Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Let's get over to Spotify.
Speaker 1: Here's a story. It's just I don't know if it's
Speaker 1: just another tech story, another tech company laying off people,
Speaker 1: but I mean the stock like the other tech names.
Speaker 1: So naming these announcements. It's up two point three. Let's
Speaker 1: bringing Githa Rogan Anthon. She covers all things media, digital media,
Speaker 1: all that stuff for Bloomberg Intelligence. So keita talk to
Speaker 1: us about Spotify. What's going on there with the company. Yes,
Speaker 1: it looks very much Paul, like you know, this company
Speaker 1: also fell into the same trap as other tech companies.
Speaker 1: They kind of overestimated demand just based on pandomic trends,
Speaker 1: and they, I guess they hire too many people. They
Speaker 1: basically double their head count from you know, about four thousand,
Speaker 1: five hundred people to all most close about ten thousand
Speaker 1: just over a span of two years. And now what
Speaker 1: are they faced with. Their faced with a subscriber slowdown,
Speaker 1: They're faced with advertising headwinds. Uh So there's a pullback
Speaker 1: across the business um and so they have to react.
Speaker 1: And this is exactly what they're doing. Is about a
Speaker 1: six percent got in their workforce that they announced this morning.
Speaker 1: So but you know, it's Spotify. When I think about
Speaker 1: the revenues drivers that you just highlighted advertising and subscriber
Speaker 1: goth but didn't Apple Music just you know, raise their prices.
Speaker 1: Doesn't give Spotify some rooms or maybe raise some prices.
Speaker 1: You know, that's a great point. I mean, you know,
Speaker 1: as we think about pricing power in the music streaming business, yes, exactly.
Speaker 1: You know, Spotify has held its price constant for you know,
Speaker 1: the longest period of times at about ten dollars. Apple
Speaker 1: just just raised it about eleven dollars a month. So
Speaker 1: the general expectation is, yes, they will be able to
Speaker 1: raise prices or they potentially will do it sometime in
Speaker 1: the first quarter. But again, where does that get you? Okay,
Speaker 1: you have about two hundred million subscribers, so that gives
Speaker 1: you an additional two million dollars of revenue annually. Again,
Speaker 1: not enough to mop the needle. You know. There's an
Speaker 1: opinion piece by Sarah Green Carmichael. I don't know if
Speaker 1: you've seen it, but she says layoffs often leave companies
Speaker 1: worse off, and she goes through the data, um, not
Speaker 1: just in terms of profitability, but just in terms of morale.
Speaker 1: Morale A lot of times it seems to break companies.
Speaker 1: You know, even those who are left are scurrying to
Speaker 1: look for other jobs. They hate management now, um, you know,
Speaker 1: they're not on board with the mission. Are these companies,
Speaker 1: not just Spotify, but across you know, the board, especially
Speaker 1: after they had such a difficult time hiring people last year?
Speaker 1: Are they shooting themselves in the foot themselves in the
Speaker 1: foot trying to um, you know, sail so close to
Speaker 1: the wind? I don't think so. I think and especially
Speaker 1: if you read kind of uh, you know, Spotify the
Speaker 1: CEO danielis letter, he said he might have been over
Speaker 1: ambitioned is And I think this is one of the
Speaker 1: things that we're seeing across in all of their investments
Speaker 1: actually with Spotify. So if you just look at Spotify,
Speaker 1: just very basically at their business model for every one
Speaker 1: of dollars of revenue that they generate, they pay out
Speaker 1: about seventy to seventy five cents to the record labels,
Speaker 1: so they really have no control over their content costs,
Speaker 1: which is what has kind of prompted this whole move
Speaker 1: for them to kind of really push into podcasts. This
Speaker 1: has been this really big source of investments for them.
Speaker 1: They've invested over a billion dollars right into the podcast market.
Speaker 1: They signed on the Obama as they signed on Prince Harry. Uh,
Speaker 1: you know, Joe Rogan, was that the only differentiator otherwise,
Speaker 1: get Apple Music and you're good to go. Yeah, exactly,
Speaker 1: so that you know, you have to own content. This
Speaker 1: is exactly what Netflix did, right. You have to have
Speaker 1: your own shows because content is the differentiator. The only
Speaker 1: thing is they've just spent too much for podcasts. They've
Speaker 1: already spent about one to one and a half billion dollars.
Speaker 1: It's only generated about two hundred millions so far in revenue.
Speaker 1: So there's just you know, we've come to a point
Speaker 1: when the industry really doesn't care about subscriber growth. And
Speaker 1: Spotify they already have a share of the music streaming market.
Speaker 1: There is a lot of runway for them to go
Speaker 1: grow in terms of subscribers, but nobody cares about subscribers anymore.
Speaker 1: They care about profits. And there's just no sustainable um
Speaker 1: or there's just the model just doesn't show us that
Speaker 1: this company can get to significant profitability anytime soon. So
Speaker 1: is you own the stock just on the come here
Speaker 1: that you just think it's it's a growth market. It
Speaker 1: is a growth market. And you know, if you just
Speaker 1: kind of look at music streaming, I think it's a
Speaker 1: defensive business. We have traditionally we've just not seen um
Speaker 1: as much churn in the music streaming business as compared
Speaker 1: to let's say video streaming, because you know, typically you
Speaker 1: you you subscribe to multiple video streaming services, whereas in
Speaker 1: the audio business it's just it's either a Spotify or
Speaker 1: an Apple or an Amazon. Um. So you know, there's
Speaker 1: there's uh, there's much less chance for streaming, much less
Speaker 1: chance for churn. Sorry, but um you know, these investments
Speaker 1: had a really kind of depressed to stop, all right.
Speaker 1: Keith a great stuff as always, Keith Roganathan. She's a
Speaker 1: US media analyst for Bloomberg Intelligence. She covers it all.
Speaker 1: She is the expert. We love getting a few minutes
Speaker 1: of her time or three weeks in to a new year.
Speaker 1: So far, so good. We got stocks up three and
Speaker 1: a half percent, we got bonds up a couple to
Speaker 1: three percent, a little bit better than last year. How
Speaker 1: about the rest of the year, Hans Olsen, We're gonna
Speaker 1: ask him that question. He's the c i O fiduciary
Speaker 1: trust company that got a jillion dollars of assets under management.
Speaker 1: He joins us here in our Bloomberg Inactor Broker studio.
