tweak and it really is going to
Speaker 5: bear fruit in a significant way in twenty twenty six
Speaker 5: when we have nineteen Carnival Cruise Line ships that are
Speaker 5: going to be a reaching celebration key from I think
Speaker 5: about ten different homeports in the Night States, so not
Speaker 5: only is that going to be a boost to our
Speaker 5: ticket revenue, is going to be a boost to the
Speaker 5: spending and the destination.
Speaker 6: And then to the point we were just talking about,
Speaker 6: you know.
Speaker 5: The proximity to the United States is phenomenal from a
Speaker 5: fuel spend and carbon emission standpoint. Because it's so close,
Speaker 5: we can go slower and shorter distances to get there.
Speaker 5: So we are very much looking forward to its introduction.
Speaker 2: All right, great stuff. As always, you're a gem for
Speaker 2: being so patient, So appreciate it, Josh, look forward to
Speaker 2: next time. Josh Weinstein. He's the president, CEO, and chief
Speaker 2: Climate Officer of Carnival Corporation, joining us from Carnival's headquarters
Speaker 2: in Miami.
Speaker 4: Okay, well from a Carnival too, well Harvard, because right
Speaker 4: now we got a conversation about Harvard's endowment. It's a
Speaker 4: kind of in house hedge fund. It's been long revered, envied,
Speaker 4: and at fifty point seven billion dollars that's as of
Speaker 4: June of last year, it remains the biggest and higher ed,
Speaker 4: but it may not be for long. A big reason
Speaker 4: why carol It's money managers have under performed and lost
Speaker 4: its investing.
Speaker 2: Edge all right, so let's get to this Bloomberg exclusive.
Speaker 2: It also is today's Bloomberg Big Take. It's among the
Speaker 2: most read on the Bloomberg terminal as we speak. Let's
Speaker 2: get into it. Bloomberg News Higher education finance reporter Janet Louren.
Speaker 2: She is with us in studio. Jenet, great story. First
Speaker 2: step though, the Harvard Endowment. It's place among university endowments historically.
Speaker 2: Let's just set the scene. I mean, this has been
Speaker 2: a big one, an iconic one.
Speaker 7: Yes, it's definitely an iconic one. It's still the largest
Speaker 7: college fund in America and it will be probably for
Speaker 7: a bit. It was built up with donations that started
Speaker 7: at the founding of Harvard, and it goes back to
Speaker 7: sixteen thirty six. You think of the principle of compounding interests.
Speaker 7: You know, they've had these gifts for hundreds of years.
Speaker 7: They've you know, accumulated and grown. And in nineteen seventy four,
Speaker 7: Harvard decided to create a separate management company called the
Speaker 7: Harvard Management Company or HMC, that runs the endowment. They're
Speaker 7: in the Boston fed it's actually a few isles from campus.
Speaker 7: And really when they started thinking about how should we
Speaker 7: invest our money. It traditionally had always been stocks and bonds,
Speaker 7: and they really weren't the envy of the world at all.
Speaker 7: They were just sort of kind of playing vanilla. And
Speaker 7: later a guy by the name of Jack Meyer decided,
Speaker 7: you know, we had this very long term horizon, we
Speaker 7: could invest in things that are a little bit more
Speaker 7: risky and a liquid and they built up a staff.
Speaker 7: He hired the best managers. They had outstanding performance, and
Speaker 7: they paid them for this outstanding performance. In some years,
Speaker 7: you know, managers were paid twenty five million dollars because
Speaker 7: you know, they were beating everybody. Yeah, and then there
Speaker 7: were some complaints that this is unseemly for a nonprofit university,
Speaker 7: and the class of sixty nine famously complained, and Jack
Speaker 7: Meyer ended up leaving a lot of people left. They
Speaker 7: created their own spinoffs, and it really hasn't been the
Speaker 7: same since then.
Speaker 4: We can't talk about Ivy League endowments without talking about
Speaker 4: Yale's endowment and the legendary David Swinson, who died back
Speaker 4: in twenty twenty one. Talk a little bit about the
Speaker 4: differences between the Yale Endowment and the Harvard Endowment and
Speaker 4: why you illustrate that in the piece.
Speaker 7: So Harvard hired their own staff and the more than
Speaker 7: two hundred traders worked there, and they did amazing. They
Speaker 7: were amazing investors. And Yale, David Swinson came around in
Speaker 7: eighty six. Jack came in nineteen ninety, and David Swinson
Speaker 7: had it at a different model. They didn't have hundreds
Speaker 7: of employees. They had a small number of employees, but
Speaker 7: they farmed their money out to outside managers and they
Speaker 7: were paying those fees you've heard the famous two and twenty,
Speaker 7: but they weren't paying them to their staff. And they
Speaker 7: built these long relationships with outside investment firms and they
Speaker 7: seeded some of them. And as you know, private equity
Speaker 7: takes a long time to make money. Not going to
Speaker 7: put money in a fund and expect a huge return
Speaker 7: next year. There's this thing called the Jay curve where
Speaker 7: you're not going to be making money for years and years.
