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Speaker 2: All right, Good Wednesday morning from Bloomberg INTERACTI Broker Studio
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Speaker 2: Bloomberg Podcast and that's where you find. It's big news
Speaker 2: today for a good head of friends of Robin Hood.
Speaker 2: Markets stocks up three point six percent today. The company
Speaker 2: unveiling a credit card. I need more credit cards.
Speaker 3: Look at the stock here. Obviously I'm a Wall Street guy.
Speaker 3: All I care about is the stock.
Speaker 2: Stock's a fifty six percent year to date wow, trailing
Speaker 2: twelve months up one hundred and thirty two since it's
Speaker 2: got a seventeen and a half billion dollar market cap
Speaker 2: so big news coming out of our friends of Robinhood.
Speaker 2: Lat Ten of joins us. He's a chief executive officer.
Speaker 2: He's a co founder Robinhood. He joined us here in
Speaker 2: a Bloomberg interactive broker studio. I'm not on the robin
Speaker 2: Hood platform because I'm a gentleman.
Speaker 3: I need the.
Speaker 2: Swiss bank secrecy laws protecting me. But my twenty eight
Speaker 2: year old twins, who are the future of this thing,
Speaker 2: they are on Robinhoo. They're very happy. They were psyched
Speaker 2: that I was talking to Vlad. Talk to us about
Speaker 2: your news today. You're not just a commission free platform,
Speaker 2: which is in and of itself amazing, but you're now
Speaker 2: getting to the credit card business.
Speaker 4: Yeah.
Speaker 5: We were really excited to announce this. We've been working
Speaker 5: on it for quite a while and we didn't just
Speaker 5: want to launch another me too credit card. We really
Speaker 5: wanted to come in and do something special and really
Speaker 5: lead the industry. So it's really the best cash back
Speaker 5: rewards that we found in any credit card on the market,
Speaker 5: the best digital experience, and really the best design. We
Speaker 5: have a solid gold card that's basically a hunk of metal.
Speaker 5: It's extremely iconic, very simple, like very well designed. We're
Speaker 5: really proud of the product. Now the hard work comes
Speaker 5: of rolling it out. But even since the announcement, in
Speaker 5: the first few hours after the announcement, which was last night,
Speaker 5: we had hundreds of thousands of people signing up for
Speaker 5: the credit card, so it's it's looking very good so far.
Speaker 6: How does the credit card fit into the business, because
Speaker 6: I know early last year you guys announced a retirement products,
Speaker 6: so it feels like you're trying to expand away from
Speaker 6: the core trading platform.
Speaker 4: Yeah.
Speaker 5: So as a business, holistically, we're focused on three things.
Speaker 5: The first is being the number one platform for active traders.
Speaker 5: Right now, we're number two, but we have a path
Speaker 5: to being number one in some number of years, and
Speaker 5: that's really through user experience improvements, product innovations like twenty
Speaker 5: four hour market, adding new asset classes like Futures, new
Speaker 5: platform launches like our web Pro platform which we've announced.
Speaker 5: But we don't want to just be an active trader platform.
Speaker 5: We also want to grow wallet share with our customers
Speaker 5: and help them build wealth. That's where Robinhood Gold comes in.
Speaker 5: That's where our innovations and the retirement program with three
Speaker 5: percent match come in. And of course, now the credit
Speaker 5: card is sort of another pillar of us growing wallet
Speaker 5: share with customers and helping them do all of their
Speaker 5: financial activities in one place via Robinhood.
Speaker 2: So are you competing with this card with the bank
Speaker 2: issued visa master cards?
Speaker 3: Is that the market you're now going into.
Speaker 5: I think that we're trying to do something really interesting
Speaker 5: with this card. So if you think about premium credit cards,
Speaker 5: the best ones out there, accept less than half of
Speaker 5: the people that apply.
Speaker 3: Is that right? Half of that? Is that Chase Sephi
Speaker 3: or is that an Platinum or whatever.
Speaker 5: Those classes of credit card. It's really like the typical
Speaker 5: sort of like super prime premium rewards cards, and they
Speaker 5: have high annual fees. So what we want to to
Speaker 5: do is, in the same way that Robinhood democratized stock
Speaker 5: trading and made it accessible to a wider group of people,
Speaker 5: we want to open up the private client experience. I
Speaker 5: don't know if you've been to a Chase branch, but
Speaker 5: you can see there's two doors, one for the private
Speaker 5: clients and one for everyone else. And the whole idea
Speaker 5: behind Robinhood Gold is giving that private client experience for
Speaker 5: as little as five dollars a month, opening it to everyone,
Speaker 5: and it starts with the premium credit card. Of course,
Speaker 5: the retirement benefits where you get a three percent match,
Speaker 5: the first and biggest in the industry the five percent
Speaker 5: apy on our cash which is just an institutional grade,
Speaker 5: high yield offering that you have to have, you know,
Speaker 5: millions of dollars to match at other brokers. So yeah,
Speaker 5: we're putting all this together and we're seeing Robinhood Gold
Speaker 5: customers actually depositing the lion's share of their money into
Speaker 5: Robinhood and really growing with us. And I think we
Speaker 5: have an opportunity to offer them services for all their
Speaker 5: financial needs in BIB the perks.
Speaker 6: Are pretty sweet, as you mentioned, three percent cash back
Speaker 6: on all purchases. Do you make money off of this?
Speaker 5: Are?
Speaker 6: How is this going to be kind of another peg
Speaker 6: for the profitability and the growth of the company.
Speaker 5: Yeah, two things there. One is we do obviously any
Speaker 5: business line we enter, we intend to be profitable over
Speaker 5: the long run on a standalone basis, so not just
Speaker 5: a creative but we anticipate this being a profitable business
Speaker 5: line just within the card portfolio. And that's through not
Speaker 5: just the interchange transaction revenue, but also the lending business
Speaker 5: through the card. We anticipate this would actually be a
Speaker 5: very attractive card for people building credit over time, and
Speaker 5: not just folks that pay off their balance in full.