Speaker 1: We appreciate him taking to schoot you down from Connecticut, Hans,
Speaker 1: when coming into this year, what were you telling your
Speaker 1: clients after what was really a disastrous year for the
Speaker 1: sixty forty portfolio out there? Yeah. Yeah, a lot of
Speaker 1: the trends that we saw in force last year we
Speaker 1: thought would bleed into this year, you know, sort of
Speaker 1: the reset of the price of money, Uh, concerns about
Speaker 1: you know, where interest rates top out and would we
Speaker 1: see a recession or not. So what we're what we
Speaker 1: thought right this The rally that we've seen over the
Speaker 1: last three weeks or so sort of fits, uh that
Speaker 1: of a of a counter trend rally, you know, bear
Speaker 1: market rally amidst a trend that I'm not sure that
Speaker 1: we've we've necessarily seen the bottom yet, could retest the bottom,
Speaker 1: but um, certainly we're like to see some more downside
Speaker 1: volatility here. So we're just about to get into the
Speaker 1: thick of it in terms of earning season, right, we
Speaker 1: get the big industrial companies reporting, UM as well as
Speaker 1: you know Microsoft and Teslas of the weirdos as well. Um,
Speaker 1: what do you expect in terms of the earnings? You know,
Speaker 1: we thought there would be an earning slowdown or is
Speaker 1: it going to materialize? We've had we lowered the bar enough.
Speaker 1: I think we will see an earning slowdown. Right, So
Speaker 1: if you look back even um, I don't know, eight
Speaker 1: weeks or so for the fourth quarter, Uh, the expectations
Speaker 1: that the earnings would be up something like three or
Speaker 1: four percent. Now the expectations will come in close to
Speaker 1: down somewhere four or five. So I think we're going
Speaker 1: to exit a very awful year in a difficult way, right, Um.
Speaker 1: And the question is does that set the stage for
Speaker 1: more I think in the early part yes it does. Um.
Speaker 1: You know, the expectations for this year are are I
Speaker 1: think modest and growing more modest by the day. The
Speaker 1: question really is what happens to margins? Right, So you know,
Speaker 1: the expectation this year is that revenues will be up
Speaker 1: what three percent but two or three percent, and earnings
Speaker 1: will be up four five So that says that the
Speaker 1: margins have to expand at this point in the cycle.
Speaker 1: Against this inflation back black backdrop, you would expect to
Speaker 1: see margins contract rather than expand. So that's got to
Speaker 1: get resolved. We will talk about earnings, and we'll talk
Speaker 1: about it a lot over the next few weeks. But
Speaker 1: at the end of the day, it still feels like
Speaker 1: the Fed is kind of the narrative here that people
Speaker 1: need to pay attention to. I mean, Matt's in the
Speaker 1: argument we need to see the FED remain firm here
Speaker 1: fifty basis points. Here's just one man's opinion. That's just
Speaker 1: one man's opinion. But the man has a beard, um,
Speaker 1: So we tend to pay attention um, and a good
Speaker 1: bed and a good beard, thank you. But what what
Speaker 1: are the good folks that fiduciary trust? Those are people
Speaker 1: I really pay attention to. What what are you guys
Speaker 1: thinking about this federal reserve? And maybe what's a good
Speaker 1: policy for them to pursue. Yeah, I think you have
Speaker 1: to squeeze the life out of inflation, and that means
Speaker 1: that you you keep rates high enough until there's no
Speaker 1: question that it's gone. And there's still a question. I mean,
Speaker 1: I think Larry Summers has been right on the mark
Speaker 1: with this, right. He says it's going to be hard,
Speaker 1: it's going to take some time. If you look at
Speaker 1: the PC numbers, which will see later this week, UM,
Speaker 1: my guess is that they're going to come in with
Speaker 1: that four and a half five, which is still a
Speaker 1: multiple multiple or so greater than where the Fed wants it.
Speaker 1: So the job is not done yet. And you know,
Speaker 1: they really the question will be what is the relationship
Speaker 1: between the price of money and the price of stuff?
Speaker 1: And that's the question that the Fed hasn't asked, and
Speaker 1: I think it was said in the earlier segment. You
Speaker 1: know you have to Um, no one wants to go
Speaker 1: down as the FED chairman it fails. No one wants
Speaker 1: to be the twentieth century g William Miller, Yes or right?
Speaker 1: Who wants that, uh you know, sort of next to
Speaker 1: their name. Um, yeah, totally agree, And I guess we'll see.
Speaker 1: I've noticed financial conditions keep getting looser and looser. Um,
Speaker 1: we three and a half percent unemployment. Uh, it seems
Speaker 1: like they have a long way to go, although we
Speaker 1: do see insurance inflation coming down. I want to ask
Speaker 1: about hedge funds, and I guess only your wealthiest clients
Speaker 1: get access to the Citadel's, the Bridgewaters, the d E Shaws.
Speaker 1: But if you get access to the biggest hedge funds,
Speaker 1: the biggest multi strategy hedge funds, you still knocked the
Speaker 1: ball out of the park last year. It doesn't matter
Speaker 1: what happens. Earnings doesn't matter for in a recession, doesn't matter,
Speaker 1: stocks go down. What do you think about, um, the
Speaker 1: shift that we're seeing from you know, long only hedge funds.
Speaker 1: You know, you could be a single pick a single name,
Speaker 1: a superstar and ride it with them to now multi strategy,
Speaker 1: multi manager hedge funds that are doing well. Yeah, I'm
Speaker 1: I'm a skeptic of hedge funds, and I think you're right.
Speaker 1: You know, if you f you that top one percent um,
Speaker 1: that's where to be, and you're going to pay for
Speaker 1: it to right in the top twenty made two billion
Speaker 1: dollars last year, but they lost two hundred and eight billion.
Speaker 1: There you go, there you go, And I just think
Speaker 1: you can replace a lot of that that market exposure
Speaker 1: with with other vehicles at a fraction of the cost. Again,
Speaker 1: they're always exceptions, um, And the Citadels and the like
Speaker 1: will will always stand out, and the ELTs will always
Speaker 1: stand out that way, But um, they are the exceptions.
Speaker 1: The rule is much more disappointing. You know, I noticed
Speaker 1: last year international markets. We talked to our international Bloomberg
Speaker 1: Intelligence people like Tim Craig head over in London and
Speaker 1: pointing out throughout the year, how you know international markets
Speaker 1: have outperformed the US. How do you think about that?
Speaker 1: In Yeah, I think that's probably going to be the
Speaker 1: sleeper story, right, the sleeper market three, which is, um,
Speaker 1: we expected the worst for Europe in many respects. It
Speaker 1: did not happen. Right, didn't have a cold winter, they
Speaker 1: didn't run out of energy, the pipeline infrastructure didn't collapse. Um.
Speaker 1: You know, inflation seems to be abating there. Uh and uh,
Speaker 1: you know those those markets have performed exceptionally. Well, if
Speaker 1: you're an American investor and we're right about the dollar
Speaker 1: that we've essentially seen peak dollar in this in this cycle,
Speaker 1: then international markets of all flavors are are gonna look
Speaker 1: pretty interesting this year. So I think that's gonna be
Speaker 1: the sleeper story. I mean, when your most exciting tech
Speaker 1: company is s A P. Yeah, that's definitely a sleeper story,
Speaker 1: that is right. But that maybe is the good thing.