Speaker 7: And then you know LinkedIn. Yale had this famous LinkedIn
Speaker 7: investment where they put in eight million dollars and they
Speaker 7: earned like eighty four million dollars. But it takes time.
Speaker 7: And while Yale was doing their thing, Harvard was doing
Speaker 7: their thing. And Harvard changed their model and now in
Speaker 7: some ways, they've adopted what Yale and Princeton and MIT
Speaker 7: have has did for years and years and years before,
Speaker 7: and they're kind of playing catch up. And now they've
Speaker 7: increased their allocation to private equity. It was sixteen percent
Speaker 7: around twenty seventeen. Today in the most recent report thirty
Speaker 7: nine percent. We know it's not a great time to
Speaker 7: be expecting returns from private equity, right, So and at
Speaker 7: the same time, Harvard decreased their allocation to us you know,
Speaker 7: to public equities.
Speaker 2: So just got that forty five seconds left here. So,
Speaker 2: I mean, is it a case of because you contrast
Speaker 2: what happened at Yale that David Swenson was there for
Speaker 2: such a long time, Harvard had a lot of different
Speaker 2: managers popping in and out. I mean, what's our net
Speaker 2: takeaway or like what happens next?
Speaker 8: Now?
Speaker 2: Well, what are you watching for?
Speaker 7: We're waiting for their returns when they come out in
Speaker 7: a few weeks and we'll see. I mean, they're very
Speaker 7: dependent on the endowment. About thirty seven percent of their
Speaker 7: budget comes from the endowment, and we're expecting, you know,
Speaker 7: potentially lower fundraising this year.
Speaker 2: Yeah, it's pretty fascinating. I feel like all of the
Speaker 2: financial The finance is really of universities right now on
Speaker 2: everybody's radar in a big way. We'd even get into
Speaker 2: the role of politics because.
Speaker 3: How much a cost to go there factor? Yeah, well, that's.
Speaker 2: That's what kind of blows my mind when it's almost
Speaker 2: forty percent of the endowment is for the budget, and
Speaker 2: yet we know costs in terms of tuition keep going
Speaker 2: up and up and up. So it's just, you know,
Speaker 2: the math on all of this is kind of mind blowing.
Speaker 2: Jet Lauren Killer story again, higher education financial reporter at
Speaker 2: Bloomberg News. As we said, it's the Bloomberg Big Take.
Speaker 2: It's among our most read on the Bloomberg terminal on
Speaker 2: this Monday. It's also a Bloomberg exclusive.
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Speaker 3: How think you can say this every day?
Speaker 9: Right?
Speaker 4: Lots going on in the world today, Yeah, just a
Speaker 4: little bit. I think it's fair to say SoftBank's Vision
Speaker 4: Fund planning to invest five hundred million dollars in open Ai.
Speaker 4: This is part of a larger funding round. This is
Speaker 4: according to the information citing a person familiar with the deal,
Speaker 4: that's part of a rays of six point five billion dollars.
Speaker 4: It would value open Ai at one hundred and fifty
Speaker 4: billion dollars of Bloomberg previously reported. Also, California Governor Gavin
Speaker 4: Newsom has vetoed what would have become one of the
Speaker 4: most comprehensive policies governing the safety of AI in the US.
Speaker 4: For all Things AI and technology, we turned to Max chafter.
Speaker 2: His name Max Aichapter.
Speaker 4: He is really he knows it all. He's Bloomberg Business
Speaker 4: Week columnist. He's also contributed to the Elinink podcast. He's
Speaker 4: the author of the contrarian Peter Teel and Silicon Valley's
Speaker 4: Pursuit of Power. He's here in the Bloomberg Interactive Brokers studio.
Speaker 4: I'll go back to Carol's comment on our planning call
Speaker 4: a little earlier today, when Paul said, our producer, Paul
Speaker 4: said six point five billion dollars.
Speaker 3: She said, what six point five billion dollars.
Speaker 4: We're not talking about evaluation, We're talking about actual cash
Speaker 4: that they're going to be using.
Speaker 8: That's the money that they are trying to raise, and
Speaker 8: they need it. And that is what is so interesting
Speaker 8: about both about this business and about the field in general.
Speaker 8: It's this is in a situation where open a I
Speaker 8: mean part of the situations investors really want wanted in
Speaker 8: on this company. But this is a company that's burning
Speaker 8: huge amounts of cash to run CHATCHYPT and to and
Speaker 8: to create the models that they are you know that
Speaker 8: that will be in their mind, the next generation model.
Speaker 8: So the company really needs money and and quickly. Frankly,
Speaker 8: because because these the servers and the chips that these
Speaker 8: things run on are so expensive and use so much
Speaker 8: power to run.
Speaker 4: I'm laughing because I use chat GPT for the dumbest,
Speaker 4: dumbest things. Last night I was like, uh Chat, I
Speaker 4: opened chat CHIPTM like uh marinad for chicken breast, literally
Speaker 4: something I can google. But I'm like, you know what,
Speaker 4: I'm gonna do it on chat gipt and I'm gonna
Speaker 4: cost them money.
