Speaker 1: This is Bloomberg Intelligence with Alex Steel and Paul Sweeney.
Speaker 2: The real app performance has been the US corporate high yield.
Speaker 3: Are the companies lean enough? Have they trimmed all the fats?
Speaker 2: The semiconductor business is a really cyclical business.
Speaker 1: Breaking market headlines and corporate news from across the globe.
Speaker 3: Do investors like the M and A that we've seen?
Speaker 2: These are two big time blue chip companies.
Speaker 4: The window between the peak and cut changing super fast.
Speaker 1: Bloomberg Intelligence with Alex Steel and Paul Sweeney.
Speaker 5: On Bloomberg Radio. I'm Paul Sweeney and I'm John Tucker
Speaker 5: filling in for Alex Steele.
Speaker 6: On Today's Bloomberg Intelligence Show.
Speaker 2: We dig inside the big business stories impacting Wall Street
Speaker 2: and the global markets.
Speaker 5: Each and every week we provide in depth research and
Speaker 5: data on some two thousand companies of one hundred and
Speaker 5: thirty industries our analysts cover worldwide.
Speaker 2: Today, we'll look at how a future Donald Trump presidency
Speaker 2: will impact electric vehicles.
Speaker 5: Plus we're going to discuss why shares of Tyson Food
Speaker 5: surge the most in more than two years.
Speaker 2: But first we dive into corporate earnings from the media
Speaker 2: and entertainment giant Walt Disney.
Speaker 5: Walt Disney reported fourth quarter sales and profit that beat
Speaker 5: Wall Street expectations and forecast earnings growth for the next
Speaker 5: three years.
Speaker 2: For more, John and I were joined by Githa Raganathan,
Speaker 2: Bloomberg Intelligence analysts on US media.
Speaker 5: First, we asked Keitha for her take on Disney's most
Speaker 5: recent quarter.
Speaker 4: What we saw was a lot of guidance, and we've
Speaker 4: never seen guidance laid out like this for us ever before.
Speaker 4: I mean, this was line by line item guidance for
Speaker 4: each of the different subdivisions at Disney, whether you know
Speaker 4: it was the theme park business or the streaming or
Speaker 4: movie studios. They kind of gave us, you know, segment
Speaker 4: by segment numbers and exactly what to expect. And really
Speaker 4: the biggest thing for Disney over the past few quarters
Speaker 4: has just been this lack of visibility and so much
Speaker 4: of investor uncertainty, and they just cleared it all up
Speaker 4: in this one, you know, fell swoop with this earnings report.
Speaker 2: They never did that for me, getha, I always had
Speaker 2: to guess and all that stuff. But for you, they
Speaker 2: just started up on silk platter. What got your attention
Speaker 2: the most from some of this guidance, What do you
Speaker 2: think the street really likes?
Speaker 4: I think what the street really likes is you have
Speaker 4: high single digit EPs growth. Remember the street was projecting
Speaker 4: about four to five percent, So that's a nice uptick
Speaker 4: there for twenty twenty five, and then going into twenty
Speaker 4: twenty six and twenty twenty seven, they're looking at double
Speaker 4: digit earnings growth. And the other bright spots were, you know,
Speaker 4: the theme park business. Now, we do know that there
Speaker 4: is a moderation when it comes to the domestic theme
Speaker 4: park business, but it looks like things might not be
Speaker 4: actually as bad as we had feared. So domestic parks
Speaker 4: actually performed a little bit better than we expected. And
Speaker 4: then they talked about some weakness going into the fiscal
Speaker 4: first quarter. Remember we did have those two big hurricanes
Speaker 4: in Florida. They do have a lot of cruise ships
Speaker 4: that they're launching, and so there's going to be some
Speaker 4: launch costs weighing on profit. But then you get into
Speaker 4: the second half of fiscal twenty twenty five and they're
Speaker 4: expecting those cruise ships to contribute in a big way
Speaker 4: and kind of the theme parks to also come back.
Speaker 4: So I think that's again some source of you know,
Speaker 4: investor optimism and confidence.
Speaker 5: I get this streaming part. I'm not sure that I
Speaker 5: understand that linear TV part and why that's still part
Speaker 5: of the empire.
Speaker 4: Yeah, nobody understands it, john And that was actually a
Speaker 4: question for Hugh Johnston and Bob Eygert at the earnings call.
Speaker 4: They're like, you know, why should you be holding onto
Speaker 4: this business? You know, Comcast just recently said that they're
Speaker 4: going to be kind of considering spinning off their cable
Speaker 4: TV network business. And remember, the big thing that's really
Speaker 4: coming up for Disney in twenty twenty five is that
Speaker 4: they are launching this standalone ESPN product. And if they
Speaker 4: had any reservations in the past about jettisoning, you know,
Speaker 4: the TV network's business because they were tied to the
Speaker 4: bundle through ESPN, you know, this kind of definitely opens
Speaker 4: up the field for them and it no longer ties
Speaker 4: them down to the bundle. So they were asked the question,
Speaker 4: they said that they're not looking into it. They like
Speaker 4: their portfolio just the way it is. But we really
Speaker 4: think that once they get that ESPN standalone of streaming
Speaker 4: service up and running, they surely will kind of look
Speaker 4: into doing something more dramatic, I think with the TV networks,
Speaker 4: especially given you know, a regulatory change.
Speaker 2: To talk to us about the streaming business. They've finally
Speaker 2: turned profitable on that business. Give us the delta that
Speaker 2: you think that streaming business go through from losses to
Speaker 2: potential profits.
