WEBVTT - Bloomberg Businessweek Weekend - January 30th, 2026 0:00:00.880 --> 0:00:05.240 This is Bloomberg Business Week Daily, reporting from the magazine 0:00:05.240 --> 0:00:09.840 that helps global leaders stay ahead with insight on the people, companies, 0:00:09.880 --> 0:00:14.760 and trends shaping today's complex economy, plus global business, finance 0:00:14.800 --> 0:00:18.360 and tech news as it happens. Bloomberg Business Week Daily 0:00:18.680 --> 0:00:22.680 with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:22.800 --> 0:00:25.799 Hi, everyone, welcome to the weekend edition of Bloomberg Business Week. 0:00:26.079 --> 0:00:29.600 This past week, well, we saw the first FOMC meeting 0:00:29.680 --> 0:00:33.479 and decision of the year, and after three consecutive meetings 0:00:33.520 --> 0:00:38.080 where FED policymakers lowered interest rates, well those officials left 0:00:38.159 --> 0:00:41.960 rates unchanged as expected, with nods to stabilization in the 0:00:42.040 --> 0:00:45.520 jobless rate and pointing to improvements in the US economy. 0:00:45.960 --> 0:00:49.239 Better Reserve chair Jerome Powell saying downside risks to the 0:00:49.280 --> 0:00:53.800 economy have diminished and side stepping January's controversies. 0:00:53.400 --> 0:00:57.040 We're getting through the distortions in the data from the shutdown. 0:00:57.800 --> 0:01:00.640 However big they were in November, their small in December, 0:01:00.680 --> 0:01:03.279 so we're getting to a place where they're no longer material. 0:01:03.600 --> 0:01:05.959 We got a certain view of the economy from the 0:01:06.120 --> 0:01:09.720 chair of the Federal Reserve, and certainly from that press conference. Also, 0:01:10.040 --> 0:01:13.839 we checked in with fastenal CEO Dan Florines to better 0:01:13.920 --> 0:01:16.880 understand a different part of the economy or maybe a 0:01:16.880 --> 0:01:21.120 more concentrated sector, the manufacturing sector, and also more broadly 0:01:21.319 --> 0:01:23.360 today's environment like AI. 0:01:23.400 --> 0:01:25.680 Here's a great story. Cool It was one of our 0:01:25.680 --> 0:01:27.240 favorite moments in that conversation. 0:01:27.280 --> 0:01:29.400 There were a lot, actually, and that's really where we 0:01:29.440 --> 0:01:32.480 start today. A big week for big tech. We got 0:01:32.480 --> 0:01:36.400 earnings from four of the mag seven meta platforms, stopping 0:01:36.440 --> 0:01:39.800 projections for quarterly revenue, also giving a strong forecast for 0:01:39.840 --> 0:01:43.480 the current period, boosted by a robust online advertising business 0:01:43.760 --> 0:01:45.959 that's making it possible for the company to invest in 0:01:46.000 --> 0:01:47.920 AI at record levels this year. 0:01:48.080 --> 0:01:51.120 And Tesla revealed plans to invest about two billion dollars 0:01:51.120 --> 0:01:56.680 into Xai, giving Elon Musk's artificial intelligence startup a cash infusion, 0:01:56.720 --> 0:01:59.320 despite a shareholder vote last year that failed to win 0:01:59.520 --> 0:02:00.000 a proof. 0:02:00.480 --> 0:02:04.240 And then there's Microsoft. Investors were disappointed after the company's 0:02:04.240 --> 0:02:07.800 spending search to a record high and cloud sales growth slowed. 0:02:08.200 --> 0:02:10.840 That worried investors that it could take longer than expected 0:02:10.919 --> 0:02:13.000 for the company's AI investments to pay off. 0:02:13.080 --> 0:02:15.240 We cut up on how all these companies are faring 0:02:15.280 --> 0:02:17.080 when it comes to the AI play. We did that 0:02:17.120 --> 0:02:20.480 with Angelo Zeno, he's senior VP and equity analyst over 0:02:20.520 --> 0:02:22.000 at CFI Research. 