Speaker 1: You know, they like semens and big manufacturing and that
Speaker 1: kind of stuff. That's the cultural energy. Look at the
Speaker 1: rotation that you've seen in both the sp and UM
Speaker 1: the MSc. I acqui. So the some of the Darling
Speaker 1: stocks fell out, like Tesla's, the metas the endvideos, right,
Speaker 1: what come? What replaces it? Exxon? Uh uh, Proctoring, gamble
Speaker 1: Um and Berkshire halfaway. We're just a few, So I
Speaker 1: mean it's it's there's an interesting rotation that's going on
Speaker 1: in the markets right now that will likely continue well
Speaker 1: into this year. How much attention do we have to
Speaker 1: pay to Washington d C. I'm so jaded by this
Speaker 1: whole debt ceiling thing because you know, I remember back
Speaker 1: when um Adam Johnson was here at Bloomberg, he did
Speaker 1: a special when the US got downgraded and everybody poured
Speaker 1: into treasuries. So it wasn't the horrible faith that we expected.
Speaker 1: Now they're doing it again, and I think everyone believes
Speaker 1: they'll eventually find a solution. Is totally political, but it
Speaker 1: could cause some ripples in financial markets, right yeah, it could.
Speaker 1: It could. I mean you don't when you start playing
Speaker 1: around the full faith and credit, Um, you know that's
Speaker 1: hostage that you don't want to take. Um because some
Speaker 1: people want to take that hostage gladly sell. Yeah. Not
Speaker 1: a good outcome. But the interesting thing last time that
Speaker 1: we went through this, we actually it up in a
Speaker 1: really good place, right so we saw we saw the
Speaker 1: deficit come down after that. What the credit rating agencies
Speaker 1: didn't like was the process. And this process isn't going
Speaker 1: to get any better at this time, right Um. If anything,
Speaker 1: it will be worse. I think the thing that we
Speaker 1: should be looking for is a resolution through the most
Speaker 1: unusual ways, which would be a discharge petition, which is
Speaker 1: where basically, because of the what happened a couple of
Speaker 1: weeks ago in the House, and because of these factions
Speaker 1: that exist in the in the majority party, you could
Speaker 1: see basically a coalition of the willing cut a deal,
Speaker 1: go right around the part of the party leadership and
Speaker 1: take it to the floor for a vote and get
Speaker 1: it done. You know, Hans, one of the things I've
Speaker 1: been I've been asking is just kind of what's who
Speaker 1: are gonna be the leaders of this market? To the
Speaker 1: extent we do have a sustained move upward here, I
Speaker 1: mean over the last twelve fifteen years it's been technology,
Speaker 1: but it just feels like that might not be the
Speaker 1: case here. How do you think about market leadership going forward? Yeah,
Speaker 1: which is this gets back to the whole idea of
Speaker 1: of this rotation going on within the market, a new
Speaker 1: leadership emerging, and I think it's more of the average
Speaker 1: stock versus the favored stock, right if you and if
Speaker 1: you proxy that for the SSP equal weight versus the
Speaker 1: market gap weight, that equal weighted version of the index
Speaker 1: has done very well over the last couple of years.
Speaker 1: Last year it outperformed the market cap weighted by about
Speaker 1: four basis points, pretty noteworthy, and it's doing the same
Speaker 1: thing this year. If if the narrative is correct around
Speaker 1: um China reopening, we don't go into recession. If your
Speaker 1: escapes recession, which is the story this morning, and we
Speaker 1: have we we escape it, or at least have a
Speaker 1: mild one, then you're going to want more of the
Speaker 1: cyclical names, right, Energy I think will be one of
Speaker 1: the standouts. Industrials will be another one, materials um and
Speaker 1: that's very different from the communication services the text of
Speaker 1: the past four or five years. Yeah, I mean energy.
Speaker 1: I'm just looking at x on mobile up on a
Speaker 1: trailing twelve month basis, So that was certainly a leader
Speaker 1: question is for a lot of folks like me that
Speaker 1: I missed trade. So but you know we've got w
Speaker 1: tech crude oil up again here at barrel. Hans Olson
Speaker 1: Hans Olsen, ce IO of Fiduciary Trust Company. Uh, he's
Speaker 1: based in Boston, but he's in here in New York
Speaker 1: for some unknown reason, nefarious reason, I'm sure, but he
Speaker 1: has to come to New York. I know. There's a
Speaker 1: lot of reason, a lot of ways to get in
Speaker 1: trouble here. So that's what I'm just calling out. Anyway,
Speaker 1: he joins us in a Bloomberg and studio. We appreciate it.
Speaker 1: Our c suite conversation for the day. We're talking information
Speaker 1: technology grid dynamics g d y N is a ticker
Speaker 1: to put in here your Bloomberg terminal. We're joined today
Speaker 1: by Leonard Lipschitz. He's the CEO of grid Dynamics. Uh, Leonard,
Speaker 1: thanks so much for joining us here. First of all,
Speaker 1: just give us the thirty thousand foot overview of what
Speaker 1: grid Dynamics is. How do you fit into that tex stack?
Speaker 1: Thank you for having Grid Dynamics is a global tech
Speaker 1: story engineer company. We generally consulted conidate with the largest
Speaker 1: most respective global brands and were so optimize and deliver
Speaker 1: the digital solutions to our clients. We drive the business
Speaker 1: of jewelity. We create innovation into the solutions, and we
Speaker 1: are known in digital commerce, artificial intelligence, the cloud roll
Speaker 1: out to help all clients expanding prospers. So that's pretty
Speaker 1: much what greeting empasies. So one of the things we
Speaker 1: we've noticed just from some of the big tech companies
Speaker 1: over the last couple of quarters is that the economic
Speaker 1: headwinds which are are are global in nature. They are
Speaker 1: in fact hitting the technology growth story and we're seeing
Speaker 1: tech stocks reflect that in the under performance we saw
Speaker 1: last year. How's it impacting your business your clients? Well, um,
Speaker 1: it is always you know, the headlines about something which
Speaker 1: happened in the world. When it comes to our specialization
Speaker 1: and I consulting specifically, UH, with addressing the client needs
Speaker 1: were broadly um, diversified. So yes, when we see some
Speaker 1: pressures coming in the tech world, UM, we find some
Speaker 1: continuous growth in a manufacturing space, there are you know,
Speaker 1: life signs that are broader way of addressing them. You know,
Speaker 1: they need some digital transformation. So UM we should kind
Speaker 1: of mixed signals. Some of them are extremely you know,
Speaker 1: prospering and growing, some of them more moderate and constraint.