Speaker 4: Here, big big turnaround, Paul, And I mean this was
Speaker 4: really the big story for twenty twenty four. To go
Speaker 4: from four billion in losses in twenty twenty two, two
Speaker 4: and a half billion in losses in twenty twenty three,
Speaker 4: to finally squeaking out a profit here in twenty twenty four.
Speaker 4: And remember they've just barely broken even, so about one
Speaker 4: hundred and fifty million dollars in profit. But the whole
Speaker 4: story is how they kind of build on that one
Speaker 4: hundred and fifty million dollars. So you know, Netflix this
Speaker 4: year is going to report about ten billion dollars in profit,
Speaker 4: and I think there's some encouraging commentary, so they already
Speaker 4: kind of guided. They gave us actually hard numbers for
Speaker 4: the streaming profit for both fiscal twenty twenty five and six.
Speaker 4: Twenty twenty five, they said over a billion dollars in profit,
Speaker 4: and in twenty twenty six they actually gave us a
Speaker 4: margin number, double digit margins. And remember this is the
Speaker 4: big story. Everybody is chasing those twenty five percent operating
Speaker 4: margins that Netflix has already achieved, and so Disney is.
Speaker 4: It looks like, I mean, they obviously have a lot
Speaker 4: of catching up to do, but they're closing in.
Speaker 5: Our Thanks to Githa Raganath in Bloomberg Intelligence analyst on
Speaker 5: US media, this.
Speaker 2: Week, we focused on a Bloomberg Big Take story entitled
Speaker 2: Trump's win puts Musk in the White House's new C suite.
Speaker 5: You can find it on Bloomberg dot com and on
Speaker 5: the terminal. The story looks at how Tesla CEO Elon
Speaker 5: Musk spent at least one hundred and thirty two million
Speaker 5: dollars to help Donald Trump's re election as US president
Speaker 5: and now Musk we'll have a role in Trump's new administration.
Speaker 2: For more, guest host Jess Meant and I were joined
Speaker 2: by one of the story's authors, Max Chafkin, Bloomberg BusinessWeek
Speaker 2: Senior reporter. We first asked Max what we know about
Speaker 2: Elon Muck's new role.
Speaker 6: And we learned a little bit more.
Speaker 7: Just after this story was published, Donald Trump made something
Speaker 7: official that he had teased and that Elon Musk can
Speaker 7: tease repeatedly on the campaign trail, Elon Musk will be
Speaker 7: the person charged with providing advice on the streamlining of government. Now,
Speaker 7: that could mean any number of things. It could mean,
Speaker 7: I think very little. It could also mean that, as
Speaker 7: Donald Trump prepares to enact his you know, very ambitious agenda,
Speaker 7: that Elon Musk will be at his side, and that'll
Speaker 7: be my bad. I mean, I think the job thing
Speaker 7: is probably a distraction. You know, the most important question
Speaker 7: in the Trump White House is who has Trump's ear,
Speaker 7: and right now that's Elon Musk. And I think as
Speaker 7: we put together the story and as I've been thinking
Speaker 7: about this, you know, Elon Musk throws him into these companies,
Speaker 7: and famously he has six different companies, you know, Tesla
Speaker 7: and SpaceX, his car company, and rocket Company being.
Speaker 6: The big ones.
Speaker 7: I think we need to start thinking about politics, and
Speaker 7: in particular Elon Musk's role in right wing politics, whether
Speaker 7: it's the Trump the next Trump administration, or even beyond
Speaker 7: on that as his other big company, as something that
Speaker 7: he is going to be devoting a lot of time
Speaker 7: to and trying to use it frankly to benefit his
Speaker 7: other interests.
Speaker 8: Leading a commission specifically outside of government, Elon Musk doesn't
Speaker 8: have to divest his personal and financial holdings when making
Speaker 8: recommendations to the White House on federal spending and regulations
Speaker 8: that he wants to cut. I mean, what sort of
Speaker 8: precedents do we have for something that's created sort of
Speaker 8: that's supposed to be specifically outside government, And what power
Speaker 8: can he yield and not yield? Do we have any indications?
Speaker 7: Sure have been lots of presidential commissions. You know, this
Speaker 7: kind of thing is not necessarily anything new. It's really
Speaker 7: just a question of how closely is Donald Trump listening
Speaker 7: to it? And when Elon Musk, He's suggested all kinds
Speaker 7: of very radical things, things that are likely to be
Speaker 7: either difficult to achieve, like practically working within the confines
Speaker 7: of government, or wildly unpopular or both. So you know,
Speaker 7: he's said he suggested, for instance, that he's going to
Speaker 7: twitter the US governmentsuggessing, you know, massive layoffs. Remember he
Speaker 7: laid off eighty percent of the Twitter staff. He is
Speaker 7: not going to lay off eighty percent of the US government.
Speaker 7: I think that would be a very very very surprising
Speaker 7: thing if it were to happen that said, you know,
Speaker 7: Trump has has is going to try to defund aspects
Speaker 7: of the government, and it really seems like Elon Musk
Speaker 7: is going to play a role in deciding what gets defunded,
Speaker 7: which is of course, is going to raise all sorts
Speaker 7: of ethical concerns and questions. And because because there are
Speaker 7: ways that President Trump, president elect Trump is going to
Speaker 7: be in a position to say, squash investigations into Elon
Speaker 7: Musk companies, or direct funds to Elon musk companies, or
Speaker 7: slow down some of Elon Musk's competitors, and and so
Speaker 7: you know, it's it's it's going to keep journalists busy.
Speaker 7: It's gonna I'm sure that the left is going to
Speaker 7: be very focused on this over the next couple of
Speaker 7: years because Elon Musk, who's a polarizing guy, is going
Speaker 7: to be tied to this administration very closely.