0:02:22.360 --> 0:02:24.880 At this point in time, after these numbers, I would 0:02:24.880 --> 0:02:28.160 actually be I'd be more inclined to tell investors to 0:02:28.200 --> 0:02:31.400 buy Microsoft on this dip, on this twelve percent or 0:02:31.480 --> 0:02:33.480 so pulled back. I mean, the stockings is now trading 0:02:33.720 --> 0:02:36.600 at about twenty twenty one times our calendar twenty seven 0:02:36.880 --> 0:02:41.840 estimate and actually is slightly or hair cheaper than our 0:02:41.840 --> 0:02:44.360 outlook for Meta. And when you kind of look at 0:02:44.440 --> 0:02:46.840 the at the two companies, I mean, yeah, I mean 0:02:46.840 --> 0:02:49.560 you can make a case that Meta is growing much faster, 0:02:49.760 --> 0:02:53.120 and in some respects it's actually attributed to the decline 0:02:53.200 --> 0:02:55.840 I think in Microsoft, when you got to thirty percent 0:02:55.919 --> 0:02:58.400 growth and on the same day, you know, you've got 0:02:58.440 --> 0:03:00.600 to compete against that, I mean just not going to 0:03:00.680 --> 0:03:03.200 look as good. But that being said, I mean, I 0:03:03.200 --> 0:03:05.400 think the valuation is very compelling here. I think the 0:03:05.440 --> 0:03:08.919 business model remains, you know, just as strong as it's 0:03:08.960 --> 0:03:12.239 ever been. But you know, you clearly have some concerns 0:03:12.240 --> 0:03:16.240 that have origen you know, post results, primarily due to 0:03:16.320 --> 0:03:18.840 some of the concentration risks to open AI and the 0:03:18.880 --> 0:03:21.760 other thing maybe a hairshy in terms of the the 0:03:21.800 --> 0:03:22.760 Azure growth number. 0:03:22.880 --> 0:03:25.640 Why isn't that concerning to you Angelo, To. 0:03:25.520 --> 0:03:27.840 Be honest with you, the Azure number I thought was 0:03:28.000 --> 0:03:31.079 pretty darn good. It actually beat our expectation, didn't beat 0:03:31.080 --> 0:03:33.959 the streets. But that being said, I mean the Azure 0:03:34.040 --> 0:03:37.480 numbers continue to grow at a very good pace, and 0:03:37.560 --> 0:03:40.400 I think, you know, if there was a slightness to 0:03:40.440 --> 0:03:42.560 the expectation, it is due to the fact that they 0:03:42.600 --> 0:03:46.640 are partly supply constrained, just like others across the industry are. 0:03:47.120 --> 0:03:48.720 And I think you know, in the same respect, this 0:03:48.800 --> 0:03:53.040 is the company that also is looking to emphasize some 0:03:53.120 --> 0:03:55.880 of their productivity tools out there. They're still you know, 0:03:55.880 --> 0:03:59.240 putting a lot of their CAPEX spent on those type 0:03:59.280 --> 0:04:02.880 of offerings because in their belief, you know, there's higher 0:04:02.880 --> 0:04:06.160 revenue per token tied to that, and that is probably 0:04:06.200 --> 0:04:08.200 a longer term story, okay, and it is going to 0:04:08.240 --> 0:04:10.800 impact the fact that, hey, listen, they could have probably 0:04:10.880 --> 0:04:13.800 grown north of forty percent if they had moved you know, 0:04:13.880 --> 0:04:17.239 the you know that GPU demand to that side of things, 0:04:17.279 --> 0:04:17.920 the editor side. 0:04:18.120 --> 0:04:19.960 So let's hit on the the other thing that you 0:04:20.040 --> 0:04:23.200 mentioned the concentration risk and video Microsoft and Amazon and 0:04:23.200 --> 0:04:26.120 discussions to us as much as sixty billion dollars in 0:04:26.240 --> 0:04:28.159 open Ai as part of a new funding round. This 0:04:28.200 --> 0:04:32.000 according to the information, if concentration risk is a concern, 0:04:32.640 --> 0:04:35.720 then why is Microsoft putting more money into open Ai. 0:04:36.400 --> 0:04:38.480 It's a great question, and I think it's just because 0:04:38.600 --> 0:04:40.440 those are some of the companies you mentioned are the 0:04:40.480 --> 0:04:43.120 ones that probably have most at stake in terms of, 0:04:43.400 --> 0:04:46.880 you know, open Ai succeeding here long term, right, And 0:04:46.960 --> 0:04:49.680 if you look at open ai today, clearly they need 0:04:49.680 --> 0:04:52.080 the money. They're not going to be able to get 0:04:52.120 --> 0:04:54.960 to where they need to be without receiving that funding. 