Speaker 1: Before we go any further into what's going on at
Speaker 1: grid in the in the tech world in general, I
Speaker 1: gotta ask what you did as UM global lighting business
Speaker 1: head at at Ford Motor Company. What does that? What
Speaker 1: does that mean you you design and implement the headlights
Speaker 1: strategies or how's that work? You're going back decades ago? Um, well,
Speaker 1: I was very fortunate to start my career after the
Speaker 1: advanced degrees from various universities at Fort Mootor Company, and UH,
Speaker 1: right of the bat, we were facing the again the
Speaker 1: revolution and lightning with modern technology like H A D
Speaker 1: lamps and uh, you know Elergy technologies, and I just
Speaker 1: happened to be in the forefront. So we were working
Speaker 1: with Ford and then later when Ford spun off this
Speaker 1: Janet the division I was again fortunate to spare had
Speaker 1: a lot of innovations in the global very very renowned
Speaker 1: brands to change their entire behavior and comes to front lighting. No,
Speaker 1: that's fascinating. Let's get back then to tech. Now, I'm
Speaker 1: wondering how much of a concern rising rates are for
Speaker 1: you and for the industry. UM. And we've heard from
Speaker 1: a number of players on the West Coast that, um,
Speaker 1: the software spend uh, and I guess in general I
Speaker 1: T spending could be challenged this year. UM. How do
Speaker 1: you how do you see that good dynamics? Well, um, well,
Speaker 1: let's just let me answer the second question first, and
Speaker 1: they'll come back to the interest rates. So yes, UM,
Speaker 1: and the and the soft forth spend. Um, you see
Speaker 1: some pressure. So is with the industrial budget? Um? Start
Speaker 1: the first downturn we've facing the company, We've been around
Speaker 1: for sety years. Typically what makes the difference is how
Speaker 1: critical the applications are for the client. Again, when we
Speaker 1: come to the health of the company, it's about the pricing, personalization,
Speaker 1: supply chain, logistics. UM. You know, competitive innovation. So typically
Speaker 1: when you are in the midst of the very critical
Speaker 1: path for the competitive advantage and the clients are relying
Speaker 1: on you. There's a little bit of another behavior during
Speaker 1: the you know, some of the constraints with the client,
Speaker 1: they rely on their partners, like the supply partners like
Speaker 1: gre Dynamics, UM, just to lebage some of the risks
Speaker 1: in turn to their own budgets. So in general, I
Speaker 1: feel very bullish for the year. Of course, UM, you know,
Speaker 1: everybody kind of watches where the raids are. But this
Speaker 1: is more about the sentiment than the true behavior. And
Speaker 1: then I mean we'll go to the earnings call um
Speaker 1: and you know very soon in a month, and then
Speaker 1: we'll have more details about our performance. But I see
Speaker 1: that we have the UM, I would say for three
Speaker 1: on the road map perspective, a pretty comfortable expectation going
Speaker 1: toward the second half of the year. As part of
Speaker 1: the interest rates, UM, everybody is watching them because again
Speaker 1: many industries depend on our loans and particularly United States
Speaker 1: and again how plans. Majority of the are you large brands,
Speaker 1: enterprises and texts in the US. So yes, as we
Speaker 1: see a little bit over the tampering on the forecasting
Speaker 1: in terms of the future of the interest rates, some
Speaker 1: of their clients become a little bit more open to
Speaker 1: discuss long term plans. Um. You know, I don't have
Speaker 1: the magic one to you know, the crystal bolt of
Speaker 1: forecast exact numbers, but we we definitely have a little
Speaker 1: bit better sentiment today than it could have been like
Speaker 1: two or three months ago. So, Leonard, your your companies
Speaker 1: based out there in Silicon Valley, San Ramon, California. What
Speaker 1: are you and maybe not you guys, but what are
Speaker 1: your neighbors doing in terms of firing people laying off people.
Speaker 1: We've seen, you know, a whole bunch of tech companies
Speaker 1: announced layoffs, you know, including today most recently Spotify. What's
Speaker 1: going on out there with you guys. Well, we are
Speaker 1: headquartered in in the Bay Area, but we also have
Speaker 1: a very strong presence in Texas, you know, Atlanta, Georgia,
Speaker 1: New York, Jersey, you know, South East, as well as
Speaker 1: mos As West, so we're quite diversified around the US
Speaker 1: from the client bates as well as Europe. Still, yes,
Speaker 1: I think, you know, Silicon Valley is notorious for those
Speaker 1: ramp up and ram downs. Um. I would say if
Speaker 1: you read your own you know publication, which you're a
Speaker 1: big fan of, Bloomberg in a subscriber for a while. Uh,
Speaker 1: you can tell that in the last two years some
Speaker 1: of the big tax you know, expressed a very very
Speaker 1: strong growth, and during the growth they added a lot
Speaker 1: of headcounts. So it's a little bit of opportunity to um.
Speaker 1: Somebody mentioned green the addicts. I hope that people not
Speaker 1: offended by that term, because of of course, as a
Speaker 1: treasure of people lose the job. But if you compare
Speaker 1: the head count of the big tech today versus three
Speaker 1: years ago, it's still very very strong for us frank
Speaker 1: as an opportunity to hire really good people are out
Speaker 1: of the industry and we were constrained with you know,
Speaker 1: crazy uh spendings, but we are very bullish that you know,
Speaker 1: there's a place of great e many school quality people
Speaker 1: as will continue to expend all right, great stuff. Leonards Lifts,
Speaker 1: CEO of grid Dynamics, the ticker is g d y
Speaker 1: N for your Bloomberg terminal got about a nine million
Speaker 1: dollar market cap there in the information technology consulting business, uh,
Speaker 1: you know, and their business, as Mr stated, it's still
Speaker 1: pretty strong. But again, as we've heard from a lot
Speaker 1: of tech companies over the past couple of quarters. You know,
Speaker 1: the economic headwindes that are affecting so many other industries, Uh,
Speaker 1: they're also affecting uh information technology and just the tech
Speaker 1: spend in general. So we'll pay attention to some of
Speaker 1: those tech companies coming up in this earning season to
Speaker 1: get an outlook for It's a good day in the
Speaker 1: Market's not so much if you're you know somebody's tech
Speaker 1: companies just you know, last year is such a tough
Speaker 1: run for them in a rising interest rate environment. We
Speaker 1: got some news out today on another big tech name,
Speaker 1: Salesforce dot com. It's got an activist investor in there.
Speaker 1: What does that mean for the company? What does that
Speaker 1: mean for management? On a rock ran a senior tech
Speaker 1: anals for Bloomberg Intelligence Joints is on the phone. What
Speaker 1: does Elliott want? What do you think when if they
Speaker 1: get a voice at the board, if they get a
Speaker 1: zoom call with the board, what do you think they're
Speaker 1: gonna ask? So I think they're gonna ask them to
Speaker 1: be a little more responsible with the way they spend
Speaker 1: their money. Frankly, and you know the number one thing
Speaker 1: for us is Salesforce spends more on sales and marketing
Speaker 1: than any company their size, you know, on a gap
Speaker 1: basis of their revenue goes to sales and marketing compared
Speaker 1: to let's say for Article or the SAP or about
Speaker 1: eleven percent for Microsoft what it calls for that difference.
Speaker 1: Do you think did they just buy more expensive dinners? Yeah?
Speaker 1: I think see what happens is in the cloud based
Speaker 1: software world and everything is growth was everything, you know,
Speaker 1: they would just push a lot money on sales and
Speaker 1: marketing and some get some you know growth out of it.