Speaker 5: And then the other side of it is we see
Speaker 5: that when customers adopt Robinhood Gold, their rate of deposit
Speaker 5: growth and account balance growth is much higher than non
Speaker 5: Gold customers. They also adopt our products at a much
Speaker 5: higher rate, and so even though they're getting so much
Speaker 5: more value with all these industry leading rates and value props,
Speaker 5: the revenue that accrues to the business from the gold
Speaker 5: relationship is also multiples higher than non gold customers. And
Speaker 5: we think the credit card, since it's so core to
Speaker 5: people's financial needs. Typically all of their the line's share
Speaker 5: of their spending goes through credit, and if you're using
Speaker 5: a credit card, much easier to grab the paycheck deposit.
Speaker 4: You need to carry his cash around.
Speaker 6: Now, this is the guy who walks around with hundreds
Speaker 6: of dollars in his pocket.
Speaker 2: I don't know why I asked myself to say, when
Speaker 2: you walk into a bar, the jersey short good cash
Speaker 2: on the bar there.
Speaker 5: Well, I mean, I'll show you what I've got in
Speaker 5: my pocket.
Speaker 2: Oh, he brought the card, very cool fourteen car So
Speaker 2: this all right, folks, on we're shoving you this card.
Speaker 2: It is it weighs something you got some hef to. Well,
Speaker 2: this is the card here, folks, it is.
Speaker 5: It's basically a gold bull. It's like it's not gold plated,
Speaker 5: it's a this is solid.
Speaker 6: Your numbers though I can't make it right now.
Speaker 5: That's the great thing about it because this is a
Speaker 5: digital first card, and we outlined all of the awesome
Speaker 5: digital features like virtual cards, like family focused suite of features. Yeah,
Speaker 5: you don't actually need the number on it. You can
Speaker 5: open up the app, look at the number, the expiration
Speaker 5: dates on there. The design of the card is minimal,
Speaker 5: only the robin Hood brand, the chip and on the
Speaker 5: back you have your name and that's pretty much interesting.
Speaker 5: So if it gets stolen or lost, you don't really
Speaker 5: have to worry about their actual number being used.
Speaker 4: Yeah, yeah, all right.
Speaker 2: So who is the typical robin Hood customer these days?
Speaker 3: Client? These days?
Speaker 5: A typical Robinhood customer, I would say, is someone in
Speaker 5: their thirties. They tend to be an early adopter of technology.
Speaker 5: They have you know, more half of our customers make
Speaker 5: over one hundred thousand dollars in annual income, so it's
Speaker 5: not sort of like the paycheck to paycheck customer as
Speaker 5: maybe some people think, and we also have much larger
Speaker 5: customers with big accounts. We recently have been introducing matches.
Speaker 5: In fact, last night we rolled out another initiative, one
Speaker 5: percent unlimited deposit match into Robinhood for all dollars deposited
Speaker 5: for our Gold members. So basically, most financial firms charge
Speaker 5: you a percentage to keep your money there as a
Speaker 5: management fee. We're paying you a percentage to move your
Speaker 5: money with us. And these types of offers have really
Speaker 5: attracted people with much bigger accounts. We've had customers with
Speaker 5: tens of millions of dollars moving those accounts to Robinhood
Speaker 5: and they've been very happy with the experience. So we
Speaker 5: have been adding capabilities to serve customers across the entire market,
Speaker 5: not just sort of in that middle tier, but also
Speaker 5: people with more money and people with less who are
Speaker 5: just getting started. We also would like to serve them
Speaker 5: and have been focusing on that demographic since day one.
Speaker 6: And VLAT When I talk to skeptics, they point out
Speaker 6: that you guys are heavily reliant on options trading, crypto volumes,
Speaker 6: and that driving the business. Paul mentioned their huge run
Speaker 6: up over the last twelve months, it's still down forty
Speaker 6: eight percent from the IPO price. What is the kind
Speaker 6: of mission in the next coming months and years for
Speaker 6: the company to.
Speaker 3: Get back to that IPO price and trade higher.
Speaker 5: Well, I think we've been doing really well focusing on
Speaker 5: the inputs of the business. I can't really control the
Speaker 5: stock price directly, but if we're growing revenues, if we're
Speaker 5: diversifying revenues, if we're launching innovative new products for our customers,
Speaker 5: I think we can kind of grow through market headwinds
Speaker 5: and high interest rate environment and be sort of like
Speaker 5: a company that thrives in all conditions. And you mentioned
Speaker 5: the revenues and you know, options trading and all these things.
Speaker 5: But what's happened in the past couple of years is
Speaker 5: the revenue profile of the business has diversified as we've
Speaker 5: rolled out all these products. As of the last earnings
Speaker 5: report several earnings calls, more than half of the revenue
Speaker 5: is actually net interest margin, not even transaction base. So
Speaker 5: as we add more of these products, like the five
Speaker 5: percent yield on your cash, the profile of the business
Speaker 5: has also changed.
Speaker 3: All right, flat, thank you so much for joining us.
Speaker 2: Really appreciate you coming into our Bloomberg and director broker
Speaker 2: studio of lad Tenev. He's the chief executive officer, co
Speaker 2: founder of Robin Hood. The news Today, Robinhood unveils a
Speaker 2: credit card and folks, it hasn't hef This is a
Speaker 2: unique credit card. It's been a further push beyond the
Speaker 2: trading business there in the stock performing very well there.
Speaker 3: We appreciate that.
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Speaker 2: One of the issues here is we think about the
Speaker 2: ripple effects of what happened in Baltimore yesterday, is who's
Speaker 2: going to pay for this stuff? And that kind of
Speaker 2: goes to the insurance discussion, and so we have a
Speaker 2: just insurance discussion. We turned to our expert, Matthew Palozola.
Speaker 2: He's a senior analys insurance annalys for Bloomberg Intelligence he
Speaker 2: joins his life in our Bloomberg Interactive Brooker Studio. So, Matthew,
Speaker 2: it's not every day that we have an event like
Speaker 2: we saw yesterday in Baltimore. From your perspective, from the
Speaker 2: insurance perspective, how do you think it's going to play out?