Speaker 2: I mean, Elon Musk, you cite it in your article,
Speaker 2: and you just mentioned here all the companies he runs, Tesla, SpaceX,
Speaker 2: orally on and on and on. How many hours in
Speaker 2: a day does this guy have?
Speaker 6: I mean, I mean, I mean, you know you have.
Speaker 8: Mentioned when you think about how many companies to plays
Speaker 8: a lot.
Speaker 7: Of video games, which you know is one of the
Speaker 7: many head scratchers with this extraordinary man.
Speaker 6: Uh. I think we've seen.
Speaker 7: Investors in some of these other companies get concerned. And
Speaker 7: you know, right now we're in the middle of this
Speaker 7: kind of honeymoon phase. You know, there's a mania to
Speaker 7: the way Elon Musk is talking about this stuff. Is
Speaker 7: in mar A Lago, he's in Washington. You know, Trump
Speaker 7: family members are referring to him as uncle Elon.
Speaker 6: You got to think that.
Speaker 7: This is not going to last, and if it were
Speaker 7: to last, that there would be a bit of a
Speaker 7: coutdown because because as you say, Tesla is a big,
Speaker 7: complicated company with lots of challenges, and right now we're
Speaker 7: seeing a lot of investors bid up the stop, but
Speaker 7: there isn't a ton of It's not like there's a
Speaker 7: clear rationale for why Tesla is suddenly worth like forty
Speaker 7: percent more than it was before the election, except that, hey,
Speaker 7: maybe Trump's gonna make things better. But but you know,
Speaker 7: they're gonna be challenges and distraction is going to be
Speaker 7: something that we're gonna be looking at.
Speaker 8: And what about ev policies because it seemed like they
Speaker 8: were more beneficial toward Tesla maybe under the Biden administration
Speaker 8: rather than the prior Trump administration. So how does this
Speaker 8: sort of shift? And you have kind of the Trump
Speaker 8: two point.
Speaker 4: Zero coming up.
Speaker 7: And this is one of the things that's so strange
Speaker 7: because Elon Musk became much more conservative during the Biden years,
Speaker 7: but the Bid years were incredibly good to Tesla.
Speaker 6: Tesla's value, you know, shot way up.
Speaker 7: It went from being kind of a niche player to
Speaker 7: one of the large American car companies. And you know, Trump,
Speaker 7: as you kind of hint, was very critical about electric
Speaker 7: vehicles on the campaign trail. Now, now there are two
Speaker 7: things here that are probably worth bringing up. One is
Speaker 7: where Tesla is now is very different than it was
Speaker 7: four or five years ago. And you could make an
Speaker 7: argument that these electric vehicle subsidies actually do more for
Speaker 7: Tesla's competitors than they do for Tesla itself.
Speaker 6: So like, if you were to remove all.
Speaker 7: These subsidies, yes, it might cost Tesla investors money, but
Speaker 7: it would also sort of help Tesla lock in its
Speaker 7: very very dominant position in the market. And the second thing,
Speaker 7: probably the more important thing, is that Elon Musk is
Speaker 7: desperately trying to move beyond the auto business. He wants
Speaker 7: Tesla to be an AI company. He wants to have robotaxis.
Speaker 7: There is no regulatory regime there, and I think what
Speaker 7: investors are hoping, and again I don't know that they
Speaker 7: have much sort of clear factual basis for this hope.
Speaker 7: But this is the rationale that Trump will basically legalize
Speaker 7: this business, that he will take a.
Speaker 6: Very dicey regulatory situation.
Speaker 7: And make it less dicey, and that will be worth
Speaker 7: a lot of money to Tesla and ultimately to as shareholders.
Speaker 6: Thirty seconds left, Max.
Speaker 2: How much time do we think Elon Musk is going
Speaker 2: to allocate to the government stuff?
Speaker 7: Well, right now it seems like he's he's it's a
Speaker 7: full time job, right I mean, he seems to be
Speaker 7: there quite a lot. I think this is going to
Speaker 7: be something that he's very very focused on, you know,
Speaker 7: probably as long as it lasts, which which maybe that's
Speaker 7: only going to be a couple of months.
Speaker 6: Maybe it's going to be longer.
Speaker 9: You know.
Speaker 7: He did he has signaled that he wants to play
Speaker 7: in politics beyond this, beyond twenty twenty four. He's talking
Speaker 7: about the midterms already so interesting, you'll see, all right.
Speaker 5: Thanks to Max Chafkin, Bloomberg BusinessWeek senior reporter, coming up
Speaker 5: wi a breakdown how oil producers will be impacted by
Speaker 5: a Donald Trump presidency.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing inpth
Speaker 2: research and data on two thousand companies and one hundred
Speaker 2: and thirty industries. You can access Bloomberg Intelligence via b
Speaker 2: I go on the terminal. I'm Paul Sweeney.
Speaker 5: And I'm John Tucker. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern car playing then broud Otto
Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
Speaker 1: get your podcasts, or watch us live on YouTube.
Speaker 5: I'm Paul Sweeney and I'm John Tucker filling in for
Speaker 5: Alex Steele. Last week, Donald Trump was elected the forty
Speaker 5: seventh President of the United States, reclaiming the White House
Speaker 5: and pulling off a stunning political comeback. And how many
Speaker 5: industries are wondering how they'll be impacted In twenty twenty five.
Speaker 5: For more against hoos, Matt Miller and I were joined
Speaker 5: by Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Manager.
Speaker 5: We first asked Steve for his take on how the
Speaker 5: EV industry will be affected by Donald Trump.