Speaker 1: They do a lot of conferences, they are all over
Speaker 1: the world. But factly speaking, that is absolutely true when
Speaker 1: you are a startup, a brand new company. But Salesforce
Speaker 1: has been around for twenty four years now, so they
Speaker 1: really don't need to do that anymore. Um So, I
Speaker 1: think that's going to be a big area of focus
Speaker 1: and ARBUO in terms of the rest of the layoffs.
Speaker 1: Um do you see this as a concern. I mean,
Speaker 1: if they're starting to cut people, it's gonna be hard
Speaker 1: to turn that around anything need to. I mean, Salesforce,
Speaker 1: I think is a special case because as we pointed out,
Speaker 1: they've hired thirty one people in two years. They you know,
Speaker 1: boosted their head count by like sixty. But the other
Speaker 1: big tech companies are in this in the same boat.
Speaker 1: So the way you want to think about it is
Speaker 1: there is a very large correlation between revenue growth and
Speaker 1: employee growth. Let's say, you know, for the sake of argument,
Speaker 1: it's one is to one or slightly less than one
Speaker 1: is to one. Now, if these if if your thes
Speaker 1: is is right, or if you believe take spending will
Speaker 1: come back, you know, next year or the year after.
Speaker 1: They have no choice but to hire people because they
Speaker 1: needed not just in sales and marketing but software developers
Speaker 1: to come up with new products or to expand services.
Speaker 1: So I'm not concerned about the head counter you know edition.
Speaker 1: The question is where the allocation goes. Are you going
Speaker 1: to put that money in R and D or you're
Speaker 1: going to put that money in you know, sales and marketing.
Speaker 1: And I think that's really going to be a big
Speaker 1: difference for salesforce. I think they will have to be
Speaker 1: a little more responsible with the way they spend money.
Speaker 1: And then also about their you know, acquisitions. They have
Speaker 1: spent so much money the last few years in acquisitions.
Speaker 1: I think that the Elliott can ask them to you know,
Speaker 1: focus more on organic growth, cost control, and then buybacks.
Speaker 1: So all right, so let's stay with just kind of
Speaker 1: the Silicon Valley layoff story, if you will. I mean,
Speaker 1: are these the you know, the high and demand engineer
Speaker 1: software folks. I can't imagine, because all I've heard for
Speaker 1: the last twenty years coming out of Silicon Valley, and
Speaker 1: that includes you know, some of the you know, the
Speaker 1: Googles of the world in the Facebook, they just can't
Speaker 1: get enough of that talent. Are they letting that talent go?
Speaker 1: I think it is a mix of both. I'm not
Speaker 1: you know, I've never looked at the breakdown of you know,
Speaker 1: who got laid off in this particular you know cycle,
Speaker 1: but I think it will be a lot of people
Speaker 1: in you know, sales and marketing, a lot of people
Speaker 1: in HR and other support functions, as well as some
Speaker 1: developers also. I'm sure that's not the case. But having
Speaker 1: said that, I've said this repeatedly that the unemployment rate
Speaker 1: for a lot of these categories, whether it's software developers,
Speaker 1: database administrators, is so low. I mean it's it's you know,
Speaker 1: two percent or sometimes even below that. Um, you know,
Speaker 1: they will have no problem finding a job anywhere, and
Speaker 1: the reason for that is every industry it doesn't have
Speaker 1: to be taking you know, energy transportation. You know, all
Speaker 1: of these people are hiring technology people to digitize their businesses.
Speaker 1: By the way, I wanted to ask you about at GPT. Right,
Speaker 1: Microsoft is investing in this AI company, well, an Open
Speaker 1: Eye AI, which runs chat GPT. I've been trying to
Speaker 1: get on it all morning, but it's just too crowded.
Speaker 1: Everybody wants to use it. It's an artificial intelligence. I
Speaker 1: guess to paper, I was going to use it to
Speaker 1: build an e t F. Me and Katie Greifeld, we're
Speaker 1: gonna do that. My brother wants to use it to
Speaker 1: write a song. You know, UM investors are using it
Speaker 1: or or or UH bankers are using it to pitch investors. UM.
Speaker 1: Is this going to be incredibly successful or is it
Speaker 1: just a fat right now that's going to burn out.
Speaker 1: Ce AI in general is going to be generally successful
Speaker 1: because it's not going to be only a product like
Speaker 1: this where you know, it's it's a chat, you know, judge,
Speaker 1: GPT like a product, but almost everything that we do,
Speaker 1: any software application that we use, and it could be
Speaker 1: Spotify as well. As you were discussing or Microsoft Word
Speaker 1: or or anything else. Um, it has to get more sophisticated.
Speaker 1: It has to have the ability of to to understand
Speaker 1: things and give you better results. So AI infusion across
Speaker 1: all software products is one of the biggest trends that
Speaker 1: we will see over the next few years. And then
Speaker 1: one of the key things about you know, this investment
Speaker 1: is you know, the back end for this is Microsoft's
Speaker 1: cloud platform. So the more people use, you know, it's
Speaker 1: good for the usage or the consumption of those cloud services.
Speaker 1: And I think that is going to be a big
Speaker 1: story for the next few years. All Right, good stuff
Speaker 1: as always on a rogronic. He's a tech analyst at
Speaker 1: Bloomberg Intelligence, talking about all things tech, tech, labor force layoffs,
Speaker 1: and chat GPT. That is the new thing, right, I mean,
Speaker 1: that's kind of like the last few weeks, and I'm
Speaker 1: excited to get on it. I'm in line. I'm waiting.
Speaker 1: Let's talk a little bit about the venture viz venture
Speaker 1: debt investing in startups. How's that marketplace these days? In
Speaker 1: a rising interest rate environment. We're gonna check in with
Speaker 1: Kyle Brown. He's a c IO and president of Trinity Capital.
Speaker 1: Nastack simbol T r I N. Mr. Brown graduated from
Speaker 1: Arizona State, whose best men's basketball team is coached by
Speaker 1: the greatest college point guard of all time? Who's that?
Speaker 1: Bobby Hurley, Jersey City, New Jersey, St. Anthony's and Duke
Speaker 1: uh Kyle. Thanks so much for joining us here. Talk
Speaker 1: to us about just to start off, what is Trinity Capital.
Speaker 1: Where do you guys play in the capital markets? Well,
Speaker 1: thanks Matt, Thanks Paul. Trinity Capital. We are a provider
Speaker 1: of capital to growth stage companies' introre dead as one
Speaker 1: product we provide, but we really focus on companies growing
Speaker 1: in annual growth rate who have raised significant equity dollars
Speaker 1: fifty plus million dollars of equity, They've proven out their technology,
Speaker 1: they've really identified a market, they've got a they've got
Speaker 1: a moat around that technology, and they're really scaling and
Speaker 1: we come in to provide capital to help them grow.
Speaker 1: And we really focus on execution type risk um and
Speaker 1: so we're helping these companies go from you of of
Speaker 1: run rate as they reach either profitability or head towards
Speaker 1: an I p O or M and a type transit action.