0:04:55.040 --> 0:04:56.520 And at the very least they need to get this 0:04:56.640 --> 0:05:00.760 hundred billion dollar funding, get themselves higher revenue, and potentially 0:05:00.800 --> 0:05:03.160 look at, you know, an IPO in the future to 0:05:03.800 --> 0:05:06.080 get additional funds. But at this point in time, I 0:05:06.120 --> 0:05:09.040 think it's you know, one of those situations where they 0:05:09.080 --> 0:05:11.839 are heavily committed to open ai and they need open 0:05:11.880 --> 0:05:12.560 Ai to succeed. 0:05:12.800 --> 0:05:16.159 Going back to that number the startup accounted open Ai 0:05:16.320 --> 0:05:19.719 that is forty five percent of Microsoft's backlog, which stood 0:05:19.720 --> 0:05:21.760 at six hundred and twenty five billion at the end 0:05:21.760 --> 0:05:24.919 of December, so it is such an important part of 0:05:25.040 --> 0:05:26.720 AI for Microsoft. 0:05:27.120 --> 0:05:30.880 It's extremely important. I'd also say this though, you know, 0:05:30.920 --> 0:05:34.560 the company does have north of three hundred billion dollars 0:05:34.600 --> 0:05:36.760 in bookings not tied to open AI, so you kind 0:05:36.800 --> 0:05:38.800 of look at at the next two to three years, 0:05:39.520 --> 0:05:41.880 you know that they do have that visibility in terms 0:05:41.880 --> 0:05:45.040 of being able to meet higher than you know, that 0:05:45.040 --> 0:05:48.080 that capacity editions that they plan to make here over 0:05:48.080 --> 0:05:50.120 the next couple of years. Not to mention, we do 0:05:50.200 --> 0:05:52.919 think that concentration risk does come down in the future 0:05:53.440 --> 0:05:56.640 as they continue to broaden their customer base as well. 0:05:56.720 --> 0:05:59.039 So yeah, I mean it's it's a concern. 0:05:59.200 --> 0:06:01.960 It is a risk to be mindful of. 0:06:02.040 --> 0:06:06.440 But nonetheless, I think if there's anyone that can continue 0:06:06.480 --> 0:06:08.600 to navigate and prosper in this environment, it's going to 0:06:08.640 --> 0:06:12.080 be Microsoft. Not to mention, this is nowhere near you know, 0:06:12.120 --> 0:06:14.560 an oracle type of situation. At the same time, right, 0:06:14.560 --> 0:06:17.560 they've got the free cash flow potential to do what 0:06:17.600 --> 0:06:19.560 they need to do in any type of landscape. 0:06:19.680 --> 0:06:21.440 I know you don't cover teslas, so don't get mad 0:06:21.440 --> 0:06:24.360 at me, but I do want to ask you that 0:06:24.520 --> 0:06:26.359 you know more and more we have people come on 0:06:26.440 --> 0:06:29.200 and say, it's not a car company, it's a technology company. 0:06:29.400 --> 0:06:31.720 And among the headlines that were highlighted on their earnings 0:06:31.800 --> 0:06:36.640 update is the investment Tesla's investment in Elon's x AI. 0:06:37.440 --> 0:06:39.520 Is this, though, a company that you were starting to 0:06:39.600 --> 0:06:42.000 think about, you know, coming on your radar when it 0:06:42.000 --> 0:06:44.880 comes to tech and the AI spend and the build 0:06:44.920 --> 0:06:46.160 out and the AI impact. 0:06:46.400 --> 0:06:46.960 Absolutely. 0:06:47.640 --> 0:06:49.440 I think it's you know when you kind of look 0:06:49.440 --> 0:06:52.320 at the enterprise space, I mean, Musk is probably the 0:06:52.680 --> 0:06:55.320 biggest spender of AI in terms of GPU servers, so 0:06:56.160 --> 0:06:59.359 you know, he is an extremely Tesla. The company x AI, 0:06:59.680 --> 0:07:03.040 you know, the company that entire ecosystem that must owns 0:07:03.520 --> 0:07:08.040 extremely important to the evolution of AI and what's going 0:07:08.120 --> 0:07:10.040 to transpire here over the next couple of years. I mean, 0:07:10.080 --> 0:07:11.720 you listen to Jensen one and you kind of look 0:07:11.720 --> 0:07:14.840 at where you know that next massive inflection is going 0:07:14.880 --> 0:07:17.000 to come from in the physical AI world, and he 0:07:17.040 --> 0:07:20.640 continues to talk about, you know, autonomous vehicles, and clearly 0:07:20.680 --> 0:07:23.360 if there's anyone that's going to leave that pat it 0:07:23.400 --> 0:07:26.320 is going to be Elon Musk. So it's it's on 0:07:26.360 --> 0:07:28.560 our radar. And it's something that I think is really 0:07:28.600 --> 0:07:31.320 critical to this broader AI story. 