Speaker 7: So we know a couple of things. Is obviously still
Speaker 7: very early, but we've seen some stuff in the trade press,
Speaker 7: and there's a little more information than there actually normally
Speaker 7: is on some of these disasters. The bridge itself, I've
Speaker 7: seen reports that it's valued at about one point two
Speaker 7: billion dollars. I have no idea how much it's going
Speaker 7: to actually cost to rebuild it. The ship the Dolly
Speaker 7: that crashed, actually is carrying, in my view, unusually large
Speaker 7: amount of insurance and reinsurance, which is a good thing
Speaker 7: in this case. There's about three point one billion dollars
Speaker 7: worth of insurance and reinsurance tied to that vessel. Now
Speaker 7: that's also separate from insurance that's on the bridge and
Speaker 7: kind of other things. The problem is it's going to
Speaker 7: take a long time to play out, so the reinsurance
Speaker 7: that's on there will probably end up paying the bulk
Speaker 7: of the.
Speaker 6: Claims and how does this compare to say a hurricane
Speaker 6: or another form of kind of natural disaster thing that
Speaker 6: happens where you have insurance and reinsures kind of all.
Speaker 7: Yeah, anything, it's it's a more complex event, right, So
Speaker 7: on the back end, stuff we probably will never see.
Speaker 7: They'll probably be a lot more back and forth. In
Speaker 7: terms of the cost of the event, I'm assuming very
Speaker 7: early back of the envelope, it's probably a mid single
Speaker 7: digit billions, probably like a four billion or probably even less, honestly,
Speaker 7: which is like a small hurricane, and we have hurricanes
Speaker 7: that are twenty thirty fifty billion dollars. So in terms
Speaker 7: of the impact of the entire industry is probably very manageable.
Speaker 3: Who ensures this stuff? I mean, these ships go all
Speaker 3: over the world. They're monsterships.
Speaker 2: I have no idea how they get in and out
Speaker 2: of ports now that you think about it, they're so
Speaker 2: huge these days, and I got to traverse you know,
Speaker 2: dangerous waters, congested waters. Who ensures this stuff?
Speaker 4: So it's pretty interesting.
Speaker 7: The way it works is it's it's kind of a
Speaker 7: mutual claims paying group that specifically this ship, right, So
Speaker 7: a bunch of this is kind of the way insurance started. Honestly,
Speaker 7: is a bunch of people running the ships get together
Speaker 7: and they pull their resources, and that's where they get
Speaker 7: the insurance from. That's really only the very low layer
Speaker 7: of the insurance. So that's one hundred million of the
Speaker 7: three point one billion of insurance, right.
Speaker 4: So then the rest of it goes to this.
Speaker 7: Global reinsurance market. Above the one hundred there's kind of
Speaker 7: another bit of ship reinsurance, and then above that it's
Speaker 7: the global reinsurance market. So I think companies like Swiss
Speaker 7: re Munich ree, some of the Bermuda reinsurance companies, I
Speaker 7: don't know if they have specific exposure.
Speaker 3: So do we know who's the name's backing this?
Speaker 4: Who's we don't. We know that acce Xcel.
Speaker 7: Was the lead on some of the reinsurance, we don't
Speaker 7: know by how much, and that was just reported by
Speaker 7: the group at the time when they renewed the policy.
Speaker 6: If I'm a shipper and now my path is delayed
Speaker 6: and I have to rethink how I'm operating, is there
Speaker 6: anyone that I'm covered by insurance or reinsurance? Like, how
Speaker 6: does insurance play into some of the delays that are
Speaker 6: likely going to happen as they eventually clear, there'll.
Speaker 7: Certainly be some knock on effects, right, so it would
Speaker 7: be a business interruption claim. So it's kind of I think,
Speaker 7: pretty classic, meaning there's something in your way, you can't
Speaker 7: do your business, you'll have some sort of business insrupting
Speaker 7: clim it's probably on the primary insurance market. If you
Speaker 7: recall in twenty twenty one the Suez Canal got blocked
Speaker 7: by that ship. There was talk about like ten billion
Speaker 7: dollars worth of commerce a day going through there or
Speaker 7: something like that, and that was that was six days.
Speaker 7: Even when that happened, it wasn't a huge amount of
Speaker 7: business eruption claims for the industry, but that that would
Speaker 7: be where it falls.
Speaker 2: All right, So are rates going to go up here
Speaker 2: or is this just a one off black Swan kind
Speaker 2: of event it which kind of seems like it.
Speaker 7: So reinsurance press have been going up anyway, right, So,
Speaker 7: and the reinsurance market doesn't exactly move in lockstep anymore.
Speaker 7: It's kind of individual market. So I think you will
Speaker 7: certainly see maritime reinsurance rates going up. So in case
Speaker 7: you're shipping anything overseas, qual you might have to pay
Speaker 7: a little more. But I think that's almost a given.
Speaker 7: After an event like this that specifically to maritime reinsurance.
Speaker 6: And looking at reinsurres, we've been sitting on the equities desk.
Speaker 6: We're trying to game out which stocks are going to
Speaker 6: move in which direction and who benefits and who loses?
Speaker 4: How does that play out? Like?
Speaker 6: Is this in real time we find out that X
Speaker 6: firm has to disclose that they're the main reinsurer on
Speaker 6: this or how how did those kind of dynamics?
Speaker 4: Usually the way works.
Speaker 7: So what will happen is and I don't expect we'll
Speaker 7: see much of this for the names I cover.
Speaker 4: But what will happen is as we go into earnings.
Speaker 7: If you are one of the companies with a big
Speaker 7: exposure to this and it's gonna be material on your results,
Speaker 7: they will usually pre announce that ahead of earnings, just
Speaker 7: so that they don't, you know, dramatically miss the number
Speaker 7: on that day. So that will be the way it
Speaker 7: would play out in the market. But I don't think
Speaker 7: you're gonna hear a ton from at least in Bermuda
Speaker 7: companies that I cover.
Speaker 3: Gotcha, where are we? I don't know?
Speaker 2: Trailing twelve months on your you're the disaster guy. So
Speaker 2: there's a hurricane or some terrible fire with our friends
Speaker 2: in California or something like that, we turned to you.
Speaker 3: We haven't talked to you a lot recently.
Speaker 4: Yeah, we've We've been alright.
Speaker 7: So even last year, what happened was the Swiss regis
Speaker 7: put out there annual catastrophe loss for the industry, right,
Speaker 7: and it was one hundred billion dollars for the third
Speaker 7: year in a row. And when I started in this
Speaker 7: industry many years ago, if you told me it would
Speaker 7: be one hundred billion dollars last year, we'd be shocked, right,
Speaker 7: it would have blown off the off the chair. And
Speaker 7: now it's been three years in a row that's happened.
