Speaker 1: This is Bloomberg Business Week Daily, reporting from the magazine
Speaker 1: that helps global leaders stay ahead with insight on the people, companies,
Speaker 1: and trends shaping today's complex economy, plus global business, finance
Speaker 1: and tech news as it happens. Bloomberg Business Week Daily
Speaker 1: with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: Hi, everyone, welcome to the weekend edition of Bloomberg Business Week.
Speaker 2: This past week, well, we saw the first FOMC meeting
Speaker 2: and decision of the year, and after three consecutive meetings
Speaker 2: where FED policymakers lowered interest rates, well those officials left
Speaker 2: rates unchanged as expected, with nods to stabilization in the
Speaker 2: jobless rate and pointing to improvements in the US economy.
Speaker 3: Better Reserve chair Jerome Powell saying downside risks to the
Speaker 3: economy have diminished and side stepping January's controversies.
Speaker 4: We're getting through the distortions in the data from the shutdown.
Speaker 4: However big they were in November, their small in December,
Speaker 4: so we're getting to a place where they're no longer material.
Speaker 3: We got a certain view of the economy from the
Speaker 3: chair of the Federal Reserve, and certainly from that press conference. Also,
Speaker 3: we checked in with fastenal CEO Dan Florines to better
Speaker 3: understand a different part of the economy or maybe a
Speaker 3: more concentrated sector, the manufacturing sector, and also more broadly
Speaker 3: today's environment like AI.
Speaker 2: Here's a great story. Cool It was one of our
Speaker 2: favorite moments in that conversation.
Speaker 3: There were a lot, actually, and that's really where we
Speaker 3: start today. A big week for big tech. We got
Speaker 3: earnings from four of the mag seven meta platforms, stopping
Speaker 3: projections for quarterly revenue, also giving a strong forecast for
Speaker 3: the current period, boosted by a robust online advertising business
Speaker 3: that's making it possible for the company to invest in
Speaker 3: AI at record levels this year.
Speaker 2: And Tesla revealed plans to invest about two billion dollars
Speaker 2: into Xai, giving Elon Musk's artificial intelligence startup a cash infusion,
Speaker 2: despite a shareholder vote last year that failed to win
Speaker 2: a proof.
Speaker 3: And then there's Microsoft. Investors were disappointed after the company's
Speaker 3: spending search to a record high and cloud sales growth slowed.
Speaker 3: That worried investors that it could take longer than expected
Speaker 3: for the company's AI investments to pay off.
Speaker 2: We cut up on how all these companies are faring
Speaker 2: when it comes to the AI play. We did that
Speaker 2: with Angelo Zeno, he's senior VP and equity analyst over
Speaker 2: at CFI Research.
Speaker 5: At this point in time, after these numbers, I would
Speaker 5: actually be I'd be more inclined to tell investors to
Speaker 5: buy Microsoft on this dip, on this twelve percent or
Speaker 5: so pulled back. I mean, the stockings is now trading
Speaker 5: at about twenty twenty one times our calendar twenty seven
Speaker 5: estimate and actually is slightly or hair cheaper than our
Speaker 5: outlook for Meta. And when you kind of look at
Speaker 5: the at the two companies, I mean, yeah, I mean
Speaker 5: you can make a case that Meta is growing much faster,
Speaker 5: and in some respects it's actually attributed to the decline
Speaker 5: I think in Microsoft, when you got to thirty percent
Speaker 5: growth and on the same day, you know, you've got
Speaker 5: to compete against that, I mean just not going to
Speaker 5: look as good. But that being said, I mean, I
Speaker 5: think the valuation is very compelling here. I think the
Speaker 5: business model remains, you know, just as strong as it's
Speaker 5: ever been. But you know, you clearly have some concerns
Speaker 5: that have origen you know, post results, primarily due to
Speaker 5: some of the concentration risks to open AI and the
Speaker 5: other thing maybe a hairshy in terms of the the
Speaker 5: Azure growth number.
Speaker 3: Why isn't that concerning to you Angelo, To.
Speaker 5: Be honest with you, the Azure number I thought was
Speaker 5: pretty darn good. It actually beat our expectation, didn't beat
Speaker 5: the streets. But that being said, I mean the Azure
Speaker 5: numbers continue to grow at a very good pace, and
Speaker 5: I think, you know, if there was a slightness to
Speaker 5: the expectation, it is due to the fact that they
Speaker 5: are partly supply constrained, just like others across the industry are.
