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Speaker 2: One of the big stock stories of to day is CBS,
Speaker 2: the healthcare company. CBS stocks down today. Management change is
Speaker 2: never a good thing. We wanted to get to the
Speaker 2: bottom of it because a lot of people don't really
Speaker 2: know what CBS is. It's not CBS the television network.
Speaker 2: It's c and Victor and s CBS. Jonathan Palmer, he
Speaker 2: knows what's going on. He's a senior healthcare anles for
Speaker 2: Bloomberg Intelligence. Hey, Jonathan, thanks so much for joining us.
Speaker 2: I know you know this company. Well, can you tell
Speaker 2: us what CBS is and why the stock is down today?
Speaker 2: What's going on there?
Speaker 3: Yeah, Paul, thanks for having me on. So you know,
Speaker 3: most people think of CBS as their corner drug store,
Speaker 3: but really it's a far bigger healthcare company in the
Speaker 3: ecosystem than just that pharmacy that you see around your corner.
Speaker 3: They own the benefits manager Etna, and they also own
Speaker 3: what's called a large PBM, a pharmacy benefit manager called
Speaker 3: care Mark. So really it's a vertically integrated enterprise that
Speaker 3: you know, most people knows their corner pharmacy, but actually
Speaker 3: has a far bigger reach through the insurance side of
Speaker 3: the business as well. So the stocks down today. They
Speaker 3: pre announced earnings that missed. They announced the management change.
Speaker 3: The CEO has left. They're calling it a resignation, but
Speaker 3: this was really probably the last straw in her tenure,
Speaker 3: and they promoted the head of care Mark, the benefits
Speaker 3: manager and a longtime employee to become the new CEO.
Speaker 4: Talk us through the build up to this management change
Speaker 4: what was going on exactly.
Speaker 3: Yeah, So the story of CBS, or the narrative on
Speaker 3: the stock, has been one of missed expectations. You know,
Speaker 3: they've been trying to get back to the double digit
Speaker 3: EPs growth and they've put that out in the in
Speaker 3: the outer years, and they keep pulling back on that guidance,
Speaker 3: you know, both reaching that milestone, but also every year
Speaker 3: they've been kind of missing their EPs guidance, and so
Speaker 3: they'd already revised guidance down last year they revised guidance
Speaker 3: down with two Q earnings last quarter, and so really
Speaker 3: I think it's a question of execution. The CEO just
Speaker 3: hasn't executed on the game plan that she has spoused,
Speaker 3: and so they've got little they can do to kind
Speaker 3: of turn the story around other than making the management change.
Speaker 2: Thirty seconds, Jonathan, do you think it can be done
Speaker 2: and in what timeframe?
Speaker 1: Yeah?
Speaker 3: I do, you know, I think it's going to take
Speaker 3: a lot of blocking and tackling. But the hard part
Speaker 3: about this business is it's based on contracts, and contracts
Speaker 3: are typically two to three years, and so it's going
Speaker 3: to take it take some time to work through the
Speaker 3: headwinds that they're facing and their benefits business on the
Speaker 3: pharmacy side. But these can be overcome.
Speaker 2: All right, Jonathan, thanks so much for joining us. Jonathan Palmer,
Speaker 2: senior healthcare analyso Bloomberg Intelligence, joining us via zoom talking
Speaker 2: about CBS Health the economics of the healthcare business. I
Speaker 2: don't pretend to understand that. I think one of the
Speaker 2: most complex businesses to analyze. So we're glad we have
Speaker 2: a smart people like Jonathan Parker.
Speaker 5: The cupons are good.
Speaker 4: The coupons are good. Coupons we get some really good
Speaker 4: coupons for CBS through our CBS care Mark.
Speaker 2: Yeah, but in New York City, in New York City Weekly, exactly,
Speaker 2: you believe it, exactly. There you go, stock off eight
Speaker 2: and a half percent today. So again, maybe this is
Speaker 2: a little bit of a kitchen sink moment for the company,
Speaker 2: and Jonathan Palmer suggested there is a path towards improved
Speaker 2: profitability there, So we'll see how they do their.
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Speaker 1: just say Alexa playing Bloomberg eleven thirty.
Speaker 2: China it's front center, not just for folks that invest
Speaker 2: in China or in emerging markets, but it's one could
Speaker 2: argue as the second largest economy in world. Everybody has
Speaker 2: to have a view on China. Our next guest, does
Speaker 2: Urar DiPippo, Senior geoeconomics analyst for Bloomberg Economics, joins us Geron.
Speaker 2: I guess the question a lot of people have as
Speaker 2: it releas to China is are their fiscal and monetary
Speaker 2: moves to support this economy? Are they enough? What do
Speaker 2: you think at this stage?
Speaker 6: So they've already announced monetary policies a few weeks ago,
Speaker 6: those by their centers are fairly aggressive. The big question
Speaker 6: is how big will the fiscal policies be. They the
Speaker 6: Ministry of Finance had a press conference on Saturday where
Speaker 6: reporters asked many questions, but they didn't provide any actual number.
Speaker 6: The reason for that is that in China, they actually
Speaker 6: need the legislator to approve any change in fiscal policy
Speaker 6: like government borrowing. They won't be meeting until probably late October,
Speaker 6: possibly early November, so we don't actually know, but I
Speaker 6: think that the general consensus is that there was sort
Speaker 6: of this initial euphoria in late September, which explains the
Speaker 6: massive stock market rally, that they were going to do
Speaker 6: this big bang stimulus. They kind of are on the
Speaker 6: monetary side, but it's not exactly clear yet whether they're
Speaker 6: going to do it on the fiscal side. But what
Speaker 6: sort of qualitatively what they're saying suggests that the early
Speaker 6: hopes of doing sort of a big consumer oriented fiscal
Speaker 6: stimulus that's likely not going to happen, but we're still
Speaker 6: waiting for the top line number.
Speaker 4: So what does this all mean for investors who are
Speaker 4: interested in equities in China?
Speaker 6: So I mean it was a good day for equities
Speaker 6: in China. The two big things that happened today were
Speaker 6: they put out their Q three data, which is generally
Speaker 6: above consensus, and how well it did, including for GDP.
