Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week.
Speaker 2: Carol Masser along with Matt Miller, who is in for
Speaker 2: tim our backdrop. This week, US inflation cooling sharply, perhaps
Speaker 2: marking a turning point for the FED. Earnings got underway
Speaker 2: courtesy of the big banks. Yes, all important and yet
Speaker 2: top of mind for us. This week, Disney's succession plans
Speaker 2: and why the iconic company could struggle to gain ground
Speaker 2: in the streaming wars, a short seller living in fear,
Speaker 2: flying cars Yes they are maybe here, And Barbie hits
Speaker 2: the big screen. All of that to come. We begin
Speaker 2: with Meta's answer to Twitter, Meta platform signing up one
Speaker 2: hundred million users in four days on its latest venture Threads,
Speaker 2: often described as a Twitter knockoff. This story and the
Speaker 2: Tech section of the new issue at Bloomberg BusinessWeek on newstands,
Speaker 2: now online at Bloomberg dot com, Slash BusinessWeek, and on
Speaker 2: the Bloomberg terminal. Let's get more from Bloomberg News social
Speaker 2: media reporter Asha Counts and our Big Tech team leader
Speaker 2: Sarah Fryar.
Speaker 3: After all the times we've talked about meta's consoliding power
Speaker 3: and social media growing to have so much influence over
Speaker 3: our behavior, we're kind of vulteering on Zuckerberg in this
Speaker 3: land crab, which is not where I would have expected
Speaker 3: us to be. But you know, Elon Musk and what
Speaker 3: he's done with Twitter has really made an opening for him.
Speaker 3: And you know, even if it feels a lot like Twitter,
Speaker 3: there are people who don't want to be on that
Speaker 3: platform anymore because of all the changes Asia.
Speaker 4: Is it really that successful a launch? I mean, they
Speaker 4: have two billion global users, so all they need to
Speaker 4: do to get to hundred million on threads is get
Speaker 4: ten percent of people who are addicted to Instagram and
Speaker 4: constantly checking it to click.
Speaker 5: Well.
Speaker 6: Look, some people have told me they're like, I'm not
Speaker 6: really impressed. Those people are just on Instagram. They don't
Speaker 6: have any new users, which I mean is partially true.
Speaker 6: A lot of those people were from Instagram. They did
Speaker 6: pull some Twitter people. I don't know that people are
Speaker 6: leaving Twitter, but they are signing up for Threads and
Speaker 6: you got to say, one hundred million in a couple
Speaker 6: of days is impressive, even though they have all these
Speaker 6: other apps and counting.
Speaker 2: Hey guys, I love in your story this line medicineo.
Speaker 2: Mark Zuckerberg's business instincts are to acquire copy or some
Speaker 2: other rival social media products. Is that a good thing though?
Speaker 2: For people who are thinking, Okay, I'm done with Twitter,
Speaker 2: and so's it's kind of an easy switchover.
Speaker 3: Yeah, I mean, I think it's it's just like Twitter
Speaker 3: in the sense that it's a it's a text based
Speaker 3: social networking situation. But I think that where it is
Speaker 3: different than Twitter now and the reason people have been
Speaker 3: moving over to it is because it has content moderation
Speaker 3: from a company that you know isn't that graded it
Speaker 3: but is better than Twitter Edit, and it has a
Speaker 3: connection to an existing network. And as as Asha and
Speaker 3: I have reported over the last few months, there has
Speaker 3: been an exodus from Twitter, specifically to apps like massed
Speaker 3: on Blue Sky and we'll get to it in second,
Speaker 3: but those are apps that promise to decentralize the future
Speaker 3: of social media and say that you know, it won't
Speaker 3: be holding power by one company. So what they're promising
Speaker 3: with this one is this is not necessarily a land
Speaker 3: grab like we've done on the past, that cross copykill strategy.
Speaker 3: This will actually be able to communicate with those other apps.
Speaker 4: To me that, you know, Threads looks just like Twitter.
Speaker 4: The buttons are kind of the same. But the one
Speaker 4: place I was really hoping it would be different is
Speaker 4: in the kind of political partisan battle. Like the crazies
Speaker 4: are out on Twitter, you know, and I wonder if
Speaker 4: Mark Zuckerberg has any incentive to make Threads different in
Speaker 4: that sense, because the crazies are what these social.
Speaker 7: Media companies count on. Right.
Speaker 4: You need people to make incendiary comments and you know,
Speaker 4: lob bombs and start fights.
Speaker 7: That's the whole point of social networks.
Speaker 6: Well, look, starting fights increases engagement, right, Like if you
Speaker 6: have a bunch of replies and arguments on Twitter, it's
Speaker 6: actually kind of good for Twitter in a really weird way.
Speaker 6: But I mean, meta executives have come out saying like,
Speaker 6: we don't really want this to be about news and
Speaker 6: politics on Threads, which is really interesting because I think
Speaker 6: it will set Threads apart from Twitter. But then are
Speaker 6: people going to want to be on there if they
Speaker 6: can't have some of those conversations and discussions, right, That's
Speaker 6: what made Twitter blow up was that a bunch of
Speaker 6: people were able to share real time news and information
Speaker 6: and talk about politics. So I think that will be
Speaker 6: the big difference between the two. And who knows whether
Speaker 6: that's good or bad. Maybe it's good and bad for
Speaker 6: different reasons.
Speaker 2: Yeah. I have to say, you know, when it's going
Speaker 2: through the story to myself, two questions ads no, no ads,
Speaker 2: question mark question mark no news, question mark question mark.
Speaker 2: I mean Sarah like, how can it become kind of
Speaker 2: I'm going to steal like a tom Ki and the zeitgeist, like,
Speaker 2: how can it become the thing?
Speaker 8: Oh?
Speaker 9: No?
Speaker 7: Hashtags?
Speaker 2: No hashtag? How can it really become a thing without
Speaker 2: those two?
Speaker 3: Well, it's gonna have ads eventually, it's meta. Yeah, So
Speaker 3: it's just a matter of time. And we've already been
Speaker 3: hearing from advertisers that they're interested in that. We've already
Speaker 3: seen a little brand sign up. I think that is
Speaker 3: also why it's people on Instagram who're trying to figure
Speaker 3: out how to be twittery, but they're not really that
Speaker 3: kind of person. So I do think it'll be different
Speaker 3: and really the opportunity here. The question about whether it
Speaker 3: will become like Twitter or not lies in how much
Speaker 3: more Twitter deteriorates from its current state. Because it wasn't
Speaker 3: letting people see more than six hundred tweets unless you
Speaker 3: were paying. Twitter's putting up more paid walls around its API,
Speaker 3: around its around its users. So I think that if
Speaker 3: people get disenchanted with Twitter, they're going to look for
Speaker 3: an alternative. Maybe they'll pick Threads and try to make
Speaker 3: it work for them. But yeah, you're right, it doesn't
Speaker 3: have those same tone, the same urgency that Twitter does.
Speaker 7: Can this be?
Speaker 4: You know, we were talking with Laura Martin yesterday and
Speaker 4: she was basically saying, ever since Elon Musk took over,
Speaker 4: Twitter has become even more of a cluster show than
Speaker 4: it already was, and the aanchisers were just leaving in droves,
Speaker 4: and we're desperate for something like Threads. Is it possible, Sarah,
Speaker 4: that we see Twitter just crater and disappear?
Speaker 3: Anything is possible in the world of Elon Musk. There
Speaker 3: is no There's no scenario that I would entirely rule out.
Speaker 3: We're prepare for them possible, But but yeah, I think
Speaker 3: I think people thought that would happen very quickly after
Speaker 3: he took over and hired Sorry, it's fired seventy five
Speaker 3: percent and lost a seventy five percent of the staff.
Speaker 3: They thought, you know, there's no way this is gonna
Speaker 3: this is gonna get a bugs right away. It's gonna
Speaker 3: it's gonna collapse, rip Twitter. It didn't turn out that way.
Speaker 3: It's still kicking, it's still live. It just got a
Speaker 3: new CEO, right, so really anything is possible.
Speaker 2: It's not winding down. He feels like he's winding up.
Speaker 2: Hey guys, One thing I did want to get into
Speaker 2: in your story, and I think it's important, is the
Speaker 2: open platform that you guys, the open system platform activity
Speaker 2: Pop because I do feel like this is an important
Speaker 2: part of it Asha coming on in that U and
Speaker 2: who they are, because this is part of you know,
Speaker 2: Meta is certainly doing this right, This is where it's
Speaker 2: Threads is using this platform for Yeah.
Speaker 6: I mean the idea behind this idea of decentralized social
Speaker 6: media is that you're not going to have one social
Speaker 6: media platform that's going to have all this power. So
Speaker 6: users would be able to maybe vote on the features
Speaker 6: that they want or communicate with other apps, so it's
Speaker 6: not all consolidated and to one place. The thing is,
Speaker 6: people we talk to in the sort of decentralized community
Speaker 6: are really skeptical about Meta being a part of it
Speaker 6: because they can say all this stuff, but they actually
Speaker 6: have to take the steps to integrate activity pub and
Speaker 6: actually activate it. And then are they going to really
Speaker 6: allow people to, let's say, take their followers onto mast
Speaker 6: it on and take all of their data. I don't know,
Speaker 6: right So that's going to be the thing to watch
Speaker 6: over the coming months, But so far, people in the
Speaker 6: open source, sort of decentralized community are pretty skeptical about
Speaker 6: Meta being involved on Disney.
Speaker 4: Right now, the board is extending Bob Eiger's contract as
Speaker 4: CEO through twenty twenty six. Is only going to stay
Speaker 4: on two years, and we already gone through twelve months
Speaker 4: of that. So through twenty twenty six, we're gonna see
Speaker 4: Bob Iger hang on and Sarah. I know this isn't
Speaker 4: your team specifically, but it's in the same zip code
Speaker 4: as Big Tech, and it's something that a lot of
Speaker 4: people have been talking about, especially as he hangs out
Speaker 4: in Sun Valley, Idaho at the Allen and Co.