Speaker 8: Well, and we don't know the exact numbers, I don't
Speaker 8: off the top of my head, but but it's definitely
Speaker 8: a much more expensive search on chat gipt than it
Speaker 8: is on Google. So like that, you know, the decision
Speaker 8: to do that is you know, if and if you're
Speaker 8: doing it regularly, like you are probably not a money
Speaker 8: maker for for open Ai. And there are many, many,
Speaker 8: many people in this position now. The company, the plan
Speaker 8: is basically twofold find ways to do what they're doing
Speaker 8: cheaper and get people to pay more. So right now
Speaker 8: Chat Gipt costs like twenty dollars a month for their
Speaker 8: you know, paid membership. I think the plan is to
Speaker 8: slowly get the price up because.
Speaker 6: They need to.
Speaker 8: Frankly, and the same thing is gonna happen with a
Speaker 8: lot of these generative AI tools. You're gonna see price
Speaker 8: increases in the coming years because you know, with the
Speaker 8: current price of energy and the current price of GPUs
Speaker 8: the chips that are used to train and run these models,
Speaker 8: it cannot be done profitably at the current Well that's what.
Speaker 2: As I'm listening, like, so is there a business model
Speaker 2: that works going forward?
Speaker 6: You know?
Speaker 8: I think if you ask the people who are investing
Speaker 8: in this, Masa's son Masi Yoshi Sun or Thrive Capital,
Speaker 8: which is another one of the companies that is a
Speaker 8: rumor to be in on this deal. Also, people talking
Speaker 8: about Microsoft and video. The people who believe in open
Speaker 8: AI and in this field think that you're going to
Speaker 8: get cheaper models, you're going to get cheaper chips, and
Speaker 8: you're going to get so much demand. This is gonna
Speaker 8: be such a crucial part of business, right that people
Speaker 8: are going to pay for it. And I think that
Speaker 8: the jury is out on that to some extent. It's
Speaker 8: it's not clear that you're going to want to pay
Speaker 8: you know, like ten twenty thirty forty dollars more a
Speaker 8: month for like Microsoft Word if it has generative IAI
Speaker 8: features than you are now. But that is like the
Speaker 8: bull case is that it's so valuable that that's what
Speaker 8: people are doing.
Speaker 3: Is it so valuable?
Speaker 2: Those like is it so valuable? Like do we yet
Speaker 2: know the payoff?
Speaker 7: No?
Speaker 8: The barecase against all of these things is number one,
Speaker 8: it's not clear outside of like writing spam emails, doing
Speaker 8: kind of marketing, maybe like certain kinds of very quick
Speaker 8: news story like a handful of areas where baking PowerPoint
Speaker 8: presentations of like a handful of areas where it's clearly helpful,
Speaker 8: but beyond that, it's not clear that it's super helpful
Speaker 8: or super useful, and it's also not clear that these
Speaker 8: AI companies have enough differentiation because there are lots of competitors.
Speaker 8: Opening I can't just raise its prices, it can't just
Speaker 8: double its prices. Because you have Facebook essentially giving away
Speaker 8: it's its algorithms. You have a bunch of different players
Speaker 8: all offering very very similar products.
Speaker 4: Help us understand Microsoft's relationship with open ai because they're
Speaker 4: the company's largest investor, but they're also working on their
Speaker 4: own products that could be competitors to what open ai
Speaker 4: is doing.
Speaker 8: I mean, I think Microsoft has a very big interest
Speaker 8: in open ai both as as the biggest investor. You know,
Speaker 8: they have a big equity stake. They've also put a
Speaker 8: ton of money into this company already, you know, more
Speaker 8: than ten billion dollars and you know, if this round closes,
Speaker 8: probably more than that. But you know, Microsoft obviously this
Speaker 8: is it's they need to hedge their betch. They think
Speaker 8: this is an important field. They also have like a
Speaker 8: gigantic AI research arm already, so it's not like they're
Speaker 8: gonna sit still, but they are very much, you know,
Speaker 8: working closely with open ai like this is probably the
Speaker 8: most important part of their AI strategy.
Speaker 4: Is the AI are the AI tools that you get
Speaker 4: within Microsoft's suite of products are those built by open
Speaker 4: ai or powered by open ai, or those separate completely.
Speaker 8: You have to look at exactly what Microsoft says, because
Speaker 8: they've at times have made it sort of hard to tell.
Speaker 8: My sense is that they are mostly offering products that
Speaker 8: are powered by open Ai and the importantly, they are
Speaker 8: also reselling open AI's technology to companies. Now that for
Speaker 8: a while seemed like a big important differentiator that Microsoft
Speaker 8: ha but now open ai is also, as I believe
Speaker 8: we and others have reported, they are also selling their
Speaker 8: sort of like corporate offering directly. So there is a
Speaker 8: sense that there's some competition. But again, these companies are
Speaker 8: their their fortunes are very closely tied together. I don't
Speaker 8: think they both need each other. It's not like they're
Speaker 8: going to turn into like cut through competitors overnight.