Speaker 6: The other thing that might have helped for the stock
Speaker 6: market was that the PBAC reiterated that it has these
Speaker 6: these swap facilities, including to help companies buy back shares,
Speaker 6: which then puts up the stock market. In general. The
Speaker 6: stock market has done well over the last few weeks,
Speaker 6: but over the past year not so much. The Chinese
Speaker 6: stock market has sort of a feast or famine tendency
Speaker 6: when it comes to sort of boom and bus. This
Speaker 6: has happened over the past decade or so. It often
Speaker 6: sort of appears to underperform. Then there's a lot of euphoria,
Speaker 6: and then a lot of that is often based on
Speaker 6: what the government is doing. So I think what everyone
Speaker 6: is waiting for now is again, what is the actual
Speaker 6: top line number for fiscal fiscal stimulus, Because if it
Speaker 6: comes in below expectations. The rally, which has already given
Speaker 6: up some of its gains, could give up even more.
Speaker 6: But if it's actually at that level three trillion R
Speaker 6: and B, maybe more than you could see some upside.
Speaker 2: Hey, Gerard, I see that the China GDP numbers recently
Speaker 2: came out at rows four point six percent from last year.
Speaker 2: That's the slowest pace in six quarters. Is there still
Speaker 2: room to go in terms of decelerating booth or economists
Speaker 2: out there are they saying, hey, maybe we're atur near
Speaker 2: the bottom.
Speaker 6: So at Bloomerg Economics, we think they're probably at the
Speaker 6: bottom in terms of top line GDP growth, And in
Speaker 6: general the data was fairly good, so industrial production, retail sales,
Speaker 6: fixed ass and investment were all just slightly above the consensus.
Speaker 6: But the sort of broader bad news is that those
Speaker 6: things are still generally below the sequential trend. So consumption,
Speaker 6: particularly retail sales, is still well below its pre pandemic trend.
Speaker 6: And the bottom line is that even though the sort
Speaker 6: of top line number might have bottomed out, the economy
Speaker 6: needs more stimulus and that's what everyone's waiting for. And
Speaker 6: the big thing in particular, it's really two that are
Speaker 6: related one is the property sector with the government that
Speaker 6: intends to stabilize probably through stabilizing the purchases, not investment
Speaker 6: or prices per se. And the other thing that's related
Speaker 6: to that is consumption or consumer confidence, which is integral
Speaker 6: linked to the property sector, which is where people have
Speaker 6: their savings.
Speaker 4: So what further risks are out there, especially as we
Speaker 4: dig a bit deeper into the property market that they
Speaker 4: did say has still yet to stabilize.
Speaker 6: Well, so in the property sector, I mean, the main
Speaker 6: thing is that one of them is that the property
Speaker 6: developers are still in a tough spot. They are in
Speaker 6: the process of recapitalizing banks in parts of the banks
Speaker 6: can lend to the property developers and help stabilize that,
Speaker 6: but ultimately you have to get sales back, you have
Speaker 6: to basically get the confidence back in. And what's tricky
Speaker 6: for the Chinese government is they actually wanted to deflate
Speaker 6: the property center. It was a property bubble. They have
Speaker 6: deflated it. It needed to happen, But then what they
Speaker 6: don't want to do is reinflate it to restabilize the economy.
Speaker 6: So they're walking a sort of a tightrope at the moment.
Speaker 2: With that, what are the next data points that we
Speaker 2: need to be looking for for China here.
Speaker 6: I mean we would be the high frequency indicators like
Speaker 6: PMIS or in general things like retail sales. The thing
Speaker 6: that the event to look forward to would be the
Speaker 6: National People's Congress meeting that will be happening probably in
Speaker 6: a few weeks, and that is when they'll announce the
Speaker 6: big stimulus or whatever the number is.
Speaker 2: That'll be interesting to see because a lot of folks
Speaker 2: and a lot of I think investments are weighing in
Speaker 2: large part on what the Chinese government will do. We here, Gerard,
Speaker 2: thanks so much for joining us. Gerard to Pippo, senior
Speaker 2: geoeconomics fist for Bloomberg Economics, giving us the latest on
Speaker 2: the monetary fiscal stimulus in China. Again, the GDP last
Speaker 2: period rows four point six percent from last year, but
Speaker 2: that was the slowest pace in six years.
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Speaker 2: Our good friends over at Netflix and FLX is the
Speaker 2: ticker symbol. They reported numbers last night, beat the streets,
Speaker 2: some good guidance, some good discussion around kind of the
Speaker 2: growth out look. The stock's up ten percent today fifty
Speaker 2: two week hig. I'm guessing that's probably close to on
Speaker 2: an all time high three hundred and twenty five billion
Speaker 2: dollar market cap. I don't know what's going on there,
Speaker 2: Keith rag and Othin does because she's the analyst of
Speaker 2: Bloomberg Intelligence who follows Netflix. Boy, what happened last night?
Speaker 2: What did Netflix report? Ethan?
Speaker 7: Yeah, Netflix had an actually very very high quality earnings
Speaker 7: report last night, Paul. So they were up on subscriber metrics.
Speaker 7: They came in ahead of consensus. But I think really
Speaker 7: what excited the street was they were ahead in terms
Speaker 7: of guidance both for the fourth quarter revenue guidance as
Speaker 7: well as operating margin guidance, and their outlook for twenty
Speaker 7: twenty five was slightly ahead of consensus. And mind you,
Speaker 7: it was slightly ahead of consensus just based on subscriber growth.
Speaker 7: So the two big growth levers that you know, everybody
Speaker 7: was expecting they would pull. One was, of course, the
Speaker 7: ad business that doesn't look like it's going to be
Speaker 7: a huge contributor in twenty twenty five looks more like
Speaker 7: a twenty twenty six event. And then, of course the thing,
Speaker 7: the event that we were all waiting for, which was
Speaker 7: you know, a price increase on their standard plan in
Speaker 7: the US, and they didn't announce that. And so the
Speaker 7: fact that they're able to guide to double digit, solid
Speaker 7: double digit revenue growth without pulling any of those growth
Speaker 7: levers just tells us that there's a lot more Jews
Speaker 7: left in this business, even with you know, just playing subscriber.