Speaker 7: Conference. What do you think about this failure.
Speaker 4: To create the right kind of succession brings Bob Iger back,
Speaker 4: and now he has to do something about it in
Speaker 4: two years, and I guess they're saying, well, maybe four years.
Speaker 3: I think it's a really tough time to be an
Speaker 3: entertainment company. And actually, you know, if I can put
Speaker 3: it in my wheelhouse a little bit more, it's because
Speaker 3: of social media, because we are all picking our own celebrities,
Speaker 3: We're following our own media, our own stars, or spending
Speaker 3: time on TikTok, spending time on reels for movies with
Speaker 3: Barbie and Oppenheimer. I can't think of the last weekend
Speaker 3: that people were excited to go to the movies. No, it's
Speaker 3: really a tough time to be a company with that
Speaker 3: kind of classic entertainment cloud centralized in one creator that
Speaker 3: Disney is.
Speaker 2: Bloomberg News Big Tech team leader Sarah Fryer and social
Speaker 2: media reporter Asha Counts with us there. Sarah, by the way,
Speaker 2: is the author of No Filter, the inside story of Instagram.
Speaker 2: Now we mentioned Disney and Bob Iger there at the end,
Speaker 2: and that's where we're going to head next.
Speaker 10: These large entertainment companies can no longer actually afford the
Speaker 10: economics to compete against Amazon and Apple, which never ever
Speaker 10: need to make money from actually content creation.
Speaker 2: Leading in longtime Wall Street Media analyst explains why the
Speaker 2: Magic Kingdom reigns as a prime takeover target. You're listening
Speaker 2: to Bloomberg Business Week. This is Bloomberg.
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Speaker 2: This past week, investors were focused on the media entertainment
Speaker 2: business thanks to Alan and Company holding its annual gathering
Speaker 2: of billionaire moguls in Sun Valley, Idaho. And that's when
Speaker 2: we learned that the Walt Disney Company extended the contract
Speaker 2: of CEO Bob Iger for another two years to the
Speaker 2: end of twenty twenty six. The move gives the executive
Speaker 2: more time to implement his turnaround and find a successor.
Speaker 2: There are other concerns at the entertainment and media giant, though,
Speaker 2: and a top ranked analyst who has watched and analyzed
Speaker 2: this sector for years thinks the iconic company will eventually
Speaker 2: become a takeover target Matt Miller and I as Needham
Speaker 2: and Company senior media analyst Laura Martin to expand on
Speaker 2: her take when it comes to Disney. We spoke with
Speaker 2: her just prior to the news of Iiger's extension.
Speaker 10: So I think that these large entertainment companies can no
Speaker 10: longer actually afford the economics to compete against Amazon and Apple,
Speaker 10: which never ever need to make money from actually content
Speaker 10: creation because they have like a new device called like
Speaker 10: Vision pro over an Apple great example, where they need
Speaker 10: content in order to drive adoption of a device that's
Speaker 10: brand new, so that content is worth more to them,
Speaker 10: especially if they can do exclusive content for that.
Speaker 11: Those new goggles that Apple is trying to drive adoption
Speaker 11: for worth a lot more. And you never need to
Speaker 11: make money from content.
Speaker 10: As we know from these standalone content companies, they're all
Speaker 10: losing money thanks to streaming, So the economics have really
Speaker 10: gotten compressed in content, so we think they need to
Speaker 10: be purchased by larger companies that have sister subsidiaries that
Speaker 10: can fund them.
Speaker 4: Paul Sweeney tells me you're his favorite analyst, so you
Speaker 4: must know a lot more about this industry than even
Speaker 4: he does. But when I hear about a device company
Speaker 4: looking to buy content for exclusivity, I think instantly about
Speaker 4: Microsoft and its attempt to buy Activision, which right now
Speaker 4: looks pretty good, but it didn't look that great for
Speaker 4: a while, and it still would be a problem if
Speaker 4: they wanted Call of Duty exclusively on the Xbox. Won't
Speaker 4: this be you know, an issue for the FTC and
Speaker 4: for other regulators if if, for example, an Apple tried
Speaker 4: to buy a Disney Yeah.
Speaker 10: So good question on the regulatory front. First of all,
Speaker 10: as you know, these kinds of things take multiple years.
Speaker 11: So let's see who's in the president's seat.
Speaker 10: Because that person appoints the head of the FTC, the DOJ.
Speaker 10: So if we end up with a Republican president, then suddenly,
Speaker 10: like all bets are off in terms of allowing consolidation,
Speaker 10: even if we stay with the democratic regime. I think
Speaker 10: one of the differences remember when Comcast was allowed to
Speaker 10: buy NBC, they said, look, you can have no exclusive
Speaker 10: content on Comcast rails meaning those the video like the
Speaker 10: wires for seven years, and after that you can. So
Speaker 10: that's they have a way to make behavioral changes to
Speaker 10: make sure they can just force Apple to sell Disney
Speaker 10: content to everybody at the same price. But as you know,
Speaker 10: if Apple buys Disney's content, it's a transfer price, so
Speaker 10: they can double the price of Disney content.
Speaker 12: Yeah.
Speaker 11: By the way, the way you make money and content
Speaker 11: to sell it to everybody, So Apple really is in
Speaker 11: incentive to not sell it for a price to everybody.
Speaker 11: It's just that if I was Apple, I would have
Speaker 11: those fabulous storytellers at Pixar make three minute shorts that
Speaker 11: are only available on and probably I could offer it
Speaker 11: to anybody else.
Speaker 10: But who else is buying a three minute short from Pixar.
Speaker 10: Probably nobody except for putting it on the goggles, I
Speaker 10: would guess.
Speaker 7: That's also that's legit.
Speaker 4: What goes around comes around, right, because yeah, Pixar, Steve
Speaker 4: Jobs sold Pixar to Disney, and it would be hilarious
Speaker 4: if Tim Cook then bought it back, right.
Speaker 11: Yeah, totally.
Speaker 2: I so agree with that, And so much of that
Speaker 2: happened because of Eiger's relationship with Steve Jobs, right, And
Speaker 2: I do think about Iger and his relationships with lots
Speaker 2: of folks. Having said that, one thing that disneylare you know,
Speaker 2: is so well known for buying some kind of content
Speaker 2: and putting it at the theme parks and making movies
Speaker 2: and selling stuff in blah blah blah. Is that a
Speaker 2: good strategy for Disney?
Speaker 12: Look?
Speaker 10: I think the big fundamental, the biggest question for Disney
Speaker 10: is how do you invest in this company today when
Speaker 10: you do not have a permanent CEO and you do
Speaker 10: not have a permanent CFO. And as we know from
Speaker 10: the failed attempt of a Disney trying to replace Iger
Speaker 10: for a decade and then picking a guy that didn't
Speaker 10: last two years, this issue of succession at the Walt
Speaker 10: Disney Company is a really hard problem to solve. It
Speaker 10: becomes an easier problem to solve it is a division
Speaker 10: of a larger company, because now you just need a
Speaker 10: division ed. You don't need a world class politician, which
Speaker 10: is what Disney requires at the top level.
Speaker 11: So I think it solves one of the big problems.
Speaker 10: Which is it gives Disney a more permanent management structure
Speaker 10: and a clear sense of strategic vision if it's part
Speaker 10: of something larger.
Speaker 7: Is there any way to make money if they stay
Speaker 7: in this business? I mean, is the streaming business? Can
Speaker 7: that be profitable?
Speaker 4: I always think about ESPN, like I would pay so
Speaker 4: much money if I could stream all of ESPN's content
Speaker 4: without happening having to buy a cable TV package.
Speaker 11: So maybe. But the problem is, as you know, bundle bundle,
Speaker 11: media bundles double economics. So when you unbundle ESPN, you.
Speaker 10: Know that destroys value because now they're not getting paid
Speaker 10: twelve dollars a month for every cable subscriber, whether or
Speaker 10: not they use it or not.
Speaker 11: The minue you unbundle it, you've got to take that
Speaker 11: price up two three x. So suddenly you may say
Speaker 11: today you'd be willing to buy it, but if the
Speaker 11: price point was one hundred dollars a month, you might
Speaker 11: not be.
Speaker 7: Then I'd rather get the cable.
Speaker 10: Yeah, exactly, exactly. So I think the answer is capitalism.
Speaker 10: Rit large has a lot of trouble funding negative growth businesses,
Speaker 10: and right now that linear TV ecosystem is really weighing
Speaker 10: on the revenue growth line of these big conglomerates like
Speaker 10: Warner Brothers and Disney and Paramount. And if you can
Speaker 10: put capital to work in something that's clearly growing, that's
Speaker 10: worth a lot more than something that has these declining
Speaker 10: you know, it has declining revenue or just single growth.
Speaker 2: So Laura, so do you anticipate something coming out of
Speaker 2: Sun Valley or what are you watching for to come
Speaker 2: out about Disney?
Speaker 11: They all get bought. I hope they all.
Speaker 10: Merge and they all get bought, sharing Redstone Cells because
Speaker 10: she's the small but I hope they all get purchased.
Speaker 10: And I think the good news is, I mean there's
Speaker 10: a serious rain trust. Like you know, John Malone Sits
Speaker 10: is a large personal shareholder of Warner Brothers.
Speaker 11: And I think all these guys are deal guys. Right,
Speaker 11: what's a film. It's a bunch of deals.
Speaker 10: It's a bunch of contract So they're all deal guys
Speaker 10: at some level. And so I hope they all understand
Speaker 10: that they've got to get bigger to save costs, or
Speaker 10: they've got to sell out to somebody that doesn't need
Speaker 10: to make money in the content business.
Speaker 11: But they are not.
Speaker 10: I do not think these are standalone companies for the
Speaker 10: next three years.
Speaker 4: I do not think they can be well, including including Netflix.
Speaker 4: Netflix has to get well, you.
Speaker 10: Know, it could just merge with Warner Brothers, or it
Speaker 10: could buy Paramount and actually have a library of IP
Speaker 10: rather than always renting other people's IP. All of these
Speaker 10: companies make more money together than they do separately.