Speaker 5: And I think you know, in the same respect, this
Speaker 5: is the company that also is looking to emphasize some
Speaker 5: of their productivity tools out there. They're still you know,
Speaker 5: putting a lot of their CAPEX spent on those type
Speaker 5: of offerings because in their belief, you know, there's higher
Speaker 5: revenue per token tied to that, and that is probably
Speaker 5: a longer term story, okay, and it is going to
Speaker 5: impact the fact that, hey, listen, they could have probably
Speaker 5: grown north of forty percent if they had moved you know,
Speaker 5: the you know that GPU demand to that side of things,
Speaker 5: the editor side.
Speaker 3: So let's hit on the the other thing that you
Speaker 3: mentioned the concentration risk and video Microsoft and Amazon and
Speaker 3: discussions to us as much as sixty billion dollars in
Speaker 3: open Ai as part of a new funding round. This
Speaker 3: according to the information, if concentration risk is a concern,
Speaker 3: then why is Microsoft putting more money into open Ai.
Speaker 5: It's a great question, and I think it's just because
Speaker 5: those are some of the companies you mentioned are the
Speaker 5: ones that probably have most at stake in terms of,
Speaker 5: you know, open Ai succeeding here long term, right, And
Speaker 5: if you look at open ai today, clearly they need
Speaker 5: the money. They're not going to be able to get
Speaker 5: to where they need to be without receiving that funding.
Speaker 5: And at the very least they need to get this
Speaker 5: hundred billion dollar funding, get themselves higher revenue, and potentially
Speaker 5: look at, you know, an IPO in the future to
Speaker 5: get additional funds. But at this point in time, I
Speaker 5: think it's you know, one of those situations where they
Speaker 5: are heavily committed to open ai and they need open
Speaker 5: Ai to succeed.
Speaker 2: Going back to that number the startup accounted open Ai
Speaker 2: that is forty five percent of Microsoft's backlog, which stood
Speaker 2: at six hundred and twenty five billion at the end
Speaker 2: of December, so it is such an important part of
Speaker 2: AI for Microsoft.
Speaker 5: It's extremely important. I'd also say this though, you know,
Speaker 5: the company does have north of three hundred billion dollars
Speaker 5: in bookings not tied to open AI, so you kind
Speaker 5: of look at at the next two to three years,
Speaker 5: you know that they do have that visibility in terms
Speaker 5: of being able to meet higher than you know, that
Speaker 5: that capacity editions that they plan to make here over
Speaker 5: the next couple of years. Not to mention, we do
Speaker 5: think that concentration risk does come down in the future
Speaker 5: as they continue to broaden their customer base as well.
Speaker 5: So yeah, I mean it's it's a concern.
Speaker 6: It is a risk to be mindful of.
Speaker 5: But nonetheless, I think if there's anyone that can continue
Speaker 5: to navigate and prosper in this environment, it's going to
Speaker 5: be Microsoft. Not to mention, this is nowhere near you know,
Speaker 5: an oracle type of situation. At the same time, right,
Speaker 5: they've got the free cash flow potential to do what
Speaker 5: they need to do in any type of landscape.
Speaker 2: I know you don't cover teslas, so don't get mad
Speaker 2: at me, but I do want to ask you that
Speaker 2: you know more and more we have people come on
Speaker 2: and say, it's not a car company, it's a technology company.
Speaker 2: And among the headlines that were highlighted on their earnings
Speaker 2: update is the investment Tesla's investment in Elon's x AI.
Speaker 2: Is this, though, a company that you were starting to
Speaker 2: think about, you know, coming on your radar when it
Speaker 2: comes to tech and the AI spend and the build
Speaker 2: out and the AI impact.
Speaker 6: Absolutely.
Speaker 5: I think it's you know when you kind of look
Speaker 5: at the enterprise space, I mean, Musk is probably the
Speaker 5: biggest spender of AI in terms of GPU servers, so
Speaker 5: you know, he is an extremely Tesla. The company x AI,
Speaker 5: you know, the company that entire ecosystem that must owns
Speaker 5: extremely important to the evolution of AI and what's going
Speaker 5: to transpire here over the next couple of years. I mean,
Speaker 5: you listen to Jensen one and you kind of look
Speaker 5: at where you know that next massive inflection is going
Speaker 5: to come from in the physical AI world, and he
Speaker 5: continues to talk about, you know, autonomous vehicles, and clearly
Speaker 5: if there's anyone that's going to leave that pat it
Speaker 5: is going to be Elon Musk. So it's it's on
Speaker 5: our radar. And it's something that I think is really
Speaker 5: critical to this broader AI story.