Speaker 4: Growth, right, good news coming out of this report. Where
Speaker 4: are some areas that they could have done better? Is
Speaker 4: there any areas that people are critiquing?
Speaker 7: I think the areas that people are critiquing is really
Speaker 7: just the lack of disclosure around advertising. And one can
Speaker 7: understand why they are holding their cards close to their chest.
Speaker 7: So this is still a very small business. They have
Speaker 7: not disclosed the number of subscribers that they have on
Speaker 7: the ad tear and that's you know, color that investors
Speaker 7: and the whole investment community has kind of been looking
Speaker 7: for for a long time. But they did give us
Speaker 7: some qualitative kind of guidelines, right, They said that, yes,
Speaker 7: we are growing pretty fast, but it's off a small base.
Speaker 7: Don't expect the advertising business to be a huge growth
Speaker 7: driver in twenty twenty five, but I think come twenty
Speaker 7: twenty six, that completely changes.
Speaker 2: Where we on programming budgets Keith, because I think one
Speaker 2: of the things that you and you and I worked together,
Speaker 2: we were just shocked at the early days of Netflix
Speaker 2: and the types of money they were willing to spend,
Speaker 2: the billions of dollars they're willing to spend on their
Speaker 2: programming budget, and that forced everybody else to kind of
Speaker 2: keep pace. Where are they with their spending their spending strategy.
Speaker 2: Do they have to keep spending to get subscribers?
Speaker 7: I think they do, but they're doing it in a
Speaker 7: much more intelligent, much more efficient way. And the ROI
Speaker 7: on the content spend has absolutely, you know, increased so
Speaker 7: so much, Paul, And that's just because you know, it's
Speaker 7: been a function of just the operating leverage that they
Speaker 7: have in the model, with the scale and the way
Speaker 7: that they're able to spread those costs over you know,
Speaker 7: a two hundred and eighty five million subscriber base. So
Speaker 7: you know, yes, there has been some content cost rationalization
Speaker 7: across the board, including Netflix, They are still spending about
Speaker 7: seventeen billion dollars this year on content, which makes them
Speaker 7: one of the biggest spenders in the streaming space. They
Speaker 7: are planning to increase their budget a little bit going forward,
Speaker 7: so I think closed about eighteen billion dollars in twenty
Speaker 7: twenty five is what the general estimate is. But then again,
Speaker 7: remember they are looking to build out an AD business,
Speaker 7: and for ads you do need to invest in different
Speaker 7: kinds of programming, not really the entertainment programming. It probably
Speaker 7: has to be more a live sports or a live
Speaker 7: events type of strategy, and they I think are willing
Speaker 7: to kind of splurge on that to really build up
Speaker 7: and scale up that AD business.
Speaker 4: How's the debt looking on their balance sheet? I know
Speaker 4: there are big spenders, especially as we think about all
Speaker 4: the shows and the movies that they're rolling out. Are
Speaker 4: they staying above water?
Speaker 7: Oh, very very much so. They have about fourteen billion
Speaker 7: dollars in debt, but remember they have over seven billion
Speaker 7: dollars in cash on there on their balance sheet and
Speaker 7: they're going to throw out, you know, six billion this year.
Speaker 7: So absolutely in very very good shape.
Speaker 2: So the sixty four thousand dollars question geetha which I'm
Speaker 2: sure you get asked by your institutional investor clients all
Speaker 2: the time, is how about everybody else? When you see
Speaker 2: a Netflix quarter like this, you're like, boy, how's everybody
Speaker 2: else can to compete against these guys in the streaming world?
Speaker 2: What are you saying to them?
Speaker 7: Yeah, so they definitely Netflix has definitely won the streaming wars.
Speaker 7: They're going to keep it that way. You know, we
Speaker 7: know that they have about ten percent of all viewing
Speaker 7: time in the United States, so they obviously see much
Speaker 7: more upside for themselves to kind of grow. And I
Speaker 7: think that's exactly what's going to happen, you know, as
Speaker 7: they have more and more plans, you know, cheaper plans
Speaker 7: with of course the advertising based here, and of course
Speaker 7: as they have more and more must have content. So
Speaker 7: there's definitely the competitive intensity is absolutely easing, which allows
Speaker 7: them to be a dominant player. But I think also
Speaker 7: Netflix is really showing the other players how it's done.
Speaker 7: So one of the big points that came out yesterday
Speaker 7: from their earnings report was the fact that they've increased margins.
Speaker 7: Remember at the start of twenty twenty four they said
Speaker 7: twenty two percent operating margin. Yesterday, they're saying twenty seven
Speaker 7: percent operating margin for twenty twenty four. And remember, Paul,
Speaker 7: I mean you know this, well, the Bogie has always
Speaker 7: been about thirty thirty five percent margins, and it looks
Speaker 7: like they're going to be able to get there in
Speaker 7: the next couple of years. So this is going to
Speaker 7: be and probably even more profitable model than the traditional
Speaker 7: TV model, which is great news.
Speaker 2: Well can am I I'm not seeing that or are
Speaker 2: we going to see that with some of the other
Speaker 2: traditional media companies which are still chasing profitability Because you
Speaker 2: say it can be done, I'd go out there and
Speaker 2: take a flyer on Warner Brothers, Discovery. I take a
Speaker 2: flyer maybe even on Power Amount. If you're saying that
Speaker 2: model can be profitable, yeah, it.
Speaker 7: Can be profitable, but of course it depends on so
Speaker 7: many other factors. I think Disney is definitely in the
Speaker 7: strongest position to kind of replicate this success. The other
Speaker 7: is not so much because again, you know, scale is
Speaker 7: going to be a huge issue for them, Marketing costs
Speaker 7: is going to be a huge issue for them. They
Speaker 7: just don't have that cloud or the firepower that you know,
Speaker 7: Netflix and Disney kind of have with their IP and
Speaker 7: their franchises.
Speaker 4: I mean, after these results, it seems like a bit
Speaker 4: of a positive start so far. When we're thinking about
Speaker 4: those sort of former fameing names. What is the next
Speaker 4: thing that investors are looking for? Has the company talked
Speaker 4: anything about new projects that they're rolling out? What are
Speaker 4: investors on the watch for?