Speaker 1: So we're an extension of runway and a compliment to
Speaker 1: the equity that they've raised. So what's the market like
Speaker 1: for those companies? Um, is it harder and harder for
Speaker 1: them to get access. So it's a really interesting market
Speaker 1: right now. Um, You've got a ton of equity out there, right,
Speaker 1: maybe even a record amount of venturer capital and private
Speaker 1: equity that's looking at to be placed. And then you
Speaker 1: have the idea that they want revaluations. Right, there's been
Speaker 1: very lucrati evaluations for founders to the last you know,
Speaker 1: five years, and so there's a lot of capital, but
Speaker 1: they are looking for deals. And so you have a
Speaker 1: variety of situations. One is a company that really needs
Speaker 1: equity um, and maybe it's not growing at the pace
Speaker 1: that they were before and it's gonna be difficult for
Speaker 1: that company to to get that equity. And then you
Speaker 1: have companies that continue to do well in the face
Speaker 1: of adversity, but in spite of that, they're going to
Speaker 1: see their company revalued. And so it's really you know,
Speaker 1: it's it's happening slowly. I don't know that it's quite
Speaker 1: happened yet, but you know, these these tech companies are
Speaker 1: getting revalued similar to what's happened in the public markets.
Speaker 1: And talked to us about I mean, you know, the
Speaker 1: startup companies. It was for the longest time, it was
Speaker 1: this top line growth, top line growth, maybe even just
Speaker 1: subscriber growth, don't worry about profits. But that's really seemed
Speaker 1: to change. Talk to us about that and how how
Speaker 1: you factor that into analysis? Sure, I mean, so our
Speaker 1: underwriting is always factored on you know, does this company
Speaker 1: have the ability to turn the corner? And do they
Speaker 1: have lovers in place to control burn? And does the
Speaker 1: burn make sense? You know, are they spending to grow
Speaker 1: because the unit and economics makes sense. And I think
Speaker 1: you know what's interesting is our portfolio. We've got ninety
Speaker 1: plus portfolio companies today. Our portfolio started making changes twelve
Speaker 1: to eighteen months ago, kind of in advance of what
Speaker 1: you're seeing in the public markets today. So many of
Speaker 1: these companies made the hard decision a year ago, knowing
Speaker 1: that they were in the middle of tough times. Uh,
Speaker 1: their and their investors of course, have seen this before,
Speaker 1: and so a lot of those changes have already been made,
Speaker 1: and so a lot of these companies are really kind
Speaker 1: of weathering the storm. They're raising the amount of capital
Speaker 1: they need to get to you know, plus years down
Speaker 1: down the road. UH, so they can get to better
Speaker 1: days and raise equity at better valuations. So it's it's UH.
Speaker 1: I think the most most changes have been made. They
Speaker 1: continue to be made, but I think it just happens
Speaker 1: sooner than what you're seeing in the public markets. Have
Speaker 1: you seen an increased demand from investors UM for access
Speaker 1: to your UH, to your firm, because it does seem like,
Speaker 1: you know, private credit has been a huge UM trend
Speaker 1: over the last sex say, six months to a year. Yeah,
Speaker 1: we we certainly have UM. You know, there's the idea
Speaker 1: is that there is if you do, if you invest
Speaker 1: right during this time with valuations in some cases kind
Speaker 1: of being had, there could be an opportunity for some
Speaker 1: outsize warrant returns. And you know, in our world, the
Speaker 1: majority of our returns and if you look at the
Speaker 1: returns we've been generating for a long time, it's all
Speaker 1: it's mostly current pay. It's it's it's rate, it's fee.
Speaker 1: We are a true lender, secured lender, but we also
Speaker 1: get warrants. There's some additional upside and in our world
Speaker 1: that that tends to kind of cover your losses and
Speaker 1: provide investors with some additional upside. If valuations are being
Speaker 1: had and we are getting warrants that those newer valuations,
Speaker 1: it provides some potential for some some additional upside down
Speaker 1: the road. And so I think investors see that certainly,
Speaker 1: and UM, I think we see it as well. What's
Speaker 1: the concern about um uh non performing loans? I have
Speaker 1: a listener who writes in to ask, you know, assuming
Speaker 1: you have none right now, um, if if we get
Speaker 1: a recession, what do you expect that that number to
Speaker 1: grow to that zero percent to grow too? So, I mean,
Speaker 1: losses are a part of our our world. You know,
Speaker 1: we we have you know, you can look at our
Speaker 1: warrant gains recently. We we have significant kind of equity
Speaker 1: realized gains that cover some of our losses. It's just
Speaker 1: part of our model. So we expect there to be losses.
Speaker 1: We expect there to be um, some non accruals. It's
Speaker 1: just part of how our world works. Can you quantify that?
Speaker 1: I mean what I know Matthew have earlier was saying
Speaker 1: he thought, um, we'd see nine percent default rate. Now
Speaker 1: that was I think an outlier, But what what what
Speaker 1: do you expect this year? We've seen a historic loss right.
Speaker 1: We've been doing this since, you know, going back to
Speaker 1: the the real estate crash in two thousand and eight,
Speaker 1: we've seen a kind of annual two percent, historic kind
Speaker 1: of loss rate. UM that really hasn't changed much. UM.
Speaker 1: You know, the companies that we have in our portfolio
Speaker 1: and that we're seeing in our space, it's not it's
Speaker 1: not really a matter of are they going to go
Speaker 1: away or not? UM. These companies have real technology, there's
Speaker 1: real value, real I P. And in our world we
Speaker 1: do a lot of equipment financing. There's really equipment value
Speaker 1: there that's that's worth something in a in a downturn scenario,
Speaker 1: it's really more about at what value are they going
Speaker 1: to raise capital at and and what that And that
Speaker 1: impacts equity investors and shareholders more than it investors secured
Speaker 1: lender who's sitting at a very low loaned value. I
Speaker 1: think we are average loaned values under fift loan to value,
Speaker 1: and so UM that impacts us less because most of
Speaker 1: our returns made up of rate and feet like I
Speaker 1: said before, so we haven't historically seen that be a
Speaker 1: huge impact to us. UM. I I do expect will
Speaker 1: continue to see it. You know, companies struggle raising that capital.
Speaker 1: That might lead to some some defaults, but you know,
Speaker 1: being senior secured against companies that have you know, a
Speaker 1: hundred plus million dollar valuations and real i P were
Speaker 1: typically in a pretty good spot to weather that type
Speaker 1: of storm. Kyle, what are some of the sectors that
Speaker 1: you guys favor investing in? So we focus a lot
Speaker 1: on manufacturing. Uh, there's a lot that goes underneath that.
Speaker 1: It could be food and beverage, it could be frontier
Speaker 1: tech like an Axiom space where they're using our tools
Speaker 1: to build the first commercial space station. We focus on
Speaker 1: mission critical equipment, equipment that company cannot survive without. And
Speaker 1: so whether or not they turn into Google or not,
Speaker 1: you know, there's real value there whoever does buy them
Speaker 1: or or or you know, there's real value in that equipment.
Speaker 1: So we focus on manufacturing. Actually really bullish on that space.