Speaker 2: Hey, you know last year the boy that everybody talked
Speaker 2: about was Elon Musk right in Twitter. The boys.
Speaker 7: I can see that, imagine if I don't.
Speaker 2: Hey, we women have dealt with a lot for years
Speaker 2: and decades.
Speaker 7: Fair enough.
Speaker 2: Having said that, now we're all like talking about meta
Speaker 2: and threads. What's your take on that, Laura, So.
Speaker 10: As you know, we have an wrongly, we have an
Speaker 10: underperform on meta because we're saying, look, we don't think
Speaker 10: it's social network business has a terminal value because we
Speaker 10: think TikTok's going to win. But I got to say,
Speaker 10: I sort of think Elon Musk, in blowing up Twitter
Speaker 10: in a series of bad execution moves, actually has left
Speaker 10: a huge hole in the market where there was clearly
Speaker 10: a consumer demand for platform that met that, but it
Speaker 10: couldn't generate ad revenue because of the fact that he
Speaker 10: sort of let in the crazies once he got in
Speaker 10: and didn't have content moderation, so advertisers abandoned ship. So
Speaker 10: there is a need by advertisers to meet that. Needa,
Speaker 10: guess what Facebook is best in class. It's sort of
Speaker 10: guaranteeing wall guard and access to premium advertisers. You know,
Speaker 10: he has a million advertisers, so she's got brands all
Speaker 10: the way down to long tail.
Speaker 11: I think Meta does that really well.
Speaker 10: So and we know they're good at ripping off other
Speaker 10: people's ideas because they did it with Snap and Instagram, so.
Speaker 7: There and with Facebook that was friends her.
Speaker 10: That's fair, okay, great, So that's their core skill, fast
Speaker 10: following and improving on somebody else's idea. So I think
Speaker 10: Elon Musk might have just lost all of his financiers
Speaker 10: forty billion dollars.
Speaker 2: That was needed in company's senior media analyst Laura Martin
Speaker 2: on Disney and the social networking world as well. Still ahead,
Speaker 2: on Bloomberg Business Week, we turned to the fraught and
Speaker 2: often misunderstood world of short selling, as US regulators i
Speaker 2: a crackdown on some of its biggest players.
Speaker 9: If making money in the market was as easy as
Speaker 9: knowing the information, it would be a different world. Trading
Speaker 9: the information, trading the market. Understanding the dynamics beneath markets
Speaker 9: mean a lot more.
Speaker 2: Why Citron Research founder Andrew Left is living in fear
Speaker 2: of the Feds. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just Say Alexa Play Bloomberg eleven thirty.
Speaker 2: It was among our most read stories on the Bloomberg
Speaker 2: Terminal this past week about the short seller Andrew Left,
Speaker 2: who is well known to our Bloomberg audience, now living
Speaker 2: in fear of federal investigators showing up at his door,
Speaker 2: and who, as Bloomberg's Tom Schoenberg writes, terrorized more than
Speaker 2: one hundred companies and riled an army of memestock traders,
Speaker 2: and now lives a life where he feels hunted. The
Speaker 2: founder of Citron Research joined me and Matt Miller to
Speaker 2: explain how his world has been turned upside down in
Speaker 2: the two years since FBI agents showed up at his
Speaker 2: California home to seize computers and phones.
Speaker 9: Well, I wasn't home at the time I was written
Speaker 9: about agents. I guess they showed up and they took
Speaker 9: your computers. So I was I wasn't there, But someone's
Speaker 9: at my house.
Speaker 2: Yes, but your life changed.
Speaker 12: Yes, yes, yes, of course.
Speaker 9: You know, whenever there's a DOJ investigation, any form of investigation,
Speaker 9: you have to take it serious. So despite me not
Speaker 9: understanding what it was about, I have you think?
Speaker 12: Of course it changes.
Speaker 4: The biggest fear here is that prosecutors will try and
Speaker 4: prove collusion.
Speaker 7: Is that right?
Speaker 4: Is that the one thing that's kind of the worst
Speaker 4: sin a short seller could commit.
Speaker 9: I mean, I don't understand what collusion would be. You know,
Speaker 9: if we're long a stock and I say to you, Hey,
Speaker 9: I like Apple. Do you like Apple? You like Apple?
Speaker 9: I'm buying Apple. You're buying Apple. I'm buying Apple. Have
Speaker 9: we cluded?
Speaker 7: I don't know.
Speaker 4: I'm not a lawyer, but I guess that's the kind
Speaker 4: of market manipulation that they're trying to weed out. Have
Speaker 4: you seen any of that, even if you're not guilty
Speaker 4: of it, Have you seen any of that in the
Speaker 4: industry that you essentially have have pioneered here?
Speaker 12: Yeah? I don't know.
Speaker 9: I mean when you say collusion, it's a very Again,
Speaker 9: just like the example I brought up is you know,
Speaker 9: if two people say I like this stock, I mean,
Speaker 9: so when you say the collusion, I'll give you an example,
Speaker 9: I famously did Valiant. Devaliant story. How many people wrote
Speaker 9: about Valiant? Many short sellers wrote about it also, And
Speaker 9: during that process, I'm sure many people exchange notes saying,
Speaker 9: oh did you see this?
Speaker 12: Oh my god, what about this? Did you see this?
Speaker 9: When you do homework and you exchange notes to someone,
Speaker 9: is that collusion? The opposite side of that is, could
Speaker 9: you imagine if you didn't speak to anyone on anything,
Speaker 9: they would say, well, you didn't speak to anyone. You'd
Speaker 9: never checked this work with anyone. You did it all
Speaker 9: by yourself. You didn't want to see if they would.
Speaker 12: Possibly you were wrong, So you know, I don't. I
Speaker 12: guess that's just verbage.
Speaker 2: Well, and I guess, as Tom notes in his story
Speaker 2: that but what the government is looking for is whether
Speaker 2: firms are acting in concert right, so potentially amplifying a
Speaker 2: report yours or others impact on a stock. Did you,
Speaker 2: in any of your cases act in concert with others
Speaker 2: acting concert?
Speaker 9: Again, I asked the question, which is if I'm if
Speaker 9: two people buy Apple and I say to you, I
Speaker 9: want to make sure my work is right.
Speaker 12: Next year, I've had them selling X amount of phones.
Speaker 12: What about you?
Speaker 9: And you're checking your work with someone who might also
Speaker 9: belong with the stock, you know, to see if your models
Speaker 9: in line maybe with their model. Okay, is that working
Speaker 9: in collusion with somebody? So have I ever discussed an
Speaker 9: idea with another person? I think most people have.
Speaker 7: You know, if I get it, we're not gonna figure
Speaker 7: this out here.
Speaker 12: I don't understand.
Speaker 7: I get your point. I get your point.
Speaker 4: The one of the other problems Andrew that people have is,
Speaker 4: you know, you you started off in a bucket shop,
Speaker 4: right with people pumping stocks and then dumping them after
Speaker 4: mom and pop got into it, and the concern I mean, now,
Speaker 4: I'm not saying that you were necessarily the inventor of
Speaker 4: this idea, but that's kind of famously how you got
Speaker 4: your start in markets, and people have a problem with
Speaker 4: pumping up a stock and then getting out of it
Speaker 4: right away, and short sellers.
Speaker 7: Some of the mechanics are similar in terms of the timing.
Speaker 4: Right you place your bet, then you make your case,
Speaker 4: and a lot of times they'll sell out quickly. Is
Speaker 4: that you think another one of the concerns that maybe
Speaker 4: the DOJ.
Speaker 12: Has I mean, sure, I don't know their concerns.
Speaker 9: If the information's correct you know, I can't tell you
Speaker 9: how many stocks I've covered too soon have gone much
Speaker 9: lower and same at the same time.
Speaker 12: Let's say a stock like game Stock.
Speaker 9: Imagine if I wrote said, hey, game stops are short
Speaker 9: and I was not able to cover it. But it
Speaker 9: just goes to three hundred and fifty dollars and I'm
Speaker 9: not able to cover it, right, you know? So trading,
Speaker 9: If making money in the market was as easy as
Speaker 9: knowing the information, it would be a different world. Trading
Speaker 9: the information, trading the market. Understanding the dynamics beneath markets
Speaker 9: mean a lot more. I mean, a couple of years ago,
Speaker 9: I was short GSX, which was a Chinese the number
Speaker 9: one percentage gainer on the New York Stock Exchange, which
Speaker 9: Bill Wong from our Chagos manipulated up with Goldman Sachs
Speaker 9: and Morgan Stanley as you know, when he's been charred,
Speaker 9: and that stock just kept going up. It was a
Speaker 9: complete fraud. It kept going up every day. What am
Speaker 9: I not allowed to cover the stock?
Speaker 8: Wait?
Speaker 4: I should jump in just and say that I don't
Speaker 4: know the details of that, so you know, I don't
Speaker 4: know if we can. I don't want to make any
Speaker 4: allegations of fraud against Goldman Sachs and Morgan Stanley or
Speaker 4: even Bill Wanne.
Speaker 9: No no, no, no, no no. But I'm saying they were
Speaker 9: the number one and two shareholders of GSX, which was
Speaker 9: a Chinese education company which in twenty twenty was the
Speaker 9: number one gainer on the New York Stock Exchange, which
Speaker 9: is you know, from Archagos, Bill Wong manipulating the stock hire.
Speaker 12: That's all, okay, I'm sorry, but let's go on.
Speaker 2: Well, so what can you tell us about what investigators
Speaker 2: have wanted to know from you specifically?
Speaker 12: I really can't discussed the details. I don't know.
Speaker 9: I've not spoken to them. I can't, so I don't
Speaker 9: know any details what they're looking at. I only know
Speaker 9: the way I've operated myself for twenty years. I think
Speaker 9: over twenty years, twenty two years, I've been doing this
Speaker 9: a high standard. I thought this before, let's say, in
Speaker 9: China a couple of years ago, like six years ago,
Speaker 9: with Evergrand, when I put my opinion out, I wrote it,
Speaker 9: I went to court in China, I lost, and then
Speaker 9: literally within months after losing, Evergrant default on their bonds.