0:07:31.760 --> 0:07:34.760 Our thanks to Angelo Zino, Senior VP and equity analyst 0:07:34.840 --> 0:07:39.600 at CFRA Research. And Apple also posted earnings Thursday, trounsing 0:07:39.720 --> 0:07:42.800 estimates for the first quarter one of the key parts 0:07:42.840 --> 0:07:45.960 of the tech giants beat. iPhone sales for the quarter 0:07:46.200 --> 0:07:48.840 hit more than eighty five billion dollars. 0:07:48.880 --> 0:07:52.360 On Apple Bloomberg's managing editor for Global Consumer Tech, we're 0:07:52.400 --> 0:07:56.080 talking about Mark German, you know, breaks so many exclusives 0:07:56.120 --> 0:07:58.120 when it comes to Apple. He is our go to 0:07:58.280 --> 0:08:02.040 on this company. He helped makes of the latest quarterly update. 0:08:02.240 --> 0:08:05.560 This is a massive, massive, massive quarter. This is a 0:08:05.720 --> 0:08:10.440 home run. Their greatest quarter ever by orders of magnitude. 0:08:10.520 --> 0:08:14.760 It's a gigantic beat on overall revenue. China is back. 0:08:15.640 --> 0:08:19.960 You have a big beat on the iPhone in particular. 0:08:20.000 --> 0:08:23.960 Eighty five billion dollar quarter is just insane. The installed 0:08:23.960 --> 0:08:26.640 base two and a half billion, The numbers are just 0:08:26.720 --> 0:08:29.800 beyond excellent. We could ignore the fact that they missed 0:08:29.800 --> 0:08:32.120 on wearables, home and accessories. We can ignore the fact 0:08:32.120 --> 0:08:34.400 they missed on Mac. We could ignore the fact that 0:08:34.440 --> 0:08:39.240 they barely you know, crossed expectations on services. I guess 0:08:39.240 --> 0:08:41.360 none of that matters when the iPhone is selling so well. 0:08:42.160 --> 0:08:46.120 But still there's the big existential question of what's next. 0:08:47.000 --> 0:08:50.439 It's an important question because of AI and Apple absolutely 0:08:50.480 --> 0:08:52.559 needs to figure out what's AI strategy. There needs to 0:08:52.600 --> 0:08:55.880 be an AI reckoning of some sort there, But they 0:08:56.040 --> 0:09:01.360 just bought themselves a very long time. This just insanely 0:09:01.400 --> 0:09:01.920 great quarter. 0:09:02.080 --> 0:09:04.439 So let's talk about a couple of the areas that 0:09:04.880 --> 0:09:07.920 you highlighted there. One is China and another one is 0:09:07.960 --> 0:09:12.400 the sort of the concerns that people had about memory 0:09:12.480 --> 0:09:16.040 chips in this quarter and the rising prices of memory chips. 0:09:16.040 --> 0:09:18.959 How was Apple able to navigate this so it didn't 0:09:19.000 --> 0:09:20.800 hit its margins like people thought it would. 0:09:22.440 --> 0:09:27.360 They buy components and memory components quarters and months in advance, 0:09:27.520 --> 0:09:30.839 sometimes years in advance. They have these deals struck, so 0:09:30.880 --> 0:09:35.160 they're working off of numbers and pricing and materials here 0:09:36.160 --> 0:09:40.920 that really give them extensive pricing power over competitors. But 0:09:41.320 --> 0:09:42.320 it seems like they're fine. 0:09:42.760 --> 0:09:44.640 Mark, I love this. I mean, I'm looking at our 0:09:44.720 --> 0:09:46.800 live blog, so you must have like kicked this out 0:09:46.840 --> 0:09:48.720 before you jumped on air with us. But you did 0:09:48.800 --> 0:09:52.880 mention that the significant things on the call You've already 0:09:52.880 --> 0:09:55.760 talked about the AI strategy succession, You've kind of said 0:09:55.800 --> 0:09:57.400 maybe that's off the table for now because this was 0:09:57.440 --> 0:09:59.760 such a blowout quarter. You talk about the long term 0:09:59.840 --> 0:10:02.040 vi ability of the business if it doesn't get its 0:10:02.040 --> 0:10:05.600 AI act together, it's hard to even think about that 0:10:05.880 --> 0:10:08.840 when you see the numbers here and just what a 0:10:08.840 --> 0:10:11.560 big company this is and how significant is I feel 0:10:11.600 --> 0:10:13.599 like in so many different people's lives, Like I have 0:10:13.640 --> 0:10:16.000 an Apple household. I think Tim has an Apple household. 