Speaker 2: Max Any chance that this is just a bust when
Speaker 2: all of a sudden done as we continue to figure out,
Speaker 2: I mean, I understand the uses of generative AI, but
Speaker 2: I just wonder we focus so much on this one company,
Speaker 2: you know, I'm just curious what you're hearing with in
Speaker 2: the industry.
Speaker 8: Yes, it definitely could be a bust. You're you're seeing
Speaker 8: people on Wall Street, including some sophisticated people. Uh, start
Speaker 8: to start to point out like some of the issues
Speaker 8: that I'm bringing up, which is that you know, the
Speaker 8: economics just aren't there yet. Also, you know, anytime you're
Speaker 8: in a competitive situation in a hot market with a
Speaker 8: lot of smart players, like it isn't it's never like
Speaker 8: a sure thing that the market leader, which is open
Speaker 8: Ai at the moment, is going to be the ultimate winner.
Speaker 8: So both the market needs to prove out. And this
Speaker 8: is a competitive market with a lot of people with
Speaker 8: a lot of resources who are also playing.
Speaker 4: The names for our audience to keep an eye on Microsoft,
Speaker 4: Meta Anthropic, open aim I, who am I missing?
Speaker 9: Google?
Speaker 6: Yeah?
Speaker 8: And X Frankly, and if you're looking to tell a
Speaker 8: story about what the challenges are for with open ai,
Speaker 8: you could start with X which is Elon Musk's thing.
Speaker 8: You know, x ai did not exist eighteen months ago,
Speaker 8: and he and in a very short amount of time
Speaker 8: Elon Musk has built essentially like a credible competitor. Now
Speaker 8: maybe maybe there's some differences, but but again it shows
Speaker 8: you just how competitive it is, how small the moat
Speaker 8: is that these companies have you.
Speaker 2: Rock Max Chafkin, Bloomberg BusinessWeek columnist. You are listening and
Speaker 2: watching Bloomberg Business Week.
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Speaker 2: General Assembly in session, lots of global leaders in town.
Speaker 2: We spent a lot of time last week talking to
Speaker 2: individuals about climate change, and even with the focus on
Speaker 2: renewables and green energy, coal is still the biggest source
Speaker 2: of electricity, accounting for a thirty five percent of the
Speaker 2: world's generation in twenty twenty three last year. That is
Speaker 2: according to the climate think tank ember. I think we
Speaker 2: pointed this out last time we had this guest done
Speaker 2: great to have back with us in this time in studio.
Speaker 2: Randall Atkins, Founder, chairman CEO Ramco Resources. It's a publicly
Speaker 2: held company, six hundred and four million dollar market camp
Speaker 2: company that produces metallurgical coal that's the type of coal
Speaker 2: used in steelmaking and as we talked about last time,
Speaker 2: the company is exploring domestic production of rare earth elements,
Speaker 2: something we talk about a lot. Welcome, welcome back, Great
Speaker 2: to have you in studio, Glad.
Speaker 10: To be here.
Speaker 4: How are you.
Speaker 10: I'm fine for a Monday.
Speaker 2: That's kind of what we say. Hey, listen, we made
Speaker 2: a point. I want to start here just because we
Speaker 2: made a point last time of talking about the coal
Speaker 2: that is used for electric electrical generation electricity generation. We
Speaker 2: talked about thermal coal. You produce metallurgical coal. So just
Speaker 2: before we get into it, remind everybody of the difference,
Speaker 2: because I think it's important.
Speaker 10: So we kind of view coal as having sort of
Speaker 10: three legs to a stool. One is for energy, which
Speaker 10: is thermal coal, one is for steel making, which is
Speaker 10: metallurgic coal. And the third, which is kind of an
Speaker 10: emerging field we call coal to products are cold critical minerals.
Speaker 10: And that's, frankly, the route that we've sort of trail
Speaker 10: blazed a bit by working on things like rare earth
Speaker 10: elements and critical minerals and use of coal to make
Speaker 10: carbon products.
Speaker 4: What's the connection between coal and rare earths?
Speaker 10: Well before we were able to discover a large deposit,
Speaker 10: and ioming it was theoretically possible that rare earth would
Speaker 10: be contained within coal in some different types of concentrations.
Speaker 4: Meaning you'd find a depositive coal inside that depositive coal
Speaker 4: would be.
Speaker 10: Rare earth, correct in higher concentrations that will normally be
Speaker 10: found just as a base context within the Earth's crust.
Speaker 10: The trick is with rare earth, they're everywhere. They're not
Speaker 10: frankly so rare, but the concentration level is what makes
Speaker 10: it commercially feasible. And we have found frankly higher concentrations
Speaker 10: in our coal of heavy and medium rare earths magnetic
Speaker 10: rare earths than have been found, according to our friends
Speaker 10: at the Department of Energy, any place outside of Western China.
Speaker 10: So that's what's the unique part about our particular deposit.
Speaker 2: Which talk to us about your emphasis and stress in
Speaker 2: terms of the business that you want to focus on.
Speaker 10: Sure, well, we've right now got a you know, our
Speaker 10: primary business across metallurgic coal, that's our bread and butter.