Speaker 9: Yeah, if Trump decides to kind of remove or cut
Speaker 9: the seventy five hundred tax credit or EV tax credit,
Speaker 9: I think most people believe that the EV penetration will stall.
Speaker 9: If not stall, it'll probably fall because a lot of
Speaker 9: the consumers are relying on that that's seventy five hundred
Speaker 9: dollars to make sure, you know, to bring down the price,
Speaker 9: the effective price of the vehicle. Most evs sold in
Speaker 9: America are still very expensive. There's only a limited number
Speaker 9: of them that are under fifty thousand dollars. So the
Speaker 9: fear is, you know, it's going to stall EV penetration.
Speaker 9: The automaker is going to have a hard time because
Speaker 9: they's already invested. They've already committed investing a lot of
Speaker 9: money under the Inflation Reduction Act about one over one
Speaker 9: hundred and fifty billion dollars to onshore a lot of
Speaker 9: supply chains. So it's going to cause a lot of
Speaker 9: chaos within the industry.
Speaker 5: So they'll be under no pressure whatsoever moving forward, possibly
Speaker 5: to increase sales of evs.
Speaker 9: Yeah, I think the automaker is going to have to
Speaker 9: increase incentives. I think what could happen if the EV
Speaker 9: penetration rate does decrease from about eight percent currently in
Speaker 9: the US. He's going to be left with the strongest players.
Speaker 9: And to me, that looks like Tesla, because Tesla does
Speaker 9: have the lowest costs structure amongst all the EV makers
Speaker 9: in the US, and if the market shrinks, the weaker
Speaker 9: ones will probably fall on the wayside.
Speaker 5: And oddly enough, First Bro or what do we call him,
Speaker 5: first friend, Elon Musk, he's not necessarily in favor of
Speaker 5: these these tax subsidies for evs.
Speaker 9: Yeah, I think, you know, to him, I don't. He
Speaker 9: thinks Tesla doesn't need them, and I you know, it's
Speaker 9: it's partly true. If you look at the amount of
Speaker 9: cars that are least and eligible for the seventy five hundred,
Speaker 9: actually a lot of the seventy five hundred tax credit
Speaker 9: as actually from leased vehicles. If you look at the
Speaker 9: amount of least vehicles that Tesla have sold in the
Speaker 9: past twelve months, it's about twenty percent. So you know
Speaker 9: they'll get impacted. But if you compare it to Rivian.
Speaker 9: You know, Rivian has about fifty percent of their vehicles
Speaker 9: leased and those and eligible for the seventy five hundred,
Speaker 9: so it could be a bigger impact in Reviant.
Speaker 10: Yeah, there's a limit on you don't get the tax
Speaker 10: credit if you're buying a vehicle that costs more than
Speaker 10: eighty thousand dollars. And I believe there's a household income
Speaker 10: requirement as well, you have to be below a certain level.
Speaker 10: But if you lease it, you can get around at
Speaker 10: least one part of that tax credit. Isn't that right, Steve?
Speaker 5: That's right.
Speaker 9: That's actually what I'm referring to. So when we look
Speaker 9: at the companies who's going to get impacted, we really
Speaker 9: look at, you know, how many of those vehicles are leased.
Speaker 9: If you look at EV's in general in the US,
Speaker 9: the you know, the leasing penetration is actually upwards of
Speaker 9: seventy five eighty ninety percent, So a lot of people
Speaker 9: that actually buy evs are leasing it to get that
Speaker 9: seventy five hundred dollars.
Speaker 10: What does the EV market look like right now? I mean,
Speaker 10: I know, if you read the headlines, you would think
Speaker 10: that no one has bought an EV this year, Like,
Speaker 10: you know, the industry is in trouble because they're so unpopular,
Speaker 10: not just politically, but you know, since there's difficult to
Speaker 10: charge for a lot of people, it's just not an option. However,
Speaker 10: don't we still see EV sales actually growing?
Speaker 5: Oh, we are.
Speaker 9: We are seeing EV sales growing, especially in the second
Speaker 9: half of this year, because there's been a lot of
Speaker 9: price cuts right over the past eighteen twenty four months
Speaker 9: in the industry, and a lot of these vehicles have
Speaker 9: become more affordable, and even especially in the used EV market,
Speaker 9: those vehicles are very competitive to gasoline cars. What the
Speaker 9: industry is really facing is getting more impacted by the
Speaker 9: fact that interest rates are high. A lot of people
Speaker 9: cannot afford expensive cars these days, and EV's are a
Speaker 9: little bit more expensive than ice at the moment. So
Speaker 9: what the industry was trying to do, and I think
Speaker 9: what the IRA was trying to do, was trying to
Speaker 9: onshore a lot of the production while on shore a
Speaker 9: lot of the supply chain in the US and hopes
Speaker 9: of brain costs down so automakers can offer more affordable evs.
Speaker 9: And that's what we were expecting. We were actually expecting
Speaker 9: the EV penetration rate to rise, especially into twenty twenty
Speaker 9: six and twenty twenty seven.
Speaker 10: I got to break in here because I feel like,
Speaker 10: you know, Americans have shown a propensity for taking one
Speaker 10: thousand dollars plus monthly payments.
Speaker 6: I don't think it's about the price.
Speaker 5: Frankly, what do you think.
Speaker 6: That's the big problem.
Speaker 10: I'm test driving right now at GMC Sierra EV. It
Speaker 10: is a fantastic vehicle. It's expensive, but I think a
Speaker 10: lot of people are willing to take on debt to
Speaker 10: own a car like that. The problem is there's nowhere
Speaker 10: to charge it. I park in a garage across the
Speaker 10: street in Manhattan, you know, capital of the world, and
Speaker 10: the only option they offer is the slowest potential charge
Speaker 10: for twenty dollars a day.