0:10:17.160 --> 0:10:19.720 Is that is that really the long term viability if 0:10:19.720 --> 0:10:20.320 they don't get. 0:10:20.160 --> 0:10:21.640 AI together, call me Tim Apple. 0:10:21.679 --> 0:10:22.720 In fact they do. 0:10:23.200 --> 0:10:26.760 That's yes, I said long term, right, and they're talking 0:10:27.280 --> 0:10:32.560 really long okay, the little, the little, the really long 0:10:32.640 --> 0:10:35.040 term here, right, Like, at some point there is going 0:10:35.120 --> 0:10:38.400 to be a need to fulfill these AI desires and 0:10:38.600 --> 0:10:40.559 you know they're going to have to figure that out well. 0:10:40.600 --> 0:10:42.760 On o agranov our BI team, he talked with Tim 0:10:42.760 --> 0:10:44.840 and I just moments ago, and he talked about, you know, 0:10:44.840 --> 0:10:47.360 how they're working with Google when it comes to AI, 0:10:47.760 --> 0:10:50.680 relying on them right now for their models, and so 0:10:50.720 --> 0:10:52.760 they're not doing the big AI spend That makes sense 0:10:52.760 --> 0:10:54.960 for now too, So do you agree that that's kind 0:10:54.960 --> 0:10:57.480 of a smart strategy now and kind of waiting it 0:10:57.520 --> 0:10:59.400 out a little bit, but at some point they've got 0:10:59.440 --> 0:11:00.360 to kind of do their own thing. 0:11:00.679 --> 0:11:04.199 It's not that they're waiting it out, it's that they 0:11:04.240 --> 0:11:06.839 have no choice. They have nothing internal, So it's not 0:11:06.880 --> 0:11:08.760 that they're waiting it out, it's that they need to 0:11:08.800 --> 0:11:11.280 do it, and so they're partnering with the best partner 0:11:11.320 --> 0:11:13.520 they can. It's going to offer them the best pricing power, 0:11:13.840 --> 0:11:16.280 which for now is Google. They initially wanted to work 0:11:16.320 --> 0:11:19.160 with Anthropic, but from a pricing standpoint, it didn't work out. 0:11:19.600 --> 0:11:21.880 They couldn't work with open Ai because they're, you know, 0:11:22.200 --> 0:11:25.720 hardcore competitors at this point. So Google was all who 0:11:25.800 --> 0:11:28.319 was left. And obviously the judge didn't break up the 0:11:28.360 --> 0:11:31.280 search deal there, so it made sense and it'll aligned 0:11:31.280 --> 0:11:32.280 pretty nicely for them. 0:11:32.400 --> 0:11:35.040 Okay, do we know yet how Apple was able to 0:11:35.080 --> 0:11:38.559 beat expectations in China once again for the first quarter 0:11:38.559 --> 0:11:40.640 the most recent quarter, Greater China revenue came in at 0:11:40.640 --> 0:11:43.080 twenty five point five to three billion dollars. Twenty one 0:11:43.080 --> 0:11:45.840 point eighty two was the estimate you said it minutes ago. 0:11:46.480 --> 0:11:48.480 It is back in China. You're holding up an iPhone 0:11:48.520 --> 0:11:49.520 right now. That's what they did. 0:11:50.240 --> 0:11:52.800 I'm answering your question. I'm answering your question. 0:11:52.960 --> 0:11:55.240 It was the iPhone seven color orange. Oh, it's the 0:11:55.280 --> 0:11:56.680 color orange. It's that easy. 0:11:56.920 --> 0:12:01.920 Is the pro maax? No, it's design people buy. The 0:12:02.000 --> 0:12:04.800 new designs. Is the first new design in half a decade. 0:12:05.120 --> 0:12:07.800 It got it done. That's why you do new designs, 0:12:07.840 --> 0:12:10.520 because you're trying to bring in new customers. Why does 0:12:10.559 --> 0:12:12.200 for upgrades and but that's the way to do it. 0:12:12.320 --> 0:12:14.840 Our thanks to Mark German, Bloomberg News Managing editor for 0:12:14.920 --> 0:12:17.640 Global Consumer Tech. For more on the earnings call and 0:12:17.679 --> 0:12:20.880 all things Apple, head to Bloomberg dot Com or the 0:12:20.920 --> 0:12:21.840 Bloomberg Terminal. 