Speaker 10: We kind of stumbled into the rare earth business, so
Speaker 10: to speak, accidentally. But now that we have been advised
Speaker 10: that we've got such a significant deposit, which might have,
Speaker 10: you know, very important strategic implications, certainly for the US
Speaker 10: that we have now decided to swing into that with
Speaker 10: as much emphasis as we can.
Speaker 2: What aide you get from the government US government in
Speaker 2: all of this when they sometimes look at something like this,
Speaker 2: I mean, we talk about this with semiconductors, you know,
Speaker 2: national security. I'm just curious if you get an assist
Speaker 2: or what's the conversations on that level?
Speaker 10: So they started different levels. So you know, we originally
Speaker 10: actually found the rare Earth because we provided samples to
Speaker 10: one of the Department of Energy's national labs that was
Speaker 10: trying to do an assessment for the Defense Department, and
Speaker 10: that's how we discovered we had a significant deposit. We
Speaker 10: have got various grants and partnerships with various labs of
Speaker 10: the national of the Department of Energy. Actually today we
Speaker 10: announced we've hired as our director of Technology a gentleman
Speaker 10: who joins us from the research arm of the Defense
Speaker 10: Department called DARPA. And so we would expect as we
Speaker 10: go further and basically add more dimension to what we're doing,
Speaker 10: that we very conceivably will be working with the government
Speaker 10: in a number of different capacities.
Speaker 4: What are the rare earths that you found in the deposit,
Speaker 4: and how do you extract them from the coal?
Speaker 3: How do you separate them?
Speaker 2: What's the cost of doing that?
Speaker 10: Those are three great questions. So the rare earths that
Speaker 10: we've found are as I said, the heavy and medium
Speaker 10: magnetic rare earths, which have wonderful Latin names that I
Speaker 10: will probably butcher. But the other two elements that we found,
Speaker 10: which aren't really rare earth, they're critical minerals called germanium
Speaker 10: and gallium. They're very important frankly for defense related technologies, semiconductors, etc.
Speaker 10: How do you extract the rar ears from coal? That
Speaker 10: is the process that you actually engage in when you
Speaker 10: go beyond the initial throwing your hat in the air
Speaker 10: that you've actually found them. We're in the middle of
Speaker 10: that now, which is arduous because they're majored in parts
Speaker 10: per million, so it's like almost trying to find things
Speaker 10: the size of a blood cell.
Speaker 2: Wait, so have you done it yet or no? Done
Speaker 2: what separate out the We.
Speaker 10: Have separated them out in various sizes right now. But
Speaker 10: what we're doing we actually have engaged a company called
Speaker 10: floor which is a major engineering group that also has
Speaker 10: a large critical materials group to actually help us determine
Speaker 10: the right process to use and then prove up the economics,
Speaker 10: which we expect to have back by the end of
Speaker 10: this year. So there are all sorts of different routes
Speaker 10: that you can take, depending upon not only the chemistry
Speaker 10: but the metallurgic and the metellergic mineral behind the actual rare.
Speaker 3: At the deposit.
Speaker 4: Would you would would it involve burning the coal and
Speaker 4: then what's left after the coal burns or is there
Speaker 4: a different process.
Speaker 3: Help us take us back to geology class.
Speaker 10: Sure, no perfect idea. So it will involve some form
Speaker 10: of either combustion or paralysis of the coal, because you
Speaker 10: need to separate the rare earth from being commingled within
Speaker 10: the carbon within the coal. And how that's done on
Speaker 10: what scale dependence on really where the deposits are, because
Speaker 10: we may be dealing in concentrations of rare earth which
Speaker 10: might not be huge in terms of material mass, but
Speaker 10: might be large in terms of the quantity of rare earth.
Speaker 10: So it's not like we would be creating enough coal
Speaker 10: that we power a power planet something like that. It
Speaker 10: would be much more confined.
Speaker 2: Two things I'm curious about, so there is a business
Speaker 2: case to be made for doing it. You guys have
Speaker 2: figured out that it's not going to cost so much
Speaker 2: that it doesn't make sense to do so I'm curious
Speaker 2: little bit more about that. What's also the impact on
Speaker 2: the environment.
Speaker 10: Sure, so the business case is one that I said,
Speaker 10: we're developing the precise techno economic study, or they call
Speaker 10: it a scoping study, which will be available by the
Speaker 10: end of the year.
Speaker 2: You're working on it.
Speaker 10: We're working on it. But the interesting thing from a
Speaker 10: business standpoint, from an overall dimension, the Chinese have been
Speaker 10: trying to put anybody out of business that gets into
Speaker 10: the rare earth business. They have a monopoly. They ruthlessly
Speaker 10: fight to maintain that monopoly and have done predatory pricing
Speaker 10: all over the world to try to drive anybody else.
Speaker 2: It boost a lot of production. We actually have a
Speaker 2: Bloomberg opinion piece that gets into cobalt and lithium specifically
Speaker 2: the same ideal. Yeah, that we've seen prices plunged by
Speaker 2: more than seventy five percent because the Chinese miners have
Speaker 2: boosted production.
