1 00:00:02,080 --> 00:00:05,880 Speaker 1: This is Bloomberg Intelligence with Alex Steel and Paul Sweeney. 2 00:00:06,000 --> 00:00:09,240 Speaker 2: The real app performance has been the US corporate high yield. 3 00:00:09,360 --> 00:00:11,720 Speaker 3: Are the companies lean enough? Have they trimmed all the fats? 4 00:00:11,800 --> 00:00:15,680 Speaker 2: The semiconductor business is a really cyclical business. 5 00:00:15,120 --> 00:00:18,680 Speaker 1: Breaking market headlines and corporate news from across the globe. 6 00:00:18,760 --> 00:00:21,360 Speaker 3: Do investors like the M and A that we've seen? 7 00:00:21,600 --> 00:00:24,640 Speaker 2: These are two big time blue chip companies. 8 00:00:24,720 --> 00:00:28,440 Speaker 4: The window between the peak and cut changing super fast. 9 00:00:28,600 --> 00:00:32,159 Speaker 1: Bloomberg Intelligence with Alex Steel and Paul Sweeney. 10 00:00:31,960 --> 00:00:36,479 Speaker 5: On Bloomberg Radio. I'm Paul Sweeney and I'm John Tucker 11 00:00:36,479 --> 00:00:37,600 Speaker 5: filling in for Alex Steele. 12 00:00:37,840 --> 00:00:39,360 Speaker 6: On Today's Bloomberg Intelligence Show. 13 00:00:39,360 --> 00:00:42,200 Speaker 2: We dig inside the big business stories impacting Wall Street 14 00:00:42,200 --> 00:00:43,120 Speaker 2: and the global markets. 15 00:00:43,200 --> 00:00:45,599 Speaker 5: Each and every week we provide in depth research and 16 00:00:45,720 --> 00:00:48,240 Speaker 5: data on some two thousand companies of one hundred and 17 00:00:48,240 --> 00:00:50,879 Speaker 5: thirty industries our analysts cover worldwide. 18 00:00:51,040 --> 00:00:53,760 Speaker 2: Today, we'll look at how a future Donald Trump presidency 19 00:00:53,800 --> 00:00:55,280 Speaker 2: will impact electric vehicles. 20 00:00:55,360 --> 00:00:57,880 Speaker 5: Plus we're going to discuss why shares of Tyson Food 21 00:00:58,000 --> 00:00:59,920 Speaker 5: surge the most in more than two years. 22 00:01:00,240 --> 00:01:02,440 Speaker 2: But first we dive into corporate earnings from the media 23 00:01:02,480 --> 00:01:03,960 Speaker 2: and entertainment giant Walt Disney. 24 00:01:04,240 --> 00:01:07,160 Speaker 5: Walt Disney reported fourth quarter sales and profit that beat 25 00:01:07,200 --> 00:01:10,920 Speaker 5: Wall Street expectations and forecast earnings growth for the next 26 00:01:10,959 --> 00:01:11,720 Speaker 5: three years. 27 00:01:12,000 --> 00:01:14,040 Speaker 2: For more, John and I were joined by Githa Raganathan, 28 00:01:14,040 --> 00:01:16,640 Speaker 2: Bloomberg Intelligence analysts on US media. 29 00:01:16,720 --> 00:01:19,640 Speaker 5: First, we asked Keitha for her take on Disney's most 30 00:01:19,760 --> 00:01:20,480 Speaker 5: recent quarter. 31 00:01:21,040 --> 00:01:23,640 Speaker 4: What we saw was a lot of guidance, and we've 32 00:01:23,720 --> 00:01:26,920 Speaker 4: never seen guidance laid out like this for us ever before. 33 00:01:26,959 --> 00:01:29,640 Speaker 4: I mean, this was line by line item guidance for 34 00:01:29,800 --> 00:01:32,600 Speaker 4: each of the different subdivisions at Disney, whether you know 35 00:01:32,680 --> 00:01:35,080 Speaker 4: it was the theme park business or the streaming or 36 00:01:35,160 --> 00:01:38,560 Speaker 4: movie studios. They kind of gave us, you know, segment 37 00:01:38,600 --> 00:01:41,759 Speaker 4: by segment numbers and exactly what to expect. And really 38 00:01:41,800 --> 00:01:45,280 Speaker 4: the biggest thing for Disney over the past few quarters 39 00:01:45,280 --> 00:01:47,920 Speaker 4: has just been this lack of visibility and so much 40 00:01:47,920 --> 00:01:51,960 Speaker 4: of investor uncertainty, and they just cleared it all up 41 00:01:52,000 --> 00:01:55,480 Speaker 4: in this one, you know, fell swoop with this earnings report. 42 00:01:55,560 --> 00:01:57,320 Speaker 2: They never did that for me, getha, I always had 43 00:01:57,360 --> 00:01:59,120 Speaker 2: to guess and all that stuff. But for you, they 44 00:01:59,160 --> 00:02:01,920 Speaker 2: just started up on silk platter. What got your attention 45 00:02:02,200 --> 00:02:03,600 Speaker 2: the most from some of this guidance, What do you 46 00:02:03,600 --> 00:02:04,560 Speaker 2: think the street really likes? 47 00:02:04,960 --> 00:02:07,200 Speaker 4: I think what the street really likes is you have 48 00:02:07,480 --> 00:02:11,560 Speaker 4: high single digit EPs growth. Remember the street was projecting 49 00:02:11,600 --> 00:02:15,320 Speaker 4: about four to five percent, So that's a nice uptick 50 00:02:15,360 --> 00:02:17,799 Speaker 4: there for twenty twenty five, and then going into twenty 51 00:02:17,840 --> 00:02:20,520 Speaker 4: twenty six and twenty twenty seven, they're looking at double 52 00:02:20,600 --> 00:02:24,400 Speaker 4: digit earnings growth. And the other bright spots were, you know, 53 00:02:24,480 --> 00:02:26,359 Speaker 4: the theme park business. Now, we do know that there 54 00:02:26,440 --> 00:02:28,679 Speaker 4: is a moderation when it comes to the domestic theme 55 00:02:28,720 --> 00:02:30,880 Speaker 4: park business, but it looks like things might not be 56 00:02:31,080 --> 00:02:34,200 Speaker 4: actually as bad as we had feared. So domestic parks 57 00:02:34,240 --> 00:02:37,520 Speaker 4: actually performed a little bit better than we expected. And 58 00:02:37,560 --> 00:02:40,800 Speaker 4: then they talked about some weakness going into the fiscal 59 00:02:40,840 --> 00:02:43,799 Speaker 4: first quarter. Remember we did have those two big hurricanes 60 00:02:43,840 --> 00:02:46,800 Speaker 4: in Florida. They do have a lot of cruise ships 61 00:02:46,800 --> 00:02:48,400 Speaker 4: that they're launching, and so there's going to be some 62 00:02:48,480 --> 00:02:51,000 Speaker 4: launch costs weighing on profit. But then you get into 63 00:02:51,040 --> 00:02:53,079 Speaker 4: the second half of fiscal twenty twenty five and they're 64 00:02:53,120 --> 00:02:55,280 Speaker 4: expecting those cruise ships to contribute in a big way 65 00:02:55,680 --> 00:02:57,919 Speaker 4: and kind of the theme parks to also come back. 66 00:02:57,960 --> 00:03:01,360 Speaker 4: So I think that's again some source of you know, 67 00:03:01,440 --> 00:03:03,440 Speaker 4: investor optimism and confidence. 68 00:03:04,360 --> 00:03:06,840 Speaker 5: I get this streaming part. I'm not sure that I 69 00:03:06,919 --> 00:03:10,560 Speaker 5: understand that linear TV part and why that's still part 70 00:03:10,560 --> 00:03:11,320 Speaker 5: of the empire. 71 00:03:12,880 --> 00:03:15,600 Speaker 4: Yeah, nobody understands it, john And that was actually a 72 00:03:15,720 --> 00:03:19,160 Speaker 4: question for Hugh Johnston and Bob Eygert at the earnings call. 73 00:03:19,240 --> 00:03:22,080 Speaker 4: They're like, you know, why should you be holding onto 74 00:03:22,120 --> 00:03:25,680 Speaker 4: this business? You know, Comcast just recently said that they're 75 00:03:25,680 --> 00:03:28,519 Speaker 4: going to be kind of considering spinning off their cable 76 00:03:28,560 --> 00:03:31,360 Speaker 4: TV network business. And remember, the big thing that's really 77 00:03:31,400 --> 00:03:35,040 Speaker 4: coming up for Disney in twenty twenty five is that 78 00:03:35,080 --> 00:03:39,240 Speaker 4: they are launching this standalone ESPN product. And if they 79 00:03:39,240 --> 00:03:43,120 Speaker 4: had any reservations in the past about jettisoning, you know, 80 00:03:43,160 --> 00:03:45,240 Speaker 4: the TV network's business because they were tied to the 81 00:03:45,280 --> 00:03:49,080 Speaker 4: bundle through ESPN, you know, this kind of definitely opens 82 00:03:49,160 --> 00:03:51,480 Speaker 4: up the field for them and it no longer ties 83 00:03:51,520 --> 00:03:53,560 Speaker 4: them down to the bundle. So they were asked the question, 84 00:03:53,920 --> 00:03:56,200 Speaker 4: they said that they're not looking into it. They like 85 00:03:56,240 --> 00:03:58,760 Speaker 4: their portfolio just the way it is. But we really 86 00:03:58,800 --> 00:04:02,160 Speaker 4: think that once they get that ESPN standalone of streaming 87 00:04:02,200 --> 00:04:05,440 Speaker 4: service up and running, they surely will kind of look 88 00:04:05,480 --> 00:04:08,520 Speaker 4: into doing something more dramatic, I think with the TV networks, 89 00:04:08,640 --> 00:04:13,280 Speaker 4: especially given you know, a regulatory change. 90 00:04:11,960 --> 00:04:15,000 Speaker 2: To talk to us about the streaming business. They've finally 91 00:04:15,360 --> 00:04:18,200 Speaker 2: turned profitable on that business. Give us the delta that 92 00:04:18,279 --> 00:04:20,919 Speaker 2: you think that streaming business go through from losses to 93 00:04:21,040 --> 00:04:21,880 Speaker 2: potential profits. 