Speaker 7: The interesting thing about last year was a lot of
Speaker 7: it was caused by severe convective storms, not huge catastrophes,
Speaker 7: not huge hurricanes, So it was kind of these smaller
Speaker 7: events that built up. So that's probably why you're not
Speaker 7: hearing these kind of headline things. But the losses, you know,
Speaker 7: are still there. That said, the market's still very well capitalized,
Speaker 7: and it really wasn't. It was still a pretty good
Speaker 7: year for the insurers. But that's kind of what's happening.
Speaker 7: And now if you get a big event on top
Speaker 7: of those accumulation of smaller events, than it could be
Speaker 7: pretty all.
Speaker 2: Right, Bailey's in the market for beachfront mansion done in
Speaker 2: the palm beachery.
Speaker 3: Can you get insurance on that stuff sitting on the water?
Speaker 7: It depends on the state, but probably not. You might
Speaker 7: have to move into yours. But yeah, no, I mean,
Speaker 7: it's it's all the insurers are pulling back from all
Speaker 7: of the coastal states.
Speaker 4: It's partly climate change.
Speaker 7: I know, we know, kind of like a point to
Speaker 7: that immediately, but that's not it's not the biggest thing.
Speaker 7: The other thing is that property valves have gone up,
Speaker 7: inflation has pushed the repair costs up, and yes, the
Speaker 7: frequency and severity of storms is worse. So it's kind
Speaker 7: of all those things mixed together. It's just at a
Speaker 7: conference where someone said a home insurance ceo who I
Speaker 7: won't name, and said they just wouldn't even touch New
Speaker 7: Jersey specifically.
Speaker 2: Right, all right, Well, I'm five blocks for us, fine
Speaker 2: blocks in from the ocean, so I feel and they're
Speaker 2: long blocks of the big block, so I feel very
Speaker 2: safe there. But again, you know, Superstorm Sandy came through
Speaker 2: and still to this day you get onto men and
Speaker 2: menal loaking in New Jersey. There are still lots like
Speaker 2: a ten million dollar home got washed away. They haven't rebuilt.
Speaker 2: It's still sitting there empty. So those folks got crushed.
Speaker 3: So it's a thing.
Speaker 2: Matthew Palozola, thanks so much for joining us senior analys
Speaker 2: covering the insurance business for Bloomberg Intelligence. Joining us here
Speaker 2: in our Bloomberg Interactive Brokers studio're trying to game out
Speaker 2: kind of what some of the insurance implications will be
Speaker 2: from this bridge collapse in Baltimore.
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Speaker 3: Cardinal Cruise Lines reported some numbers.
Speaker 2: They raised their four year outlook amid record setting booking pace,
Speaker 2: but they also said that the collaps Baltimore Bridge might
Speaker 2: have a ten million dollars negative impact on their cash flow.
Speaker 3: And earnings for the year.
Speaker 2: Let's break it down with Jody Lourie. She covers all
Speaker 2: the consumer stuff for Bloomberg Intelligence.
Speaker 3: She's a credit analyst over there.
Speaker 2: So, Jody, what'd you make of the Carnival numbers. It
Speaker 2: seems like people are cruising like crazy here, So I.
Speaker 8: Would say a few things about that, Paul.
Speaker 9: First of all, I would say that when you look
Speaker 9: at Carnival, it's really a cash flow story. It really
Speaker 9: is a credit story more than anything else, and the
Speaker 9: bookings are sort of confirming that.
Speaker 8: Now.
Speaker 9: The booking level, if you include short and long term,
Speaker 9: it's actually not at the peak, which was second quarter
Speaker 9: of last year, but it's right near the peak, and
Speaker 9: based on what management is saying, it sounds like second
Speaker 9: quarter of this year might top second quarter of last year.
Speaker 8: That said, I.
Speaker 9: Think more importantly, the company is starting to attack some
Speaker 9: of its debt load, particularly in some of its secured areas,
Speaker 9: which will help to sort of free up the balance
Speaker 9: sheet a little bit, provide some flexibility, make it so
Speaker 9: that the company has an ability to sort of make
Speaker 9: its way back to high grade ratings as it's been
Speaker 9: targeting for twenty twenty six.
Speaker 6: H Jody, you call that out just using the FA
Speaker 6: function on the terminal Carnival cruise almost thirty two billion
Speaker 6: dollars in debt compared to a market cap of twenty
Speaker 6: one billion dollars. How does that stack up to the
Speaker 6: likes of Royal, Caribbean or Norwegian and some of those
Speaker 6: other piers in the cruise liner space.
Speaker 9: So yeah, Carnival was able to bring down their debt
Speaker 9: load to about thirty billion over the past year, and
Speaker 9: it's likely that'll probably end this year around that level
Speaker 9: based on what they're taking in in terms of ships.
Speaker 9: That said, it is significantly higher than Royal, it is
Speaker 9: significantly higher than Norwegian, but on a leverage perspective, it's
Speaker 9: sort of middle of the pack at the moment as
Speaker 9: compared to Royal and Norwegian. Royal is a little bit
Speaker 9: a few quarters ahead of Carnival in terms of its
Speaker 9: deleveraging strategy. Management at Royal actually bumped up their narrative
Speaker 9: around getting to investment grade level metrics to do it
Speaker 9: earlier than twenty twenty five, and Carnival stuck to that
Speaker 9: twenty twenty six number, which I think is descriptive of
Speaker 9: being a little bit more conservative, particularly with the backdrop
Speaker 9: of everything happening globally, not just the Baltimore Bridge situation,
Speaker 9: but also at the Red Sea and everywhere else that's
Speaker 9: affecting Carnival more broadly because of its more global nature.
Speaker 2: I'm looking at again, the FA function is barely called out.
Speaker 2: I still see you know, three four billion dollars in
Speaker 2: in capex every year. Are they buying ships or what
Speaker 2: are they spending that kind of money on?
Speaker 9: Yeah, the three four billion dollars of capex is primarily ship.
Speaker 9: There is a portion of it that is in terms
Speaker 9: of maintenance capex. Right, your ships get old, you have
Speaker 9: to update them every few years. You have all these
Speaker 9: sort of different requirements related to it. They also have
Speaker 9: that celebration key that they're rolling out on, which is
Speaker 9: on the Grand Bahama, and that's to rival their peers,
Speaker 9: which have been investing really heavily also into island presence. Right,
Speaker 9: the Caribbean island presence is a money maker for all
Speaker 9: of them.