Speaker 3: Our thanks to Angelo Zino, Senior VP and equity analyst
Speaker 3: at CFRA Research. And Apple also posted earnings Thursday, trounsing
Speaker 3: estimates for the first quarter one of the key parts
Speaker 3: of the tech giants beat. iPhone sales for the quarter
Speaker 3: hit more than eighty five billion dollars.
Speaker 2: On Apple Bloomberg's managing editor for Global Consumer Tech, we're
Speaker 2: talking about Mark German, you know, breaks so many exclusives
Speaker 2: when it comes to Apple. He is our go to
Speaker 2: on this company. He helped makes of the latest quarterly update.
Speaker 7: This is a massive, massive, massive quarter. This is a
Speaker 7: home run. Their greatest quarter ever by orders of magnitude.
Speaker 7: It's a gigantic beat on overall revenue. China is back.
Speaker 7: You have a big beat on the iPhone in particular.
Speaker 7: Eighty five billion dollar quarter is just insane. The installed
Speaker 7: base two and a half billion, The numbers are just
Speaker 7: beyond excellent. We could ignore the fact that they missed
Speaker 7: on wearables, home and accessories. We can ignore the fact
Speaker 7: they missed on Mac. We could ignore the fact that
Speaker 7: they barely you know, crossed expectations on services. I guess
Speaker 7: none of that matters when the iPhone is selling so well.
Speaker 7: But still there's the big existential question of what's next.
Speaker 7: It's an important question because of AI and Apple absolutely
Speaker 7: needs to figure out what's AI strategy. There needs to
Speaker 7: be an AI reckoning of some sort there, But they
Speaker 7: just bought themselves a very long time. This just insanely
Speaker 7: great quarter.
Speaker 3: So let's talk about a couple of the areas that
Speaker 3: you highlighted there. One is China and another one is
Speaker 3: the sort of the concerns that people had about memory
Speaker 3: chips in this quarter and the rising prices of memory chips.
Speaker 3: How was Apple able to navigate this so it didn't
Speaker 3: hit its margins like people thought it would.
Speaker 7: They buy components and memory components quarters and months in advance,
Speaker 7: sometimes years in advance. They have these deals struck, so
Speaker 7: they're working off of numbers and pricing and materials here
Speaker 7: that really give them extensive pricing power over competitors. But
Speaker 7: it seems like they're fine.
Speaker 2: Mark, I love this. I mean, I'm looking at our
Speaker 2: live blog, so you must have like kicked this out
Speaker 2: before you jumped on air with us. But you did
Speaker 2: mention that the significant things on the call You've already
Speaker 2: talked about the AI strategy succession, You've kind of said
Speaker 2: maybe that's off the table for now because this was
Speaker 2: such a blowout quarter. You talk about the long term
Speaker 2: vi ability of the business if it doesn't get its
Speaker 2: AI act together, it's hard to even think about that
Speaker 2: when you see the numbers here and just what a
Speaker 2: big company this is and how significant is I feel
Speaker 2: like in so many different people's lives, Like I have
Speaker 2: an Apple household. I think Tim has an Apple household.
Speaker 2: Is that is that really the long term viability if
Speaker 2: they don't get.
Speaker 3: AI together, call me Tim Apple.
Speaker 2: In fact they do.
Speaker 8: That's yes, I said long term, right, and they're talking
Speaker 8: really long okay, the little, the little, the really long
Speaker 8: term here, right, Like, at some point there is going
Speaker 8: to be a need to fulfill these AI desires and
Speaker 8: you know they're going to have to figure that out well.
Speaker 2: On o agranov our BI team, he talked with Tim
Speaker 2: and I just moments ago, and he talked about, you know,
Speaker 2: how they're working with Google when it comes to AI,
Speaker 2: relying on them right now for their models, and so
Speaker 2: they're not doing the big AI spend That makes sense
Speaker 2: for now too, So do you agree that that's kind
Speaker 2: of a smart strategy now and kind of waiting it
Speaker 2: out a little bit, but at some point they've got
Speaker 2: to kind of do their own thing.