94 00:04:21,880 --> 00:04:24,680 Speaker 4: Here, big big turnaround, Paul, And I mean this was 95 00:04:24,720 --> 00:04:26,960 Speaker 4: really the big story for twenty twenty four. To go 96 00:04:27,040 --> 00:04:30,120 Speaker 4: from four billion in losses in twenty twenty two, two 97 00:04:30,200 --> 00:04:32,520 Speaker 4: and a half billion in losses in twenty twenty three, 98 00:04:32,800 --> 00:04:36,719 Speaker 4: to finally squeaking out a profit here in twenty twenty four. 99 00:04:36,760 --> 00:04:39,080 Speaker 4: And remember they've just barely broken even, so about one 100 00:04:39,120 --> 00:04:41,560 Speaker 4: hundred and fifty million dollars in profit. But the whole 101 00:04:41,600 --> 00:04:43,960 Speaker 4: story is how they kind of build on that one 102 00:04:44,040 --> 00:04:46,919 Speaker 4: hundred and fifty million dollars. So you know, Netflix this 103 00:04:47,000 --> 00:04:50,359 Speaker 4: year is going to report about ten billion dollars in profit, 104 00:04:50,640 --> 00:04:52,719 Speaker 4: and I think there's some encouraging commentary, so they already 105 00:04:52,760 --> 00:04:55,880 Speaker 4: kind of guided. They gave us actually hard numbers for 106 00:04:56,040 --> 00:05:00,480 Speaker 4: the streaming profit for both fiscal twenty twenty five and six. 107 00:05:00,600 --> 00:05:03,520 Speaker 4: Twenty twenty five, they said over a billion dollars in profit, 108 00:05:04,120 --> 00:05:05,880 Speaker 4: and in twenty twenty six they actually gave us a 109 00:05:05,960 --> 00:05:09,279 Speaker 4: margin number, double digit margins. And remember this is the 110 00:05:09,279 --> 00:05:13,440 Speaker 4: big story. Everybody is chasing those twenty five percent operating 111 00:05:13,480 --> 00:05:16,359 Speaker 4: margins that Netflix has already achieved, and so Disney is. 112 00:05:16,440 --> 00:05:18,160 Speaker 4: It looks like, I mean, they obviously have a lot 113 00:05:18,160 --> 00:05:20,599 Speaker 4: of catching up to do, but they're closing in. 114 00:05:20,680 --> 00:05:24,080 Speaker 5: Our Thanks to Githa Raganath in Bloomberg Intelligence analyst on 115 00:05:24,320 --> 00:05:25,400 Speaker 5: US media, this. 116 00:05:25,400 --> 00:05:28,279 Speaker 2: Week, we focused on a Bloomberg Big Take story entitled 117 00:05:28,360 --> 00:05:32,160 Speaker 2: Trump's win puts Musk in the White House's new C suite. 118 00:05:32,400 --> 00:05:34,640 Speaker 5: You can find it on Bloomberg dot com and on 119 00:05:34,720 --> 00:05:37,760 Speaker 5: the terminal. The story looks at how Tesla CEO Elon 120 00:05:37,839 --> 00:05:40,200 Speaker 5: Musk spent at least one hundred and thirty two million 121 00:05:40,240 --> 00:05:43,080 Speaker 5: dollars to help Donald Trump's re election as US president 122 00:05:43,400 --> 00:05:46,280 Speaker 5: and now Musk we'll have a role in Trump's new administration. 123 00:05:46,800 --> 00:05:48,720 Speaker 2: For more, guest host Jess Meant and I were joined 124 00:05:48,720 --> 00:05:52,039 Speaker 2: by one of the story's authors, Max Chafkin, Bloomberg BusinessWeek 125 00:05:52,160 --> 00:05:55,239 Speaker 2: Senior reporter. We first asked Max what we know about 126 00:05:55,240 --> 00:05:56,679 Speaker 2: Elon Muck's new role. 127 00:05:56,760 --> 00:05:58,039 Speaker 6: And we learned a little bit more. 128 00:05:58,120 --> 00:06:01,240 Speaker 7: Just after this story was published, Donald Trump made something 129 00:06:01,240 --> 00:06:04,120 Speaker 7: official that he had teased and that Elon Musk can 130 00:06:04,160 --> 00:06:07,440 Speaker 7: tease repeatedly on the campaign trail, Elon Musk will be 131 00:06:07,600 --> 00:06:12,720 Speaker 7: the person charged with providing advice on the streamlining of government. Now, 132 00:06:12,720 --> 00:06:15,520 Speaker 7: that could mean any number of things. It could mean, 133 00:06:15,680 --> 00:06:19,039 Speaker 7: I think very little. It could also mean that, as 134 00:06:19,160 --> 00:06:23,200 Speaker 7: Donald Trump prepares to enact his you know, very ambitious agenda, 135 00:06:23,920 --> 00:06:26,159 Speaker 7: that Elon Musk will be at his side, and that'll 136 00:06:26,160 --> 00:06:29,000 Speaker 7: be my bad. I mean, I think the job thing 137 00:06:29,720 --> 00:06:32,920 Speaker 7: is probably a distraction. You know, the most important question 138 00:06:33,240 --> 00:06:35,520 Speaker 7: in the Trump White House is who has Trump's ear, 139 00:06:35,920 --> 00:06:39,000 Speaker 7: and right now that's Elon Musk. And I think as 140 00:06:39,040 --> 00:06:41,000 Speaker 7: we put together the story and as I've been thinking 141 00:06:41,040 --> 00:06:44,240 Speaker 7: about this, you know, Elon Musk throws him into these companies, 142 00:06:44,240 --> 00:06:47,679 Speaker 7: and famously he has six different companies, you know, Tesla 143 00:06:47,760 --> 00:06:50,479 Speaker 7: and SpaceX, his car company, and rocket Company being. 144 00:06:50,279 --> 00:06:50,839 Speaker 6: The big ones. 145 00:06:51,080 --> 00:06:53,719 Speaker 7: I think we need to start thinking about politics, and 146 00:06:53,760 --> 00:06:57,000 Speaker 7: in particular Elon Musk's role in right wing politics, whether 147 00:06:57,040 --> 00:07:00,000 Speaker 7: it's the Trump the next Trump administration, or even beyond 148 00:07:00,080 --> 00:07:03,520 Speaker 7: on that as his other big company, as something that 149 00:07:03,560 --> 00:07:05,480 Speaker 7: he is going to be devoting a lot of time 150 00:07:05,560 --> 00:07:09,200 Speaker 7: to and trying to use it frankly to benefit his 151 00:07:09,440 --> 00:07:10,160 Speaker 7: other interests. 152 00:07:10,520 --> 00:07:14,120 Speaker 8: Leading a commission specifically outside of government, Elon Musk doesn't 153 00:07:14,120 --> 00:07:17,240 Speaker 8: have to divest his personal and financial holdings when making 154 00:07:17,240 --> 00:07:20,080 Speaker 8: recommendations to the White House on federal spending and regulations 155 00:07:20,360 --> 00:07:21,840 Speaker 8: that he wants to cut. I mean, what sort of 156 00:07:21,880 --> 00:07:24,240 Speaker 8: precedents do we have for something that's created sort of 157 00:07:24,280 --> 00:07:27,760 Speaker 8: that's supposed to be specifically outside government, And what power 158 00:07:27,800 --> 00:07:30,080 Speaker 8: can he yield and not yield? Do we have any indications? 159 00:07:30,160 --> 00:07:33,960 Speaker 7: Sure have been lots of presidential commissions. You know, this 160 00:07:34,480 --> 00:07:37,559 Speaker 7: kind of thing is not necessarily anything new. It's really 161 00:07:37,640 --> 00:07:41,640 Speaker 7: just a question of how closely is Donald Trump listening 162 00:07:41,680 --> 00:07:44,640 Speaker 7: to it? And when Elon Musk, He's suggested all kinds 163 00:07:44,680 --> 00:07:47,120 Speaker 7: of very radical things, things that are likely to be 164 00:07:47,480 --> 00:07:51,600 Speaker 7: either difficult to achieve, like practically working within the confines 165 00:07:51,640 --> 00:07:55,640 Speaker 7: of government, or wildly unpopular or both. So you know, 166 00:07:55,720 --> 00:07:58,120 Speaker 7: he's said he suggested, for instance, that he's going to 167 00:07:58,200 --> 00:08:02,000 Speaker 7: twitter the US governmentsuggessing, you know, massive layoffs. Remember he 168 00:08:02,080 --> 00:08:05,040 Speaker 7: laid off eighty percent of the Twitter staff. He is 169 00:08:05,080 --> 00:08:07,440 Speaker 7: not going to lay off eighty percent of the US government. 170 00:08:07,440 --> 00:08:10,360 Speaker 7: I think that would be a very very very surprising 171 00:08:10,400 --> 00:08:12,880 Speaker 7: thing if it were to happen that said, you know, 172 00:08:13,080 --> 00:08:17,320 Speaker 7: Trump has has is going to try to defund aspects 173 00:08:17,360 --> 00:08:20,000 Speaker 7: of the government, and it really seems like Elon Musk 174 00:08:20,120 --> 00:08:23,520 Speaker 7: is going to play a role in deciding what gets defunded, 175 00:08:23,680 --> 00:08:26,240 Speaker 7: which is of course, is going to raise all sorts 176 00:08:26,240 --> 00:08:30,360 Speaker 7: of ethical concerns and questions. And because because there are 177 00:08:30,480 --> 00:08:34,280 Speaker 7: ways that President Trump, president elect Trump is going to 178 00:08:34,280 --> 00:08:38,280 Speaker 7: be in a position to say, squash investigations into Elon 179 00:08:38,360 --> 00:08:42,040 Speaker 7: Musk companies, or direct funds to Elon musk companies, or 180 00:08:42,080 --> 00:08:46,600 Speaker 7: slow down some of Elon Musk's competitors, and and so 181 00:08:46,760 --> 00:08:48,839 Speaker 7: you know, it's it's it's going to keep journalists busy. 182 00:08:48,840 --> 00:08:51,920 Speaker 7: It's gonna I'm sure that the left is going to 183 00:08:52,800 --> 00:08:54,839 Speaker 7: be very focused on this over the next couple of 184 00:08:54,920 --> 00:08:58,240 Speaker 7: years because Elon Musk, who's a polarizing guy, is going 185 00:08:58,320 --> 00:08:59,920 Speaker 7: to be tied to this administration very closely. 