Speaker 8: It's this captive audience.
Speaker 9: They bring the people who are on their ships to
Speaker 9: these islands and to these sections of islands like you know,
Speaker 9: not the whole Grand Bahama, but that carved out sections
Speaker 9: specifically for Carnival and you know, wine and dying them
Speaker 9: get them to spend extra money that onboard spend is
Speaker 9: really where you see that.
Speaker 6: Margin you mentioned wining and dining. I just want to
Speaker 6: look at some of the other areas that you cover,
Speaker 6: talking about wind resorts, MGM and HILT all the funds,
Speaker 6: all the fund stuff. Yeah, you have the best job.
Speaker 6: I hope you take advantage of it. But like when
Speaker 6: you look at the underlying business dynamics of some of
Speaker 6: the other areas that you cover. What are we seeing
Speaker 6: in terms of hotel demand and hotel sales and what
Speaker 6: that means from a credit perspective.
Speaker 9: So hotel demands, hotel sales, it's it is a bit
Speaker 9: mixed regionally, but I think overall we're pretty optimistic about
Speaker 9: this year, and that's a function of the fact that
Speaker 9: business and conference is really picking up this year as
Speaker 9: compared to the past few years. You know, we're at
Speaker 9: that point where that post pandemic narrative has sort of
Speaker 9: played out and we're getting to more normalized.
Speaker 8: That said, there are areas.
Speaker 9: Of expansion and growth. We're also seeing that all inclusive
Speaker 9: area be a much more attractive area for a lot
Speaker 9: of these companies, and I think we are seeing some
Speaker 9: rivalry across the board when it comes to hotels casinos,
Speaker 9: cruise lines as these destination opportunities. We're talking Las Vegas
Speaker 9: obviously not the regional casinos that's a little bit different,
Speaker 9: but Las Vegas, Macaw, you know, the cruise lines and
Speaker 9: the hotels. There's a lot of sort of this destination
Speaker 9: narrative that's going on to get people to spend that
Speaker 9: extra money and to sort of go on vacation, live
Speaker 9: life to the fullest. Now, we do have these partnerships
Speaker 9: that are happening between Marriott and an MGM, but then
Speaker 9: also we have an MGM and Carnival relationship. So there
Speaker 9: is this fluidity that's happening within my industry that makes
Speaker 9: it sort of interesting.
Speaker 2: And you get a great view on the consumer Jody
Speaker 2: with you know the coverage you have again hotels and
Speaker 2: casinos and cruise lines. Where are people kind of spending
Speaker 2: their dollar And it seems like they're still spending on
Speaker 2: that whole experiential thing, the experiences. What are the companies
Speaker 2: you cover, what are they saying is to the how
Speaker 2: that's likely to play out?
Speaker 9: Because so consumers are definitely spending still on experiences. We're
Speaker 9: still very much seeing it now if you compare twenty
Speaker 9: twenty three twenty twenty two. It's a different sort of
Speaker 9: narrative than twenty twenty three to two thousand two before,
Speaker 9: because the base is much greater. Right, if you looked
Speaker 9: at the base going back to twenty twenty one, you're
Speaker 9: dealing with nothing, building on nothing. It's very significant. That said,
Speaker 9: there still is that narrative of growth and that consumer
Speaker 9: spending on experiences where we sort of wonder is what's
Speaker 9: going to happen heading into the second half. That's sort
Speaker 9: of the puzzle piece that isn't quite filled.
Speaker 8: Out for us yet.
Speaker 9: Where first half into the summer season is very strong,
Speaker 9: we're also seeing that for cruise lines, they're saying that
Speaker 9: going into the twenty twenty five they're seeing strength, and
Speaker 9: that's a function of the fact that people book their
Speaker 9: cruises so far in advance. You don't get that benefit
Speaker 9: in the hotel space, you don't get that benefit as
Speaker 9: much in the vacation arena elsewhere. People don't book vacations
Speaker 9: apart from cruises so far in advance. So I think
Speaker 9: as we head into second half, we'll sort of get
Speaker 9: a feel for how comfortable the consumer is in terms
Speaker 9: of spending.
Speaker 6: And Jody, I just want to ask about FED if
Speaker 6: we do have higher for longer and if a rate
Speaker 6: cut keeps dragging on, how does that impact the kind
Speaker 6: of areas of your coverage differently, whether it's sector by
Speaker 6: sector or a company by company, it's.
Speaker 8: A combination of factors.
Speaker 9: So when you're talking the cruise lines, a lot of
Speaker 9: the narrative is around repaying and refinancing debt. That refinancing
Speaker 9: portion won't be as attractive if we are higher for longer.
Speaker 9: The other component, though, is on the consumer side. So
Speaker 9: you have the high end consumers that might benefit or
Speaker 9: not from high interest rates or a elevated stock market
Speaker 9: price of sorts, But then you have the lower end
Speaker 9: consumer that might feel a little bit more of the pressure.
Speaker 9: I think the more important piece is that inflation factor,
Speaker 9: where you say, okay, from the inflation standpoint, how much
Speaker 9: is the consumer feeling it, how are they feeling it
Speaker 9: directly in their wallet, and how much are they willing
Speaker 9: to borrow in order to continue that's spending, and so
Speaker 9: I don't really know how that's going to play out.
Speaker 9: That's you know, there are other people within the firm
Speaker 9: that are really very smart and can talk more to that.
Speaker 8: That said that is something we.
Speaker 9: Are monitoring from the standpoint of how much the consumer
Speaker 9: is stretching, because that narrative around consumer is having extra
Speaker 9: cash on the sidelines to pump into vacations isn't so
Speaker 9: much there, but the thought process around spending on vacations
Speaker 9: and that mentality around spending on vacations still exists.
Speaker 3: All right, Jodi, thanks so much for joining us. Really
Speaker 3: appreciate it. Jody Lourie.
Speaker 2: She covers all the consumer companies, all the fun companies.
Speaker 2: She does it from the credit perspective. Talking about Carnival,
Speaker 2: Cruz reported some numbers today took their guidance up a
Speaker 2: little bit, citing even though some concerns a little bit
Speaker 2: near term short term small hit from Baltimore.