Speaker 12: Everything I said was going to be true happened. So
Speaker 12: you know I take.
Speaker 9: I think I understand the SEC and the DJ have
Speaker 9: difficult jobs and they're trying to keep a regulated market.
Speaker 9: I think the markets did a good job regulating itself.
Speaker 9: I also think it's very tough to regulate people's opinions.
Speaker 9: I mean, look Twitter, me look thread now, it was
Speaker 9: one hundred million users in like four or five days.
Speaker 9: What you can't talk about a stock on there if
Speaker 9: you have a position, I mean.
Speaker 12: Think about that.
Speaker 9: I think Twitter is all people talking stock positions.
Speaker 2: So what changed during meme stocks? You write in the
Speaker 2: story that Tom wrote on you, you said, during the
Speaker 2: run up, during the pandemic and memestocks, you realize something
Speaker 2: changed when it came to short sellers and you specifically.
Speaker 12: Well what changed?
Speaker 9: Well, first of all, what changed is the gamification of
Speaker 9: the market. So people realize the fact that, okay, who
Speaker 9: cares if the stock's garbage? And who cares if there's
Speaker 9: a high short interest in the stock. The stock can
Speaker 9: squeeze higher and if the higher it goes, the higher
Speaker 9: it can go. So once people understood the gamification of
Speaker 9: the market, it changed the way you were able to.
Speaker 12: Allocate size on short selling.
Speaker 9: Okay, So you couldn't you know, you couldn't be all
Speaker 9: in on a short regardless of how good.
Speaker 12: Information you've had.
Speaker 9: You understand, if you knew a complete fraud, you still
Speaker 9: couldn't say, okay'muting all my chips on this one because
Speaker 9: people say it doesn't make a difference.
Speaker 12: Now, I mean or a bad business, Isn't.
Speaker 7: It also the wrong direction to go because you.
Speaker 4: Know, game Stop and AMC are not necessarily flourishing business
Speaker 4: is that are generating a ton of cash flow. In fact, exactly,
Speaker 4: there's no reason for game Stop to have brick and
Speaker 4: mortar stores.
Speaker 7: I don't get it. I go in sometimes and they're empty.
Speaker 4: Is it when you and Carson Block and Nate Anderson,
Speaker 4: when you guys kind of pull back a little bit,
Speaker 4: doesn't that allow a little bit too much irrational exuberance
Speaker 4: to flourish in the markets?
Speaker 13: Uh?
Speaker 1: Yeah, you know.
Speaker 12: Similarly you can say that.
Speaker 9: But then the flip side is as short ollers bring
Speaker 9: attention to it and there's a short interest, you get
Speaker 9: a stock that's wound up that could take off at anytime.
Speaker 12: Look at game Stop.
Speaker 9: So you know, the markets become gamified, and that is
Speaker 9: nothing to do with game Stop, just gamified. Many people
Speaker 9: get the fact that, Okay, we can you know, the
Speaker 9: markets can move around the algorithms.
Speaker 12: To this day, we still don't really know what drove
Speaker 12: game stopped to those levels.
Speaker 9: Was it, you know, was it algorithms or was it
Speaker 9: retail investors who were buying it at three hundred?
Speaker 12: I don't know.
Speaker 7: So hey, listen, there's a movie coming out about it.
Speaker 2: By the way, we hit we only have about a
Speaker 2: minute and a half left here. You know, one of
Speaker 2: the things in this story by Tom Andrew you at
Speaker 2: one point asked him for a hug. How come?
Speaker 9: Tom said that I was having a rough day personally
Speaker 9: that day, nothing to do with the market.
Speaker 12: I had.
Speaker 9: It's a rough family day. And I was looked at
Speaker 9: my phone. I was like, oh God knocked this. And
Speaker 9: I looked at Tom and I just I'm an emotional guy,
Speaker 9: So give me a hug.
Speaker 2: Well, and you brought that?
Speaker 12: Yeah?
Speaker 7: Can you?
Speaker 4: Can you?
Speaker 2: Jess, We've just got about a minute left here. What
Speaker 2: this has been like on your life and your family?
Speaker 12: Oh, it's been It's been difficult for me. Obviously.
Speaker 9: It's difficult because I take what I do serious, and
Speaker 9: I treat it with respect and high regard for the law,
Speaker 9: so I don't even know what to be accused of,
Speaker 9: so that's been very difficult for me. And obviously being
Speaker 9: a patriarch of a family, everything's going to take effect
Speaker 9: on you know, your wife, your kids, and your life
Speaker 9: around you.
Speaker 12: So yeah, it's it's been a difficult.
Speaker 9: Challenging two and a half years and hopefully we get
Speaker 9: through this sooner than later.
Speaker 2: Our thanks to sit You On Research founder Andrew Left.
Speaker 2: Be sure to stick with Bloomberg for the latest on
Speaker 2: whether the Justice Department in SEC pursue charges against him
Speaker 2: in their investigations of tactics used by activists short sellers.
Speaker 2: Be sure to read Bloomberg's Tom Schoenberg his story that's
Speaker 2: on the Bloomberg You're listening to Bloomberg BusinessWeek. Up next,
Speaker 2: we take a look at the leverage loan market in
Speaker 2: an era of higher interest rates and growing uncertainty about
Speaker 2: the nation's commercial real estate market. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen.
Speaker 8: On Bloomberg dot com, the iHeartRadio app, and.
Speaker 1: The Bloomberg Business App, or watch us live on YouTube.
Speaker 2: Bloomberg News reporting this past week that cooling US inflation
Speaker 2: will help fuel demand for leverage loans. The Federal Reserve
Speaker 2: is widely expected to end its policy tightening cycle after
Speaker 2: this month's meeting, and that should help these concerns about
Speaker 2: a recession leading to higher default rates. For a closer
Speaker 2: look at this corner of the financial markets, let's bring
Speaker 2: in ROBERTA. Goss, Senior managing director and head of the bank,
Speaker 2: loan and clo platform at Predium. It's a specialized investment
Speaker 2: firm with approximately fifty billion dollars in assets under management,
Speaker 2: focused on US residential real estate, residential credit, and corporate credit.
Speaker 14: So leverage loans this year have actually performed quite well
Speaker 14: through the first half of the year, the leverage loan
Speaker 14: index up close to seven percent six and three quarter percent,
Speaker 14: but that was with some degree of volatility. So as
Speaker 14: we went through the regional bank crisis in March, the
Speaker 14: loan market went from a high of ninety four to
Speaker 14: a low of ninety two and have largely recovered back
Speaker 14: to the highs of February. That has been almost entirely
Speaker 14: driven by corporate earnings as we went through Q four
Speaker 14: and Q one, but I would expect a little more
Speaker 14: volatility as we go through the back half of this year,
Speaker 14: but I don't believe it will be as noted as
Speaker 14: we saw in March.
Speaker 4: Really is that because companies were doing so well that
Speaker 4: they're able to continue to meet their you know, to
Speaker 4: make payments. Because if you borrowed money FIRS say four percent,
Speaker 4: and now you're paying twelve, that's that's problematics painful, right
Speaker 4: it is.
Speaker 14: What is really driving the exceeding expectations over the course
Speaker 14: of this year is that we already experienced a lot
Speaker 14: of volatility through twenty twenty one and twenty twenty two.
Speaker 14: And I've talked about this in the past, which is
Speaker 14: this is largely a function of corporate margins, which were
Speaker 14: dramatically compressed over the last really twenty four months. We're
Speaker 14: starting to see as inflation starts to ease, that's helping
Speaker 14: on the margin side, even as we're seeing the top
Speaker 14: line start to decelerate. On the interest rate impact, yes,
Speaker 14: we've seen libor effectively go from zero to mid five
Speaker 14: and a half percent over the last year, and most
Speaker 14: I would say fifty to sixty percent of most companies
Speaker 14: total loans outstanding in the loan market are hedged. That
Speaker 14: being said, there's some companies that are completely unhedged, but
Speaker 14: most leverage companies raise liquidity well ahead of expectations and need.
Speaker 14: So we've seen companies, as a result of the inflation pressures,
Speaker 14: really try to raise cash out of working capital, raise
Speaker 14: liquidity in the loan market. And I think the majority
Speaker 14: of businesses are well positioned even with sort of continued
Speaker 14: rate hike expectations over the balance of this year.
Speaker 2: So I am curious what's the demand, what's the default
Speaker 2: rate that you are seeing, and what it tells you
Speaker 2: about the health of maybe the corporate market.
Speaker 14: So I think one of the indicators that we look at,
Speaker 14: or one of the stats we look at every day,
Speaker 14: is the percentage of loans that are trading below ninety,
Speaker 14: so ninety being a level where stress starts to become
Speaker 14: a concern for a company. In the mid sort lows
Speaker 14: of March, when we were in the midst of the
Speaker 14: banking crisis, that percentage reached over twenty percent since then,
Speaker 14: and as of this week that number has reduced to
Speaker 14: thirteen percent.
Speaker 2: That was roberta Gossipredium with me and Matt Miller head
Speaker 2: over to our podcast feed to hear the entire conversation,
Speaker 2: and that wraps up the first hour of the weekend
Speaker 2: edition of Bloomberg Business Week from Bloomberg Radio. Ahead, in
Speaker 2: our next hour, we'll speak with the CEO of one
Speaker 2: of the biggest convenience store in pizza chains in the country,
Speaker 2: and chances are you've never been inside one. Plus they've
Speaker 2: been talked about and promised for years now it could
Speaker 2: actually be happening. Personal flying cars coming to market. Plus
Speaker 2: our BusinessWeek cover story Barbie's one hundred million dollar rebirth
Speaker 2: on the silver Screen. I'm Carol Masser. Stay with us.
Speaker 2: Today's top stories and global business headlines are coming up.
Speaker 1: Right now, you're listening to the Bloomberg Business Week Podcast.