Speaker 7: It's not that they're waiting it out, it's that they
Speaker 7: have no choice. They have nothing internal, So it's not
Speaker 7: that they're waiting it out, it's that they need to
Speaker 7: do it, and so they're partnering with the best partner
Speaker 7: they can. It's going to offer them the best pricing power,
Speaker 7: which for now is Google. They initially wanted to work
Speaker 7: with Anthropic, but from a pricing standpoint, it didn't work out.
Speaker 7: They couldn't work with open Ai because they're, you know,
Speaker 7: hardcore competitors at this point. So Google was all who
Speaker 7: was left. And obviously the judge didn't break up the
Speaker 7: search deal there, so it made sense and it'll aligned
Speaker 7: pretty nicely for them.
Speaker 3: Okay, do we know yet how Apple was able to
Speaker 3: beat expectations in China once again for the first quarter
Speaker 3: the most recent quarter, Greater China revenue came in at
Speaker 3: twenty five point five to three billion dollars. Twenty one
Speaker 3: point eighty two was the estimate you said it minutes ago.
Speaker 3: It is back in China. You're holding up an iPhone
Speaker 3: right now. That's what they did.
Speaker 7: I'm answering your question. I'm answering your question.
Speaker 3: It was the iPhone seven color orange. Oh, it's the
Speaker 3: color orange. It's that easy.
Speaker 7: Is the pro maax? No, it's design people buy. The
Speaker 7: new designs. Is the first new design in half a decade.
Speaker 7: It got it done. That's why you do new designs,
Speaker 7: because you're trying to bring in new customers. Why does
Speaker 7: for upgrades and but that's the way to do it.
Speaker 2: Our thanks to Mark German, Bloomberg News Managing editor for
Speaker 2: Global Consumer Tech. For more on the earnings call and
Speaker 2: all things Apple, head to Bloomberg dot Com or the
Speaker 2: Bloomberg Terminal.
Speaker 3: Coming up on Bloomberg BusinessWeek, we'll have more on earnings,
Speaker 3: including the thoughts from one analyst weighing in not just
Speaker 3: on airlines, but all the results that we got from
Speaker 3: defense companies too.
Speaker 2: It's a sector that's been on a tear in the
Speaker 2: past year.
Speaker 6: That's next.
Speaker 2: This is Bloomberg.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Steneveek on Bloomberg Radio.
Speaker 3: Across the United States, airlines spent most of the week
Speaker 3: trying to get passengers back on track after cutting more
Speaker 3: than nineteen thousand flights due to that major winter storm
Speaker 3: it pelted the East Coast and coded parts of the
Speaker 3: South and mid Atlantic regions with ice. We're still digging
Speaker 3: out of this thing here in New York.
Speaker 2: Yeah, and this is going on for a while. Yeah,
Speaker 2: we are in this week, and there were lots of
Speaker 2: we'll see how this other storm we'll see, we'll see,
Speaker 2: we'll see. Northeastern airports, though, I should say by that
Speaker 2: storm one week ago, we're hit especially hard. And in
Speaker 2: their earnings report, American Airlines warning the weather could clip
Speaker 2: revenue in the range of one hundred and fifty million
Speaker 2: to two hundred million dollars.
Speaker 3: We spoke to Shila Kayalu, Managing director in equity research
Speaker 3: over at Jeffreys about what she's seeing not just in airlines,
Speaker 3: more broadly in the red hot aerospace and defense industries too.
Speaker 2: Let's just start with airlines, and then we want to
Speaker 2: move into defense because you cover that really closely as well.
Speaker 2: It does feel like they're all finding their way back
Speaker 2: after the storm in terms of the impact. Is it
Speaker 2: still a case of they're still trying to assess how
Speaker 2: do you, as someone who covers some of these names,
Speaker 2: kind of factor that in.
Speaker 9: Yeah, in terms of airlines, we're looking for revenue growth.