Speaker 5: So it's just not worth it.
Speaker 9: Yeah, I think that's a very good point. Affordability is
Speaker 9: not the only hurdle. It's the charging and the range,
Speaker 9: and you know, dependent on the use. I think a
Speaker 9: lot of people with the second vehicle make it an EV.
Speaker 9: Someone who's using it for daily commutes make an EV.
Speaker 9: But you know, America is a big country and people
Speaker 9: love to drive cars, and there are a big majority
Speaker 9: of car buyers that are you know, probably staying away
Speaker 9: from ev.
Speaker 5: Because of that, all right? Thanks to Steve Man, Bloomberg Intelligence,
Speaker 5: Global Autos and Industrials Research Manager.
Speaker 2: Each week we look at research from Bloomberg and EF
Speaker 2: previously known as New Energy Finance.
Speaker 5: They're the team at Bloomberg that tracks and analyzes the
Speaker 5: energy transition from commodities to power, transport, industries, buildings, and
Speaker 5: agriculture sectors. This week, we took a look at how
Speaker 5: Donald Trump's upcoming presidency will impact the oil industry.
Speaker 2: For more guests, Sos, Molly Smith, and I were joined
Speaker 2: by ty Lou b n E, f oil market specialist.
Speaker 2: We first asked, Hi, if it is a fair assumption
Speaker 2: that Donald Trump will be good for the energy industry.
Speaker 11: I think the USL industry and the gas industry can
Speaker 11: benefit from Trumpet administration in the number of ways. I
Speaker 11: think the first off, the bed is like a lower
Speaker 11: corporate tax rate.
Speaker 12: So personal see.
Speaker 11: That Trump has mentioned has indicated he would like to
Speaker 11: lower corporate tax rates from the current twenty one percent
Speaker 11: to fifteen percent.
Speaker 12: So if the materializes, that's the way of the BED.
Speaker 11: That's like more money for the industry and for the shareholders.
Speaker 3: What are they going to do with that money?
Speaker 9: Then?
Speaker 3: Are you suggesting it would be share buybacks?
Speaker 2: Yeah?
Speaker 11: So there's definitely like a number of options these companies
Speaker 11: can do with this quote unquote extra money. They can,
Speaker 11: like you said, they can do more buyback for the shares,
Speaker 11: they can issue more dibidend payouts, they can reduce the debt,
Speaker 11: and finally they can always they always have the option
Speaker 11: to funnel some of these money into capital expenditures, which
Speaker 11: ultimately retranslates into more production down the road.
Speaker 2: From the regulatory standpoint, I mean, can I go down
Speaker 2: there now and drill a well? Can I make a
Speaker 2: pipeline to take my natural guess to corporate christ Year
Speaker 2: wherever it needs to get to. Is it can be
Speaker 2: easier under a second Trump administration to build energy stuff?
Speaker 12: Yeah, I would definitely think so.
Speaker 11: So under the Parton administration, that's the government has imposed
Speaker 11: a lot of regulations. There are team that's unfriendly to
Speaker 11: the only gas industry. The government is issued during rights
Speaker 11: moratorium they issued they placed the pause on energy exports permits,
Speaker 11: and they also increase royalties on federal land leases.
Speaker 1: Uh.
Speaker 12: And I would presume and all of.
Speaker 11: These like we're pretty hostile and created a lot of
Speaker 11: uncertainty to the industry.
Speaker 12: So I would assume I would.
Speaker 11: Think that Trump administration would remove a lot of these regulations.
Speaker 11: There are team that's ownerds to our gas producers, so
Speaker 11: definitely beneficial from that point of view.
Speaker 13: You mentioned before, you know, increasing capex potentially and how
Speaker 13: that would mean more production.
Speaker 3: Got to the worry about prices.
Speaker 13: If you are producing so much more, what happens to
Speaker 13: the supply demand equation. There is that already some thing
Speaker 13: that drillers are thinking about of how much more they
Speaker 13: might want to maybe not go in too much.
Speaker 12: Yeah, that's for sure.
Speaker 11: So if you look at the past ten years, use
Speaker 11: oil producers have on server occasions crashed the aill process
Speaker 11: when they decided to turn on the production tabs. So
Speaker 11: they're very cognizange of the risks this time around. On
Speaker 11: top of that, that's like a lot of shareholder pressures
Speaker 11: on these oil and gas companies to maintain capital discipline
Speaker 11: and to increase capital payback. So from that sense, I
Speaker 11: think even though if there's like more money to grow
Speaker 11: around in the industry, it would be more much harder
Speaker 11: for the oil producers to grow production the way they.
Speaker 12: Did in the past ten years.
Speaker 2: So when did the US become a net exporter like
Speaker 2: twenty sixteen or something like that. I think so, okay,
Speaker 2: so we were a net importer forever, then we became
Speaker 2: thanks to the shell find so we became.
Speaker 6: A net exporter.
Speaker 2: How does the US oil industry and not sure if
Speaker 2: you can being characterize it or is it just individual companies?
Speaker 2: How does the US oil industry interact with O Peck
Speaker 2: if at all?
Speaker 11: So the way I think about that, very competitive, like
Speaker 11: natural competitors against each other. So if if lower taxes
Speaker 11: in the Trump administration materializes, it would definitely make the
Speaker 11: US O patch a lot more competitive. It will also
Speaker 11: the brick given calculations there be and there would be
Speaker 11: more money to grow around, so it would be it
Speaker 11: will make it much harder for OPEC.