Speaker 1: Catch us live weekday afternoons from three to six Easter
Speaker 1: on Bloomberg Radio, the Bloomberg Business app and YouTube. You
Speaker 1: can also listen live on Amazon Alexa from our flagship
Speaker 1: New York station, Just Say Alexa play Bloomberg eleven thirty Carol.
Speaker 2: Masser along with Matt Miller. He is of course filling
Speaker 2: in for Tim plenty. Ahead in our second hour of
Speaker 2: the weekend edition of Bloomberg Business Week, including a conversation
Speaker 2: with the CEO of Casey's General Stores on expansion catering
Speaker 2: to America's rural communities and an unusual spin on pizza,
Speaker 2: plus the founder and CEO of Darroni Aerospace on personal
Speaker 2: flying cars that are just around the corner. First though,
Speaker 2: this hour this week's cover story. And I got to say,
Speaker 2: as someone who grew up playing big time with Barbie's,
Speaker 2: I still remember inheriting my older sisters, it was a
Speaker 2: big deal for me. I am definitely all in on
Speaker 2: Barbie as it heads to the movies in the big screen.
Speaker 2: And I gotta say it sounds like a lot of
Speaker 2: people are. This could turn out to be one of
Speaker 2: the summer big blockbusters. And this story, by the way,
Speaker 2: it was a Bloomberg big take and the cover story
Speaker 2: for the latest issue of Bloomberg BusinessWeek, now at Bloomberg
Speaker 2: dot com, slash business Week, on newsstands and on the
Speaker 2: Bloomberg terminal. Bloomberg News Global Business editor Kelly Gilblom and
Speaker 2: entertainment reporter Thomas Buckley co wrote the piece. They joined
Speaker 2: us on Mattel's risky bet to prove that Barbie isn't
Speaker 2: hopelessly out of date.
Speaker 5: I think the way we want to approach a story
Speaker 5: was trying to understand the history of Barbie and also
Speaker 5: kind of trying to understand what it meant for Mattel.
Speaker 5: You know, it's an iconic doll, and the reason that
Speaker 5: it is is because she was so aspirational to young
Speaker 5: girls when she came out in the fifties, and so
Speaker 5: I think we just wanted to understand how kind of
Speaker 5: her reputation fell over the years, and how this movie
Speaker 5: is going to help rehabilitate it and help change the
Speaker 5: business model at Mattel.
Speaker 4: So, I mean, Barbie was a big hit when it
Speaker 4: first came out. You give some of that history and
Speaker 4: your story. I learned a lot reading it, So it's
Speaker 4: a fantastic piece. Have the sales numbers dipped as she's
Speaker 4: become kind of more controversial over the years.
Speaker 5: Yeah, absolutely. In the two thousands, Mattel was in a
Speaker 5: true crisis. I mean, Barbie sales fell every year between
Speaker 5: twenty twelve and twenty fifteen because it was so out
Speaker 5: of touch with the culture. They revived the brand in
Speaker 5: twenty sixteen by introducing new body types, and that helped,
Speaker 5: you know, kind of set the stage for another sales
Speaker 5: boom in the pandemic when all toy sales were up. However,
Speaker 5: that hasn't lasted due to just kind of inflationary pressures
Speaker 5: and economic malaise, so they have to keep those sales.
Speaker 5: Arrows kind of pointed.
Speaker 2: Up, Thomas Buckley. You're with us as well, you and
Speaker 2: Kelly putting out and reporting out this story. You're an
Speaker 2: entertainment reporter with Bloomberg News. You two are in la
Speaker 2: joining us on zoom Come on in on the conversation.
Speaker 2: Because Barbie's iconic been around for decades, has this kind
Speaker 2: of incredible legacy in history, but she has definitely had
Speaker 2: her ups and downs.
Speaker 13: That's as you right, and I think that as we
Speaker 13: think about her ups and downs over the years, what's
Speaker 13: very interesting is that she has never really been tested
Speaker 13: as a brand and as an icon on the big screen.
Speaker 13: And that's not to say that I haven't been iterations
Speaker 13: of Barbie on screen, you know, from TV shows to
Speaker 13: video games. But this is the first half of time
Speaker 13: that she's going to get a full fledged theatrical release,
Speaker 13: and so that's in partnership with Warner Brothers that's produced
Speaker 13: the movie alongside Mattel with a budget of about one
Speaker 13: hundred million dollars, directed by Greta Gerwick, starring Marga Robbie
Speaker 13: as Barbie in the title role. And it's going to
Speaker 13: be very interesting to see how this film plays out.
Speaker 13: I mean, I think that, you know, the hype around
Speaker 13: it is unlike anything that we've seen in months. The
Speaker 13: most recent example I can probably think of it is
Speaker 13: maybe the Avatar sequel, but since then that hasn't been
Speaker 13: very much. And this could really storm the box office.
Speaker 13: And Kelly and I have been tracking the numbers on
Speaker 13: a weekly basis to see how it's set to open,
Speaker 13: and it's set to open at the moment at a
Speaker 13: very impressive one hundred plus million dollars domestically.
Speaker 2: Yeah, well, the social media presence has been just crazy.
Speaker 2: I mean, I've watched the videos and so on. What's
Speaker 2: interesting too, Thomas is I think about enon Cries of Mattel,
Speaker 2: the CEO, and they've gone through several CEOs over the years.
Speaker 2: You know, we've talked with him a lot, and he
Speaker 2: is very into intellectual property and he is thinking about
Speaker 2: the media world in terms of bringing you know, various
Speaker 2: properties to life.
Speaker 13: Absolutely, and this is something that you know, Kelly and
Speaker 13: I have often discussed is the fact that Inon is
Speaker 13: very much as CEO, who considers himself increasingly a major
Speaker 13: player in the entertainment game, and he's previously had a
Speaker 13: career mostly in entertainment. He's sold two very successful companies
Speaker 13: to Disney, and I think he's trying to apply that
Speaker 13: playbook to Mattel came in, as Kelly mentioned as CEO
Speaker 13: in twenty eighteen, looked at the stable of brands and thought,
Speaker 13: you know, all of these authora breads in the stable,
Speaker 13: and why should they only be toys when they can
Speaker 13: be so much more than that, including theatrical films, possible
Speaker 13: theme park rids, video games, and the rest of it.
Speaker 4: Why hasn't Kelly Barbie had a starring role in a
Speaker 4: feature film before? I mean she was invented in like
Speaker 4: the late fifties early sixties, right, and all of the
Speaker 4: other iconic characters from Mickey Mouse to Superman have been
Speaker 4: in movies. Obviously that's a great way to sell the toys.
Speaker 4: So why didn't Mattel do this earlier?
Speaker 5: I think the reason is because Barbie has some specific
Speaker 5: risks associated with her. You know, she was marketed as
Speaker 5: this toy of special personal importance. She's supposed to be
Speaker 5: aspirational and so therefore she kind of has to encompass
Speaker 5: every little girl's hopes and dreams, and that has also
Speaker 5: made her kind of a cultural lightning rod, especially because
Speaker 5: her body type has, you know, kind of been out
Speaker 5: of step with what women want to have people expect
Speaker 5: of them and how they should look. And so I
Speaker 5: think they basically just thought there was a possibility for
Speaker 5: a huge backlash and kind of this emotionally charged environment
Speaker 5: and they couldn't afford that because Barbie is their biggest brand.
Speaker 5: It is the one responsible for the biggest portion of
Speaker 5: their sales, sometimes as much as half of their sales,
Speaker 5: and definitely one of the most profitable products.
Speaker 2: I mean, there's a lot on the line, I feel
Speaker 2: like from the movie studio as well as for Mattel, right,
Speaker 2: no doubt about it. I Mean, this was what one
Speaker 2: hundred million dollars Kelly to put together.
Speaker 5: Yeah, there's a lot online for Mattel. And keep in
Speaker 5: mind that their strategy doesn't include actually funding movies, so
Speaker 5: they license their brands out to the studios who pay
Speaker 5: for the movies, and they don't even get much box
Speaker 5: office returns. That'll be Warner Brothers that takes those ticket sales.
Speaker 5: But it's about reputation, it's about brand management, and it's
Speaker 5: about out creating a business model that's reliant on franchises
Speaker 5: that they can push out and create new streams of revenue,
Speaker 5: kind of like what Disney does. Just think and Star
Speaker 5: Wars just.
Speaker 2: Thinking Disney right, has a property and whether it goes
Speaker 2: in the theme parks, whether it goes on the screens,
Speaker 2: whether it goes into apps, whatever. I mean, that's what
Speaker 2: they do.
Speaker 7: Thomas, How did they sell this film to.
Speaker 4: Margot Robbie? She's been a pretty outspoken feminist. I guess
Speaker 4: I don't know exactly what that means anymore, but you know,
Speaker 4: Ryan Gosling, he's a fairly progressive actor. How did they
Speaker 4: sell this project to those, you know, huge Hollywood names.
Speaker 13: Well, it's very interesting. I think people when they have
Speaker 13: a preconceived notion of what Barbie looks like, they probably
Speaker 13: think about somebody very akin to the looks of Margot Robbie.
Speaker 13: What's interesting. What's interesting is that, well, I think most
Speaker 13: audiences know Margot Robbie, you know, for the star actress
Speaker 13: that she is. What maybe fewer people know is just
Speaker 13: how incredibly talented she is a producing these films behind
Speaker 13: the scenes. So Lucky Chapin's Atainment, which is a company,
Speaker 13: a production company that she manages with her husband, and
Speaker 13: you know, plays a major part in getting this film
Speaker 13: off the ground. And some of the earliest conversations revolved around,
Speaker 13: you know, who would be the right steward in the
Speaker 13: director's chair for a film such as this, you know,
Speaker 13: which is we've said, the sort of girl boss, post
Speaker 13: feminist and the rest of it. And I think that
Speaker 13: it was actually Margot and Kelly knows this as well,
Speaker 13: who suggested Greta Gerwick as the potential director, and Enon
Speaker 13: was very much sold on that idea. So it's interesting
Speaker 13: to see it take off from the direction.
Speaker 12: That it has.