Speaker 7: Yeah, so the new projects right now? Rah. Of course,
Speaker 7: the big thing that everybody has kind of got their
Speaker 7: hat hanging on is the advertising business and how big
Speaker 7: that can potentially be when it takes off in a
Speaker 7: big way. They also, of course again are making this
Speaker 7: big you know splash or this big foray into live events.
Speaker 7: So you have you know, the NFL games that are
Speaker 7: going to come up, you have that Jake Paul Versus
Speaker 7: Mike Tyson event. The question is how many more of
Speaker 7: those are they going to do and will those actually
Speaker 7: be a big you know, needle mover for them, and
Speaker 7: then of course you would have them kind of taken
Speaker 7: you know, these baby steps in the in the gaming
Speaker 7: industry again not necessarily been a game changer so far,
Speaker 7: but over time it certainly can be. So they have
Speaker 7: these different ancillary revenue streams that can definitely build uh
Speaker 7: and kind of increase their not only their catalog of content,
Speaker 7: but also their competitive positioning as in strengthening their competitive positioning.
Speaker 8: I need I need some tips on how to get
Speaker 8: around the sharing.
Speaker 2: Well that's the thing. I mean, getha, that's sharing thing.
Speaker 4: Please?
Speaker 2: That's that that helps them out.
Speaker 7: Right them out huge, big time, big time, one hundred
Speaker 7: million subscribe versus the opportunity that they outlined there.
Speaker 2: So they've identified that. The Tucker offspring, I think is
Speaker 2: the dead beats like me to get around I know,
Speaker 2: all right, thanks so much. Keith wrong an oath and
Speaker 2: she's a medias for Bloomberg Intelligence. And I'll notice what's.
Speaker 8: The Netflix nowadays?
Speaker 2: Since I don't get it anymore? Oh you you were
Speaker 2: cripping off one of your kids.
Speaker 8: No, I'm not going to make yourself. It's called sharing,
Speaker 8: right is carring?
Speaker 3: Yes?
Speaker 2: Thank you? Sweeny shocked when this happened. Oh, I like
Speaker 2: they were calling like all like, Dad, would you do
Speaker 2: you cut us off?
Speaker 5: Said?
Speaker 2: I didn't cut you off.
Speaker 4: My dad was like, I don't even know how to
Speaker 4: work this cut it off.
Speaker 2: That's why we own the stock. It's one of the
Speaker 2: many reasons for Dead beats like you were off the
Speaker 2: doll So so that's important. And the advertising, is Keitha said,
Speaker 2: is a you know, twenty five twenty six event that
Speaker 2: investors can hold their hats on as they look for
Speaker 2: growth to continue to support that multiple.
Speaker 1: There you're listening to the Bloomberg Intelligence Podcast. Catch us
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Speaker 1: station Just Say Alexa Play Bloomberg eleven thirty.
Speaker 2: SAMAS officials they have confirmed the dethical maas leader Yagat Sinwar,
Speaker 2: who was said to be the architect behind October seventh
Speaker 2: attack order. Today, President Joe Biden spoke on Sinewar's death,
Speaker 2: seeing it as a quote moment of justice and quote
Speaker 2: while also renewing the call for a cease fire dealist
Speaker 2: take a listen.
Speaker 9: The death of leader AMAS represents a moment of justice.
Speaker 9: He had the blood of Americans and Israelis, Palestinians in Germany,
Speaker 9: and so many others on his hands. I told the
Speaker 9: Prime Minister Visil yesterday, let's also make this moment an
Speaker 9: opportunity to seek a path to piece a better future
Speaker 9: in Gaza without Amas.
Speaker 2: All right, That was President Biden earlier today speaking about
Speaker 2: the death of Sinwar's death, again calling it a moment
Speaker 2: of justice. Let's break it down a little bit farther.
Speaker 2: We talked geopolitics in the Middle East. Some smart voices
Speaker 2: help us out there. Jonathan Schanzer, He's the senior vice
Speaker 2: president for research. He's at the non partisan Foundation for
Speaker 2: Defense of Democracies think tank. Joins us from Washington, DC
Speaker 2: via zoom. Jonathan, what do you make of this latest news?
Speaker 2: I mean, the Israeli seemed to be quite successful targeting
Speaker 2: leaders of Hamas and Hesbola. What do you think their
Speaker 2: strategy is right now?
Speaker 10: Well, first, I think we need to acknowledge something that
Speaker 10: yesterday's strike against Sinwar was dumb luck. The Israelis have
Speaker 10: pulled off a lot of serious operations and places like
Speaker 10: Lebanon and Iran. In Gaza, this was the result of
Speaker 10: a couple of younger IDF soldiers simply happenstance falling upon
Speaker 10: Sinhwar's position. After a brief altercation, they called in a
Speaker 10: tank strike and ended up killing him. Really just a
Speaker 10: remarkable turn of events. But what the Israelis have done,
Speaker 10: you know, outside of this particular strike that killed Sinowar
Speaker 10: is they have just been using their intelligence advantage. They've
Speaker 10: been using their technology advantage to effectively evisceerate Hamas. They've
Speaker 10: got his balla on the ropes. They're now preparing for
Speaker 10: a strike against the Iranians. I think the expectation there
Speaker 10: is they're going to take away some of Iran's capabilities.
Speaker 10: This has been not the war that the Israelis wanted
Speaker 10: to fight. It's been a war of attrition. It's been
Speaker 10: fought in some cases on their turf that runs one
Speaker 10: hundred and eighty degrees away from their doctrine, which is
Speaker 10: fighting fast wars on other people's turf. But I do
Speaker 10: you get the sense right now that through these precisions, strikes,
Speaker 10: through the technology, through their comparative advantage, they're starting to
Speaker 10: gain the upper hand against the Iranians and six or
Speaker 10: seven in other proxies, which is truly a formidable axis
Speaker 10: that they are fighting. But you do get a sense
Speaker 10: that they're starting to make some headway.
Speaker 4: Jonathan, this war has been going on for over a year.
Speaker 4: What chapter are we in? How much closer Are we
Speaker 4: to a truce? What are people saying?