0:12:22.240 --> 0:12:25.800 Coming up on Bloomberg BusinessWeek, we'll have more on earnings, 0:12:25.960 --> 0:12:29.040 including the thoughts from one analyst weighing in not just 0:12:29.120 --> 0:12:31.520 on airlines, but all the results that we got from 0:12:31.520 --> 0:12:32.600 defense companies too. 0:12:32.840 --> 0:12:34.680 It's a sector that's been on a tear in the 0:12:34.720 --> 0:12:35.360 past year. 0:12:35.840 --> 0:12:36.439 That's next. 0:12:36.679 --> 0:12:37.440 This is Bloomberg. 0:12:41.800 --> 0:12:45.960 This is Bloomberg Business Week Daily with Carol Masser and 0:12:46.040 --> 0:12:48.600 Tim Steneveek on Bloomberg Radio. 0:12:49.640 --> 0:12:52.600 Across the United States, airlines spent most of the week 0:12:52.679 --> 0:12:55.520 trying to get passengers back on track after cutting more 0:12:55.559 --> 0:12:58.760 than nineteen thousand flights due to that major winter storm 0:12:59.040 --> 0:13:01.600 it pelted the East Coast and coded parts of the 0:13:01.679 --> 0:13:04.480 South and mid Atlantic regions with ice. We're still digging 0:13:04.480 --> 0:13:05.720 out of this thing here in New York. 0:13:05.800 --> 0:13:07.560 Yeah, and this is going on for a while. Yeah, 0:13:07.720 --> 0:13:09.400 we are in this week, and there were lots of 0:13:09.760 --> 0:13:12.680 we'll see how this other storm we'll see, we'll see, 0:13:12.720 --> 0:13:16.040 we'll see. Northeastern airports, though, I should say by that 0:13:16.160 --> 0:13:19.080 storm one week ago, we're hit especially hard. And in 0:13:19.120 --> 0:13:22.560 their earnings report, American Airlines warning the weather could clip 0:13:22.640 --> 0:13:24.880 revenue in the range of one hundred and fifty million 0:13:25.040 --> 0:13:26.679 to two hundred million dollars. 0:13:27.120 --> 0:13:30.400 We spoke to Shila Kayalu, Managing director in equity research 0:13:30.440 --> 0:13:33.800 over at Jeffreys about what she's seeing not just in airlines, 0:13:33.960 --> 0:13:37.120 more broadly in the red hot aerospace and defense industries too. 0:13:37.440 --> 0:13:38.880 Let's just start with airlines, and then we want to 0:13:38.920 --> 0:13:41.600 move into defense because you cover that really closely as well. 0:13:42.280 --> 0:13:44.120 It does feel like they're all finding their way back 0:13:44.160 --> 0:13:46.640 after the storm in terms of the impact. Is it 0:13:46.720 --> 0:13:48.760 still a case of they're still trying to assess how 0:13:48.800 --> 0:13:51.120 do you, as someone who covers some of these names, 0:13:51.200 --> 0:13:52.199 kind of factor that in. 0:13:52.640 --> 0:13:55.840 Yeah, in terms of airlines, we're looking for revenue growth. 0:13:56.440 --> 0:13:58.560 We've seen the same trend across American that we saw 0:13:58.559 --> 0:14:01.800 at United and Delta. Corporate was up twelve percent. Corporate 0:14:01.800 --> 0:14:05.200 momentum continues. I'm taking a very long flight this weekend 0:14:06.320 --> 0:14:09.040 and then main cabin weakness, but it's getting a little 0:14:09.040 --> 0:14:11.319 bit better. And it's all about cost control. That's why 0:14:11.320 --> 0:14:13.440 I think United went up the most on earnings is 0:14:13.480 --> 0:14:17.720 they really beat out on costs when American Airlines margins 0:14:17.720 --> 0:14:20.240 came in one hundred BIPs belower estimate. So I think 0:14:20.280 --> 0:14:23.160 the most polarizing stock is going to be Southwest because 0:14:23.160 --> 0:14:25.840 they have some lofty targets. The stack's at forty dollars today. 0:14:25.880 --> 0:14:28.640 Some people think it's going to thirty. People think it's 0:14:28.640 --> 0:14:31.080 going to eighty. It's all about they're adding extra lug 0:14:31.160 --> 0:14:33.760 room seats and is the strategy going to work. 0:14:33.880 --> 0:14:36.840 But that's a huge shift for Southwest. I mean they're 0:14:36.920 --> 0:14:39.840 essentially moving away from their DNA what they're known for 0:14:40.280 --> 0:14:43.520 and the culture that they're known for, and that's alienated 0:14:43.520 --> 0:14:44.320 some people already. 