186 00:09:00,200 --> 00:09:03,120 Speaker 2: I mean, Elon Musk, you cite it in your article, 187 00:09:03,120 --> 00:09:07,040 Speaker 2: and you just mentioned here all the companies he runs, Tesla, SpaceX, 188 00:09:07,200 --> 00:09:09,679 Speaker 2: orally on and on and on. How many hours in 189 00:09:09,679 --> 00:09:10,520 Speaker 2: a day does this guy have? 190 00:09:10,960 --> 00:09:13,320 Speaker 6: I mean, I mean, I mean, you know you have. 191 00:09:13,640 --> 00:09:17,040 Speaker 8: Mentioned when you think about how many companies to plays 192 00:09:17,040 --> 00:09:17,440 Speaker 8: a lot. 193 00:09:17,280 --> 00:09:20,160 Speaker 7: Of video games, which you know is one of the 194 00:09:20,559 --> 00:09:23,720 Speaker 7: many head scratchers with this extraordinary man. 195 00:09:24,160 --> 00:09:26,719 Speaker 6: Uh. I think we've seen. 196 00:09:26,640 --> 00:09:30,160 Speaker 7: Investors in some of these other companies get concerned. And 197 00:09:30,520 --> 00:09:32,920 Speaker 7: you know, right now we're in the middle of this 198 00:09:33,000 --> 00:09:36,160 Speaker 7: kind of honeymoon phase. You know, there's a mania to 199 00:09:36,240 --> 00:09:38,959 Speaker 7: the way Elon Musk is talking about this stuff. Is 200 00:09:39,000 --> 00:09:41,600 Speaker 7: in mar A Lago, he's in Washington. You know, Trump 201 00:09:41,640 --> 00:09:44,240 Speaker 7: family members are referring to him as uncle Elon. 202 00:09:44,600 --> 00:09:46,000 Speaker 6: You got to think that. 203 00:09:45,920 --> 00:09:48,720 Speaker 7: This is not going to last, and if it were 204 00:09:48,760 --> 00:09:50,520 Speaker 7: to last, that there would be a bit of a 205 00:09:50,559 --> 00:09:54,440 Speaker 7: coutdown because because as you say, Tesla is a big, 206 00:09:54,640 --> 00:09:58,199 Speaker 7: complicated company with lots of challenges, and right now we're 207 00:09:58,200 --> 00:10:00,480 Speaker 7: seeing a lot of investors bid up the stop, but 208 00:10:00,559 --> 00:10:03,120 Speaker 7: there isn't a ton of It's not like there's a 209 00:10:03,120 --> 00:10:06,800 Speaker 7: clear rationale for why Tesla is suddenly worth like forty 210 00:10:06,800 --> 00:10:10,200 Speaker 7: percent more than it was before the election, except that, hey, 211 00:10:10,240 --> 00:10:12,840 Speaker 7: maybe Trump's gonna make things better. But but you know, 212 00:10:12,880 --> 00:10:15,920 Speaker 7: they're gonna be challenges and distraction is going to be 213 00:10:15,920 --> 00:10:17,839 Speaker 7: something that we're gonna be looking at. 214 00:10:18,040 --> 00:10:20,520 Speaker 8: And what about ev policies because it seemed like they 215 00:10:20,520 --> 00:10:24,160 Speaker 8: were more beneficial toward Tesla maybe under the Biden administration 216 00:10:24,280 --> 00:10:26,920 Speaker 8: rather than the prior Trump administration. So how does this 217 00:10:26,960 --> 00:10:29,200 Speaker 8: sort of shift? And you have kind of the Trump 218 00:10:29,240 --> 00:10:29,800 Speaker 8: two point. 219 00:10:29,679 --> 00:10:30,160 Speaker 4: Zero coming up. 220 00:10:30,200 --> 00:10:32,080 Speaker 7: And this is one of the things that's so strange 221 00:10:32,120 --> 00:10:36,959 Speaker 7: because Elon Musk became much more conservative during the Biden years, 222 00:10:37,200 --> 00:10:40,160 Speaker 7: but the Bid years were incredibly good to Tesla. 223 00:10:40,240 --> 00:10:43,160 Speaker 6: Tesla's value, you know, shot way up. 224 00:10:43,400 --> 00:10:45,760 Speaker 7: It went from being kind of a niche player to 225 00:10:45,920 --> 00:10:50,240 Speaker 7: one of the large American car companies. And you know, Trump, 226 00:10:50,280 --> 00:10:53,880 Speaker 7: as you kind of hint, was very critical about electric 227 00:10:54,000 --> 00:10:56,320 Speaker 7: vehicles on the campaign trail. Now, now there are two 228 00:10:56,360 --> 00:10:58,840 Speaker 7: things here that are probably worth bringing up. One is 229 00:10:59,160 --> 00:11:01,440 Speaker 7: where Tesla is now is very different than it was 230 00:11:01,679 --> 00:11:03,880 Speaker 7: four or five years ago. And you could make an 231 00:11:03,960 --> 00:11:06,960 Speaker 7: argument that these electric vehicle subsidies actually do more for 232 00:11:07,040 --> 00:11:09,600 Speaker 7: Tesla's competitors than they do for Tesla itself. 233 00:11:09,760 --> 00:11:11,680 Speaker 6: So like, if you were to remove all. 234 00:11:11,559 --> 00:11:15,480 Speaker 7: These subsidies, yes, it might cost Tesla investors money, but 235 00:11:15,679 --> 00:11:18,480 Speaker 7: it would also sort of help Tesla lock in its 236 00:11:18,720 --> 00:11:21,800 Speaker 7: very very dominant position in the market. And the second thing, 237 00:11:21,840 --> 00:11:24,400 Speaker 7: probably the more important thing, is that Elon Musk is 238 00:11:24,440 --> 00:11:27,640 Speaker 7: desperately trying to move beyond the auto business. He wants 239 00:11:27,760 --> 00:11:31,079 Speaker 7: Tesla to be an AI company. He wants to have robotaxis. 240 00:11:31,400 --> 00:11:33,960 Speaker 7: There is no regulatory regime there, and I think what 241 00:11:34,080 --> 00:11:36,640 Speaker 7: investors are hoping, and again I don't know that they 242 00:11:36,640 --> 00:11:39,360 Speaker 7: have much sort of clear factual basis for this hope. 243 00:11:39,400 --> 00:11:42,880 Speaker 7: But this is the rationale that Trump will basically legalize 244 00:11:42,880 --> 00:11:44,880 Speaker 7: this business, that he will take a. 245 00:11:44,920 --> 00:11:47,360 Speaker 6: Very dicey regulatory situation. 246 00:11:47,040 --> 00:11:49,560 Speaker 7: And make it less dicey, and that will be worth 247 00:11:49,600 --> 00:11:52,359 Speaker 7: a lot of money to Tesla and ultimately to as shareholders. 248 00:11:52,480 --> 00:11:54,000 Speaker 6: Thirty seconds left, Max. 249 00:11:54,360 --> 00:11:56,720 Speaker 2: How much time do we think Elon Musk is going 250 00:11:56,800 --> 00:11:59,319 Speaker 2: to allocate to the government stuff? 251 00:11:59,480 --> 00:12:02,080 Speaker 7: Well, right now it seems like he's he's it's a 252 00:12:02,080 --> 00:12:04,160 Speaker 7: full time job, right I mean, he seems to be 253 00:12:04,200 --> 00:12:07,880 Speaker 7: there quite a lot. I think this is going to 254 00:12:07,960 --> 00:12:11,120 Speaker 7: be something that he's very very focused on, you know, 255 00:12:11,240 --> 00:12:14,840 Speaker 7: probably as long as it lasts, which which maybe that's 256 00:12:14,880 --> 00:12:16,840 Speaker 7: only going to be a couple of months. 257 00:12:17,480 --> 00:12:18,760 Speaker 6: Maybe it's going to be longer. 258 00:12:18,880 --> 00:12:19,120 Speaker 9: You know. 259 00:12:19,160 --> 00:12:21,760 Speaker 7: He did he has signaled that he wants to play 260 00:12:21,880 --> 00:12:25,720 Speaker 7: in politics beyond this, beyond twenty twenty four. He's talking 261 00:12:25,720 --> 00:12:28,280 Speaker 7: about the midterms already so interesting, you'll see, all right. 262 00:12:28,320 --> 00:12:32,160 Speaker 5: Thanks to Max Chafkin, Bloomberg BusinessWeek senior reporter, coming up 263 00:12:32,160 --> 00:12:35,120 Speaker 5: wi a breakdown how oil producers will be impacted by 264 00:12:35,120 --> 00:12:36,520 Speaker 5: a Donald Trump presidency. 265 00:12:36,760 --> 00:12:40,040 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing inpth 266 00:12:40,080 --> 00:12:42,280 Speaker 2: research and data on two thousand companies and one hundred 267 00:12:42,280 --> 00:12:45,360 Speaker 2: and thirty industries. You can access Bloomberg Intelligence via b 268 00:12:45,520 --> 00:12:47,839 Speaker 2: I go on the terminal. I'm Paul Sweeney. 269 00:12:47,480 --> 00:12:49,800 Speaker 5: And I'm John Tucker. This is Bloomberg. 270 00:12:54,120 --> 00:12:57,960 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 271 00:12:58,080 --> 00:13:01,400 Speaker 1: weekdays at ten am Eastern car playing then broud Otto 272 00:13:01,480 --> 00:13:04,400 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 273 00:13:04,480 --> 00:13:08,160 Speaker 1: get your podcasts, or watch us live on YouTube. 274 00:13:09,040 --> 00:13:11,280 Speaker 5: I'm Paul Sweeney and I'm John Tucker filling in for 275 00:13:11,320 --> 00:13:14,600 Speaker 5: Alex Steele. Last week, Donald Trump was elected the forty 276 00:13:14,640 --> 00:13:18,199 Speaker 5: seventh President of the United States, reclaiming the White House 277 00:13:18,200 --> 00:13:21,480 Speaker 5: and pulling off a stunning political comeback. And how many 278 00:13:21,520 --> 00:13:24,880 Speaker 5: industries are wondering how they'll be impacted In twenty twenty five. 279 00:13:25,440 --> 00:13:27,560 Speaker 5: For more against hoos, Matt Miller and I were joined 280 00:13:27,559 --> 00:13:31,880 Speaker 5: by Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Manager. 281 00:13:32,280 --> 00:13:34,200 Speaker 5: We first asked Steve for his take on how the 282 00:13:34,360 --> 00:13:37,480 Speaker 5: EV industry will be affected by Donald Trump. 283 00:13:37,640 --> 00:13:41,079 Speaker 9: Yeah, if Trump decides to kind of remove or cut 284 00:13:41,080 --> 00:13:43,960 Speaker 9: the seventy five hundred tax credit or EV tax credit, 285 00:13:44,559 --> 00:13:49,079 Speaker 9: I think most people believe that the EV penetration will stall. 286 00:13:49,520 --> 00:13:53,079 Speaker 9: If not stall, it'll probably fall because a lot of 287 00:13:53,120 --> 00:13:57,360 Speaker 9: the consumers are relying on that that's seventy five hundred 288 00:13:57,400 --> 00:14:00,000 Speaker 9: dollars to make sure, you know, to bring down the price, 289 00:14:00,520 --> 00:14:04,480 Speaker 9: the effective price of the vehicle. Most evs sold in 290 00:14:04,520 --> 00:14:08,199 Speaker 9: America are still very expensive. There's only a limited number 291 00:14:08,240 --> 00:14:11,760 Speaker 9: of them that are under fifty thousand dollars. So the 292 00:14:11,800 --> 00:14:16,400 Speaker 9: fear is, you know, it's going to stall EV penetration. 