Speaker 10: Yeah, Look, I think there's a possibility of possibly getting
Speaker 10: to a truce with Hamas because they've just been eviscerated, right,
Speaker 10: I mean, I think they have to at some point
Speaker 10: understand that fighting is just not worth it any longer,
Speaker 10: not for the people of Gaza, not for the organization itself.
Speaker 10: They're still holding one hundred and one hostages, including I
Speaker 10: believe seven Americans right now. A deal can be cut
Speaker 10: that would end the fighting in Gaza. But I think
Speaker 10: we need to all be clear about something. This seven
Speaker 10: front war that the Iranians are waging against Israel, that's
Speaker 10: going to keep going, and we're seeing it now. His
Speaker 10: Ballas declared that they're going to up the ante and
Speaker 10: possibly use more advanced weapons against Israel than we've seen
Speaker 10: so far deployed in that theater. The Huthi's are still
Speaker 10: at it, the SAI militias in Iraq and Syria are
Speaker 10: still at it. Various terrorist groups that have been attacking
Speaker 10: Israel out of the West Bank they're still at it.
Speaker 10: And then of course there's Iran itself, which recently lobbed
Speaker 10: one hundred and eighty one ballistic missiles at Israel in
Speaker 10: one night. So this war is going to continue on
Speaker 10: other fronts. But certainly it would be welcome to see
Speaker 10: the fighting finally stop in Gaza. It would be a
Speaker 10: welcome relief for the people of Gaza, who really do
Speaker 10: I think, need to see that place go under some
Speaker 10: serious reconstruction, both politically and physically. That needs to happen
Speaker 10: sooner rather than later. But the war, the broader war
Speaker 10: in the Middle East, is going to continue.
Speaker 2: Yeah, Jonathan, it seems like, you know, in this year
Speaker 2: that there's been this hostilities in Middle East, it's gone
Speaker 2: from a limited war in Hamas to simply you know,
Speaker 2: evistrate Hamas and get the hostages back to a much
Speaker 2: much broader regional conflict, something that the US wanted to
Speaker 2: avoid here. But it feels like the Israelis recognize this
Speaker 2: as a moment in time where they can settle everything
Speaker 2: everywhere in the region. Is that what you're thinking at
Speaker 2: this point?
Speaker 10: Look, you know, I think first to frame this properly,
Speaker 10: you have to understand that what started with Hamas, it
Speaker 10: was never about you know, Hamas versus Israel, or Israel
Speaker 10: versus the Palestinians, or you know, a war in Gaza.
Speaker 10: This was an Iranian proxy hamas you know, waging more
Speaker 10: against Israel and then opening up multiple fronts at once,
Speaker 10: and so now we're seeing all those fronts, it's become
Speaker 10: even more clear. I think it was a clarifying the
Speaker 10: moment yesterday. With sinwar gone, you begin to see that
Speaker 10: these other fronts haven't stopped. If anything, they may actually
Speaker 10: only get hotter. And so I think for many of
Speaker 10: us here in the West, it was kind of an
Speaker 10: aha moment where we say, Okay, wow, this really is
Speaker 10: a wider war in Iran is behind it now? Israel
Speaker 10: I think has some choices in front of it, right,
Speaker 10: it can try to fight to a ceasefire in Lebanon
Speaker 10: where you know, maybe his Bala is forced to withdraw
Speaker 10: above the Latani River, which is you know, what was
Speaker 10: enshrined the international law after the last war in two
Speaker 10: thousand and six. But it doesn't solve for all of
Speaker 10: the other challenges that Israel still facing, these Sheite militias
Speaker 10: that have been firing drones and rockets and missiles at
Speaker 10: Israel over the last year. There's still a problem. The
Speaker 10: regime itself is still the big problem, and the biggest
Speaker 10: problem of all is that Iran is still flirting with
Speaker 10: that nuclear weapon. They may use all of this as
Speaker 10: a distraction to make a dash to that bomb, and
Speaker 10: then the entire map changes. In the Middle East. You've
Speaker 10: got basically a regime that is as malign as North
Speaker 10: Korea in the heart of the Middle East, threatening to
Speaker 10: pull the trigger at any time, and using, by the way,
Speaker 10: in nuke as the ultimate insurance policy to be able
Speaker 10: to continue the kind of mayhem that we've been watching.
Speaker 10: So the Israelis, I think, are looking at all these
Speaker 10: and I think they're clear eyed about it. They see
Speaker 10: the need to bring down the regime in Iran. I
Speaker 10: don't know if they can do so without help from
Speaker 10: the United States or maybe more importantly, help from the
Speaker 10: Iranian people. These are people that truly hate their regime,
Speaker 10: and I think we're now starting to see a strategy
Speaker 10: take shape where the Israelis. The Israeli Prime Minister spoke
Speaker 10: directly to the Iranian people a little bit more than
Speaker 10: a week ago, enlisting them in the battle against their
Speaker 10: mutual enemy.
Speaker 2: Jonathan, thanks so much for giving us a few minutes
Speaker 2: of your time. Really appreciated. Jonathan Schanzer, Senior vice president
Speaker 2: for research at the non partisan Foundation for Defensive Democracies.
Speaker 2: That's a think tank in Washington, DC. There are a
Speaker 2: lot of smart people out there that help us understand
Speaker 2: what's going on in a very difficult part of the world.
Speaker 2: We appreciate getting few minutes of Jonathan's time there.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty Normal.
Speaker 2: Linda sitting in for Alex Steele. I am Paul Sweeney.
Speaker 2: We're live here in our Bloomberg Interactive Broker's studio. We're
Speaker 2: streaming live on YouTube as well. To check us out there.
Speaker 2: Sylvia Jablonski joins us. She's a chief executive officer and
Speaker 2: chief investment officer Defiance ETFs. So we're gonna talk to
Speaker 2: market with Sylvia, and I also want to talk ETFs
Speaker 2: because I'm just continue to be shocked at the amount
Speaker 2: of money going into the ETF space. It's one of
Speaker 2: the great stories of my during my career on Wall
Speaker 2: Street to see the fun flow there. Sylvia, thanks so
Speaker 2: much for joining us here. We've got a lot of
Speaker 2: economic data that looks pretty solid. Maybe a lot of
Speaker 2: folks in that soft landing camp, I think they're feeling
Speaker 2: pretty comfortable with that kind of backdrop. Where are you
Speaker 2: telling your clients to all k capital these days?