Speaker 12: To increase the output.
Speaker 11: So it's going to place O pack on a more
Speaker 11: difficult grant.
Speaker 13: You know, something that in part got Donald Trump reelected
Speaker 13: to the White House was the idea of bringing prices down.
Speaker 13: And you know, gas prices obviously a big sticking point
Speaker 13: for a lot of Americans. Gas prices have been coming
Speaker 13: down pretty consistently over the past, you know, six months
Speaker 13: or so down to now, like about roughly three dollars
Speaker 13: a gallon on average nationwide.
Speaker 3: What can Trump really do for gas prices?
Speaker 11: Well, when I think about gas prices, there are two
Speaker 11: pieces to it. That's the crude oil price art and
Speaker 11: then the that's the refinery margin part. Now, on the
Speaker 11: refinery margin, there's probably not much a person can do
Speaker 11: to it because you basically have to increase refining capacity
Speaker 11: and that takes years to build out. If you want
Speaker 11: to prove their part, the outer part will be the
Speaker 11: all price prize. Now, if you wed regulations make it
Speaker 11: easier for companies to drill, you.
Speaker 12: Can pre rent. Theoretically, you can prevent some of the.
Speaker 11: Possible price spikes in all price in all prices, just
Speaker 11: because it's less onerous for these jurists to put more
Speaker 11: capital into the ground. So in this sense, you can
Speaker 11: help prices from seeing more spikes. But however, I don't
Speaker 11: think these companies will really go out and go all
Speaker 11: and endure again the way they did before, for the
Speaker 11: reasons we talked about before.
Speaker 2: So what's happened to the Russian oil It's been a
Speaker 2: couple of years now, and if it's not going to Germany.
Speaker 6: Where's it going.
Speaker 11: Yeah, so it's not going to the Western European nations,
Speaker 11: and Western Nations has placed sanctions on Russian So a
Speaker 11: lot of this has been brought up.
Speaker 12: By unconscries like India and China.
Speaker 11: So they're pretty really benefiting from these sensions.
Speaker 6: So these sanctions aren't really working, are they.
Speaker 12: They'll be directing trade flow.
Speaker 6: It's the redirecting trade flow, and.
Speaker 11: They're making it harder for Russia to ship the ows
Speaker 11: around the world. So it does increase the costs on
Speaker 11: the Russian all producers. So that's an impact, but the
Speaker 11: impact I feel like it's probably more limited.
Speaker 5: All Right, thanks to Tyler B and E f oil
Speaker 5: market specialists. Just to head on the program, we're going
Speaker 5: to look at how Wall Street math wizards are decoding
Speaker 5: private market returns.
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Speaker 5: I'm Paul Sweeney and I'm John Tucker filling in for
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Speaker 6: We move next to corporate earnings from Tyson Foods. This
Speaker 6: week shares a Tyson food surge, the most in more
Speaker 6: than two years.
Speaker 5: That's after the company beat fourth quarter earnings expectations and
Speaker 5: projected stronger results next year. And this comes as a
Speaker 5: turnaround at Tyson's chicken business offset losses in beef for More.
Speaker 2: Guest host Jess Mett and I were joined by Jen
Speaker 2: bartashis Bloomberg Intelligence senior retail analysts. We first asked Jen
Speaker 2: for her take on Tyson's Foods the most recent.
Speaker 14: Quarter, and I think what we've really thought was they
Speaker 14: were able to end their fiscal year on a high note.
Speaker 14: That's really been a culmination of a lot of effort
Speaker 14: to streamline and improve their business. They've been very inconsistent
Speaker 14: in the last few years, so it is a little
Speaker 14: refreshing to see that they finally seem to have gotten
Speaker 14: their arms around some of the problems that they were having,
Speaker 14: and I seem to be on a very good trajectory
Speaker 14: going forward.
Speaker 8: Talk to us more, maybe about the inflation picture, because
Speaker 8: it looks like Tyson's second largest source of revenue actually
Speaker 8: demand for chicken actually improved because consumers were looking for
Speaker 8: those cheaper alternatives to beef. So what do you think
Speaker 8: this tells us about inflation right now?
Speaker 14: It's a great question, And with regards to inflation, there's
Speaker 14: a dual effect that Tyson has. The first is because
Speaker 14: they are so big in chicken, it's obviously a benefit
Speaker 14: to them when people are trading down or they're seeking
Speaker 14: cheap protein to put on their table. Chicken is a
Speaker 14: big answer to that question, and Tyson is definitely reaping
Speaker 14: the benefits of that. A little bit harder and a
Speaker 14: little bit more nuanced is the impact that inflation has
Speaker 14: on their prepared food segment. That's on the things that
Speaker 14: you find in the frozen aisle, in the refrigerated aisle.
Speaker 14: Those are higher cost items usually and they're a little
Speaker 14: bit higher margin for Tyson. So finding the right balance
Speaker 14: has been important as consumers look for those prices to
Speaker 14: come down a little bit further as well.
Speaker 2: So what drives their business top line revenue drivers is
Speaker 2: is it kind of a GDP stories, It's something different
Speaker 2: than that.
Speaker 14: It really is a reflection of where the consumer is.
Speaker 14: It is really about where the demand is going to
Speaker 14: fall when it comes to cost drivers. For Tyson, they
Speaker 14: really benefit from lower grain prices. So when corn comes down,
Speaker 14: soy comes down. That's good because that's the feedstock for
Speaker 14: the animals. But the way that Tyson goes usually follows
Speaker 14: just the general consumer and where they're trending and how
Speaker 14: incomes are progressing.