Speaker 2: Yeah, I mean, Greta girrig she's like incredible and if
Speaker 2: you think about the work she's already done. She's really young,
Speaker 2: but just has been so successful out of the gate.
Speaker 2: You know, in doing this story, Kelly, what kind of
Speaker 2: jumped out for you? Because you guys did dig into
Speaker 2: Ruth Handler and her family and her kids, Ken and Barbie,
Speaker 2: Like I mean, the history of this is a lot
Speaker 2: of fun. But what really jumped out in poorting out
Speaker 2: this story.
Speaker 5: I think what jumped out is I guess I didn't
Speaker 5: realize how opinionated people are on Barbie. I mean, it's
Speaker 5: kind of shocking. Her recognition rate is something like ninety
Speaker 5: nine percent, Mattel says, and she's been literally the subject
Speaker 5: of like graduate feminist courses, and people feel very strongly.
Speaker 5: And I think that's just because you know, they're especially
Speaker 5: when she was introduced, not that many role models that
Speaker 5: that little girls could could look up to. So I
Speaker 5: guess what shocked me was was just how important she
Speaker 5: was to kind of female culture. How few movies, how
Speaker 5: few entertainment properties in general are targeted at women. We
Speaker 5: you know, an analysis we saw with something like six
Speaker 5: percent of all major movies since the history of time
Speaker 5: have been targeted toward women. So that was one of
Speaker 5: the things that really shocked me. And if you can
Speaker 5: understand that market, you can understand it well, then clearly
Speaker 5: you can have a big hit on your hands.
Speaker 4: Yeah, I think, I mean I learned so much by
Speaker 4: reading this story. So you guys did really great work.
Speaker 4: Have you seen the movie? Do you like the movie?
Speaker 5: We haven't seen it. Unbelievably, but there'll be a chance
Speaker 5: this weekend, so we're pretty excited.
Speaker 2: Thomas real quickly thirty seconds here. What'd you get from
Speaker 2: doing all this story in this reporting?
Speaker 13: You know, I got a free Bobby Baseball Capital spend
Speaker 13: time with Kelly, so the best of both worlds.
Speaker 2: Great conversation with Bloomberg's Kelly Gilblum and Thomas Buckley on
Speaker 2: this week's cover story, joining Matt Miller and me. You're
Speaker 2: listening to Bloomberg Business Week. Coming up, Darren Rebellas, the
Speaker 2: CEO of Casey's General Stores, talks building for the future
Speaker 2: and how the company stays low key despite a footprint
Speaker 2: of twenty five hundred stores.
Speaker 15: We really kind of consider ourselves in a category of
Speaker 15: one because we have those unique attributes, that rural footprint,
Speaker 15: our you know, our grocery, our alcohol and liquor, our
Speaker 15: pizza business.
Speaker 2: More on the category of one. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen.
Speaker 8: On Bloomberg dot com, the iHeartRadio app, and the Bloomberg
Speaker 8: Business app, or watch us live on YouTube.
Speaker 2: Wait last month RBC Capital Markets put out a note
Speaker 2: praising the tone at Casey's General Store's recent investor day,
Speaker 2: the company announced a new three year strategic plan aimed
Speaker 2: at driving store growth, accelerating its food business, and enhancing operations,
Speaker 2: which RBC said was realistic and constructive. With more on
Speaker 2: those plans, Matt Miller and I caught up with Darren Rebellas.
Speaker 2: Darren is president and CEO of the nine billion dollar
Speaker 2: market cap in Iowa based convenience store chain. He stopped
Speaker 2: by our New York studio on June twenty eighth.
Speaker 15: We have twenty five hundred stores focused in the Midwest
Speaker 15: and sixteen Midwestern states, and about half of our stores
Speaker 15: are in rural communities, towns of five thousand people or less,
Speaker 15: and so in those communities we play a number of roles.
Speaker 15: We're the third largest commediance store chain in the US,
Speaker 15: and so we supply basic needs and groceries and that
Speaker 15: sort of thing. We're also the fifth largest pizza chain
Speaker 15: in the US, so we're the pizza area. And in
Speaker 15: about fifteen hundred of our stores, we have full liquor licenses,
Speaker 15: so we're also the liquor store, so we wear a
Speaker 15: lot of hats and serve a lot of needs in
Speaker 15: those community.
Speaker 2: Open twenty four hours.
Speaker 15: In some of our stores. Yeah, but as you can imagine,
Speaker 15: in some of those more rural communities, there's not a
Speaker 15: lot happening between midnight and four in.
Speaker 2: The morning, or there is sometimes.
Speaker 4: Yeah, we don't want to be involved in So the
Speaker 4: ticker is I don't think the year to date move
Speaker 4: really tells the story because I look over the last
Speaker 4: five years and you've gone from one hundred dollars to
Speaker 4: two thirty five, so you've drastically outperformed the S and
Speaker 4: P five hundred. Of course, you're Nasdaq listed, right, and
Speaker 4: the ticker is c as Y.
Speaker 7: That's rights.
Speaker 4: It's interesting to be because of you have a rural
Speaker 4: pre you're a very big company that a lot of
Speaker 4: people on the coasts maybe haven't heard of, right, right,
Speaker 4: So does that make it harder to tell your story
Speaker 4: to shareholders?
Speaker 15: You know, we just have to continue to tell it.
Speaker 15: And you know, we always invite shareholders to come to
Speaker 15: where our store support center is in Ancone, Iowa, and
Speaker 15: we can show them around, and we've done that a
Speaker 15: number of times. But yeah, I mean, people don't run
Speaker 15: into cases in their day to day lives, so we
Speaker 15: have to explain to them. And in certain markets, I'll
Speaker 15: take New York as an example, you wouldn't find anything
Speaker 15: that even resembles the cases here, so when we describe it,
Speaker 15: it takes a little bit of work.
Speaker 4: But yeah, because you said, you have your own kitchens
Speaker 4: in the stores, so they make their pizza dough from scratch,
Speaker 4: and it's not when I think of convenience store, That's
Speaker 4: not what I think of.
Speaker 8: That's right.
Speaker 15: Yeah, So we really kind of consider ourselves in a
Speaker 15: category of one because we have those unique attributes, that
Speaker 15: rural footprint, you know, our grocery, our alcohol and liquor,
Speaker 15: our pizza business. We really are unique that respect.
Speaker 2: So does it make sense to kind of just continue
Speaker 2: along those lines? Like I said to you, you know
Speaker 2: you're not here in New York, would you come to
Speaker 2: the New York metro area.
Speaker 15: Well, the way we focus our development for the moment
Speaker 15: is we have three distribution centers as we supply all
Speaker 15: of our own stores, and so we look initially at
Speaker 15: the effective distribution radius around those and so we know
Speaker 15: we can continue to build a lot of stores in
Speaker 15: that geography. In fact, of our twenty five hundred stores,
Speaker 15: two thousand of them are in only nine of the
Speaker 15: states we operate in, and so we still have plenty
Speaker 15: of white space. So it's not that we would never
Speaker 15: come to in New York, but we would probably do
Speaker 15: something a little more upstate if we were ever to
Speaker 15: get to that point.
Speaker 4: So how have you dealt with inflation? How have your
Speaker 4: consumers been dealing with this?
Speaker 1: With this inflation?
Speaker 15: You know, I would say, so far, so good. Our
Speaker 15: guests have proven to be pretty resilient. What I'd tell
Speaker 15: you about the demographics of our guests, three quarters of
Speaker 15: of our folks make fifty thousand dollars a year or more.
Speaker 15: And while I know that doesn't sound like a lot
Speaker 15: in New York, in the states where we operate, that
Speaker 15: goes a long way. In fact, if your rank ordered
Speaker 15: all the states in the US in terms of cost
Speaker 15: of living, the most expensive state we operate in is
Speaker 15: ranked twenty second.
Speaker 2: Interesting do you think about that in terms of where
Speaker 2: you want to open?
Speaker 15: Well, we factor in a lot of things of where
Speaker 15: we want to open the economy and cost of living
Speaker 15: is definitely one of those that fit into the equation.
Speaker 2: Talk to us a little bit about your new three
Speaker 2: year plan.
Speaker 15: Yeah. You know, we've had a long track record of
Speaker 15: success in our company, and the last three or four
Speaker 15: years is really accelerated. But we've done that through a
Speaker 15: couple of ways. Our growth algorithm is pretty simple. We
Speaker 15: get about half of our growth from what we call
Speaker 15: the mothership, the base business, driving same store sales, improving
Speaker 15: the base business, and then the other half is from
Speaker 15: new unit development. So that three hundred and fifty stores
Speaker 15: really represents a bit of an acceleration, but really a
Speaker 15: continuation of where we've been for the last few years.
Speaker 15: And we'll do that through a combination of organic growth
Speaker 15: and acquisitions. And our industry is highly fragmented. About ninety
Speaker 15: five thousand of the one hundred and fifty thousand Commence
Speaker 15: stores in the US or operate and change at ten
Speaker 15: stores or less. Yeah, and as you can imagine, with
Speaker 15: the inflationary pressures and supply chain issue everything else that
Speaker 15: we've all been dealing with, those smaller operators really struggle
Speaker 15: and so provides a great opportunity for us to acquire
Speaker 15: and operate those stores.
Speaker 2: Help us always supply chains, because I feel like they've
Speaker 2: eased and gotten better. Are they back to where they
Speaker 2: were pre pandemic.
Speaker 15: I would say for the most part, yes, I mean
Speaker 15: it's gotten significantly better from where it was twelve eighteen
Speaker 15: months ago. There's still some lingering things on certain things
Speaker 15: like tractor trailer trucks that still been delayed. You know,
Speaker 15: some things that required chips have a little bit longer
Speaker 15: lead times. But for the most part, we're about back
Speaker 15: to normal.
Speaker 2: Just trying to understand, you know, as inflation has certainly
Speaker 2: settled back in the past twelve months, but we still
Speaker 2: have a ways to go, and you still hear about
Speaker 2: inflationary pressures. I mean, I feel like I'm still paying
Speaker 2: a lot for a lot of stuff, and I'm trying
Speaker 2: to understand kind of whether you guys are seeing these pressures.