Speaker 10: Sure, and even today, actually DARP is putting a conference
Speaker 10: on that involves how the United States could assist in
Speaker 10: creating sort of almost a pricing index that would stabilize
Speaker 10: the rare earth market, which is clearly not happening today.
Speaker 2: So okay, so you're studying the cost the business equation.
Speaker 2: You're kind of figuring it out in terms of the
Speaker 2: economic and not the environmental impact.
Speaker 10: Sure, the environmental impact I had a thing too, sure
Speaker 10: will be will be very limited. I mean, the nice
Speaker 10: thing about coal, even if.
Speaker 2: You're burning it and stuff, that's limited.
Speaker 10: Well, here's here's the here's the trick there on rare earth.
Speaker 10: Most rare earths are found in hard minerals cobalt, lithium, uranium,
Speaker 10: et cetera, which are number one radioactive. So that creates
Speaker 10: issues in terms of mining it, but more importantly in
Speaker 10: terms of processing it, which is why most rare earths
Speaker 10: are shipped to China to be processed, which needless to say,
Speaker 10: is not helpful for the United States. So by virtue
Speaker 10: of using coal as the feedstock, that in itself is
Speaker 10: much more environmentally benign, and we are not going to
Speaker 10: be burning it in sufficient quantity that would create a
Speaker 10: sort of a smokestack effect, if you will. We'll be
Speaker 10: doing it almost like a kiln type operation. And the
Speaker 10: interesting thing is a lot of the carbon that would
Speaker 10: be thrown off from the coal we intend to try
Speaker 10: to use to make carbon products like synthetic graph height
Speaker 10: and graphene and carbon fiber precursors. These are things that
Speaker 10: we were working on with the government way before we
Speaker 10: ever got involved in the rarer space.
Speaker 4: What happens if the rareerfs don't pan out? What happens
Speaker 4: if you can't figure out a way to make it
Speaker 4: work financially if.
Speaker 10: The rarers don't pan out? Actually, as I said, we'll
Speaker 10: go back to what our original intent was, which was
Speaker 10: to use coal as a feedstock to make carbon products.
Speaker 10: Because the Chinese have also basically put an export stop
Speaker 10: on synthetic graph height in regular graph height. So there's
Speaker 10: a great demand for graph fight right now, which is
Speaker 10: ninety five percent of the anodes and batteries. So that's
Speaker 10: our next product, if you will that we'll be working
Speaker 10: in respective.
Speaker 2: So what do you anticipate rendall that in. I don't
Speaker 2: know whether it's twelve months, whether it's two years, what
Speaker 2: the product mix is for your company, because it sounds
Speaker 2: like you guys are still kind of figuring out some things.
Speaker 2: We've got about a minute or so less.
Speaker 3: You've bet so very shortly.
Speaker 10: We will still be at least in terms of cash
Speaker 10: flow dominantly a metallurgic coal company. We're actually growing. We're
Speaker 10: probably one of the few coal companies that actually has
Speaker 10: of last year, we will double in size between now
Speaker 10: in the next say three years. That's the metallurgic side
Speaker 10: and the rarer side. As you said, we're sort of
Speaker 10: figuring it out as we go along. Our Our hope
Speaker 10: is to basically be in a position to start a
Speaker 10: demonstration facility this coming spring, and that will then prove
Speaker 10: out the economics and the techniques that we can use
Speaker 10: to then take it into a larger commercial venture. I
Speaker 10: think as soon as we start that will be probably
Speaker 10: getting a lot of assistance along the way because it
Speaker 10: will have such a potentially strategic impact on the United States.
Speaker 2: Does just forgive me twenty twenty five seconds the election outcome?
Speaker 2: Does it matter for you guys as a business the
Speaker 2: election outcome? Who's in the White House?
Speaker 10: I fix from from the standpoint of critical minerals and
Speaker 10: rare earth, it does not, because again, it has such
Speaker 10: strategic national security significance that you've seen both the Democrats
Speaker 10: and the Republicans almost in tandem, try to push for
Speaker 10: more legislation encouraging development.
Speaker 2: Of those All right, well, so appreciate gatting more time
Speaker 2: with you. We were fascinating the first time around. So
Speaker 2: really great to have you in studio. Rind Atkins, Founder
Speaker 2: chairman CEO Aramico Resources joining us right here in studio, Mac.
Speaker 8: The journal.
Speaker 7: How about you let me drive?
Speaker 1: No, no, no, honey, please, I'll.
Speaker 6: I want to try.
Speaker 8: It's a good question.
Speaker 3: This is the drive to the globes dot com effect.
Speaker 4: Well, Dan on Bloomberg Radio, it's Bloomberg Business Week and Carol,
Speaker 4: can you believe it?
Speaker 3: It's that time?
Speaker 2: Yeah, quarter, I'm so ready to be done with.
Speaker 3: Done with the quarter. Read to be done with the quarter.
Speaker 2: I'm done to be I'm ready to be done with
Speaker 2: the court. Although I like the summer quarter.
Speaker 4: Yeah, just making sure I'm rarely done with the quarter.
Speaker 2: Twelve months a year, defeated by four three months makes quarter.
Speaker 3: It's a quarter to date for the S and P
Speaker 3: five hundred five percent.