Speaker 8: Something earlier this year I thought was interesting because I
Speaker 8: talked to you about kind of price mix when it
Speaker 8: came to another segment in the consumer staples category, when
Speaker 8: it came to consumer package good type companies. Obviously, if
Speaker 8: you look at Tyson's Food too, when it comes to
Speaker 8: those types of food, beverage, food product type companies that
Speaker 8: are distributing packaged foods and meats, how do you view
Speaker 8: kind of when you were talking to me earlier this
Speaker 8: year about promotiontional sales for a lot of these types
Speaker 8: of companies in the back half of the year, like
Speaker 8: buy one, get one free, different things like that. As
Speaker 8: far as what this shows us about maybe consumer spending
Speaker 8: and what a lot of these companies when they are
Speaker 8: distributing these types of goods, how they're faring.
Speaker 14: It's a big topic for these companies. And so when
Speaker 14: you're looking at volumes, almost every package food company started
Speaker 14: this year saying they were going to grow volumes, and
Speaker 14: yet very few have actually been able to actually realize
Speaker 14: volume growth this year. And that's really because the shoppers
Speaker 14: have been so conservative on their spending and they've been
Speaker 14: seeking deals. There's been a lot of pressure to run promotions,
Speaker 14: and so we've seen promotional activity tick up substantially in
Speaker 14: the last quarter and in the second half of this
Speaker 14: year overall, and we're seeing more deals, more discounts, and
Speaker 14: all of that is usually coming at the price of
Speaker 14: the package food company, not necessarily the retailer. So that's
Speaker 14: good news for consumers who are looking for deals. It
Speaker 14: makes it a much harder process to manage for the
Speaker 14: packa food companies. So for Tyson, you know, part of
Speaker 14: what they've really been working on is increasing their innovation
Speaker 14: pipeline things where they can bring new products to market
Speaker 14: and have a different price point for those and that's
Speaker 14: a similar strategy to what a lot of these other
Speaker 14: package food companies are trying to do to just generate
Speaker 14: consumer interest in their products.
Speaker 2: Again, so Jenna know Tyson, they actually have adjusted operating
Speaker 2: income losses for beef and pork.
Speaker 14: Why is that, Yes, Well, when you look at the
Speaker 14: beef market, we have a shortage of beef. The animals
Speaker 14: are getting bigger, so there's still beef there, but because
Speaker 14: of that, prices have been a lot higher and it's
Speaker 14: been a little bit more expensive for consumers in terms
Speaker 14: of purchasing beef and certainly specific cuts of beef. And
Speaker 14: what we're seeing in the cattle market are very few
Speaker 14: signs that that's going to change anytime soon. So at
Speaker 14: this moment, we're thinking we're not going to see big
Speaker 14: signs that the cattle market is going to expand again
Speaker 14: until the end of twenty twenty five, so that's still
Speaker 14: a good ways away, which is part of why the
Speaker 14: company guided to a loss and adjusted operating income for
Speaker 14: the beef segment for twenty twenty five.
Speaker 5: All Right, Thanks to Jen Bartashis Bloomberg Intelligence Senior Analysts,
Speaker 5: Retail staples and packaged food.
Speaker 2: This week, we took a look at a Bloomberg Big
Speaker 2: Take story entitled Wall Street math Wizards are Decoding Private
Speaker 2: market Returns.
Speaker 5: You can find it on Bloomberg dot Com and the Terminal.
Speaker 5: The story looks at how a small band of math
Speaker 5: wizards want to demystify private market returns.
Speaker 2: For more, guest host Molly Smith and I were joined
Speaker 2: by the stories author Justina Lee, Bloomberg Markets reporter. We
Speaker 2: first asked Justina for more context on our latest story.
Speaker 15: If we kind of think about, you know, what's been
Speaker 15: happening to active management in the stock market for the
Speaker 15: past few decades. I mean, these days were really used
Speaker 15: to talk about like you know, alpha and beta and
Speaker 15: kind of how does your performance compare to the benchmark?
Speaker 15: And that's really killed a lot of the business. And
Speaker 15: I think what my story tries to bring up is
Speaker 15: could we see a similar revolution in private markets? And
Speaker 15: of course it's a way harder math to crunch, because
Speaker 15: as you mentioned, you know, you don't have the numbers
Speaker 15: as often and a lot of the time, you know,
Speaker 15: the numbers are quite subjective. But we are seeing a
Speaker 15: lot of interesting quant research here and they are trying
Speaker 15: to kind of use some statistical techniques to kind of
Speaker 15: reveal the risks and also to compare performance within private markets.
Speaker 13: And so much of what comparing performance needs is obviously
Speaker 13: a benchmark. And talking about how the S and P
Speaker 13: five hundred is the natural benchmark for so many companies.
Speaker 3: Does that still apply in private markets?
Speaker 13: Does that still make sense to be comparing these returns
Speaker 13: against a publicly a basket of publicly traded companies.
Speaker 15: Yeah, that really is a big question here, because even
Speaker 15: if you use a lot of these quant techniques, you
Speaker 15: still need to choose a benchmark to compare private markets to.
Speaker 15: And actually it can tell you a very different kind
Speaker 15: of story depending on which benchmark you pick. Like in
Speaker 15: my story, I cited this paper from Public Market Quants
Speaker 15: saying that you know, if you compare PE to S
Speaker 15: and P five hundred, I mean, the average P fund
Speaker 15: actually does quite well. But if you compare it to
Speaker 15: like small cap value, you know, come up. Maybe perhaps
Speaker 15: you might think that looks more like a P portfolio.