Speaker 3: Have you cruised before?
Speaker 2: Not a cruise, So you're not cruising for the honeymoon honeymoon?
Speaker 6: No, we are flying to Portugal and then flying and
Speaker 6: driving running a car leash mateo cruiser.
Speaker 3: No, I haven't.
Speaker 8: I'm kind of scared. I don't know. Titanic like comes
Speaker 8: in my head and I'm like, I can't do it.
Speaker 3: My thing is I don't like people. So that's kind
Speaker 3: of a that's kind of a it could be a problem.
Speaker 3: That's a problem for me.
Speaker 2: So I mean it'd be stuck on board with like
Speaker 2: three thousand people onto this ship.
Speaker 4: Liesa says Titanic.
Speaker 6: I use the pandemic as like exhibit number six hundred
Speaker 6: for me to not do it, And you're just like,
Speaker 6: I don't really want to interact with it.
Speaker 3: I just don't like people. Yes, I don't need to
Speaker 3: see it.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Say Alexa, playing Bloomberg eleven thirty.
Speaker 2: Speaking of a global investment bank, Let's get the Alison Williams,
Speaker 2: she covers the global investment banks for Bloomberg Intelligence. She
Speaker 2: joins us from Princet, New Jersey via zoom Allison, I
Speaker 2: guess the most recent story out is UBS. They're selling
Speaker 2: an eight billion dollars in loans to Apollo. I guess
Speaker 2: these are some loans they picked up on the acquired
Speaker 2: Swiss What's going on with her friends in Switzerland?
Speaker 10: Yeah, so this is really just wrapping up feel that
Speaker 10: Credit SUITEE had put in place some time ago.
Speaker 8: So even before UBS.
Speaker 10: Had had purchased Credit Suite, they were winding down the
Speaker 10: investment banks. They had this business, the securitized products group
Speaker 10: that they were you know, getting rid of, and so
Speaker 10: they upon consummation of the deal, some of those assets
Speaker 10: had been sold off, but the rest have been put
Speaker 10: in sort of a non core unit. So I think
Speaker 10: this is really just kind of closing the loop on
Speaker 10: that and it just shows progress that they're continuing to
Speaker 10: wind down the business some of the more I don't
Speaker 10: want to say unprofitable, but sort of some of the
Speaker 10: more voluable assets, balancing intensive, the types of things that
Speaker 10: UBS really does not want to be involved with.
Speaker 6: Now's in UBS booking and net gain of three hundred
Speaker 6: million in the first quarter related to the deal or
Speaker 6: the matter.
Speaker 3: Is this just a big.
Speaker 6: Win for them given kind of how they're shedding the assets.
Speaker 10: Yeah, I mean, I think if you if you look
Speaker 10: at some of the numbers that they gave, I mean,
Speaker 10: and it's there's obviously sort of the way that they
Speaker 10: accounted for the transactions when they did the deal. I think,
Speaker 10: you know, the important thing is probably not the direct
Speaker 10: impact but just shutting those assets so that they can
Speaker 10: you know, kind of return to the core business.
Speaker 3: They have a.
Speaker 10: Huge road ahead. I mean, this is you know, eight
Speaker 10: billion in assets. It's about ten percent of the non
Speaker 10: core book that they want to get rid of, and
Speaker 10: they're sort of on a long path of integrating the
Speaker 10: two banks. They've got big restructuring chargers ahead. I think
Speaker 10: what we're focusing on really in the first quarter is,
Speaker 10: you know, can we start to see some results from
Speaker 10: this investment bank you know that part of what they wanted.
Speaker 10: You know, obviously the wealth assets are huge for them,
Speaker 10: the Swiss assets are huge for them, but another thing
Speaker 10: they wanted was the investment bankers and credit Suiteze really
Speaker 10: did have expertise in the tech area, as you know, Paul.
Speaker 10: They have you know, a great reputation and done really
Speaker 10: well on tech IPOs. And what we've seen in the
Speaker 10: first couple of months of the quarter is UBS really
Speaker 10: moving up the league tables for tech IPOs, showing that
Speaker 10: they might be getting some of that benefit.
Speaker 2: I'm looking at the stock here of thank you. I'm
Speaker 2: looking at stock here, Allison of UBS. It's not kind
Speaker 2: of flat year to date, but it's up sixty five
Speaker 2: percent on a trailing twelve month basis. So what's the
Speaker 2: when you talk to introditional investors out there, what's the
Speaker 2: call here on UBS?
Speaker 10: I think, you know, it depends probably a little bit
Speaker 10: on your time frame. It's going to be a long
Speaker 10: slog and so I think, you know, the broader look
Speaker 10: at the company, and as you know, we don't we
Speaker 10: don't make recommend recommendations on stocks. But I think you know,
Speaker 10: when I talk about this company from a fundamental standpoint
Speaker 10: and how investors might be looking at it, it's going
Speaker 10: to be a very long time for them to you know,
Speaker 10: sort of get this deal done the execution. As I said,
Speaker 10: you know, we're looking at mid single digit returns in
Speaker 10: the year ahead, so there's sort of a long path
Speaker 10: to go to the fifteen percent return on common equity
Speaker 10: that you know that they're kind of targeting in a
Speaker 10: long run, and a lot of work to do. So
Speaker 10: it depends on you know, sort of the investors' patients.
Speaker 10: Also somewhat of a show me story. I think that
Speaker 10: the big gains last year really reflect that they did
Speaker 10: this deal. It was a very financially attractive just given
Speaker 10: the structure of the deal, and especially what happened with
Speaker 10: the at ones and you know the fact that they
Speaker 10: were able to stabilize the wealth flows and stabilize that franchise.
Speaker 10: So I think a lot of the initial concerns were
Speaker 10: will they be able to you know, preserve some of
Speaker 10: that value or will their competitors pick it off? And
Speaker 10: I think they did show that they've stabilized it. So
Speaker 10: we have the foundation and now just need to start
Speaker 10: doing some of the heavy lifting.
Speaker 6: And Allison Paul's looking to put some money to work.
Speaker 6: He's got his eye on global banks and asset managers,
Speaker 6: which is exactly what you cover. What stocks do you
Speaker 6: like right now? And where does ubs fit into it?