Speaker 9: We've seen the same trend across American that we saw
Speaker 9: at United and Delta. Corporate was up twelve percent. Corporate
Speaker 9: momentum continues. I'm taking a very long flight this weekend
Speaker 9: and then main cabin weakness, but it's getting a little
Speaker 9: bit better. And it's all about cost control. That's why
Speaker 9: I think United went up the most on earnings is
Speaker 9: they really beat out on costs when American Airlines margins
Speaker 9: came in one hundred BIPs belower estimate. So I think
Speaker 9: the most polarizing stock is going to be Southwest because
Speaker 9: they have some lofty targets. The stack's at forty dollars today.
Speaker 9: Some people think it's going to thirty. People think it's
Speaker 9: going to eighty. It's all about they're adding extra lug
Speaker 9: room seats and is the strategy going to work.
Speaker 3: But that's a huge shift for Southwest. I mean they're
Speaker 3: essentially moving away from their DNA what they're known for
Speaker 3: and the culture that they're known for, and that's alienated
Speaker 3: some people already.
Speaker 9: Yeah, it depends. So the average Southwest fair is about
Speaker 9: one hundred and nine dollars. So if you add an
Speaker 9: option for extra lug room or refundable or seating, if
Speaker 9: you add fifty dollars to that cost of that airfare,
Speaker 9: so one hundred and fifty nine, that's a fifty percent increase.
Speaker 9: Almost does the passenger back away? I'm not sure, but
Speaker 9: then again it's only one hundred and fifty nine dollars,
Speaker 9: So how do we think about that and what adoption
Speaker 9: do we assume We're at about five percent adoption in
Speaker 9: twenty six. They have a bunch of other benefits as well,
Speaker 9: baggage fees and cost optimization, so that's driving their EPs
Speaker 9: to three dollars essentially, ebit tripling off of a very
Speaker 9: low twenty five base. So it's their first go at
Speaker 9: it and we'll see how it takes off.
Speaker 2: You have a forty five dollars price target, so you're
Speaker 2: not at the eighty and you're not at the thirty.
Speaker 2: So maybe a little bit higher from where we are.
Speaker 9: You know, I would prefer United where they've If you
Speaker 9: think about United, they're going to be accounting for forty
Speaker 9: four percent of the why of the new premium seats
Speaker 9: through twenty twenty eight, so they're going to be accounting
Speaker 9: for more than any other airline in the US Americans
Speaker 9: after that in Southwest because of their extra love room.
Speaker 9: I prefer to bet on that corporate customer paying one
Speaker 9: thousand plus one hundred dollars to achieve that additional corporate
Speaker 9: fair and that higher margin. Where United is adding its
Speaker 9: seats than Southwest adding on the you know, I think
Speaker 9: both are given the multiples that they're currently trading at.
Speaker 9: United is more appealing to me.
Speaker 3: Let's talk some defense and then we'll talk some Boeing too.
Speaker 3: I want to look at shares of RTX. They're higher
Speaker 3: right now by about three point four percent profit topped
Speaker 3: Wall Street estimates assign the momentum that the company awaits
Speaker 3: a potentially huge jump in US military spending. That's kind
Speaker 3: of where I want to start. What we've heard from
Speaker 3: President Trump in the last few weeks, not just with
Speaker 3: the idea of a one point five trillion dollar defense package,
Speaker 3: but also calling on some of these companies to do
Speaker 3: a better job, pay their executives less, and also build
Speaker 3: stuff for the US government more quickly. What are these
Speaker 3: CEOs to do there's a.
Speaker 9: Lot going on in defense, and that's why I was
Speaker 9: saying it's an exciting sector to cover because this is
Speaker 9: the first time that the five primes might no longer
Speaker 9: exist as five primes by the end of the Trump administration,
Speaker 9: which is our view. We think that there's going to
Speaker 9: be similar to what LHX announced ten days ago, there's
Speaker 9: going to be more deconsolidation happening among the primes. Their
Speaker 9: budget is going up by five hundred billion from a
Speaker 9: trillion dollars. We don't know the time period of that spending.
Speaker 9: We don't know how much will be added to actual
Speaker 9: equipment and R and D versus military operations, but they're
Speaker 9: seeing an increase, whether it's to fund defense technaumes like
Speaker 9: firefly voyage or the recent IPOs we've seen in the space,
Speaker 9: or the traditional primes or suppliers like aero environment crados
Speaker 9: are up one hundred percent on the year already and
Speaker 9: we're twenty seven days in. So it's really interesting to
Speaker 9: see what happens in defense. But there's a lot of
Speaker 9: shakeups that are I think are going to play out.