Speaker 15: It actually loses to small cap value. And I think
Speaker 15: that really is the big question here, because if you're
Speaker 15: an investor and you can get better returns in public markets.
Speaker 15: I mean, you're paying way less fees in public markets,
Speaker 15: and so you wouldn't want to be EPE.
Speaker 2: What is the direct alpha approach?
Speaker 15: Yeah, so this staric alpha approach was kind of invented
Speaker 15: by this guy, Barry Griffiths, who was at Landmark Partners
Speaker 15: for a long time and then when that was acquired
Speaker 15: by Ares, he was the head quantum ARES. And the
Speaker 15: math is actually not that complicated. It's mostly to compare
Speaker 15: kind of the cash flows you get from PE kind
Speaker 15: of with the opportunity cost of what you would have
Speaker 15: gotten if you had invested that in public markets. And
Speaker 15: so the idea there is kind of a more apples
Speaker 15: to apples comparison to what you could have gotten. And
Speaker 15: then that's supposed to kind of raise a question of
Speaker 15: you know, where the fees worth it? Or was locking
Speaker 15: up your money worth it, Because even if you are
Speaker 15: getting better returns in private equity, a lot of the
Speaker 15: time it might not be worth it if you think
Speaker 15: it's riskier because you cannot sell out of it, or
Speaker 15: you think it's riskier because it's using more leverage. And
Speaker 15: so I think a lot of the quant research is
Speaker 15: kind of bringing forth to these questions give.
Speaker 13: Us a sense of what some of these fees are like,
Speaker 13: because on the public side, it's really been such the
Speaker 13: story as the race to the bottom in fees, especially
Speaker 13: with the proliferation of ETFs and other funds that you
Speaker 13: can get into with passive management.
Speaker 3: So how expensive is it if you're.
Speaker 13: An investor in some of these private funds?
Speaker 15: Yeah, I mean so a lot of these private funds
Speaker 15: do have a hurdle rate, And interestingly, the hurdle rate
Speaker 15: is pretty standard, like around eight percent, and that you
Speaker 15: kind of start earning kind of carry above and beyond that,
Speaker 15: and that carry has actually increased the steer because we
Speaker 15: are seeing a bit more deal making pick cup as well.
Speaker 2: All Right, here's my big issue with private investments is
Speaker 2: just the marked to market. It's so I think it's
Speaker 2: just so unevenly applied. I don't feel like there's any consistency. Again,
Speaker 2: as I was mentioning to Molly, private equity folks are
Speaker 2: happy to mark the market on the way up, But
Speaker 2: I don't recall anybody reporting terrible marks in twenty twenty
Speaker 2: two when stocks and bonds were both down double digits.
Speaker 6: Talk to us at that part of the business.
Speaker 15: Yeah, And I think that is the big question right now,
Speaker 15: because the defining theme of the last two years is
Speaker 15: that we're not really seeing a lot of exits from
Speaker 15: PE investments and because of that, a lot of investors,
Speaker 15: you know, your pensions and your endowments are not getting
Speaker 15: their cash back. And the reason for that seems to
Speaker 15: be that a lot of PE firms don't want to
Speaker 15: sell into this market. They're not getting valuations that they like,
Speaker 15: even though the market has been kind of going up,
Speaker 15: And I think that kind of reflects sort of the
Speaker 15: disconnect here, like maybe maybe private markets haven't really caught
Speaker 15: up with sort of the twenty twenty two adjustment from
Speaker 15: higher interest rates here. And so if you actually kind
Speaker 15: of look at some of these math techniques that's being
Speaker 15: used to unsmooth the volatility, what you get is actually
Speaker 15: a volatility level that's very similar to the S and
Speaker 15: P five hundred. So, but a lot of people would
Speaker 15: say maybe investors do like the smooth volatility, even if
Speaker 15: it's not the truth. So that is one sin of
Speaker 15: code Taque that we hear a lot.
Speaker 13: What do you hear from other people outside of private
Speaker 13: markets about some of these math techniques?
Speaker 3: Do they pass the so called sniff test.
Speaker 13: You know, they seem legit or cause I guess like
Speaker 13: for maybe like some where my head is going, is
Speaker 13: you know the way that companies can sometimes make like
Speaker 13: really creative adjustments.
Speaker 3: To what their earnings looks like.
Speaker 13: And it's like, hmm, is that like maybe just a
Speaker 13: little bit to Rosie, So tell us a little bit
Speaker 13: about like what the feedback has been on what these
Speaker 13: quants are doing.
Speaker 15: Yeah, I think, you know, using these cont techniques is
Speaker 15: definitely not the standardier And I think if you talk
Speaker 15: to a lot of allocators they will tell you sort
Speaker 15: of the practical side of things, which is that, you know,
Speaker 15: since two thousand and eight, PE generally has at least
Speaker 15: on the surface, done better than you know, public markets,
Speaker 15: and most people are pretty happy with that, and they
Speaker 15: kind of feel like, you know, even if it is
Speaker 15: actually riskier, who cares, right. I have a kind of
Speaker 15: a quote from a guy who's very familiar with PEE
Speaker 15: where he's like, well, there's more cash coming out of
Speaker 15: this box, So do we really need to dig that deeper?
Speaker 15: Do we really need to torture the data? But I
Speaker 15: think there's also more interest in these methods right now
Speaker 15: because there's a sense out here that with interest rates
Speaker 15: higher and kind of with maybe just riding valuations getting
Speaker 15: a bit more difficult, we're entering into a tougher period
Speaker 15: for private equity, and so people will actually start to
Speaker 15: ask these questions, all right.
Speaker 5: Thanks to Justina Lead, Bloomberg Markets Reporter.
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