Speaker 10: Okay, Well, as I said, I can't, we don't recommend stocks,
Speaker 10: so but I will talk about, you know, the fundamentals,
Speaker 10: and I would say that, you know, one of the
Speaker 10: big things that investors are looking for this year is
Speaker 10: a pickup and fees. We think that we will get
Speaker 10: good growth and fees, but you know, we're nowhere near
Speaker 10: the twenty twin levels, so that story could end up
Speaker 10: being a little bit disappointing. But trading, on the other
Speaker 10: hand holding up really well. The asset values are great
Speaker 10: for asset managers, right, especially from a mixed perspective. We
Speaker 10: have equities at record highs. That definitely helps the few
Speaker 10: prospects because more assets just mathematically turn into more fees
Speaker 10: and the potential for more flows. The flows are always tricky.
Speaker 10: They've also been good for the hedge funds. Hedge funds
Speaker 10: and asset managers doing well. That means Goldman's doing well
Speaker 10: in their prime brokerage business. They do have more of
Speaker 10: a bent to those types of customers. But we think
Speaker 10: trading looks good across the banks. Bank of America is
Speaker 10: also someone that we're watching, Gating share Bank of America
Speaker 10: and Wells Fargo, who's a smaller one, but you know,
Speaker 10: the share games are really more meaningful about for them
Speaker 10: because because they're smaller, So from a fundamental standpoint, those
Speaker 10: skew to trading. Like Goldman, Sachs looking like a strong corner.
Speaker 10: All right, Alison, thank you so much for joining us.
Speaker 2: Als Williams senior analy She covers all the big banks
Speaker 2: investment banks globally for Bloomberg Intelligence. She's based down in Princeton,
Speaker 2: joining us via zoom. I guess my one of my
Speaker 2: questions is again having worked for one of the firms
Speaker 2: that now makes up UBS, that being Pain Weber, I
Speaker 2: still don't know what UBS is kind of globally ambitions
Speaker 2: are do they do they intend to compete against the
Speaker 2: jpm Morgans and the Morgan Sailings of the world, or
Speaker 2: are they, you know, they're a little bit more focused
Speaker 2: maybe on just a handful of markets, a handful of
Speaker 2: business lines and not going to kind of compete across
Speaker 2: the board. I'm not really sure now that they've acquired
Speaker 2: credits with you know, kind of what's happening there. But
Speaker 2: I think typically the street rewards, at least for this
Speaker 2: investment banks kind of just focus, yeah, you know, like
Speaker 2: Morgan Stanley focusing on the wealth management business, which has been.
Speaker 3: So good for them.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and androyd
Speaker 1: Otto with the Bloomberg Business. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station just
Speaker 1: Say Alexa playing Bloomberg eleven thirty.
Speaker 2: One of the most read stories on the Bloomberg Terminal
Speaker 2: is regarding former President Donald Trump. He is richer than ever,
Speaker 2: yet still strapped for cash. To former President's fortune on
Speaker 2: paper has vaulted to seven point two billion dollars thanks
Speaker 2: to his newly public media company. In the ticker there's
Speaker 2: d j T for his initials, but legal strains threatened
Speaker 2: his finances to more than we welcome. Eric Larson, he
Speaker 2: covers all of this stuff for Bloomberg News. He joins
Speaker 2: us here in our Bloomberg Interactive Brokers studio. So, Eric,
Speaker 2: I'm looking at DJT stocks up another eleven percent. It's
Speaker 2: had a heck of a run year up to two
Speaker 2: hundred and seventy percent year to date, three hundred and
Speaker 2: seventy percent over the past year. A heck of a
Speaker 2: good run for the former president. So there's net worth,
Speaker 2: how about cash? Talk to us about those two dynamics.
Speaker 11: Right, So it was actually Bailey's story I was reading
Speaker 11: earlier about DJT is very fascinating.
Speaker 4: He's obviously more than you know, doubled his wealth.
Speaker 11: But Trump testified in a deposition last year in one
Speaker 11: of his civil lawsuits that he had more than four
Speaker 11: hundred million dollars in cash. Just last week he said
Speaker 11: on truth Social that he had almost five hundred million
Speaker 11: dollars in cash. We're not exactly sure. We can't really
Speaker 11: exactly verify that, but he had been saying in that
Speaker 11: court case that he was low on cash, he didn't
Speaker 11: have enough to post this big bond. So that's kind
Speaker 11: of our relationship with Trump's cash right now, is his
Speaker 11: comments in regards to that huge bonds that he that
Speaker 11: he has to pay for his appeal in that case.
Speaker 6: And so your story calls out seven point two billion
Speaker 6: dollars in wealth on paper? How much is that is
Speaker 6: in Trump media? How much of that is real estate
Speaker 6: and other ventures?
Speaker 11: Right, so it seems like the bulk of it is
Speaker 11: actually on paper. As you mentioned from the from the
Speaker 11: Trump media, his real estate has always usually been the
Speaker 11: bulk of his wealth, about like two point seven billion
Speaker 11: or so. I don't have the story right in front
Speaker 11: of me, but clearly that's what Bloomberg Billionaire's Index put
Speaker 11: his wealth at three point one billion before these these verdicts.
Speaker 11: So the vast majority of that was real estate, and
Speaker 11: of course there's licensing deals around the world and things
Speaker 11: like that. So now that with Trump media, you know
Speaker 11: his wealth is largely from this from the shares, which
Speaker 11: is fascinating to me, but of course his real estate
Speaker 11: continues to be you know, his crown jewels of his portfolio.
Speaker 4: Yeah.
Speaker 3: So I'm looking at dj T Trump Media.
Speaker 2: It's got a you know, eight billion dollars eight point
Speaker 2: seven billion dollar market cap, and I pull up FA
Speaker 2: the financial analysis section to see the financials for this company,
Speaker 2: and I don't really have any.
Speaker 6: H What's part of that is because it's a SPAC deal,
Speaker 6: so our our filings kind of are backloaded. That's why
Speaker 6: I will like caution with SPACs.
Speaker 3: So what do we know about the financials of this company?
Speaker 6: They revenue three point four million in the first nine
Speaker 6: months of last year and they lost I think air
Speaker 6: correct me if I'm wrong about thirty million dollars, right, right, right,
Speaker 6: So we're valuing.