Speaker 9: So it's about seeing who has the best position positioned
Speaker 9: portfolio and who to play from here.
Speaker 2: I was surprised, like I know, when you walked in
Speaker 2: we started talking, and I mean aerospace defense. Just the
Speaker 2: S and P broad Index up about nine percent year
Speaker 2: to date, up about forty six percent last year. Is
Speaker 2: it just because defense spending all around the globe is
Speaker 2: just happening and everybody's zamping it up.
Speaker 9: Yeah, just as simple as tremendous growth internationally twenty percent
Speaker 9: plus NATO budgets, Japan, Korea. We're seeing countries like Serbia
Speaker 9: put in orders that never used to, put in billion
Speaker 9: dollar orders for equipment to companies like Elbet in Israel.
Speaker 9: Coupled with the defense budget going from a trillion to
Speaker 9: one point five trillion, makes defense very interesting and the
Speaker 9: administration has been very supportive of defense tech emergent technology companies,
Speaker 9: companies that had stagnant revenues for the last decade are
Speaker 9: seeing thirty forty percent growth.
Speaker 2: But you know, as to mention, you know, when the
Speaker 2: president talks about an industry, it can be good or bad.
Speaker 2: So is it good that they're on his radar?
Speaker 6: But when he's five.
Speaker 9: Million dollars talking about he did back off of that.
Speaker 9: He didn't quantify in the executive order the pay and I.
Speaker 3: But he mentioned it, he mentioned it really, Yes, that's
Speaker 3: I love. That caught our attention. And five million dollars
Speaker 3: It sounds like a lot of money, but not for
Speaker 3: a CEO who's paid over twenty million dollars.
Speaker 9: Right the executive executive pay. The average executive pay, I
Speaker 9: would assume in any sector is over twenty million. So
Speaker 9: the caliber of folks you would get into the defense
Speaker 9: would be the opposite of what the administration is trying
Speaker 9: to achieve.
Speaker 2: So what do you hear from defense companies about getting
Speaker 2: some attention like that from the President?
Speaker 7: Do they do?
Speaker 2: They kind of brush it off a little bit, like
Speaker 2: we're talking.
Speaker 9: With them, Like I think one interesting trend we've seen
Speaker 9: from the reports, whether it was Northrop or Raitheon today
Speaker 9: is the lack of buybacks because that's what the administration
Speaker 9: asked for a focus on additional cap x. Raith Yon
Speaker 9: mentioned that Northrop mentioned that Boeing mentioned that, so across
Speaker 9: the board, everyone's like, sure, we're investing, We're going to
Speaker 9: get use supplies on time. That's our job and it
Speaker 9: helps funnel the growth.
Speaker 2: The CEO saying Northrop rebalancing the need for performance with
Speaker 2: affordability and speed to market to meet the US defense
Speaker 2: departments focus on speedy development.
Speaker 9: Yes, And I think Kathy Ward and the CEO of Northrop,
Speaker 9: said this was the best spending environment she's ever seen
Speaker 9: in her career. So most of these executives are very bullish.
Speaker 3: Do the off starts in defense tech pose a threat
Speaker 3: to the incumbents? And I'm thinking of you know, Ananderil
Speaker 3: that is not yet And I say, now, yeah, because
Speaker 3: obviously this company, I'm guessing well IPO at some point
Speaker 3: soon they do they compete with these incumbents.
Speaker 9: Yes, clearly they're competing, and they're collaborating. They're working together
Speaker 9: both internationally and domestically. The primes are trying to work
Speaker 9: with you know, Northropez a partnership with Krados on CCI
Speaker 9: it's a autonomous vehicle essentially, so we're seeing a lot
Speaker 9: more collaboration, but they're also trying to take share. But
Speaker 9: the budget is growing overall, and that's the bottom line,
Speaker 9: although we're not really seeing it. In twenty six Northrops
Speaker 9: Guidance's five percent growth, they talk about an acceleration from
Speaker 9: there in twenty seven twenty eight. Same thing with raytheon
Speaker 9: it was modest growth in defense. It didn't really pop. Yes,
Speaker 9: it grew in the second half versus the first half,
Speaker 9: and we'll see you how those trends continue.
Speaker 2: I feel like with all of the geopolitical tensions and
Speaker 2: the wars that we've seen around the world, that everybody
Speaker 2: comes back to the US military might and the defense
Speaker 2: companies here in the United States. What is the global picture?