293 00:14:17,559 --> 00:14:19,640 Speaker 9: The automaker is going to have a hard time because 294 00:14:19,640 --> 00:14:23,480 Speaker 9: they's already invested. They've already committed investing a lot of 295 00:14:23,520 --> 00:14:28,000 Speaker 9: money under the Inflation Reduction Act about one over one 296 00:14:28,080 --> 00:14:31,280 Speaker 9: hundred and fifty billion dollars to onshore a lot of 297 00:14:31,360 --> 00:14:33,920 Speaker 9: supply chains. So it's going to cause a lot of 298 00:14:34,000 --> 00:14:35,360 Speaker 9: chaos within the industry. 299 00:14:35,520 --> 00:14:39,560 Speaker 5: So they'll be under no pressure whatsoever moving forward, possibly 300 00:14:39,680 --> 00:14:41,600 Speaker 5: to increase sales of evs. 301 00:14:42,200 --> 00:14:45,400 Speaker 9: Yeah, I think the automaker is going to have to 302 00:14:45,520 --> 00:14:49,880 Speaker 9: increase incentives. I think what could happen if the EV 303 00:14:50,040 --> 00:14:55,160 Speaker 9: penetration rate does decrease from about eight percent currently in 304 00:14:55,200 --> 00:14:58,200 Speaker 9: the US. He's going to be left with the strongest players. 305 00:14:58,320 --> 00:15:02,080 Speaker 9: And to me, that looks like Tesla, because Tesla does 306 00:15:02,160 --> 00:15:06,840 Speaker 9: have the lowest costs structure amongst all the EV makers 307 00:15:07,160 --> 00:15:12,480 Speaker 9: in the US, and if the market shrinks, the weaker 308 00:15:12,520 --> 00:15:14,960 Speaker 9: ones will probably fall on the wayside. 309 00:15:15,040 --> 00:15:17,560 Speaker 5: And oddly enough, First Bro or what do we call him, 310 00:15:17,600 --> 00:15:20,640 Speaker 5: first friend, Elon Musk, he's not necessarily in favor of 311 00:15:20,720 --> 00:15:24,240 Speaker 5: these these tax subsidies for evs. 312 00:15:25,240 --> 00:15:28,960 Speaker 9: Yeah, I think, you know, to him, I don't. He 313 00:15:29,040 --> 00:15:32,120 Speaker 9: thinks Tesla doesn't need them, and I you know, it's 314 00:15:32,160 --> 00:15:36,080 Speaker 9: it's partly true. If you look at the amount of 315 00:15:36,240 --> 00:15:42,600 Speaker 9: cars that are least and eligible for the seventy five hundred, 316 00:15:42,680 --> 00:15:45,200 Speaker 9: actually a lot of the seventy five hundred tax credit 317 00:15:45,680 --> 00:15:49,000 Speaker 9: as actually from leased vehicles. If you look at the 318 00:15:49,040 --> 00:15:52,520 Speaker 9: amount of least vehicles that Tesla have sold in the 319 00:15:52,560 --> 00:15:55,960 Speaker 9: past twelve months, it's about twenty percent. So you know 320 00:15:56,000 --> 00:15:58,680 Speaker 9: they'll get impacted. But if you compare it to Rivian. 321 00:15:59,280 --> 00:16:02,200 Speaker 9: You know, Rivian has about fifty percent of their vehicles 322 00:16:02,280 --> 00:16:06,600 Speaker 9: leased and those and eligible for the seventy five hundred, 323 00:16:06,680 --> 00:16:09,320 Speaker 9: so it could be a bigger impact in Reviant. 324 00:16:09,440 --> 00:16:11,800 Speaker 10: Yeah, there's a limit on you don't get the tax 325 00:16:11,840 --> 00:16:14,920 Speaker 10: credit if you're buying a vehicle that costs more than 326 00:16:14,920 --> 00:16:17,720 Speaker 10: eighty thousand dollars. And I believe there's a household income 327 00:16:18,920 --> 00:16:21,400 Speaker 10: requirement as well, you have to be below a certain level. 328 00:16:21,560 --> 00:16:24,120 Speaker 10: But if you lease it, you can get around at 329 00:16:24,200 --> 00:16:26,160 Speaker 10: least one part of that tax credit. Isn't that right, Steve? 330 00:16:26,960 --> 00:16:27,440 Speaker 5: That's right. 331 00:16:27,480 --> 00:16:29,840 Speaker 9: That's actually what I'm referring to. So when we look 332 00:16:29,880 --> 00:16:32,440 Speaker 9: at the companies who's going to get impacted, we really 333 00:16:32,480 --> 00:16:36,240 Speaker 9: look at, you know, how many of those vehicles are leased. 334 00:16:36,520 --> 00:16:39,000 Speaker 9: If you look at EV's in general in the US, 335 00:16:39,120 --> 00:16:42,800 Speaker 9: the you know, the leasing penetration is actually upwards of 336 00:16:42,840 --> 00:16:45,600 Speaker 9: seventy five eighty ninety percent, So a lot of people 337 00:16:45,640 --> 00:16:48,680 Speaker 9: that actually buy evs are leasing it to get that 338 00:16:48,720 --> 00:16:49,960 Speaker 9: seventy five hundred dollars. 339 00:16:50,040 --> 00:16:52,680 Speaker 10: What does the EV market look like right now? I mean, 340 00:16:52,800 --> 00:16:56,960 Speaker 10: I know, if you read the headlines, you would think 341 00:16:57,000 --> 00:16:59,400 Speaker 10: that no one has bought an EV this year, Like, 342 00:16:59,800 --> 00:17:04,720 Speaker 10: you know, the industry is in trouble because they're so unpopular, 343 00:17:04,800 --> 00:17:07,399 Speaker 10: not just politically, but you know, since there's difficult to 344 00:17:07,480 --> 00:17:10,200 Speaker 10: charge for a lot of people, it's just not an option. However, 345 00:17:10,480 --> 00:17:13,880 Speaker 10: don't we still see EV sales actually growing? 346 00:17:15,000 --> 00:17:15,840 Speaker 5: Oh, we are. 347 00:17:16,000 --> 00:17:18,520 Speaker 9: We are seeing EV sales growing, especially in the second 348 00:17:18,600 --> 00:17:21,119 Speaker 9: half of this year, because there's been a lot of 349 00:17:21,119 --> 00:17:24,520 Speaker 9: price cuts right over the past eighteen twenty four months 350 00:17:24,880 --> 00:17:26,879 Speaker 9: in the industry, and a lot of these vehicles have 351 00:17:27,000 --> 00:17:31,959 Speaker 9: become more affordable, and even especially in the used EV market, 352 00:17:32,440 --> 00:17:37,080 Speaker 9: those vehicles are very competitive to gasoline cars. What the 353 00:17:37,160 --> 00:17:41,800 Speaker 9: industry is really facing is getting more impacted by the 354 00:17:41,840 --> 00:17:44,320 Speaker 9: fact that interest rates are high. A lot of people 355 00:17:44,359 --> 00:17:47,560 Speaker 9: cannot afford expensive cars these days, and EV's are a 356 00:17:47,560 --> 00:17:50,800 Speaker 9: little bit more expensive than ice at the moment. So 357 00:17:50,840 --> 00:17:52,480 Speaker 9: what the industry was trying to do, and I think 358 00:17:52,480 --> 00:17:54,800 Speaker 9: what the IRA was trying to do, was trying to 359 00:17:54,840 --> 00:17:57,480 Speaker 9: onshore a lot of the production while on shore a 360 00:17:57,480 --> 00:18:00,359 Speaker 9: lot of the supply chain in the US and hopes 361 00:18:00,400 --> 00:18:06,320 Speaker 9: of brain costs down so automakers can offer more affordable evs. 362 00:18:06,720 --> 00:18:11,040 Speaker 9: And that's what we were expecting. We were actually expecting 363 00:18:11,080 --> 00:18:15,119 Speaker 9: the EV penetration rate to rise, especially into twenty twenty 364 00:18:15,160 --> 00:18:16,320 Speaker 9: six and twenty twenty seven. 365 00:18:17,680 --> 00:18:19,119 Speaker 10: I got to break in here because I feel like, 366 00:18:19,440 --> 00:18:22,840 Speaker 10: you know, Americans have shown a propensity for taking one 367 00:18:22,880 --> 00:18:24,680 Speaker 10: thousand dollars plus monthly payments. 368 00:18:24,760 --> 00:18:26,119 Speaker 6: I don't think it's about the price. 369 00:18:26,200 --> 00:18:27,840 Speaker 5: Frankly, what do you think. 370 00:18:29,240 --> 00:18:30,000 Speaker 6: That's the big problem. 371 00:18:30,080 --> 00:18:33,480 Speaker 10: I'm test driving right now at GMC Sierra EV. It 372 00:18:33,560 --> 00:18:37,199 Speaker 10: is a fantastic vehicle. It's expensive, but I think a 373 00:18:37,200 --> 00:18:39,359 Speaker 10: lot of people are willing to take on debt to 374 00:18:39,359 --> 00:18:41,600 Speaker 10: own a car like that. The problem is there's nowhere 375 00:18:41,640 --> 00:18:43,679 Speaker 10: to charge it. I park in a garage across the 376 00:18:43,680 --> 00:18:46,800 Speaker 10: street in Manhattan, you know, capital of the world, and 377 00:18:46,880 --> 00:18:50,119 Speaker 10: the only option they offer is the slowest potential charge 378 00:18:50,119 --> 00:18:51,280 Speaker 10: for twenty dollars a day. 379 00:18:51,320 --> 00:18:52,480 Speaker 5: So it's just not worth it. 380 00:18:53,240 --> 00:18:56,120 Speaker 9: Yeah, I think that's a very good point. Affordability is 381 00:18:56,160 --> 00:18:59,520 Speaker 9: not the only hurdle. It's the charging and the range, 382 00:18:59,720 --> 00:19:02,760 Speaker 9: and you know, dependent on the use. I think a 383 00:19:02,760 --> 00:19:05,400 Speaker 9: lot of people with the second vehicle make it an EV. 384 00:19:06,280 --> 00:19:10,040 Speaker 9: Someone who's using it for daily commutes make an EV. 385 00:19:10,880 --> 00:19:13,320 Speaker 9: But you know, America is a big country and people 386 00:19:13,359 --> 00:19:17,680 Speaker 9: love to drive cars, and there are a big majority 387 00:19:17,760 --> 00:19:21,840 Speaker 9: of car buyers that are you know, probably staying away 388 00:19:21,840 --> 00:19:22,440 Speaker 9: from ev. 389 00:19:22,520 --> 00:19:25,760 Speaker 5: Because of that, all right? Thanks to Steve Man, Bloomberg Intelligence, 390 00:19:25,760 --> 00:19:28,480 Speaker 5: Global Autos and Industrials Research Manager. 