Speaker 2: Is wages also a decent pressure right now still for you.
Speaker 15: Know, that's moderated. You know, after the peak of COVID,
Speaker 15: we saw a real acceleration in wages. That is somewhat
Speaker 15: moderated a bit. But you know, what we've really been
Speaker 15: focused on is is employee engagement in retaining the team
Speaker 15: members that we have, and so if you looked at
Speaker 15: our results over the last year, we actually had a
Speaker 15: reduction in same store labor hours, and it was really
Speaker 15: driven by the fact that we reduced our turnover, so
Speaker 15: we have twenty percent reduction in overtime, twenty percent reduction
Speaker 15: and training hours and really focused on making the job
Speaker 15: in the store easier so we relieve some of that
Speaker 15: pressure and so we don't have to throw money at people.
Speaker 15: We want to take care of them. We paid people fairly,
Speaker 15: but also making their job easier close a long one.
Speaker 7: So the culture is extremely important to you.
Speaker 2: Absolutely, and so they get benefits and everything. Yes, yeah, yes,
Speaker 2: Sam in our control room wants to know if you're
Speaker 2: going to run for political office.
Speaker 7: We've all taken a poll and decided that we would
Speaker 7: vote for you. Yeah.
Speaker 15: Well, there's probably fewer things I'd want to do.
Speaker 7: Less for office. I could understand that. Talk to us
Speaker 7: about that.
Speaker 15: I was an infantry guy in the Army, so I've
Speaker 15: done some pretty nasty things. I'd rather do that than
Speaker 15: run for a thank you for your service.
Speaker 4: Talk to us about the pizza, because we hear it
Speaker 4: has a bit of a cult following. We already talked
Speaker 4: about the fact that it's handmade.
Speaker 7: I'd like pizza is it's key here in New York.
Speaker 7: It's important, you know.
Speaker 15: Yeah, yeah, it's well, it's it's iconic and we've been
Speaker 15: doing it since the eighties, so we've got a long
Speaker 15: track record. What I think is really cool one is
Speaker 15: that we make it from scratch and we use really
Speaker 15: quality and green so one hundred percent whole milk mozzarella cheese.
Speaker 15: Now you kind of think, well, doesn't everybody do that?
Speaker 15: But no, now most people don't. None of the large
Speaker 15: chains do. They use low fat mozzera because it's cheaper.
Speaker 15: We don't do that. We put extra cheese on the pizza.
Speaker 15: So it's not a thing to get to order extra
Speaker 15: cheese on your pizza from a Casey's because you don't
Speaker 15: need it. But what really sets us apart is our
Speaker 15: breakfast pizza. And it's not pizza for breakfast, it's breakfast pizza.
Speaker 15: And so we have people coming into our stores every day.
Speaker 2: What's that a breakfast pizza.
Speaker 4: Oh, it's bacon and eggs, bacon, eggs, sausage, cheese, and
Speaker 4: then more cheese.
Speaker 2: That's Darren Rebella's presidency of Casey's General Stores. That's stock,
Speaker 2: by the way, up more than eight percent so far
Speaker 2: this year. Still to come on Bloomberg Business Week, a
Speaker 2: former member of the Israeli Air Force, says his company's
Speaker 2: ready to make flying cars a reality, and there's no
Speaker 2: need to worry about air traffic.
Speaker 16: We're not flying at an altitude of like thirty thousand feet
Speaker 16: like a regular What we're doing is a couple of
Speaker 16: one hundred feet like a drone. This is the comfortable
Speaker 16: zone for us. And you know, the whole idea is
Speaker 16: not just to get from point to point B, but
Speaker 16: the whole idea is to enjoy.
Speaker 2: Djer Toroni, Aerospace CEO, joins us. On the other side,
Speaker 2: this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business app and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station.
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: Well, everyone, stop the presses. Just found the next segment
Speaker 2: for what's Matt Miller driving or should I say flying?
Speaker 2: We're talking about personal flying cars And according to Vencat Biswanthonon,
Speaker 2: he's a Carnegie Mellon University professor who's worked with many
Speaker 2: leading battery startups. He says we could see a world
Speaker 2: of electric flying vehicles in the next decade, joining us
Speaker 2: with more on the nascent market for personal flying cars.
Speaker 2: The founder and CEO of Direct Aerospace, Jerome.
Speaker 16: Murder car, this is the definition. Essentially, it's an evy
Speaker 16: talk electric vertical take off a landing vehicle. It's on
Speaker 16: electric personally use for a two seater, and you can
Speaker 16: park it home and charge it home. It's very easy
Speaker 16: and intuitive and safe to use.
Speaker 4: So you're not I mean like some random inventure from
Speaker 4: the nineteen fifties who's just attached wings and a propeller
Speaker 4: to an old car. You were in the Israeli Air Force,
Speaker 4: serve air Force intelligence in Israel, you went got your
Speaker 4: MBA at the NYU Stern School of Business.
Speaker 7: You're a serious man here.
Speaker 4: How likely is it that I will have the opportunity
Speaker 4: to buy and operate a flying car in my lifetime?
Speaker 16: Well, first of all, we're already doing it here. I mean,
Speaker 16: it's already happening. It's you know, some of the futuristic
Speaker 16: movies are showing, you know, get engines, but we are
Speaker 16: doing it with preparers electric autopilot system. So the target
Speaker 16: for US is to we already have over a three
Speaker 16: hundred requests for pre orders to start delivering by twenty
Speaker 16: twenty five, so it's it's pretty close. And if you
Speaker 16: look at what's going on in this market, it's divided
Speaker 16: into three main segments. The biggest one of these, even
Speaker 16: to als called flying car, belongs to air Taxi, so
Speaker 16: as it's a ride sharing service and they are already
Speaker 16: out there, they claim that they're going to be the
Speaker 16: first one by twenty twenty four. And our vehicle is
Speaker 16: less complicated and in terms of certification and use, so
Speaker 16: we expect that you should be alignment as well, so
Speaker 16: very soon.
Speaker 2: Well, but there's always regulatory oversight. And I'm just thinking
Speaker 2: about these crowded spot you know, like I'm assuming the
Speaker 2: demand will be well, the demand will be in big cities,
Speaker 2: but it's pretty crowded up in the air, So how
Speaker 2: does that work.
Speaker 16: Yeah, So the goal for us is not immediately, is
Speaker 16: not to go into main cities like you know, your Boston, Chicago.
Speaker 16: This is really not where we want to you know, fly.
Speaker 16: At this point, there is enough space to fly everywhere
Speaker 16: around the US suburban area and outside, you know, it's
Speaker 16: so beautiful outside and unless congested. So as far as
Speaker 16: being crowded, we're not flying at an altitude of like
Speaker 16: thirty thousand feet like a regular aircraft. What we're doing
Speaker 16: is a couple of one hundred feet like a drone.
Speaker 16: This is the comfortable zone for us. And you know,
Speaker 16: the whole idea is not just to get from point
Speaker 16: to point B, but the whole idea is to enjoy nature,
Speaker 16: and you can't.
Speaker 4: Do that to that.
Speaker 16: So it's not crowded. It will take a lot of
Speaker 16: time until that become crowded. This is you know, this
Speaker 16: is a myth that people you know were asking yo crowded,
Speaker 16: But it will take a long time for it to happen.
Speaker 16: If it will happen, I don't know.
Speaker 4: But so it does look like fun and an amazing
Speaker 4: way to see nature. I think that's laudable to do
Speaker 4: it for that reason rather than you know, reducing congestion
Speaker 4: or whatever.
Speaker 7: Describe to us your vehicle.
Speaker 4: Because a lot of our listeners are on radio and
Speaker 4: can't see the picture behind you.
Speaker 7: It looks like you've got what.
Speaker 4: Four props main propulsion systems? How does it work?
Speaker 16: So first of all, they can go into our website
Speaker 16: Doroni that I owe and they can see a lot
Speaker 16: of information there. As far as the way it works, yeah,
Speaker 16: we have all together ten motors, so we have four
Speaker 16: ducts and this is what sets us apart where unique
Speaker 16: to that we have ducted fans embedded into wings, so
Speaker 16: that gives us extra lift. So in each duct we
Speaker 16: have two motors for redundancy, so altogether we have eight
Speaker 16: for vertical and two pushers for a four efficient flight.
Speaker 16: So it's very I mean it's very simple to use.
Speaker 16: Let's say that you're already out there and you want
Speaker 16: to fly, so three kicks of a button, you're going up.
Speaker 16: And this system is a semi autonomous system. If you
Speaker 16: fluid drone today, you know how it works like DJI,
Speaker 16: so it just goes up.
Speaker 13: It knows exactly.
Speaker 16: It's ok in our three dimensional world with multiple sensors
Speaker 16: which are already you know, working pretty good for the last.
Speaker 4: So it's very drone like in other words, which is cool?
Speaker 4: Is it going to be piloted like a drone? Will
Speaker 4: you use you know, a screen with a joystick or
Speaker 4: how how does how do the controls look?
Speaker 16: Yeah, so in our case, we have one big screen
Speaker 16: that you have everything, but the control really is just
Speaker 16: one simple joystick, very intuitive. You go forward, you go backwards,
Speaker 16: you go left, you go up with a throttle, and
Speaker 16: there's it's really it's really there's nothing much you need
Speaker 16: to know. I mean, because it's a semi toy of
Speaker 16: a system. It makes everything very simple for you essentially.
Speaker 16: And we presented in Oshkosh Inertia the oshcostcier last year
Speaker 16: and the biggest reject that we go over there is
Speaker 16: like people saying, hey, guys, you know I learned to
Speaker 16: five for twenty years. I took all the complexities out
Speaker 16: of the flight because we're not flying like a regular helicopter,
Speaker 16: not like a regular you know, aircraft. Essentially it's a
Speaker 16: drone right like, So we have eight motors for redundancies
Speaker 16: as well for safety.
Speaker 2: So how many motors can you lose before it becomes
Speaker 2: a problem.