Speaker 2: Where's the competition? Is there not much global competition Shila
Speaker 2: when it comes to to the US defense companies.
Speaker 9: So I think it's focused on maybe a few things
Speaker 9: first as missiles and munitions readiness, like we need to
Speaker 9: have that available, and that's why we're seeing companies like
Speaker 9: Lockheed increase Pack three production from six hundred missiles a year,
Speaker 9: which pack it's a missile Packtoray is the name of
Speaker 9: the missile. Going from six hundred units a year to
Speaker 9: two thousand. That is significant to say at least that's
Speaker 9: eight billion of additional revenues to Lockheed over seven years
Speaker 9: if they could ramp to those levels. The backlogs twenty
Speaker 9: years for a missile like that. We're seeing that across
Speaker 9: the board. LHX ten days ago or two weeks ago
Speaker 9: now announced that they are seeing a government investment within
Speaker 9: their solid rocket motor business that powers missiles. They're going
Speaker 9: to open up sixty factories next year. LHX currently has
Speaker 9: two one hundred and fifty factories, so that's a magnitude
Speaker 9: of investment we're seeing from the government. So focus on missiles, ammunitions,
Speaker 9: and second, I think it goes back to old school warfare.
Speaker 9: Everybody thinks helicopters are over and F thirty five is
Speaker 9: a bad program. But we think about Venezuela, if we
Speaker 9: think about Iran, what's the kind of equipment we're using.
Speaker 9: So you know, it's not necessarily rebuilding an entire fleet
Speaker 9: for the Navy, but it's doing things that we could
Speaker 9: use pretty quickly.
Speaker 3: Just in last ninety seconds, I want to hit Boeing
Speaker 3: with you. Shares are down today by about one point
Speaker 3: eight percent. The company did report this morning a second
Speaker 3: straight quarter of generating cash, fifty seven percent bump in
Speaker 3: sales during the final three months of the year. Shares down, though,
Speaker 3: Is it because of accounting charges for the CAC forty
Speaker 3: six tanker program? Is that it?
Speaker 9: No, everybody just assumes that's going to happen every quarter.
Speaker 2: So we're all good.
Speaker 3: There shares down after So the.
Speaker 9: Share shares opened down. The call at ten thirty, got
Speaker 9: it up to write, it reversed about four points and
Speaker 9: then they're down again. We're a believer in Boeing. They're
Speaker 9: underwriting their free cash flow was a loss of two
Speaker 9: billion in twenty five. They're talking about positive two billion
Speaker 9: at the midpoint in twenty six, normalized for one time items.
Speaker 9: They're saying they're free cash flows had single digits, so
Speaker 9: say eight billion. They're reaffirming their ten billion target, and
Speaker 9: then they're saying they could go above that, so you
Speaker 9: know ten fifteen. It's giving long only as a reason
Speaker 9: not to dismiss the stock. If this company could actually
Speaker 9: earn ten billion of free cash flow, then it's quite
Speaker 9: compelling at its current valuation. So we're seeing a lot
Speaker 9: of fulctuations. Are they talking back twenty seven to twenty eight? No,
Speaker 9: I think that you're going to see two billion in
Speaker 9: twenty six and an improvement in twenty seven and twenty eight.
Speaker 2: So Boeing, let me just say, you've got a two
Speaker 2: ninety price target, it's at two forty four. You feel
Speaker 2: good about that?
Speaker 6: Yeah?
Speaker 9: I want to know why is it we are supportive
Speaker 9: of Boeing. We think there's a few positive catalysts. I
Speaker 9: think President Trump might be headed to China in April.
Speaker 9: We'll see if Boeing heads there. We haven't seen a
Speaker 9: China order since I can't even recall. Maybe it was
Speaker 9: twenty nineteen, maybe earlier. So I think Boeing works from here,
Speaker 9: you know, depressed prices for Max's maybe fifty percent below
Speaker 9: what they historically sell at today.
Speaker 3: That was she like Hayalu, managing director or for equity
Speaker 3: Research at Jeffrey's.
Speaker 2: Coming up on Bloomberg BusinessWeek. Yes, indeed, we are a
Speaker 2: services led economy in the United States, and yet with
Speaker 2: a White House focusing on bringing manufacturing back to the
Speaker 2: United States, getting a read on that end the manufacturing
Speaker 2: economy super important.