391 00:19:28,920 --> 00:19:31,520 Speaker 2: Each week we look at research from Bloomberg and EF 392 00:19:31,600 --> 00:19:33,520 Speaker 2: previously known as New Energy Finance. 393 00:19:33,640 --> 00:19:36,520 Speaker 5: They're the team at Bloomberg that tracks and analyzes the 394 00:19:36,680 --> 00:19:41,679 Speaker 5: energy transition from commodities to power, transport, industries, buildings, and 395 00:19:41,760 --> 00:19:45,080 Speaker 5: agriculture sectors. This week, we took a look at how 396 00:19:45,119 --> 00:19:49,359 Speaker 5: Donald Trump's upcoming presidency will impact the oil industry. 397 00:19:49,560 --> 00:19:51,600 Speaker 2: For more guests, Sos, Molly Smith, and I were joined 398 00:19:51,600 --> 00:19:55,119 Speaker 2: by ty Lou b n E, f oil market specialist. 399 00:19:55,440 --> 00:19:57,240 Speaker 2: We first asked, Hi, if it is a fair assumption 400 00:19:57,320 --> 00:19:59,640 Speaker 2: that Donald Trump will be good for the energy industry. 401 00:20:00,080 --> 00:20:03,680 Speaker 11: I think the USL industry and the gas industry can 402 00:20:03,720 --> 00:20:07,320 Speaker 11: benefit from Trumpet administration in the number of ways. I 403 00:20:07,359 --> 00:20:10,160 Speaker 11: think the first off, the bed is like a lower 404 00:20:10,200 --> 00:20:11,120 Speaker 11: corporate tax rate. 405 00:20:12,160 --> 00:20:13,640 Speaker 12: So personal see. 406 00:20:13,400 --> 00:20:16,159 Speaker 11: That Trump has mentioned has indicated he would like to 407 00:20:16,240 --> 00:20:19,040 Speaker 11: lower corporate tax rates from the current twenty one percent 408 00:20:19,160 --> 00:20:19,960 Speaker 11: to fifteen percent. 409 00:20:20,320 --> 00:20:22,520 Speaker 12: So if the materializes, that's the way of the BED. 410 00:20:22,560 --> 00:20:25,240 Speaker 11: That's like more money for the industry and for the shareholders. 411 00:20:25,560 --> 00:20:26,760 Speaker 3: What are they going to do with that money? 412 00:20:26,760 --> 00:20:26,879 Speaker 9: Then? 413 00:20:26,920 --> 00:20:28,919 Speaker 3: Are you suggesting it would be share buybacks? 414 00:20:29,200 --> 00:20:29,440 Speaker 2: Yeah? 415 00:20:29,480 --> 00:20:32,800 Speaker 11: So there's definitely like a number of options these companies 416 00:20:32,800 --> 00:20:35,840 Speaker 11: can do with this quote unquote extra money. They can, 417 00:20:35,960 --> 00:20:38,560 Speaker 11: like you said, they can do more buyback for the shares, 418 00:20:38,600 --> 00:20:42,040 Speaker 11: they can issue more dibidend payouts, they can reduce the debt, 419 00:20:42,440 --> 00:20:44,680 Speaker 11: and finally they can always they always have the option 420 00:20:44,760 --> 00:20:48,240 Speaker 11: to funnel some of these money into capital expenditures, which 421 00:20:48,359 --> 00:20:51,920 Speaker 11: ultimately retranslates into more production down the road. 422 00:20:52,280 --> 00:20:54,640 Speaker 2: From the regulatory standpoint, I mean, can I go down 423 00:20:54,640 --> 00:20:56,919 Speaker 2: there now and drill a well? Can I make a 424 00:20:56,960 --> 00:21:00,400 Speaker 2: pipeline to take my natural guess to corporate christ Year 425 00:21:00,359 --> 00:21:02,000 Speaker 2: wherever it needs to get to. Is it can be 426 00:21:02,080 --> 00:21:06,640 Speaker 2: easier under a second Trump administration to build energy stuff? 427 00:21:07,119 --> 00:21:08,480 Speaker 12: Yeah, I would definitely think so. 428 00:21:08,480 --> 00:21:11,600 Speaker 11: So under the Parton administration, that's the government has imposed 429 00:21:11,600 --> 00:21:14,720 Speaker 11: a lot of regulations. There are team that's unfriendly to 430 00:21:14,760 --> 00:21:18,800 Speaker 11: the only gas industry. The government is issued during rights 431 00:21:18,840 --> 00:21:24,600 Speaker 11: moratorium they issued they placed the pause on energy exports permits, 432 00:21:24,640 --> 00:21:27,879 Speaker 11: and they also increase royalties on federal land leases. 433 00:21:28,400 --> 00:21:28,560 Speaker 1: Uh. 434 00:21:28,680 --> 00:21:30,080 Speaker 12: And I would presume and all of. 435 00:21:30,000 --> 00:21:32,399 Speaker 11: These like we're pretty hostile and created a lot of 436 00:21:33,000 --> 00:21:34,440 Speaker 11: uncertainty to the industry. 437 00:21:34,640 --> 00:21:36,280 Speaker 12: So I would assume I would. 438 00:21:36,000 --> 00:21:40,240 Speaker 11: Think that Trump administration would remove a lot of these regulations. 439 00:21:40,480 --> 00:21:43,600 Speaker 11: There are team that's ownerds to our gas producers, so 440 00:21:44,119 --> 00:21:46,080 Speaker 11: definitely beneficial from that point of view. 441 00:21:46,440 --> 00:21:50,360 Speaker 13: You mentioned before, you know, increasing capex potentially and how 442 00:21:50,359 --> 00:21:51,600 Speaker 13: that would mean more production. 443 00:21:52,080 --> 00:21:53,600 Speaker 3: Got to the worry about prices. 444 00:21:53,680 --> 00:21:56,159 Speaker 13: If you are producing so much more, what happens to 445 00:21:56,200 --> 00:22:00,199 Speaker 13: the supply demand equation. There is that already some thing 446 00:22:00,240 --> 00:22:03,160 Speaker 13: that drillers are thinking about of how much more they 447 00:22:03,240 --> 00:22:05,240 Speaker 13: might want to maybe not go in too much. 448 00:22:05,440 --> 00:22:06,240 Speaker 12: Yeah, that's for sure. 449 00:22:06,320 --> 00:22:08,959 Speaker 11: So if you look at the past ten years, use 450 00:22:09,040 --> 00:22:12,879 Speaker 11: oil producers have on server occasions crashed the aill process 451 00:22:12,920 --> 00:22:15,520 Speaker 11: when they decided to turn on the production tabs. So 452 00:22:15,560 --> 00:22:18,240 Speaker 11: they're very cognizange of the risks this time around. On 453 00:22:18,320 --> 00:22:20,600 Speaker 11: top of that, that's like a lot of shareholder pressures 454 00:22:20,640 --> 00:22:23,920 Speaker 11: on these oil and gas companies to maintain capital discipline 455 00:22:23,960 --> 00:22:27,240 Speaker 11: and to increase capital payback. So from that sense, I 456 00:22:27,280 --> 00:22:29,040 Speaker 11: think even though if there's like more money to grow 457 00:22:29,080 --> 00:22:32,879 Speaker 11: around in the industry, it would be more much harder 458 00:22:32,880 --> 00:22:36,919 Speaker 11: for the oil producers to grow production the way they. 459 00:22:36,760 --> 00:22:38,320 Speaker 12: Did in the past ten years. 460 00:22:38,440 --> 00:22:41,520 Speaker 2: So when did the US become a net exporter like 461 00:22:41,560 --> 00:22:44,000 Speaker 2: twenty sixteen or something like that. I think so, okay, 462 00:22:44,040 --> 00:22:46,920 Speaker 2: so we were a net importer forever, then we became 463 00:22:46,960 --> 00:22:49,800 Speaker 2: thanks to the shell find so we became. 464 00:22:49,560 --> 00:22:50,680 Speaker 6: A net exporter. 465 00:22:51,240 --> 00:22:54,199 Speaker 2: How does the US oil industry and not sure if 466 00:22:54,200 --> 00:22:56,719 Speaker 2: you can being characterize it or is it just individual companies? 467 00:22:56,720 --> 00:23:00,600 Speaker 2: How does the US oil industry interact with O Peck 468 00:23:00,920 --> 00:23:01,400 Speaker 2: if at all? 469 00:23:01,920 --> 00:23:04,119 Speaker 11: So the way I think about that, very competitive, like 470 00:23:04,280 --> 00:23:08,160 Speaker 11: natural competitors against each other. So if if lower taxes 471 00:23:08,200 --> 00:23:11,720 Speaker 11: in the Trump administration materializes, it would definitely make the 472 00:23:11,800 --> 00:23:14,840 Speaker 11: US O patch a lot more competitive. It will also 473 00:23:15,080 --> 00:23:18,359 Speaker 11: the brick given calculations there be and there would be 474 00:23:18,359 --> 00:23:20,560 Speaker 11: more money to grow around, so it would be it 475 00:23:20,560 --> 00:23:22,480 Speaker 11: will make it much harder for OPEC. 476 00:23:22,680 --> 00:23:23,760 Speaker 12: To increase the output. 477 00:23:24,000 --> 00:23:26,920 Speaker 11: So it's going to place O pack on a more 478 00:23:26,960 --> 00:23:27,840 Speaker 11: difficult grant. 479 00:23:28,440 --> 00:23:32,080 Speaker 13: You know, something that in part got Donald Trump reelected 480 00:23:32,119 --> 00:23:35,359 Speaker 13: to the White House was the idea of bringing prices down. 481 00:23:35,440 --> 00:23:38,240 Speaker 13: And you know, gas prices obviously a big sticking point 482 00:23:38,320 --> 00:23:41,320 Speaker 13: for a lot of Americans. Gas prices have been coming 483 00:23:41,359 --> 00:23:45,880 Speaker 13: down pretty consistently over the past, you know, six months 484 00:23:46,000 --> 00:23:49,119 Speaker 13: or so down to now, like about roughly three dollars 485 00:23:49,160 --> 00:23:51,240 Speaker 13: a gallon on average nationwide. 486 00:23:51,600 --> 00:23:54,280 Speaker 3: What can Trump really do for gas prices? 