Speaker 1: I think you're seeing more and more focus on infrastructure
Speaker 1: in the US, and they need a lot of tools,
Speaker 1: a lot of equipment, so we see a lot happening there. Um.
Speaker 1: You know, we also we continue to see a lot
Speaker 1: of enterprise sas although you know, I think you're seeing
Speaker 1: a lot of revaluations happening there. Um, that's not going away,
Speaker 1: and that's a that's a pretty big part of our
Speaker 1: portfolio as well. So you know, Manufacturing, Enterprise SASS and
Speaker 1: then uh, you know, life science and healthcare. I think
Speaker 1: that that correction happened a long time ago, and you're
Speaker 1: starting to see some really interesting opportunities there as well.
Speaker 1: What's you know that Uh, what's the biggest challenge to
Speaker 1: your growth? Because I just reminded that it's difficult to
Speaker 1: find workers. I know that in tech, Uh there are
Speaker 1: a lot of pink slips going out, so maybe that
Speaker 1: would help, um, but a lot of people we talked
Speaker 1: to say they have to go to Canada to find um,
Speaker 1: you know, workers with the skills that they need. Ye know. Um,
Speaker 1: I don't know that our our portfolio companies, you know,
Speaker 1: think about our portfolio there, maybe they're not quite big enough.
Speaker 1: But I'm just wondering what are the challenges to growth
Speaker 1: that you see out there? Sure, Um, you know, inflation
Speaker 1: obviously continues to be a difficult, especially for consumer type products. Um.
Speaker 1: You know, I think that if you see a recession,
Speaker 1: there's gonna be a one to your time period where
Speaker 1: it's just gonna be a little bit slower, you're not
Speaker 1: gonna have these growth rates. Maybe it's a little bit
Speaker 1: less than that. So I think, you know, capitalization and
Speaker 1: making sure you've got runway to whether a storm is
Speaker 1: absolutely on the forefront of all of our all of
Speaker 1: our company's minds, and and it should be. Um, they've
Speaker 1: got real technology. It's very disruptive. Uh, and they were
Speaker 1: disrupting old archaic businesses. But it's not necessarily the best
Speaker 1: technology that wins the day. It's the best capitalized company
Speaker 1: that wins the day. Often, he Kyle, you took your
Speaker 1: company Trinity to Capital Public. What was the strategy behind
Speaker 1: that for you and your your colleagues? So, Um, we
Speaker 1: decided many years ago we want to be the best
Speaker 1: in the world at this We wanted to be a
Speaker 1: solution that was everything for growth stage companies, above and
Speaker 1: beyond that cheap receivable financing you can get from a bank.
Speaker 1: We wanted to be the alternative lender of choice, and
Speaker 1: access to the capital markets was key. We're a BBC.
Speaker 1: We distribute out the majority or all of our earnings annually,
Speaker 1: so we can't grow unless we can raise capital. And uh,
Speaker 1: you know, recently we just got approved by the SEC
Speaker 1: for our public companies. Is really interesting our public company
Speaker 1: to manage an r I A where we can manage
Speaker 1: additional funds off bouance sheet and it's owned by our
Speaker 1: public company, so it gives us the ability to grow
Speaker 1: on balance sheet when the public markets are open, and
Speaker 1: it's the creative and it makes sense to investors, and
Speaker 1: then we can raise money privately, all to the benefit
Speaker 1: of our shareholders as well. So, um, you know, it's
Speaker 1: gonna take a lot of capital to continue to build
Speaker 1: and grow and become that one stop shop for growth
Speaker 1: stage companies. But I think we've got the platform, uh,
Speaker 1: and it's the opportunities right for us to be able
Speaker 1: to do that. All right, good stuff. Appreciate getting the
Speaker 1: low down. Kyle Brown, cee IO and president of Trinity Capital.
Speaker 1: Again that is a public traded company on nastack. The
Speaker 1: company rang the bell list Tuesday. Actually the tickers t
Speaker 1: r I, N they all know how much Matt and
Speaker 1: I love the big take stories in depth reporting, some
Speaker 1: really cool topics in our reporters and editors. They go
Speaker 1: deep and needed to bring you some really good stories.
Speaker 1: It's so good, and we've got a podcast for the
Speaker 1: Bloomberk Big Take, and it's hosted by West Kosova. West,
Speaker 1: thanks so much for joining us share Westcasova, what do
Speaker 1: you got for us here on your podcast? Coming up?
Speaker 1: So today's episode is really interesting. It's about how Americans
Speaker 1: are driving more. We're all getting back in our cars,
Speaker 1: driving instead of flying, and yet we're using less gasoline
Speaker 1: than ever before. So gasoline usage has not returned to
Speaker 1: pre COVID levels. And so it's this indication that you know,
Speaker 1: we've all talked forever about we're gonna reduce our depending
Speaker 1: on gasoline, and it's actually starting to happen. Now gasoline
Speaker 1: uses ticking downward even though we're using you know, our
Speaker 1: cars even more. Yeah, I mean, I so I'm the
Speaker 1: wrong person to talk to about this because I've never
Speaker 1: had a car that gets more than like thirteen miles
Speaker 1: a gallon but includes the Chevy Silverado with the thin
Speaker 1: about like thirteen point six it's a six point two
Speaker 1: lead V eight. But I've been test driving a Kia
Speaker 1: e V six and electric vehicle over the last week
Speaker 1: and it's like eye opening. I never even think about
Speaker 1: a gas station. I would say five dollars a month
Speaker 1: if I had an e v UM. Is this why
Speaker 1: the figures are moving down, More people using the e vs,
Speaker 1: more people uh driving cars that get you know, better
Speaker 1: mileage than me. Yeah, you nailed both of them. Ev
Speaker 1: use is um you know up you see it now
Speaker 1: like it used to be. Oh, tesla is the whole thing,
Speaker 1: and now everybody's getting into it. So that's going up.
Speaker 1: Even though evs are only one percent of car sales,
Speaker 1: it's going to start kind of picking up. The other
Speaker 1: big thing is joining the Obama administration, they started putting
Speaker 1: stricter you know, mileage standards, and they started in California
Speaker 1: and then everybody else followed. And so the cars on
Speaker 1: the fleet right now just kind of cars on the
Speaker 1: road are more efficient than ever before. And those two
Speaker 1: things largely are combining to just let us drive longer
Speaker 1: with less gasoline. By the way, is that everything I
Speaker 1: mean gasoline? I assume that the lion share of gasoline
Speaker 1: usage globally is personal transportation vehicles. It's cars, and of
Speaker 1: course it's a lot of delivery. And me think about
Speaker 1: what happened during the pandemic. You know that so much
Speaker 1: more delivery you have instead of text cabs, you have many,
Speaker 1: many more ubers and lifts all over the place on
Speaker 1: the road. So I mean you even think about that,
Speaker 1: like all those miles piling up and gasoline used going down.