Speaker 2: Well done, well done quarter. All right, let's see what
Speaker 2: our next guest has to say back with This is
Speaker 2: called speed CEO and portfolio manager it's Meed Capital Management,
Speaker 2: joining us from Phoenix. The SMEED Value Fund, by the way,
Speaker 2: has returned fourteen percent on average annually, putting it in
Speaker 2: the ninety fourth percentile according to our data. Hey, how
Speaker 2: are you good?
Speaker 9: To see you guys?
Speaker 6: How are you.
Speaker 2: Yeah, we're doing okay. Just kind of going from day
Speaker 2: to day data point to data point. Tell us little
Speaker 2: bit about flows. What are you seeing? What does it
Speaker 2: tell you about the investment environment?
Speaker 9: Yeah, I think I think there's much ado about nothing
Speaker 9: for most investors is what we've seen. Most people are
Speaker 9: very much happy and comfortable in whatever they're doing already.
Speaker 9: And I think the only problem with that is if
Speaker 9: you look at two data points that really stand out
Speaker 9: to US, household ownership of stocks as reported by the
Speaker 9: Saint Louis Federal Reserve or what they call the FRED data,
Speaker 9: it's never been higher, and the only problem with that
Speaker 9: is that bodes very poorly for forward returns. The other
Speaker 9: thing I would mention that I was just in Asia
Speaker 9: for two weeks visiting with investors, and when I go
Speaker 9: to Thailand and the institutional investors there own seventy percent
Speaker 9: of their total equities in US equities, it shows as
Speaker 9: the FED has been reporting that the foreign ownership of
Speaker 9: US equities has never been higher as well, that those
Speaker 9: are just contrary indicators relative to history.
Speaker 3: Why are those contra indicators?
Speaker 9: Yeah, if you use the household data as an example
Speaker 9: to him, the correlation coefficient between that ownership and the
Speaker 9: forwarder turns the S and P is like negative point
Speaker 9: eight two to negative point eight five, depending on when
Speaker 9: you're looking at the data. So it shows you it's
Speaker 9: negatively correlated at this level of ownership. The last time
Speaker 9: we had this was ninety nine, was anywhere near this,
Speaker 9: and it was negative one percent for ten years. Nominally,
Speaker 9: that doesn't count inflation, you know, in that it was
Speaker 9: negative real returns for the S and P five hundred
Speaker 9: and So I find it interesting that the households are
Speaker 9: comfortable owning a lot of their equity or learning a
Speaker 9: lot a lot of their assets and equities, while they
Speaker 9: foreign institutions, foreign owners, you name it, are doing the
Speaker 9: same thing at the same time. How differentiated is that globally?
Speaker 9: And I would argue that's not good for global equity investors.
Speaker 2: Interesting, Okay, So then what are you anticipating in terms
Speaker 2: of the US market for the rest of the year
Speaker 2: we've got We talked about being in the fourth quarter here,
Speaker 2: do you anticipate that we just kind of mark time
Speaker 2: a little bit or or what?
Speaker 9: Yeah, you know what, whether it's marketing time or we
Speaker 9: you know, as we always do, we go through bool
Speaker 9: markets and bear markets, you know, whether it's that or
Speaker 9: starting a nice bear market, it's a it's a harbinger
Speaker 9: of what's not going to be good going forward. And
Speaker 9: this is coming right at a time where you know,
Speaker 9: people are pretty at home with the idea that you know,
Speaker 9: the FED is kind of quelched inflation at least in
Speaker 9: the interim. I was actually just having a really fun
Speaker 9: discussion with Wilbur Ross earlier today because I'm going to
Speaker 9: be interviewing him in a few weeks, and he's got
Speaker 9: a really interesting book out called Risks in Return, where
Speaker 9: you know, the idea being that in the old guns
Speaker 9: and butter debate, Like Tim, you know, Tim and I
Speaker 9: my brother, Tim's brother, and I went to college at
Speaker 9: Women College. In witmen College economics classes, you learned about
Speaker 9: guns and butter. This is guns and Butter two point zero,
Speaker 9: And that was some of the discussion I was having
Speaker 9: with Wilbur Ross. And it makes me very excited to
Speaker 9: read his book. But I just say that because the
Speaker 9: idea that the fiscal spending goes on and yet inflation disappears,
Speaker 9: I think that's adorable. And I don't think it's the
Speaker 9: Fed's fault. It's the politics fault. But fiscal largesse is
Speaker 9: a thing of this era.
Speaker 3: Okay, you mentioned Wilbur Ross.
Speaker 4: We got to talk politics, Cole, because we are You're
Speaker 4: in a swing state.
Speaker 3: You get a lot of ads for I am the
Speaker 3: swing state. Yeah, you get a lot of ads.
Speaker 4: For Harris and Trump in Arizona where you are. You
Speaker 4: also mentioned Wilbur Ross, who was United States Secretary of
Speaker 4: Commerce during the Trump administration. How are you thinking about
Speaker 4: the election in terms of investing, in terms of what
Speaker 4: you're doing with your portfolios?