Speaker 11: Hi, Paul, Thanks for having me, And first of all,
Speaker 11: I would like to have a best but to whiz
Speaker 11: her on the jersey you are with that sounds like
Speaker 11: a lot of fun. Yeah, I think you know, I
Speaker 11: think the markets are in a good spot, right we
Speaker 11: it all kind of started, the momentum restarted, I should say,
Speaker 11: with that job's number that looked a little bit better
Speaker 11: after concerns of the report prior. Inflation is looking good.
Speaker 11: So we have the situation now where monetary policy is
Speaker 11: becoming a little bit more favorable. We have steady jobs,
Speaker 11: we have wage growth, we have consumer sentiment, you know,
Speaker 11: pretty solid, and consumer spending and then earnings earnings are
Speaker 11: holding up, right, So while valuations are high, companies are
Speaker 11: proving that they're profitable and that they're continuing to grow.
Speaker 11: So it does feel a little bit like a goldilocks
Speaker 11: market right now, particularly you know, we're going into that
Speaker 11: seasonally strong time of year next month, we have an
Speaker 11: election year. I think it's it's going to be a
Speaker 11: pretty good ending to the you know, to the S
Speaker 11: and P five hundred and NASDAC, and so where do
Speaker 11: you allocate? You know, whenever the market pulls back on
Speaker 11: dips and AI stocks, I always buy them. We've talked
Speaker 11: about that. You know, a lot of people probably already
Speaker 11: know my picks there right then, videos the AMD's super
Speaker 11: micro micro strategies. But I'm also starting to allocate to XMAG.
Speaker 11: So the other two hundred and ninety three stocks in
Speaker 11: the S and P five hundred that are kind of
Speaker 11: forgotten over the last couple of years, I think they're
Speaker 11: going to start having their day in the sun.
Speaker 4: What areas are you avoiding?
Speaker 11: You know, I think the breath is increasing in the market,
Speaker 11: and I think that the overall market is starting to perform.
Speaker 11: So it's not that I'm necessarily avoiding a particular sector.
Speaker 11: I think if I look at the MAG seven for example,
Speaker 11: actually there's only two of them that are now outperforming
Speaker 11: the S and P five hundred, and that's Nvidia and
Speaker 11: Meta and the others, although Apple might have picked up
Speaker 11: after the last couple of days, but the others are
Speaker 11: kind of slowing down in terms of outperformance, and so
Speaker 11: I'm not really looking to pick up like the classic
Speaker 11: mag seven. But that's not to say that I'm selling
Speaker 11: the positions that I already have. I think if I
Speaker 11: just put new money to work, I'm going to be
Speaker 11: a little bit more thoughtful about where I diversify it,
Speaker 11: and that probably will be away from some of these
Speaker 11: names that have flown high.
Speaker 2: You've got excellon in your notes here. That's the name
Speaker 2: we don't talk about, I think enough here John Tucker
Speaker 2: and I were just talking about oil coming back down
Speaker 2: now below seventy dollars a hour for WTA crude oil.
Speaker 2: What's the investor call on Exxon.
Speaker 11: Yeah, I mean that's why I like it, right. I
Speaker 11: think it's it's come down quite a bit. But if
Speaker 11: you look at what's going on in the rest of
Speaker 11: the world, to me, this is this is a bit
Speaker 11: of a you know, a bit of a diversifier to
Speaker 11: the portfolio. First of all, it's again it's not the
Speaker 11: Max seven. It's in that four ninety three it's a
Speaker 11: strong company with a solid balance sheet. They pay a dividend,
Speaker 11: and I think the company's also well positioned, you know,
Speaker 11: whether whether or not. Of course, they're tied to oil
Speaker 11: and whatnot, but I think that they're doing a lot
Speaker 11: of investing in kind of you know, green energy and
Speaker 11: going climate neutral to twenty fifty, they'll be big players
Speaker 11: in that space because I think they've learned that they
Speaker 11: have to be evolved. So I just like that company overall.
Speaker 11: But I do think that oil is going to be
Speaker 11: a story. You know, there's so much going on in
Speaker 11: the Middle East right now. I don't think it's necessarily
Speaker 11: over and that's an impetus for potentially oil to spike
Speaker 11: throughout the months coming ahead. And then the other thing is,
Speaker 11: you know China, if we keep seeing China, if we
Speaker 11: see that stimulus there and we see the second largest
Speaker 11: economy in the world growing. You know, they're one of
Speaker 11: the biggest consumers of X products, and so I think
Speaker 11: that that company has a shot of growing.
Speaker 4: Here talk to me about healthcare. I know this is
Speaker 4: an area that can get really nitty, griny and niche,
Speaker 4: but what's going on?
Speaker 11: So healthcare again, this goes to my to my ex
Speaker 11: mag right, if you look at if you look at
Speaker 11: the MAG seven and then kind of start going down
Speaker 11: the list and start trying to look at the companies
Speaker 11: that are outperforming the S and P five hundred. You know,
Speaker 11: Eli Lie Lily is one of them. Can't talk today.
Speaker 11: I think you know, part of that is is the
Speaker 11: GLP one craze and the weight loss drugs, and you
Speaker 11: have you know, Novo and Lily playing in that space.
Speaker 11: But that company in particular has a big portfolio of drugs,
Speaker 11: whether it's Manjaro, whether it's you know, cancer drugs and
Speaker 11: FDA trials, Alzheimer's disease drugs on trials and things like this.
Speaker 11: But I think it's a macro story that's starting to
Speaker 11: play out. To be honest, I thought that these companies,
Speaker 11: these you know, big pharma companies would do better than
Speaker 11: they have sooner than they have. They're getting some steam now,
Speaker 11: but you know, you have this massive aging baby boom
Speaker 11: population people started to consume medical services and you know,
Speaker 11: these these products post COVID. I think that's going to continue.
Speaker 11: And just strong balance sheet. They pay a nice dividend,
Speaker 11: good diversifier, you know, defensive play for the market. So
Speaker 11: I do think it's worth looking at Sylvia.