0:14:44.920 --> 0:14:48.520 Yeah, it depends. So the average Southwest fair is about 0:14:48.520 --> 0:14:51.320 one hundred and nine dollars. So if you add an 0:14:51.360 --> 0:14:56.200 option for extra lug room or refundable or seating, if 0:14:56.200 --> 0:14:58.600 you add fifty dollars to that cost of that airfare, 0:14:58.640 --> 0:15:01.600 so one hundred and fifty nine, that's a fifty percent increase. 0:15:01.600 --> 0:15:04.120 Almost does the passenger back away? I'm not sure, but 0:15:04.160 --> 0:15:05.880 then again it's only one hundred and fifty nine dollars, 0:15:05.920 --> 0:15:08.880 So how do we think about that and what adoption 0:15:09.000 --> 0:15:11.840 do we assume We're at about five percent adoption in 0:15:11.880 --> 0:15:14.640 twenty six. They have a bunch of other benefits as well, 0:15:14.960 --> 0:15:19.280 baggage fees and cost optimization, so that's driving their EPs 0:15:19.320 --> 0:15:22.520 to three dollars essentially, ebit tripling off of a very 0:15:22.560 --> 0:15:25.720 low twenty five base. So it's their first go at 0:15:25.760 --> 0:15:27.520 it and we'll see how it takes off. 0:15:27.600 --> 0:15:29.520 You have a forty five dollars price target, so you're 0:15:29.560 --> 0:15:31.440 not at the eighty and you're not at the thirty. 0:15:31.560 --> 0:15:33.720 So maybe a little bit higher from where we are. 0:15:33.840 --> 0:15:37.440 You know, I would prefer United where they've If you 0:15:37.520 --> 0:15:40.240 think about United, they're going to be accounting for forty 0:15:40.280 --> 0:15:43.560 four percent of the why of the new premium seats 0:15:44.440 --> 0:15:47.000 through twenty twenty eight, so they're going to be accounting 0:15:47.040 --> 0:15:50.000 for more than any other airline in the US Americans 0:15:50.000 --> 0:15:52.280 after that in Southwest because of their extra love room. 0:15:53.360 --> 0:15:56.600 I prefer to bet on that corporate customer paying one 0:15:56.680 --> 0:16:00.440 thousand plus one hundred dollars to achieve that additional corporate 0:16:00.440 --> 0:16:03.720 fair and that higher margin. Where United is adding its 0:16:03.720 --> 0:16:06.840 seats than Southwest adding on the you know, I think 0:16:06.960 --> 0:16:10.360 both are given the multiples that they're currently trading at. 0:16:10.720 --> 0:16:12.040 United is more appealing to me. 0:16:12.640 --> 0:16:15.560 Let's talk some defense and then we'll talk some Boeing too. 0:16:15.800 --> 0:16:17.760 I want to look at shares of RTX. They're higher 0:16:17.960 --> 0:16:22.000 right now by about three point four percent profit topped 0:16:22.000 --> 0:16:25.920 Wall Street estimates assign the momentum that the company awaits 0:16:25.920 --> 0:16:28.720 a potentially huge jump in US military spending. That's kind 0:16:28.720 --> 0:16:30.600 of where I want to start. What we've heard from 0:16:30.640 --> 0:16:32.520 President Trump in the last few weeks, not just with 0:16:32.600 --> 0:16:35.920 the idea of a one point five trillion dollar defense package, 0:16:36.000 --> 0:16:39.040 but also calling on some of these companies to do 0:16:39.080 --> 0:16:43.000 a better job, pay their executives less, and also build 0:16:43.040 --> 0:16:45.560 stuff for the US government more quickly. What are these 0:16:45.560 --> 0:16:46.880 CEOs to do there's a. 0:16:46.840 --> 0:16:48.360 Lot going on in defense, and that's why I was 0:16:48.360 --> 0:16:51.760 saying it's an exciting sector to cover because this is 0:16:51.800 --> 0:16:54.200 the first time that the five primes might no longer 0:16:54.240 --> 0:16:56.720 exist as five primes by the end of the Trump administration, 0:16:57.160 --> 0:16:59.800 which is our view. We think that there's going to 0:16:59.800 --> 0:17:02.920 be similar to what LHX announced ten days ago, there's 0:17:02.960 --> 0:17:06.600 going to be more deconsolidation happening among the primes. Their 0:17:06.640 --> 0:17:09.639 budget is going up by five hundred billion from a 0:17:09.680 --> 0:17:12.600 trillion dollars. We don't know the time period of that spending. 