Speaker 9: Yeah, well, I think the more important short term thing
Speaker 9: in any discussion is whether in the doubleheader today the
Speaker 9: Mets or the Braves will lose two games and send
Speaker 9: my Diamondbacks to the playoffs. But that's a whole separate issue.
Speaker 9: To your point about elections, it looks very close. It
Speaker 9: looks like a dead heat. I also think locally, you're
Speaker 9: going to see a lot of split ticket So for example,
Speaker 9: you know, Carrie Lake against Reuben Diego in the Senate,
Speaker 9: she looks like a sheer loser at this point. And
Speaker 9: so I think it's interesting to see in a swing
Speaker 9: state like this, where you're not going to see a
Speaker 9: down the ticket vote really kind of chopping up to
Speaker 9: who they like as candidates. And I think it also
Speaker 9: highlights in a state like Arizona how important candidates are.
Speaker 9: If you have bad candidates, you will lose elections. And
Speaker 9: I think both part of are losing that and figuring
Speaker 9: that out across states. So I think Arizona is a
Speaker 9: pretty good Petri dish for what's going on in the country,
Speaker 9: which is, we look like we have a dead heat
Speaker 9: right now. And you know, if you ask me who's
Speaker 9: going to win, I don't know. I just do know
Speaker 9: that fiscal spending will be the priority of either candidate,
Speaker 9: which again I think flows back to, you know, the
Speaker 9: idea of guns and butter two point Oh it's here
Speaker 9: to stay, all right.
Speaker 2: Let's talk about some names that you like top holdings.
Speaker 2: I'm looking at your value fund energy names are certainly there.
Speaker 2: You like Occidental, you continue to like it. Also. Another
Speaker 2: one is Sonovo's energy.
Speaker 9: Yeah, Yeah, the returns on capital we're getting in the
Speaker 9: space are very attractive. And you know, as we all know,
Speaker 9: it's a cyclical business, so it moves around with the commodity.
Speaker 9: But the positive is price regulates supply, and so as
Speaker 9: price has gone down, you're gonna see less reinvestment in
Speaker 9: the space. And what I like about it is people
Speaker 9: build up their ideas of what's going on based on
Speaker 9: what goes on in markets. And I always tell people
Speaker 9: they say, well, what's the price of oil telling us
Speaker 9: about the future, And pardon my cruelty with this, but
Speaker 9: the answer is nothing, you idiot. It just tells us
Speaker 9: about where buyers and sellers are meeting today. And so
Speaker 9: I think there's been a lot of discussion aboute around
Speaker 9: weak China in the last month, followed by immediately this
Speaker 9: idea that was posed the ft that the Saudis would be,
Speaker 9: you know, leaving the idea of one hundred dollars a
Speaker 9: barrel oil. I think that's completely hearsay. But we like
Speaker 9: the returns in the business. We like how depressed the
Speaker 9: multiples are here at this juncture on book multiples, not
Speaker 9: even looking at free cash, and that's just that's so
Speaker 9: far away from what people are paying for other stocks,
Speaker 9: you know, particularly big Captech in the S and P.
Speaker 9: It's a different game. But again go back to the
Speaker 9: other ears of guns and butter. Like the seventies, you
Speaker 9: may double digit and energy and the S and P
Speaker 9: lost real money. We're just it's a different world, and
Speaker 9: I don't think people are really thinking about the risks present.
Speaker 9: There's a lot of risk. That's what the equity investors
Speaker 9: are missing.
Speaker 2: Hey, listen, just got about forty five seconds left here.
Speaker 2: You kicked it off saying I'm just back from Asia.
Speaker 2: What was the story around? I guess Asia generally, but
Speaker 2: more specifically about China, especially coming off of all the stimulus.
Speaker 2: And forgive me because it's just about thirty seconds here.
Speaker 9: Yeah, they don't have any clue what's going on there,
Speaker 9: more than anybody else in the United States does. They
Speaker 9: ask me, as a kid from Seattle, Washington, whether the
Speaker 9: Hong Kong stocks at bottom. That's bizarre. Here's what I
Speaker 9: will say. I think people are really missing out on
Speaker 9: what can go on below the serface. The S and
Speaker 9: P or Go Watch unicredits deal. They're going to close
Speaker 9: on Commerce Bank and no one cares and money's being
Speaker 9: made in Europe and banking, and so I think there's
Speaker 9: just great things to go out and make money. Picking
Speaker 9: stocks on it's below the service, it's not in the index.
Speaker 2: New money coming in, money going out. Ten seconds. Do
Speaker 2: you see more money come in or people cashing out
Speaker 2: right now?
Speaker 1: Yeah?
Speaker 9: But money, money's going to raise because as long as
Speaker 9: you're doing what's differentiated, you can go raise capital. And
Speaker 9: that's what we're continuing to see. If you do what
Speaker 9: the old value people did, you're not going to raise
Speaker 9: any money.
Speaker 2: All right, Gonna leave it there. Hey, Cole, good to
Speaker 2: check in with you. Cole Smeed, CEO portfolio manager at
Speaker 2: SMED Capital Management, joining us from Phoenix, PA.
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