Speaker 2: You know, when I was growing up on Wall Street,
Speaker 2: it was all about the mutual funds. Now, the funds
Speaker 2: flows over the last decade plus have just been extraordinary
Speaker 2: to this new rapper called the ETFs at your platform
Speaker 2: defines ETFs. What are you seeing today trips of funds
Speaker 2: flows and kind of where are they going?
Speaker 11: Yeah, I mean this was our best year yet. I
Speaker 11: think it was the best year yet for the ETF industry.
Speaker 11: I know you guys have Eric talking about that pretty
Speaker 11: regularly out there, but it's it's a multi trillion dollar
Speaker 11: business and state of the world now. And if you
Speaker 11: look at you know, these big mutual fund companies, I mean,
Speaker 11: they're all trying to figure out how they can do
Speaker 11: these conversions to ETF products because I think it's the
Speaker 11: way of the future. I mean, I'll say something bold.
Speaker 11: I don't think that you know, I have young kids.
Speaker 11: I don't think that they'll know what a mutual fund
Speaker 11: is by the time they're teenagers right when they invest.
Speaker 11: I mean, it'll be some it'll be like a you know,
Speaker 11: rotary phone or something like that. But I just think
Speaker 11: ETFs are a better product. Right, you can trade them
Speaker 11: throughout the day. They're transparent, and they're a lot cheaper,
Speaker 11: I think the days of expensive mutual funds, I mean,
Speaker 11: give or take a few. Like the market leaders, it's
Speaker 11: just like have their client base. I think they'll have
Speaker 11: it for a while, but you kind of have to
Speaker 11: adapt and go you know, cheaper, more transparent, unless it's
Speaker 11: like a super sophisticated active strategy, but that probably still
Speaker 11: works better than an ETF forepper. So I think growth
Speaker 11: continues there.
Speaker 2: Yeah, but when I was, they're not as profitable to me.
Speaker 2: When I'm trading for Salomon Brothers, I'm wearing Stanley back
Speaker 2: in the day.
Speaker 11: You're not going to make its much money as an advisor,
Speaker 11: that's for sure. And that's you know, but I think
Speaker 11: if you you know, the good news is that the
Speaker 11: types of ETFs that are out there are are more interesting.
Speaker 11: You know, there's a lot of great thematic products, options
Speaker 11: based products and things like this, and so an advisor
Speaker 11: I think can now be you know, really providing a
Speaker 11: good service by alerting ret tell clients of theirs that
Speaker 11: there's all this other stuff out there that they can
Speaker 11: get exposure to, including bitcoin, right, I mean Bitcoin wasn't
Speaker 11: a thing a few years ago within an ETF product.
Speaker 11: Now people are putting it in their IRA, so it's
Speaker 11: a different world.
Speaker 2: It is a different world, and as you mentioned, it
Speaker 2: is arguably much better for investors, and that's the most
Speaker 2: important thing. Sovia Jablonski, thanks so much for joining us
Speaker 2: chief executive officer and chief investment Officer for Defiance at ETFs.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Say Alexa playing Bloomberg eleven thirty.
Speaker 2: Romelina sitting in for Alex Deel poul Swinging. You live
Speaker 2: here in our Bloomberg Interactive Brokers studio. I'm going to
Speaker 2: get right to our next guest here. A very cool
Speaker 2: story here, Roland Martineque, CEO of Data Bank. Data Bank
Speaker 2: is a private company. Tell us what you guys do
Speaker 2: role because I think a lot of people are really
Speaker 2: interested in your business.
Speaker 5: Sure be here.
Speaker 12: Thanks for having me so, data Bank we're a US
Speaker 12: based company. We're a data center developer, data center. So
Speaker 12: we have over seventy data centers in twenty seven markets,
Speaker 12: giving us the largest geographic footprint of data centers in America.
Speaker 12: A data center, I like to say, if you know,
Speaker 12: it's basically the foundation for technology adoption. Right, you think
Speaker 12: about anything on your phone, anything on your computer, it
Speaker 12: basically originates and terminates in a data center. So we
Speaker 12: support over twenty five hundred customers, you know, from the
Speaker 12: major hyperscalers to major enterprises to smaller businesses that want
Speaker 12: to put their critical data, their applications, their services inside
Speaker 12: a hard and facility that a data center. Because obviously
Speaker 12: in today's world, everyone's really dependent on on their digital footprint.
Speaker 4: Throw me a few names of your customers.
Speaker 12: So Amazon, Google, Netflix, JP, Morgan, just A and C Bank, Carnival, Cruiser.
Speaker 2: Right, so even simple people like Nora, and I know,
Speaker 2: nor is much smarter than is the real estate business.
Speaker 2: I know that the data center business is a good business, booming,
Speaker 2: really good business. Some people want to invest with you
Speaker 2: and you just raise some capital. Talk to us about that.
Speaker 12: Yeah, So one thing about data centers is they're really expensive. Right,
Speaker 12: you know, we measure everything in power. We call it,
Speaker 12: you know, by the megawatt, which is a million watts.
Speaker 12: It costs about ten to twelve million dollars per megawat
Speaker 12: to build out data centers, and we're building data centers
Speaker 12: that are sixty megawats, seventy two megawats, forty megawatts. So
Speaker 12: you know, we're now in the kind of the billions
Speaker 12: range when it comes to these investments across the sector.
Speaker 12: So this week we announced that we had raised two
Speaker 12: billion of equity capital with Aussie Super which is an
Speaker 12: Australian pension fund, as our new lead investor, with a
Speaker 12: one point five billion dollar commitment.
Speaker 4: So, I mean, the tech industry moves fast and breaks things,
Speaker 4: but if you think about the utility industry, it's a
Speaker 4: bit slower and tries never to break anything at all. Obviously,
Speaker 4: you work as the middleman here. I'm curious, how do
Speaker 4: you manage the relationships between both ends.
Speaker 12: Yeah, that's a great question. Yeah, these two kind of
Speaker 12: galaxies are really colliding now.
Speaker 5: You know.