487 00:23:55,280 --> 00:23:57,680 Speaker 11: Well, when I think about gas prices, there are two 488 00:23:57,720 --> 00:24:00,840 Speaker 11: pieces to it. That's the crude oil price art and 489 00:24:00,880 --> 00:24:03,639 Speaker 11: then the that's the refinery margin part. Now, on the 490 00:24:03,680 --> 00:24:06,800 Speaker 11: refinery margin, there's probably not much a person can do 491 00:24:06,880 --> 00:24:10,680 Speaker 11: to it because you basically have to increase refining capacity 492 00:24:10,680 --> 00:24:12,760 Speaker 11: and that takes years to build out. If you want 493 00:24:12,760 --> 00:24:15,119 Speaker 11: to prove their part, the outer part will be the 494 00:24:15,200 --> 00:24:19,679 Speaker 11: all price prize. Now, if you wed regulations make it 495 00:24:19,760 --> 00:24:21,480 Speaker 11: easier for companies to drill, you. 496 00:24:21,400 --> 00:24:24,320 Speaker 12: Can pre rent. Theoretically, you can prevent some of the. 497 00:24:24,480 --> 00:24:28,000 Speaker 11: Possible price spikes in all price in all prices, just 498 00:24:28,040 --> 00:24:32,119 Speaker 11: because it's less onerous for these jurists to put more 499 00:24:32,160 --> 00:24:34,560 Speaker 11: capital into the ground. So in this sense, you can 500 00:24:35,160 --> 00:24:39,200 Speaker 11: help prices from seeing more spikes. But however, I don't 501 00:24:39,320 --> 00:24:42,320 Speaker 11: think these companies will really go out and go all 502 00:24:42,359 --> 00:24:44,320 Speaker 11: and endure again the way they did before, for the 503 00:24:44,359 --> 00:24:45,680 Speaker 11: reasons we talked about before. 504 00:24:46,280 --> 00:24:49,280 Speaker 2: So what's happened to the Russian oil It's been a 505 00:24:49,280 --> 00:24:52,200 Speaker 2: couple of years now, and if it's not going to Germany. 506 00:24:52,440 --> 00:24:53,200 Speaker 6: Where's it going. 507 00:24:54,160 --> 00:24:57,400 Speaker 11: Yeah, so it's not going to the Western European nations, 508 00:24:57,600 --> 00:25:00,760 Speaker 11: and Western Nations has placed sanctions on Russian So a 509 00:25:00,800 --> 00:25:02,480 Speaker 11: lot of this has been brought up. 510 00:25:02,359 --> 00:25:04,280 Speaker 12: By unconscries like India and China. 511 00:25:04,600 --> 00:25:07,879 Speaker 11: So they're pretty really benefiting from these sensions. 512 00:25:08,080 --> 00:25:09,879 Speaker 6: So these sanctions aren't really working, are they. 513 00:25:10,000 --> 00:25:11,879 Speaker 12: They'll be directing trade flow. 514 00:25:12,600 --> 00:25:14,240 Speaker 6: It's the redirecting trade flow, and. 515 00:25:14,240 --> 00:25:17,359 Speaker 11: They're making it harder for Russia to ship the ows 516 00:25:17,440 --> 00:25:21,199 Speaker 11: around the world. So it does increase the costs on 517 00:25:21,200 --> 00:25:24,639 Speaker 11: the Russian all producers. So that's an impact, but the 518 00:25:24,640 --> 00:25:26,600 Speaker 11: impact I feel like it's probably more limited. 519 00:25:27,200 --> 00:25:29,840 Speaker 5: All Right, thanks to Tyler B and E f oil 520 00:25:29,960 --> 00:25:32,679 Speaker 5: market specialists. Just to head on the program, we're going 521 00:25:32,720 --> 00:25:35,879 Speaker 5: to look at how Wall Street math wizards are decoding 522 00:25:36,040 --> 00:25:37,560 Speaker 5: private market returns. 523 00:25:37,760 --> 00:25:40,720 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 524 00:25:40,760 --> 00:25:43,760 Speaker 2: depth research and data on two thousand companies one hundred 525 00:25:43,760 --> 00:25:46,119 Speaker 2: and thirty industries. You can access Bloomberg Intelligence via b 526 00:25:46,240 --> 00:25:47,320 Speaker 2: I go on the terminal. 527 00:25:47,400 --> 00:25:51,960 Speaker 5: I'm Paul Swiney and I'm John Tucker, and this is Bloomberg. 528 00:25:55,520 --> 00:25:59,400 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 529 00:25:59,480 --> 00:26:03,000 Speaker 1: weekdays in ten am Eastern on applecar Play and Android 530 00:26:03,040 --> 00:26:06,200 Speaker 1: Auto with The Bloomberg Business. You can also listen live 531 00:26:06,320 --> 00:26:09,440 Speaker 1: on Amazon Alexa from our flagship New York station Just 532 00:26:09,520 --> 00:26:12,160 Speaker 1: Say Alexa playing Bloomberg eleven thirty. 533 00:26:14,160 --> 00:26:16,480 Speaker 5: I'm Paul Sweeney and I'm John Tucker filling in for 534 00:26:16,520 --> 00:26:17,119 Speaker 5: Alex Steele. 535 00:26:17,359 --> 00:26:20,119 Speaker 6: We move next to corporate earnings from Tyson Foods. This 536 00:26:20,160 --> 00:26:22,440 Speaker 6: week shares a Tyson food surge, the most in more 537 00:26:22,480 --> 00:26:23,160 Speaker 6: than two years. 538 00:26:23,320 --> 00:26:26,480 Speaker 5: That's after the company beat fourth quarter earnings expectations and 539 00:26:26,560 --> 00:26:30,040 Speaker 5: projected stronger results next year. And this comes as a 540 00:26:30,040 --> 00:26:34,920 Speaker 5: turnaround at Tyson's chicken business offset losses in beef for More. 541 00:26:35,160 --> 00:26:37,000 Speaker 2: Guest host Jess Mett and I were joined by Jen 542 00:26:37,080 --> 00:26:41,080 Speaker 2: bartashis Bloomberg Intelligence senior retail analysts. We first asked Jen 543 00:26:41,200 --> 00:26:43,720 Speaker 2: for her take on Tyson's Foods the most recent. 544 00:26:43,520 --> 00:26:46,239 Speaker 14: Quarter, and I think what we've really thought was they 545 00:26:46,280 --> 00:26:48,600 Speaker 14: were able to end their fiscal year on a high note. 546 00:26:49,000 --> 00:26:51,080 Speaker 14: That's really been a culmination of a lot of effort 547 00:26:51,119 --> 00:26:54,879 Speaker 14: to streamline and improve their business. They've been very inconsistent 548 00:26:54,880 --> 00:26:56,680 Speaker 14: in the last few years, so it is a little 549 00:26:56,720 --> 00:26:59,480 Speaker 14: refreshing to see that they finally seem to have gotten 550 00:26:59,520 --> 00:27:02,439 Speaker 14: their arms around some of the problems that they were having, 551 00:27:02,480 --> 00:27:04,320 Speaker 14: and I seem to be on a very good trajectory 552 00:27:04,359 --> 00:27:04,959 Speaker 14: going forward. 553 00:27:05,320 --> 00:27:08,480 Speaker 8: Talk to us more, maybe about the inflation picture, because 554 00:27:08,520 --> 00:27:11,760 Speaker 8: it looks like Tyson's second largest source of revenue actually 555 00:27:12,080 --> 00:27:15,119 Speaker 8: demand for chicken actually improved because consumers were looking for 556 00:27:15,160 --> 00:27:17,800 Speaker 8: those cheaper alternatives to beef. So what do you think 557 00:27:17,840 --> 00:27:20,160 Speaker 8: this tells us about inflation right now? 558 00:27:21,480 --> 00:27:24,480 Speaker 14: It's a great question, And with regards to inflation, there's 559 00:27:24,520 --> 00:27:27,520 Speaker 14: a dual effect that Tyson has. The first is because 560 00:27:27,560 --> 00:27:30,280 Speaker 14: they are so big in chicken, it's obviously a benefit 561 00:27:30,320 --> 00:27:33,080 Speaker 14: to them when people are trading down or they're seeking 562 00:27:33,440 --> 00:27:35,639 Speaker 14: cheap protein to put on their table. Chicken is a 563 00:27:35,680 --> 00:27:39,320 Speaker 14: big answer to that question, and Tyson is definitely reaping 564 00:27:39,400 --> 00:27:41,840 Speaker 14: the benefits of that. A little bit harder and a 565 00:27:41,840 --> 00:27:44,120 Speaker 14: little bit more nuanced is the impact that inflation has 566 00:27:44,119 --> 00:27:47,159 Speaker 14: on their prepared food segment. That's on the things that 567 00:27:47,200 --> 00:27:49,639 Speaker 14: you find in the frozen aisle, in the refrigerated aisle. 568 00:27:50,560 --> 00:27:53,360 Speaker 14: Those are higher cost items usually and they're a little 569 00:27:53,400 --> 00:27:56,520 Speaker 14: bit higher margin for Tyson. So finding the right balance 570 00:27:56,800 --> 00:27:59,639 Speaker 14: has been important as consumers look for those prices to 571 00:27:59,640 --> 00:28:01,359 Speaker 14: come down a little bit further as well. 572 00:28:02,000 --> 00:28:06,720 Speaker 2: So what drives their business top line revenue drivers is 573 00:28:06,720 --> 00:28:08,920 Speaker 2: is it kind of a GDP stories, It's something different 574 00:28:08,960 --> 00:28:09,199 Speaker 2: than that. 575 00:28:10,080 --> 00:28:12,719 Speaker 14: It really is a reflection of where the consumer is. 576 00:28:12,880 --> 00:28:15,080 Speaker 14: It is really about where the demand is going to 577 00:28:15,119 --> 00:28:19,120 Speaker 14: fall when it comes to cost drivers. For Tyson, they 578 00:28:19,160 --> 00:28:22,440 Speaker 14: really benefit from lower grain prices. So when corn comes down, 579 00:28:22,520 --> 00:28:25,119 Speaker 14: soy comes down. That's good because that's the feedstock for 580 00:28:25,200 --> 00:28:29,880 Speaker 14: the animals. But the way that Tyson goes usually follows 581 00:28:30,320 --> 00:28:34,000 Speaker 14: just the general consumer and where they're trending and how 582 00:28:34,080 --> 00:28:35,480 Speaker 14: incomes are progressing. 