Speaker 16: Yeah, So that we design it in a way so
Speaker 16: you have a working motor for vertical and if any
Speaker 16: four motor is separate in different ducts, will will have
Speaker 16: an issue. The system can self stabilize itself and would
Speaker 16: commence automatic descent. So this is all you know that
Speaker 16: it's aware of. Like a gyroscope. Where is it in
Speaker 16: the three dimensional world?
Speaker 7: Durone?
Speaker 4: What what kind of license would I need to fly that?
Speaker 4: I mean if I buy one from you guys and
Speaker 4: I don't know park it at my ranch in Montana?
Speaker 7: Do I have to take a course? Do I have
Speaker 7: to be a private pilot? What do I need?
Speaker 16: So at this point what we have is called some
Speaker 16: CO called LSA Lightboard Aircraft type certification, which for now
Speaker 16: is for one reciprocal motor. You need at least twenty
Speaker 16: hours of course the premises of the factory, so at
Speaker 16: fifteen hours of you know, on the vehicle and fivur
Speaker 16: of solo. This is what we expect, you know, in
Speaker 16: our case as well as the rules and regulation are
Speaker 16: being now changed by the FAA. They're aware of that.
Speaker 16: We're sitting in committees advising them also to NASA and
Speaker 16: to the FA as well. So it's very very simple,
Speaker 16: very straightforward, less complex than any aircraft. So the ED
Speaker 16: essay will enable you to fly up to ten thousand
Speaker 16: feet again we are good a couple of hundred feet
Speaker 16: to go.
Speaker 2: So what's going to be the biggest market segment do
Speaker 2: you think? Is it military? Is it tourism? Is it
Speaker 2: just kind of an uber transportation kind of thing.
Speaker 16: So we all the request that we have are for
Speaker 16: private people. At this point, we were kind of amazed.
Speaker 16: There was one article on us and just you know,
Speaker 16: people started to basically order pre order that.
Speaker 2: So it's two hundred and fifty thousand, right, two.
Speaker 16: Hundred and fifty to three hundred, it's about yeah. So yeah,
Speaker 16: private people very interested. You know, people have you know,
Speaker 16: maybe a collection of cars, a few cars, maybe aircraft,
Speaker 16: so it's a bunch of them. One of them, for example,
Speaker 16: is a doctor in our case, he lives is one
Speaker 16: of the first one. He lives in an airport community. Uh,
Speaker 16: it's essentially a private airport. He wants to fly to work.
Speaker 2: You know, he's with But where do you see the growth,
Speaker 2: where do you see the business?
Speaker 16: So business definitely, you know, private people. Again, the production
Speaker 16: the capacity at this point is like limited to what
Speaker 16: we can deliver, so we see that definitely. Personal were
Speaker 16: also in touch with the with the Air Force. They
Speaker 16: won't use these vehicles for SURVEILLISKA and also reconnaissance and
Speaker 16: you know, rescue a planet that ejected abundant out of
Speaker 16: you know, are in the territory for also getting from
Speaker 16: first respondents, police department. You can it's very fast, easy
Speaker 16: to deploy.
Speaker 1: FEMA.
Speaker 16: We're is getting them all the time from all. I mean,
Speaker 16: it's just it's hard for to say. But the perorders
Speaker 16: at this point, and we also from Canada, uh so
Speaker 16: the perioders are more personal, which has kind of amazed us.
Speaker 16: And I mean, we we do it what we get.
Speaker 4: So a lot of official use cases though, even if
Speaker 4: the pre orders are person So how many do you
Speaker 4: expect to produce, like say twenty twenty five, how many
Speaker 4: are going to be rolling out of your factory?
Speaker 16: So for twenty twenty five, we're you're talking about about
Speaker 16: one hundred and twenty twenty five units the first the
Speaker 16: first to twenty five, My apport is six units, the
Speaker 16: next year is one twenty five, and their scant up
Speaker 16: production to about twenty five hundred units a year. We
Speaker 16: will probably have to scat up because this technology is
Speaker 16: well just so revolutionary that will take place from you know,
Speaker 16: other market segments as well.
Speaker 2: That was darn Merdinger, founder and CEO of d'roni Aerospace.
Speaker 2: You're listening to Bloomberg Business Week coming up, How tighter
Speaker 2: monetary policy in America is putting the squeeze on New
Speaker 2: York City's pricey residential real estate sector.
Speaker 11: The problem with the market right now is that these
Speaker 11: high interest rates are causing people to be forced to
Speaker 11: pay lower prices.
Speaker 2: This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App,
Speaker 1: or watch us live on YouTube.
Speaker 2: Bloomberg News recently reported on how more Manhattan buyers are
Speaker 2: paying cash than at any other time on record. In fact,
Speaker 2: some sixty five percent of purchases in the second quarter
Speaker 2: were done without financing. That's up from fifty seven percent
Speaker 2: in the first quarter and the largest share since appraiser
Speaker 2: Miller Samuel and Brokeridge Douglas Element real Estate began tracking
Speaker 2: payment methods in twenty fourteen. For an update on what
Speaker 2: she is seeing firsthand, we welcome back Barbara Fox, president
Speaker 2: at Fox Residential Group and an Upper East sider for
Speaker 2: a post check on housing prices in the Big Apple.
Speaker 11: The spring and early summer markets were a little were
Speaker 11: pretty active. There was a lot of activity there was
Speaker 11: sales being made. There were things coming on the market, surprisingly,
Speaker 11: but mainly it's that was in the smaller units one, two,
Speaker 11: and even three bedroom units, not the super luck stuff,
Speaker 11: but the the lower price stuff. But that's fallen off
Speaker 11: now we're in the summer doldrum.
Speaker 12: You know.
Speaker 4: Carol is talking about the fact that more buyers are
Speaker 4: cash now than ever before, and well, it's a very
Speaker 4: expensive place to buy real estate, so that means a
Speaker 4: lot of cash in these transactions. Is it only the
Speaker 4: very wealthy that are transacting right now?
Speaker 11: No, actually it's not. The very wealthy always transact and
Speaker 11: they can pay cash. However, the bulk of the people
Speaker 11: who are buying in New York City really can afford
Speaker 11: to pay cash or don't want to pay cash. They
Speaker 11: do it if they have to because of the interest rates.
Speaker 11: The problem with the market right now is that these
Speaker 11: high interest rates are causing people to be forced to
Speaker 11: pay lower prices, and there is a there's a juxtaposition
Speaker 11: between what the buyers think and what the sellers think.
Speaker 11: That still exists, doesn't that's very much in an existence now.
Speaker 11: It's uh, it's really a it's it's a difficult situation.
Speaker 11: And the sellers who are pretty savvy in New York
Speaker 11: have been gotten so used to these very high inflated
Speaker 11: prices that they aren't really coming down to reality at
Speaker 11: this point. And that's the only way to do transactions.
Speaker 11: I mean, the buyers are very cautious. They're not going
Speaker 11: to overpay. They will look at a million things.
Speaker 2: Because they can. If they've got to higher interest rate
Speaker 2: and a mortgage, right, they've got to kind of reduce
Speaker 2: what they can pay essentially for the pass.
Speaker 4: All right, So what kind of properties are moving then
Speaker 4: right now? Which ones are are are people willing to
Speaker 4: actually sell?
Speaker 11: Well, the people that it's really an interesting market right
Speaker 11: now because most of the people who are selling, there's
Speaker 11: not a lot of product coming on the market because
Speaker 11: because of the people, because of the interest rate situation.
Speaker 11: If people are moving, they don't want to have to
Speaker 11: pay a higher interest rate for a new apartment, so
Speaker 11: they aren't. There's not a lot of movement in the
Speaker 11: in the market.
Speaker 2: You're saying there's no movement or what what does sell?
Speaker 11: Less expective, It does sell, and people are always having
Speaker 11: to sell for various reasons, moving or whatever. And what
Speaker 11: sells fastest are new developments and the nicely renovated apartment.
Speaker 4: Is that because if you're a new developer, can you
Speaker 4: figure out a way to give people a four or
Speaker 4: five percent mortgage rather than a six or seven percent mortgage?
Speaker 11: I presume I don't really think that's happening right now,
Speaker 11: but I'm sure what is.
Speaker 7: The good happen between now?
Speaker 4: Barbara, and you're not nearly old enough, but some people
Speaker 4: remember the eighties when rates were not.
Speaker 7: Only this high, but a lot higher.
Speaker 11: I remember I remember in the seventies and eighties when
Speaker 11: the rates were eighteen percent.
Speaker 2: Our thanks to Barbara Fox, president at Fox Residential Group,
Speaker 2: for joining me and Matt Miller in studio. Head over
Speaker 2: to our BusinessWeek podcast feed for more on the New
Speaker 2: York City housing market. And that wraps up the weekend
Speaker 2: edition at Bloomberg business Week from Bloomberg Radio. Thank you
Speaker 2: so much for joining us. Be sure to tune into
Speaker 2: Bloomberg Business Week Monday through Friday starting at three pm
Speaker 2: Wall Street Time on Bloomberg Radio and on serious XM
Speaker 2: Channel one nineteen. You can also watch our daily broadcast
Speaker 2: on YouTube. Just search Bloomberg Global News and we're summacast
Speaker 2: on Bloomberg Originals available at Bloomberg dot com, Slash Originals,
Speaker 2: and streaming platforms including Roku, Amazon, fireTV, Samsung TV Plus
Speaker 2: and more. Find our Bloomberg BusinessWeek podcast at Bloomberg dot com, Apple,
Speaker 2: or wherever you get your podcasts, and the latest edition
Speaker 2: of the magazine available on newstands now at Bloomberg dot com,
Speaker 2: Slash Businessweekend, always on the Bloomberg Terminal. Have a good
Speaker 2: and safe weekend for Matt Miller. I'm Carol Masser. Stay
Speaker 2: with us. Today's top stories in global business headlines are
Speaker 2: coming up right now.
Speaker 1: This is the Bloomberg Business Week Podcast, available on Apple, Spotify,
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Speaker 1: afternoons from three to six Eastern on Bloomberg dot com,
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