0:17:12.640 --> 0:17:14.439 We don't know how much will be added to actual 0:17:14.440 --> 0:17:18.080 equipment and R and D versus military operations, but they're 0:17:18.119 --> 0:17:20.639 seeing an increase, whether it's to fund defense technaumes like 0:17:20.680 --> 0:17:23.960 firefly voyage or the recent IPOs we've seen in the space, 0:17:24.160 --> 0:17:27.600 or the traditional primes or suppliers like aero environment crados 0:17:27.720 --> 0:17:29.879 are up one hundred percent on the year already and 0:17:29.920 --> 0:17:33.399 we're twenty seven days in. So it's really interesting to 0:17:33.400 --> 0:17:35.480 see what happens in defense. But there's a lot of 0:17:35.480 --> 0:17:37.760 shakeups that are I think are going to play out. 0:17:37.880 --> 0:17:41.000 So it's about seeing who has the best position positioned 0:17:41.080 --> 0:17:43.679 portfolio and who to play from here. 0:17:43.920 --> 0:17:45.680 I was surprised, like I know, when you walked in 0:17:45.720 --> 0:17:48.439 we started talking, and I mean aerospace defense. Just the 0:17:48.560 --> 0:17:50.960 S and P broad Index up about nine percent year 0:17:51.000 --> 0:17:53.520 to date, up about forty six percent last year. Is 0:17:53.520 --> 0:17:57.040 it just because defense spending all around the globe is 0:17:57.080 --> 0:17:59.280 just happening and everybody's zamping it up. 0:18:00.320 --> 0:18:03.840 Yeah, just as simple as tremendous growth internationally twenty percent 0:18:03.880 --> 0:18:08.040 plus NATO budgets, Japan, Korea. We're seeing countries like Serbia 0:18:08.040 --> 0:18:10.359 put in orders that never used to, put in billion 0:18:10.400 --> 0:18:13.199 dollar orders for equipment to companies like Elbet in Israel. 0:18:13.920 --> 0:18:16.119 Coupled with the defense budget going from a trillion to 0:18:16.160 --> 0:18:19.080 one point five trillion, makes defense very interesting and the 0:18:19.119 --> 0:18:24.160 administration has been very supportive of defense tech emergent technology companies, 0:18:24.240 --> 0:18:27.479 companies that had stagnant revenues for the last decade are 0:18:27.480 --> 0:18:29.159 seeing thirty forty percent growth. 0:18:29.200 --> 0:18:30.720 But you know, as to mention, you know, when the 0:18:30.720 --> 0:18:33.399 president talks about an industry, it can be good or bad. 0:18:33.760 --> 0:18:36.119 So is it good that they're on his radar? 0:18:36.240 --> 0:18:39.480 But when he's five. 0:18:39.280 --> 0:18:42.320 Million dollars talking about he did back off of that. 0:18:42.480 --> 0:18:45.600 He didn't quantify in the executive order the pay and I. 0:18:45.720 --> 0:18:48.240 But he mentioned it, he mentioned it really, Yes, that's 0:18:48.240 --> 0:18:50.959 I love. That caught our attention. And five million dollars 0:18:51.040 --> 0:18:52.840 It sounds like a lot of money, but not for 0:18:52.880 --> 0:18:54.800 a CEO who's paid over twenty million dollars. 0:18:54.840 --> 0:18:57.560 Right the executive executive pay. The average executive pay, I 0:18:57.600 --> 0:19:00.239 would assume in any sector is over twenty million. So 0:19:00.560 --> 0:19:02.960 the caliber of folks you would get into the defense 0:19:03.000 --> 0:19:05.280 would be the opposite of what the administration is trying 0:19:05.320 --> 0:19:05.720 to achieve. 0:19:05.840 --> 0:19:09.479 So what do you hear from defense companies about getting 0:19:09.480 --> 0:19:11.120 some attention like that from the President? 0:19:11.560 --> 0:19:12.000 Do they do? 0:19:12.040 --> 0:19:13.560 They kind of brush it off a little bit, like 0:19:13.560 --> 0:19:14.400 we're talking. 0:19:14.080 --> 0:19:16.600 With them, Like I think one interesting trend we've seen 0:19:16.600 --> 0:19:19.000