583 00:28:35,960 --> 00:28:38,520 Speaker 8: Something earlier this year I thought was interesting because I 584 00:28:38,560 --> 00:28:41,000 Speaker 8: talked to you about kind of price mix when it 585 00:28:41,040 --> 00:28:45,040 Speaker 8: came to another segment in the consumer staples category, when 586 00:28:45,080 --> 00:28:48,200 Speaker 8: it came to consumer package good type companies. Obviously, if 587 00:28:48,240 --> 00:28:50,520 Speaker 8: you look at Tyson's Food too, when it comes to 588 00:28:50,560 --> 00:28:54,040 Speaker 8: those types of food, beverage, food product type companies that 589 00:28:54,040 --> 00:28:56,880 Speaker 8: are distributing packaged foods and meats, how do you view 590 00:28:57,000 --> 00:28:58,760 Speaker 8: kind of when you were talking to me earlier this 591 00:28:58,880 --> 00:29:01,840 Speaker 8: year about promotiontional sales for a lot of these types 592 00:29:01,840 --> 00:29:03,640 Speaker 8: of companies in the back half of the year, like 593 00:29:03,720 --> 00:29:06,400 Speaker 8: buy one, get one free, different things like that. As 594 00:29:06,400 --> 00:29:09,120 Speaker 8: far as what this shows us about maybe consumer spending 595 00:29:09,200 --> 00:29:11,040 Speaker 8: and what a lot of these companies when they are 596 00:29:11,040 --> 00:29:13,840 Speaker 8: distributing these types of goods, how they're faring. 597 00:29:14,480 --> 00:29:16,960 Speaker 14: It's a big topic for these companies. And so when 598 00:29:17,000 --> 00:29:20,760 Speaker 14: you're looking at volumes, almost every package food company started 599 00:29:20,800 --> 00:29:23,280 Speaker 14: this year saying they were going to grow volumes, and 600 00:29:23,360 --> 00:29:26,520 Speaker 14: yet very few have actually been able to actually realize 601 00:29:26,640 --> 00:29:29,600 Speaker 14: volume growth this year. And that's really because the shoppers 602 00:29:29,640 --> 00:29:32,320 Speaker 14: have been so conservative on their spending and they've been 603 00:29:32,400 --> 00:29:36,080 Speaker 14: seeking deals. There's been a lot of pressure to run promotions, 604 00:29:36,160 --> 00:29:40,400 Speaker 14: and so we've seen promotional activity tick up substantially in 605 00:29:40,440 --> 00:29:43,320 Speaker 14: the last quarter and in the second half of this 606 00:29:43,440 --> 00:29:47,880 Speaker 14: year overall, and we're seeing more deals, more discounts, and 607 00:29:48,080 --> 00:29:50,600 Speaker 14: all of that is usually coming at the price of 608 00:29:50,640 --> 00:29:54,440 Speaker 14: the package food company, not necessarily the retailer. So that's 609 00:29:54,480 --> 00:29:57,600 Speaker 14: good news for consumers who are looking for deals. It 610 00:29:57,600 --> 00:29:59,680 Speaker 14: makes it a much harder process to manage for the 611 00:29:59,640 --> 00:30:02,840 Speaker 14: packa food companies. So for Tyson, you know, part of 612 00:30:02,880 --> 00:30:05,840 Speaker 14: what they've really been working on is increasing their innovation 613 00:30:05,920 --> 00:30:08,960 Speaker 14: pipeline things where they can bring new products to market 614 00:30:09,440 --> 00:30:12,480 Speaker 14: and have a different price point for those and that's 615 00:30:12,520 --> 00:30:14,400 Speaker 14: a similar strategy to what a lot of these other 616 00:30:14,400 --> 00:30:17,680 Speaker 14: package food companies are trying to do to just generate 617 00:30:17,920 --> 00:30:19,680 Speaker 14: consumer interest in their products. 618 00:30:19,680 --> 00:30:23,880 Speaker 2: Again, so Jenna know Tyson, they actually have adjusted operating 619 00:30:23,960 --> 00:30:26,680 Speaker 2: income losses for beef and pork. 620 00:30:27,040 --> 00:30:29,959 Speaker 14: Why is that, Yes, Well, when you look at the 621 00:30:30,000 --> 00:30:34,600 Speaker 14: beef market, we have a shortage of beef. The animals 622 00:30:34,640 --> 00:30:37,800 Speaker 14: are getting bigger, so there's still beef there, but because 623 00:30:37,840 --> 00:30:41,120 Speaker 14: of that, prices have been a lot higher and it's 624 00:30:41,200 --> 00:30:43,840 Speaker 14: been a little bit more expensive for consumers in terms 625 00:30:43,840 --> 00:30:48,000 Speaker 14: of purchasing beef and certainly specific cuts of beef. And 626 00:30:48,080 --> 00:30:50,360 Speaker 14: what we're seeing in the cattle market are very few 627 00:30:50,400 --> 00:30:53,600 Speaker 14: signs that that's going to change anytime soon. So at 628 00:30:53,680 --> 00:30:56,160 Speaker 14: this moment, we're thinking we're not going to see big 629 00:30:56,200 --> 00:30:58,520 Speaker 14: signs that the cattle market is going to expand again 630 00:30:58,640 --> 00:31:02,320 Speaker 14: until the end of twenty twenty five, so that's still 631 00:31:02,520 --> 00:31:04,120 Speaker 14: a good ways away, which is part of why the 632 00:31:04,160 --> 00:31:07,720 Speaker 14: company guided to a loss and adjusted operating income for 633 00:31:07,760 --> 00:31:09,400 Speaker 14: the beef segment for twenty twenty five. 634 00:31:09,880 --> 00:31:13,360 Speaker 5: All Right, Thanks to Jen Bartashis Bloomberg Intelligence Senior Analysts, 635 00:31:13,440 --> 00:31:15,600 Speaker 5: Retail staples and packaged food. 636 00:31:15,960 --> 00:31:18,600 Speaker 2: This week, we took a look at a Bloomberg Big 637 00:31:18,640 --> 00:31:22,360 Speaker 2: Take story entitled Wall Street math Wizards are Decoding Private 638 00:31:22,440 --> 00:31:23,400 Speaker 2: market Returns. 639 00:31:23,520 --> 00:31:25,960 Speaker 5: You can find it on Bloomberg dot Com and the Terminal. 640 00:31:26,240 --> 00:31:28,640 Speaker 5: The story looks at how a small band of math 641 00:31:28,680 --> 00:31:32,120 Speaker 5: wizards want to demystify private market returns. 642 00:31:32,560 --> 00:31:34,640 Speaker 2: For more, guest host Molly Smith and I were joined 643 00:31:34,640 --> 00:31:38,000 Speaker 2: by the stories author Justina Lee, Bloomberg Markets reporter. We 644 00:31:38,080 --> 00:31:41,080 Speaker 2: first asked Justina for more context on our latest story. 645 00:31:41,600 --> 00:31:43,640 Speaker 15: If we kind of think about, you know, what's been 646 00:31:43,680 --> 00:31:46,920 Speaker 15: happening to active management in the stock market for the 647 00:31:46,960 --> 00:31:49,720 Speaker 15: past few decades. I mean, these days were really used 648 00:31:49,720 --> 00:31:52,080 Speaker 15: to talk about like you know, alpha and beta and 649 00:31:52,200 --> 00:31:55,040 Speaker 15: kind of how does your performance compare to the benchmark? 650 00:31:55,120 --> 00:31:57,800 Speaker 15: And that's really killed a lot of the business. And 651 00:31:57,840 --> 00:32:00,120 Speaker 15: I think what my story tries to bring up is 652 00:32:00,240 --> 00:32:03,800 Speaker 15: could we see a similar revolution in private markets? And 653 00:32:03,840 --> 00:32:06,760 Speaker 15: of course it's a way harder math to crunch, because 654 00:32:07,080 --> 00:32:09,120 Speaker 15: as you mentioned, you know, you don't have the numbers 655 00:32:09,160 --> 00:32:11,360 Speaker 15: as often and a lot of the time, you know, 656 00:32:11,440 --> 00:32:15,120 Speaker 15: the numbers are quite subjective. But we are seeing a 657 00:32:15,120 --> 00:32:18,360 Speaker 15: lot of interesting quant research here and they are trying 658 00:32:18,400 --> 00:32:21,560 Speaker 15: to kind of use some statistical techniques to kind of 659 00:32:21,560 --> 00:32:25,720 Speaker 15: reveal the risks and also to compare performance within private markets. 660 00:32:26,320 --> 00:32:29,680 Speaker 13: And so much of what comparing performance needs is obviously 661 00:32:29,720 --> 00:32:31,880 Speaker 13: a benchmark. And talking about how the S and P 662 00:32:32,000 --> 00:32:35,880 Speaker 13: five hundred is the natural benchmark for so many companies. 663 00:32:35,640 --> 00:32:38,040 Speaker 3: Does that still apply in private markets? 664 00:32:38,040 --> 00:32:41,120 Speaker 13: Does that still make sense to be comparing these returns 665 00:32:41,160 --> 00:32:44,520 Speaker 13: against a publicly a basket of publicly traded companies. 666 00:32:44,920 --> 00:32:47,360 Speaker 15: Yeah, that really is a big question here, because even 667 00:32:47,400 --> 00:32:50,120 Speaker 15: if you use a lot of these quant techniques, you 668 00:32:50,200 --> 00:32:53,960 Speaker 15: still need to choose a benchmark to compare private markets to. 669 00:32:54,560 --> 00:32:57,520 Speaker 15: And actually it can tell you a very different kind 670 00:32:57,520 --> 00:33:00,719 Speaker 15: of story depending on which benchmark you pick. Like in 671 00:33:00,720 --> 00:33:04,200 Speaker 15: my story, I cited this paper from Public Market Quants 672 00:33:04,240 --> 00:33:07,160 Speaker 15: saying that you know, if you compare PE to S 673 00:33:07,240 --> 00:33:09,280 Speaker 15: and P five hundred, I mean, the average P fund 674 00:33:09,320 --> 00:33:12,160 Speaker 15: actually does quite well. But if you compare it to 675 00:33:12,280 --> 00:33:15,800 Speaker 15: like small cap value, you know, come up. Maybe perhaps 676 00:33:15,800 --> 00:33:18,200 Speaker 15: you might think that looks more like a P portfolio. 677 00:33:18,360 --> 00:33:21,920 Speaker 15: It actually loses to small cap value. And I think 678 00:33:21,960 --> 00:33:24,280 Speaker 15: that really is the big question here, because if you're 679 00:33:24,480 --> 00:33:27,560 Speaker 15: an investor and you can get better returns in public markets. 680 00:33:28,040 --> 00:33:30,400 Speaker 15: I mean, you're paying way less fees in public markets, 681 00:33:30,440 --> 00:33:32,920 Speaker 15: and so you wouldn't want to be EPE. 682 00:33:33,240 --> 00:33:35,760 Speaker 2: What is the direct alpha approach? 