Speaker 1: It really is this indication of kind of like what
Speaker 1: the future holds. But I am seeing a lot of
Speaker 1: the lot more. And I just noticed over the past
Speaker 1: few weeks of the Amazon electronic vans delivering stuff, so
Speaker 1: a lot of that fleet is switching to cleaner fuels too.
Speaker 1: So all this stuff coming down the road, and part
Speaker 1: of the podcast we talked about as well, Okay, so fine,
Speaker 1: but does that mean gasoline is going away? And of
Speaker 1: course the answer is no, And it's gonna be a
Speaker 1: very slow, bumpy, kind of painful ride down because we
Speaker 1: still have all of these refineries and everything in business
Speaker 1: and trying to unwind that is going to be pretty
Speaker 1: messy stuff. What does the future look I'm looking at
Speaker 1: right now. I gotta buy a Dodge Challenger hell cap
Speaker 1: before they stopped making them. This is the last year.
Speaker 1: That's a very much gasoline. You have to you have to.
Speaker 1: I want I want it desperately. But um, I'm worried
Speaker 1: that at some point there won't be any as stations,
Speaker 1: you know, or you know, it might not be legal
Speaker 1: for me to drive a car that imbibes gasoline like that?
Speaker 1: Is that, um a legit a valid concern? Wes I
Speaker 1: think you're gonna be okay for as long as you're
Speaker 1: gonna drive that car. I mean, I really that they're
Speaker 1: going to say, okay, these cars are legal. Look what
Speaker 1: happened when gasoline became unleaded. You know, you could still
Speaker 1: drive your leaded gasoline car, but over a long period
Speaker 1: of time, it finally became impossible to find leading gasoline.
Speaker 1: Probably a similar thing like that. You've got plenty of
Speaker 1: time to to get your phone out of that car.
Speaker 1: So West, what are what are the what's the energy
Speaker 1: complex the energy industry? What are they saying about kind
Speaker 1: of the future of gasoline demand and maybe how they're
Speaker 1: gonna adapt. Well, I mean they're already preparing for it now.
Speaker 1: I mean they're looking at the future you're thinking about, okay,
Speaker 1: so what sort of investment should we make. One of
Speaker 1: the things we talked about on the podcast is how
Speaker 1: Biden administration is saying, you know, hey, why don't you
Speaker 1: guys build refineries? We need more. You're saying, well, you know,
Speaker 1: looking down the road, is this gonna be viable? Costs
Speaker 1: billions of dollars to build these things, and so they're
Speaker 1: instead investing in another the things. You know, of course
Speaker 1: there's um, there's these al and there's jet fuel, and
Speaker 1: there's a lot of plastics you know, I'll derive from petroleum.
Speaker 1: So there could be shifts to those more profitable things
Speaker 1: as gasoline rides down, and so all of that is
Speaker 1: going to kind of be this this big kind of
Speaker 1: major change over from gasoline to other petroleum kind of products,
Speaker 1: hopefully not plastics that's nasty. Um, what do you think
Speaker 1: about E VS versus hydrogen? I guess it's not necessarily
Speaker 1: an either or question, but um, what I'm asking is
Speaker 1: are there going to be more alternative power sources to
Speaker 1: rival gasoline? That's a really good question. I mean all
Speaker 1: of it comes down to can you make money off
Speaker 1: of it? I mean, just now we're starting to see that,
Speaker 1: you know, battery powered cars can be profitable. That's why
Speaker 1: everyone's getting into it. I don't know that anybody in
Speaker 1: a serious way has invested in like hydrogen or sometimes
Speaker 1: you see these cars run on you know, uh, you know,
Speaker 1: waste material and this other kind of stuff. Becoming like
Speaker 1: a really big thing. But I don't know, like you
Speaker 1: only takes one person to do it, and suddenly there's
Speaker 1: a market in our You mentioned California. I mean you
Speaker 1: think of California and I just think it traffic jams.
Speaker 1: I mean, you know, I mean, everybody drives. There's no
Speaker 1: little to no mass transportation. You know this. I wont
Speaker 1: if that's ever going to change. I mean, it doesn't
Speaker 1: seem like mass transportation gets the support or the I
Speaker 1: guess that nobody cares in America. So is that gonna
Speaker 1: is that the future was? I don't know. I mean
Speaker 1: they've always been talking about it and we've been terrible.
Speaker 1: You look at Europe, you can get anywhere on mass transportation.
Speaker 1: We did an episode of the podcast recently about how
Speaker 1: cities like London are starting to charge a lot of
Speaker 1: money to drive a gasoline powered car into the center
Speaker 1: of the city, and so they're not just trying to
Speaker 1: reduce the traffic, but trying to say you should buy
Speaker 1: an e V because you can drive those in the
Speaker 1: city without having to pay. So they're trying to change
Speaker 1: people's behavior by making it painful to drive balloting cars.
Speaker 1: So what's the bottom line for oil West. Um. You know,
Speaker 1: we're looking at eighty dollars in change for bail of
Speaker 1: West barrel of West Texas Intermediate, and some people are
Speaker 1: saying the reopening of China and the lack of a
Speaker 1: deep procession in Europe could drive that price even higher. UM.
Speaker 1: I guess you're you're looking at you're taking a much
Speaker 1: longer term view. Yeah, and that's actually a really interesting thing.
Speaker 1: We get into it on the show today. UM, is
Speaker 1: about how you think, oh, well, so you know, demand
Speaker 1: for gasoline is gonna go lower, so maybe we're gonna
Speaker 1: get some relief from these high gas prices. And the
Speaker 1: answer is, yeah, that's gonna happen, um, But it's gonna
Speaker 1: happen in the long term because in a medium term,
Speaker 1: especially when these oil companies are trying to adjust to
Speaker 1: a new future and trying to ride down as profitably
Speaker 1: as possible, there could be price shocks, there could be
Speaker 1: temporary shortages, um, all leading to you know, higher prices.
Speaker 1: And you know, the three Bloomberg journalists on the show,
Speaker 1: Lynn Dowan, John z Jou and Millie Munchi are just amazing.
Speaker 1: They write about this thing about this all the time,
Speaker 1: and they are really really interested in talking about it,
Speaker 1: all right, that's great stuff. West Kasova. He's a host
Speaker 1: of Bloomberg The Big Take podcasts in uh this week
Speaker 1: to talk about Gasolene. Gasolene starts its long slow ride down.
Speaker 1: That's the podcast. I don't know, Matt, I I kind
Speaker 1: of always envisioned you in a internal combustion engine vehicle.
Speaker 1: I well, yusting out with a beard. I just can't
Speaker 1: see you going evy with the beard. I mean I
Speaker 1: I I'm open to both. So variety is the spice
Speaker 1: of life. There you go. And again that four D
Speaker 1: F one fifty ev that I drove, that was awesome.
Speaker 1: The lightning, Yeah, the lightning that kind of turned my
Speaker 1: eyes a little bit. Thanks for listening to the Bloomberg
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
Speaker 1: I'm on Twitter at Matt Miller. Put on ball Sweeney
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
Speaker 1: can always catch us worldwide at Bloomberg Radio