Speaker 12: Obviously we always were good partners with utilities, but over
Speaker 12: the last twenty four months, with the advent of generative AI,
Speaker 12: the demand for data center capacity has just skyrocketed. To
Speaker 12: give you some example, in twenty twenty let's say twenty
Speaker 12: twenty one RIP. Before chat GPT, there was probably about
Speaker 12: a gigawats seven hundred and fifty megawatts of absorption in
Speaker 12: the United States for new data center capacity. This year,
Speaker 12: the estimate is six gigawatts of new data center capacity
Speaker 12: will be absorbed. So our relationships with ver utilities are critical.
Speaker 12: And yes, they are more on the slow moving side, right.
Speaker 12: They're utilities that are regulated. They think of things in
Speaker 12: ten year cycles. Meanwhile our customers think of things in
Speaker 12: twelve month cycles. So there's a lot of activity going
Speaker 12: on there. But the utilities are, you know, working hard
Speaker 12: to try to figure out how they're going to meet
Speaker 12: the expected demand of AI over the coming decade.
Speaker 2: So what do you do when you develop a data
Speaker 2: center g you us assume the utilities can be there
Speaker 2: to support you, or do you build your own power there?
Speaker 2: Like John Tucker lakes to talk about these small.
Speaker 8: Well, you couldn't build your own power, Like if a
Speaker 8: littleminum produce al CoA had to build its own power
Speaker 8: its own dam in the wherever it was. But you
Speaker 8: can't do something.
Speaker 12: Like that technically, you can, I mean that self generation, right,
Speaker 12: that is becoming a topic that is much more discussed
Speaker 12: now than it was before.
Speaker 5: But ultimately, what we do is, you know, before we.
Speaker 12: Acquire land, we're already working with the utilities to understand
Speaker 12: where they have capacity on their platform.
Speaker 5: Right.
Speaker 12: We look for, you know, transmission lines that obviously carry
Speaker 12: the electrons, and then we'll buy a land kind of
Speaker 12: in close proximity to those transmission lines so that we
Speaker 12: can tap into them to grab power. And that's exactly
Speaker 12: what we did with the three announcements we made this year.
Speaker 12: We're building a four hundred and eighty megawat data center
Speaker 12: campus in Texas South Dallas. We worked with Encore there
Speaker 12: to identify that spot. We're building one hundred and twenty
Speaker 12: megawat data center campus in Atlanta. We worked with Georgia
Speaker 12: Power to again identify a suitable location.
Speaker 5: And then we're building one hundred and ninety two.
Speaker 12: Mega walk campus in Culpepper, Virginia, which is about fifty
Speaker 12: miles south of kind of data center.
Speaker 8: Ally as when are you eyeing nuclear plants?
Speaker 12: No, most of the power here is kind of there's
Speaker 12: a it's a grid mix, right, So like in Texas,
Speaker 12: you know, Encore is you know, very proactive in terms
Speaker 12: of connecting new generation there, believe it or not. As
Speaker 12: an example, you know, on any given sunny day in Texas,
Speaker 12: you know, forty five percent of the power is coming
Speaker 12: from solar, wind and batteries. So there's been a huge
Speaker 12: investment in those kind of renewable power generation sources.
Speaker 2: You get in Dallas, right we are. We just had
Speaker 2: a story your pension. You've got a pension problem in
Speaker 2: your city, right and like an incredibly unfunded pension. And
Speaker 2: I looked at this story. I like, there's a million
Speaker 2: companies like your smart young companies fucking to Texas, fucking
Speaker 2: to Dallas. I don't know how you guys got yourself
Speaker 2: in that pickle in the city of Dallas. But that's
Speaker 2: another story for another time. So talk to us about
Speaker 2: this investment here. I mean, what are the Australians are they?
Speaker 2: Did they see this as an AI play for them?
Speaker 2: What's the angle for them?
Speaker 5: Yeah?
Speaker 12: I mean what's great about our business is that, you know,
Speaker 12: we're really a pick and shoble business, right. You know,
Speaker 12: data centers are agnostic. It doesn't matter what technology you
Speaker 12: put into a data center. All that matters is that
Speaker 12: people consume technology That's what I love about our business
Speaker 12: that you know, we're really indexed to technology adoption, and
Speaker 12: I would argue humans are addicted to technology, right, and
Speaker 12: that because of that, we think there's going to be
Speaker 12: you know, long term demand. So so you know, these
Speaker 12: investments are very long term investments. You know, we build
Speaker 12: a data center, you know, we expected to have an
Speaker 12: operational life of thirty to forty years. In fact, you know,
Speaker 12: there's the data center sector really has only been around
Speaker 12: for about twenty five years, so you still have assets
Speaker 12: that were.
Speaker 5: Built in the nineties.
Speaker 12: They're in the dot com bubble that are still relevant
Speaker 12: and active today. So Australian Super they're looking to support
Speaker 12: us as we build out this eight hundred and fifty
Speaker 12: megawatts that I just described over these three campuses, and
Speaker 12: this equity will help us build those facilities.
Speaker 4: I mean, there's insatiable demand right now in the market.
Speaker 4: How are you all thinking about sustainability, I know you
Speaker 4: mentioned renewable power.
Speaker 12: Yeah, so the good news is is that you know,
Speaker 12: there's a commitment with the sector, and there's a commitment
Speaker 12: from the largest consumers of data center capacity, which are
Speaker 12: the hyperscalers, to a renewable future, so ourselves obviously all
Speaker 12: the major hyperscalers, we all have kind.
Speaker 5: Of carbon neutral net zero goals.
Speaker 12: Ours is for twenty thirty and the major hyperscalers are
Speaker 12: also in that range. You know, they are the largest consumers.
Speaker 5: Of renewable energy in the world.
Speaker 12: I've just read recently because of Google's announcement about that
Speaker 12: nuclear that they consume fourteen gigawatts of renewable energy. So
Speaker 12: these companies have a corporate commitment to renewables and that
Speaker 12: creates a demand signal for people to invest because they
Speaker 12: know there's going to be a buyer for that product.
Speaker 2: Ro thank you so much for coming in. Really appreciate it.
Speaker 2: Fascinating story. Raoul Martineck. He is the CEO of a
Speaker 2: Data bank. Is the company sup private company based down
Speaker 2: in Dallas, Texas, the data center of business.
Speaker 1: Boy.
Speaker 2: I know that's a great business. So interesting story there.
Speaker 2: Of course.
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