683 00:33:36,240 --> 00:33:39,960 Speaker 15: Yeah, so this staric alpha approach was kind of invented 684 00:33:40,000 --> 00:33:43,240 Speaker 15: by this guy, Barry Griffiths, who was at Landmark Partners 685 00:33:43,720 --> 00:33:46,680 Speaker 15: for a long time and then when that was acquired 686 00:33:46,680 --> 00:33:49,600 Speaker 15: by Ares, he was the head quantum ARES. And the 687 00:33:49,680 --> 00:33:53,840 Speaker 15: math is actually not that complicated. It's mostly to compare 688 00:33:54,200 --> 00:33:56,920 Speaker 15: kind of the cash flows you get from PE kind 689 00:33:56,920 --> 00:34:00,440 Speaker 15: of with the opportunity cost of what you would have 690 00:34:00,480 --> 00:34:03,680 Speaker 15: gotten if you had invested that in public markets. And 691 00:34:03,720 --> 00:34:06,520 Speaker 15: so the idea there is kind of a more apples 692 00:34:06,520 --> 00:34:09,400 Speaker 15: to apples comparison to what you could have gotten. And 693 00:34:09,440 --> 00:34:12,239 Speaker 15: then that's supposed to kind of raise a question of 694 00:34:12,280 --> 00:34:14,720 Speaker 15: you know, where the fees worth it? Or was locking 695 00:34:14,840 --> 00:34:17,680 Speaker 15: up your money worth it, Because even if you are 696 00:34:17,719 --> 00:34:20,400 Speaker 15: getting better returns in private equity, a lot of the 697 00:34:20,400 --> 00:34:22,480 Speaker 15: time it might not be worth it if you think 698 00:34:22,520 --> 00:34:25,120 Speaker 15: it's riskier because you cannot sell out of it, or 699 00:34:25,600 --> 00:34:27,960 Speaker 15: you think it's riskier because it's using more leverage. And 700 00:34:28,040 --> 00:34:30,480 Speaker 15: so I think a lot of the quant research is 701 00:34:30,560 --> 00:34:33,080 Speaker 15: kind of bringing forth to these questions give. 702 00:34:33,000 --> 00:34:35,880 Speaker 13: Us a sense of what some of these fees are like, 703 00:34:36,040 --> 00:34:38,840 Speaker 13: because on the public side, it's really been such the 704 00:34:38,880 --> 00:34:42,320 Speaker 13: story as the race to the bottom in fees, especially 705 00:34:42,360 --> 00:34:45,080 Speaker 13: with the proliferation of ETFs and other funds that you 706 00:34:45,120 --> 00:34:47,640 Speaker 13: can get into with passive management. 707 00:34:47,760 --> 00:34:50,720 Speaker 3: So how expensive is it if you're. 708 00:34:50,560 --> 00:34:52,520 Speaker 13: An investor in some of these private funds? 709 00:34:53,000 --> 00:34:55,000 Speaker 15: Yeah, I mean so a lot of these private funds 710 00:34:55,080 --> 00:34:58,200 Speaker 15: do have a hurdle rate, And interestingly, the hurdle rate 711 00:34:58,480 --> 00:35:00,840 Speaker 15: is pretty standard, like around eight percent, and that you 712 00:35:01,000 --> 00:35:05,160 Speaker 15: kind of start earning kind of carry above and beyond that, 713 00:35:05,440 --> 00:35:09,840 Speaker 15: and that carry has actually increased the steer because we 714 00:35:09,880 --> 00:35:13,600 Speaker 15: are seeing a bit more deal making pick cup as well. 715 00:35:13,719 --> 00:35:18,000 Speaker 2: All Right, here's my big issue with private investments is 716 00:35:18,040 --> 00:35:20,680 Speaker 2: just the marked to market. It's so I think it's 717 00:35:20,680 --> 00:35:25,000 Speaker 2: just so unevenly applied. I don't feel like there's any consistency. Again, 718 00:35:25,080 --> 00:35:28,759 Speaker 2: as I was mentioning to Molly, private equity folks are 719 00:35:28,840 --> 00:35:30,400 Speaker 2: happy to mark the market on the way up, But 720 00:35:30,440 --> 00:35:33,800 Speaker 2: I don't recall anybody reporting terrible marks in twenty twenty 721 00:35:33,800 --> 00:35:37,320 Speaker 2: two when stocks and bonds were both down double digits. 722 00:35:37,520 --> 00:35:39,120 Speaker 6: Talk to us at that part of the business. 723 00:35:39,560 --> 00:35:41,759 Speaker 15: Yeah, And I think that is the big question right now, 724 00:35:41,800 --> 00:35:44,400 Speaker 15: because the defining theme of the last two years is 725 00:35:44,440 --> 00:35:46,839 Speaker 15: that we're not really seeing a lot of exits from 726 00:35:47,040 --> 00:35:50,520 Speaker 15: PE investments and because of that, a lot of investors, 727 00:35:50,520 --> 00:35:53,000 Speaker 15: you know, your pensions and your endowments are not getting 728 00:35:53,040 --> 00:35:56,160 Speaker 15: their cash back. And the reason for that seems to 729 00:35:56,200 --> 00:35:58,239 Speaker 15: be that a lot of PE firms don't want to 730 00:35:58,280 --> 00:36:03,319 Speaker 15: sell into this market. They're not getting valuations that they like, 731 00:36:03,600 --> 00:36:05,600 Speaker 15: even though the market has been kind of going up, 732 00:36:05,880 --> 00:36:07,800 Speaker 15: And I think that kind of reflects sort of the 733 00:36:08,200 --> 00:36:12,439 Speaker 15: disconnect here, like maybe maybe private markets haven't really caught 734 00:36:12,520 --> 00:36:15,640 Speaker 15: up with sort of the twenty twenty two adjustment from 735 00:36:15,920 --> 00:36:18,960 Speaker 15: higher interest rates here. And so if you actually kind 736 00:36:18,960 --> 00:36:21,560 Speaker 15: of look at some of these math techniques that's being 737 00:36:21,680 --> 00:36:25,120 Speaker 15: used to unsmooth the volatility, what you get is actually 738 00:36:25,440 --> 00:36:28,360 Speaker 15: a volatility level that's very similar to the S and 739 00:36:28,400 --> 00:36:31,439 Speaker 15: P five hundred. So, but a lot of people would 740 00:36:31,440 --> 00:36:34,680 Speaker 15: say maybe investors do like the smooth volatility, even if 741 00:36:34,680 --> 00:36:36,759 Speaker 15: it's not the truth. So that is one sin of 742 00:36:36,800 --> 00:36:38,200 Speaker 15: code Taque that we hear a lot. 743 00:36:38,719 --> 00:36:41,040 Speaker 13: What do you hear from other people outside of private 744 00:36:41,080 --> 00:36:43,680 Speaker 13: markets about some of these math techniques? 745 00:36:43,719 --> 00:36:46,319 Speaker 3: Do they pass the so called sniff test. 746 00:36:46,440 --> 00:36:48,799 Speaker 13: You know, they seem legit or cause I guess like 747 00:36:48,960 --> 00:36:51,600 Speaker 13: for maybe like some where my head is going, is 748 00:36:51,640 --> 00:36:54,040 Speaker 13: you know the way that companies can sometimes make like 749 00:36:54,080 --> 00:36:55,960 Speaker 13: really creative adjustments. 750 00:36:55,440 --> 00:36:56,640 Speaker 3: To what their earnings looks like. 751 00:36:56,719 --> 00:36:59,560 Speaker 13: And it's like, hmm, is that like maybe just a 752 00:36:59,600 --> 00:37:01,880 Speaker 13: little bit to Rosie, So tell us a little bit 753 00:37:01,880 --> 00:37:04,239 Speaker 13: about like what the feedback has been on what these 754 00:37:04,320 --> 00:37:05,160 Speaker 13: quants are doing. 755 00:37:05,760 --> 00:37:09,120 Speaker 15: Yeah, I think, you know, using these cont techniques is 756 00:37:09,160 --> 00:37:12,000 Speaker 15: definitely not the standardier And I think if you talk 757 00:37:12,080 --> 00:37:15,040 Speaker 15: to a lot of allocators they will tell you sort 758 00:37:15,080 --> 00:37:17,719 Speaker 15: of the practical side of things, which is that, you know, 759 00:37:17,920 --> 00:37:21,319 Speaker 15: since two thousand and eight, PE generally has at least 760 00:37:21,320 --> 00:37:24,400 Speaker 15: on the surface, done better than you know, public markets, 761 00:37:24,560 --> 00:37:28,120 Speaker 15: and most people are pretty happy with that, and they 762 00:37:28,200 --> 00:37:29,960 Speaker 15: kind of feel like, you know, even if it is 763 00:37:30,000 --> 00:37:33,640 Speaker 15: actually riskier, who cares, right. I have a kind of 764 00:37:33,640 --> 00:37:36,160 Speaker 15: a quote from a guy who's very familiar with PEE 765 00:37:36,200 --> 00:37:38,920 Speaker 15: where he's like, well, there's more cash coming out of 766 00:37:38,960 --> 00:37:42,520 Speaker 15: this box, So do we really need to dig that deeper? 767 00:37:42,560 --> 00:37:45,400 Speaker 15: Do we really need to torture the data? But I 768 00:37:45,440 --> 00:37:48,399 Speaker 15: think there's also more interest in these methods right now 769 00:37:48,440 --> 00:37:51,240 Speaker 15: because there's a sense out here that with interest rates 770 00:37:51,320 --> 00:37:56,200 Speaker 15: higher and kind of with maybe just riding valuations getting 771 00:37:56,200 --> 00:37:59,720 Speaker 15: a bit more difficult, we're entering into a tougher period 772 00:37:59,760 --> 00:38:02,120 Speaker 15: for private equity, and so people will actually start to 773 00:38:02,280 --> 00:38:04,080 Speaker 15: ask these questions, all right. 774 00:38:04,080 --> 00:38:06,680 Speaker 5: Thanks to Justina Lead, Bloomberg Markets Reporter. 775 00:38:07,320 --> 00:38:11,839 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify, 776 00:38:12,040 --> 00:38:15,720 Speaker 1: and anywhere else you'll get your podcasts. Listen live each weekday, 777 00:38:15,840 --> 00:38:18,800 Speaker 1: ten am to noon Eastern on Bloomberg dot com, the 778 00:38:18,920 --> 00:38:22,360 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 779 00:38:22,400 --> 00:38:25,560 Speaker 1: can also watch us live every weekday on YouTube and 780 00:38:25,760 --> 00:38:27,360 Speaker 1: always on the Bloomberg terminal