Speaker 2: That company at eight point eight billion dollars, correct, right,
Speaker 2: and get my equity animals.
Speaker 6: I'm trying to do my evaluation here, Paul. It's a
Speaker 6: two thousand. Last night, it was a twenty two hundred
Speaker 6: price to sales multia to sales reference in videos.
Speaker 3: About thirty eight so understood.
Speaker 4: And what was Facebook?
Speaker 11: I believe I saw when it went public was something
Speaker 11: maybe like twelve times minutes revenue.
Speaker 2: So this is so are we characterizing in this company
Speaker 2: at this stage as a kind of a mean stock.
Speaker 11: I mean, we could call it a startup, but it
Speaker 11: certainly has been put in that category. I think when
Speaker 11: when one meme stock moves one way and a lot
Speaker 11: of them tend to I think that's sort of been
Speaker 11: true with this.
Speaker 2: Okay, So what do we know about the liquidity of
Speaker 2: the former president Trump? Again, he's been given a little
Speaker 2: bit of a reprieve here to come up with this
Speaker 2: one hundred and seventy five million dollar bond. But again
Speaker 2: there still is that judgment out there for the larger amount.
Speaker 2: But the I guess the expectation is he'll satisfy that
Speaker 2: bond either with cash or.
Speaker 11: He has said that he will satisfy that with cash.
Speaker 11: Keep in mind that earlier or just in January, he
Speaker 11: lost a big defamation trial with the writer Egene Carroll,
Speaker 11: who had accused him of sexually assaulting her in the
Speaker 11: nineties and then defaming her by denying it. And that
Speaker 11: was an eighty three point three million dollar verdict. He
Speaker 11: did post a bond in that case of over ninety
Speaker 11: one million dollars in order to put it on hold
Speaker 11: while he appealed, so that took up almost one hundred
Speaker 11: million right there. Then we're running one seventy five from
Speaker 11: this next upcoming bond. And he has said he still
Speaker 11: also wants to be able to spend some of his
Speaker 11: money on his campaign, so that I mean, even based
Speaker 11: on what he's saying he has, that's using up a
Speaker 11: lot of it.
Speaker 6: And Eric, when we look at the inability, from my understanding,
Speaker 6: to borrow against his Trump media stake, can he take
Speaker 6: out loans against some of his other real estate, Like
Speaker 6: how if he doesn't want to use the cash on hand,
Speaker 6: how can he kind of churn up some money.
Speaker 4: I mean, that certainly is an option.
Speaker 11: I think some wonder if he hasn't already done that
Speaker 11: though with some of his properties, we know that he's
Speaker 11: refinanced some of them, but he has claimed that he
Speaker 11: has very low debt on his properties, so it certainly
Speaker 11: one of them he should be able to borrow against
Speaker 11: if he really had to. But it's also possible that
Speaker 11: he could get the board of TMGT to change the
Speaker 11: rules on that lock up period potentially and which would
Speaker 11: allow him to sell some shares theoretically before that six
Speaker 11: month period.
Speaker 4: Although that might be a bad look with some of
Speaker 4: the other buyers.
Speaker 3: And interesting, i'man looking at the mg MT function, the management.
Speaker 2: Function for the Trump Media and Technology Group again the tickers.
Speaker 6: D j T.
Speaker 2: I don't see former President Trump on the board or
Speaker 2: listed as an executive, but I do see his son
Speaker 2: is on the board, Donald Trump Junior.
Speaker 3: So but do we know of anything of his.
Speaker 2: Interaction or interaction with this company or is he simply
Speaker 2: the shareholder.
Speaker 4: Well, he's certainly the face of it.
Speaker 11: I don't know exactly how much in the day to
Speaker 11: day he's involved in it, other than of course being
Speaker 11: the star user of its main or only products, truth Social.
Speaker 11: So you know, as you point out it pointed out
Speaker 11: in your story, Bailey, at a lot of these purchases,
Speaker 11: you know, this stock is largely seen as a bet
Speaker 11: on his political futures as well. So in a way,
Speaker 11: these meme stocks are betting against you know, they're betting
Speaker 11: against Wall Street, or in this case, betting against people
Speaker 11: who are Trump detractors who don't think he can win.
Speaker 2: Okay, Well, certainly having a good run here, that's that's
Speaker 2: for sure.
Speaker 3: There's certainly some buyers out there.
Speaker 2: We're seeing good volume again, to stock up over double
Speaker 2: digits here about twelve percent on some pretty decent volume.
Speaker 2: Eric Larsan, thanks so much for joining us. Eric is
Speaker 2: a Bloomberg legal reporter. On this story that it's a
Speaker 2: great headline. Trump is richer than ever yet still strapped
Speaker 2: for cash. We'll see how that plays out going forward.
Speaker 2: And the question I have alias just as a you know,
Speaker 2: someone who used to follow the social media companies like Facebook,
Speaker 2: like Snapchat, want, you know, I have to take a
Speaker 2: look and see kind of where the users are, where
Speaker 2: the revenue is, and see, you know, kind of what
Speaker 2: the opportunities are for this company.
Speaker 6: And that's been the big thing when I talk to
Speaker 6: investors who are not in the stock but are you know,
Speaker 6: on the street, and their big question is how can
Speaker 6: you actually monetize the business? If he wins the presidency,
Speaker 6: does that then draw people to true social and advertisers.
Speaker 3: In turn, or do they go out and acquire companies.
Speaker 6: That's the big kind of question is how do you
Speaker 6: fundamentally value what really is an app that has been
Speaker 6: around for a little over a year at this point.
Speaker 2: Right and you know, just seeing the business model for
Speaker 2: these social media companies, it's very simple It's no different
Speaker 2: than the magazine business back in the day. The newspaper
Speaker 2: business back in the day is you have mass an audience.
Speaker 2: The bigger the audience and the more engage the audience,
Speaker 2: the more.
Speaker 3: Valuable that is to advertisers.
Speaker 2: You mess on audience and you sell advertising against that audience,
Speaker 2: as simple as that. Maybe a little bit of an
Speaker 2: e commerce in there if you're fortunate, but really it's
Speaker 2: an advertising game.
Speaker 3: So the question for the folks.
Speaker 2: At Trump Media Technology goog will be whether they can
Speaker 2: what kind of audience they can amss over timing.
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