Speaker 3: And we get that from none other than Dan Flornes,
Speaker 3: the CEO of Fasten Now. Plus a story on AI,
Speaker 3: one of Carroll's favorites. I think it's fair to say, yeah,
Speaker 3: he joins us. Next, this is Bloomberg.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Tim
Speaker 1: Stenevak on Bloomberg Radio.
Speaker 2: So something we've already touched upon, and this is this
Speaker 2: letter from sixty CEOs of Minnesota based companies. More than sixty,
Speaker 2: I should say, have called for an immediate de escalation
Speaker 2: of tensions between state, local, and federal authorities as a
Speaker 2: state is reeling from another fatal shooting of an American
Speaker 2: by immigration agents. The chief executive officers of companies they
Speaker 2: include Target Best, Land of Lakes, Cargol, General Mills, United
Speaker 2: Health Group, as well as professional sports teams including the
Speaker 2: Minnesota Vikings, among the signatories of the letter that was
Speaker 2: shared yesterday Sunday by the Minnesota Chamber of Commerce. We're
Speaker 2: laying that out for those who are watching on streaming
Speaker 2: and TV, just to get to the crux of it.
Speaker 10: Though.
Speaker 2: The open letter says we are calling for an immediate
Speaker 2: de escalation of tensions and for state, local, and federal
Speaker 2: officials to work together to find real solutions.
Speaker 3: Our next guest is head of a company in the
Speaker 3: great state of Minnesota. We're talking about Fasten Now recently
Speaker 3: reporter earnings, the stock selling off on the day of
Speaker 3: the report, but rallying the day after, the most in
Speaker 3: nine months. That trade reaction had us scratching our heads.
Speaker 3: So we're grateful Carol to have back with us. To
Speaker 3: talk about the release of the Outlook. The CEO of
Speaker 3: the close to fifty billion dollar market cap company Fasten Now,
Speaker 3: Dan Flornes, is back with us.
Speaker 2: Yeah, so delighted. Let's get to it. Dan, good to
Speaker 2: have you here. Happy New Year. We do love talking
Speaker 2: with you. We feel like we get a read on
Speaker 2: the US economy, the manufacturing world. You've seen a lot
Speaker 2: in your career, and we want to get to all
Speaker 2: of this. But I really do feel like we'd be
Speaker 2: remiss to not ask you about what's going on in
Speaker 2: your home state. And I feel like those who are
Speaker 2: listening might be curious if you were asked to sign
Speaker 2: this letter of CEOs who want a de escalation of
Speaker 2: what's happening in Minneapolis specifically. So can you Were you
Speaker 2: aware that this letter was happening or were you asked
Speaker 2: to sign it?
Speaker 4: Was?
Speaker 11: First off, Happy New Year and thanks for allowing me
Speaker 11: to participate today. I was not aware of it. We're
Speaker 11: outstate Minnesota. We're about two and a half hours from
Speaker 11: the Minneapolis Saint Paul market, and so it's not uncommon.
Speaker 11: It's a pretty tight knit group up in the Twin Cities,
Speaker 11: and was not aware of it going out with that,
Speaker 11: Sid was not surprised by going out and it seemed
Speaker 11: to be pretty common sense of hey, that' style down
Speaker 11: the heat.
Speaker 2: So would you have signed it though, if asked.
Speaker 3: Yeah, I would sign that.
Speaker 2: What What's We talk so much about leadership at this time,
Speaker 2: and I am curious what you see as the responsibility
Speaker 2: of leaders in the United States when we see situations
Speaker 2: happening where it feels like and again I don't want
Speaker 2: to get political. I don't want to take sides, but
Speaker 2: it does feel like Americans are being what some would
Speaker 2: say is targeted unfairly.
Speaker 11: Yeah, you know, I think as a leader, one of
Speaker 11: our one of our tasks are to create some calm
Speaker 11: in the air.
Speaker 12: You know.
Speaker 11: I think back a few years ago when when COVID
Speaker 11: was going on, it seemed like every everybody, every day
Speaker 11: turned everything into a political thing. And sometimes it's the
Speaker 11: case of, you know, if you're around a bunch of
Speaker 11: people that that are high at risk in the case
Speaker 11: of COVID, put a mask on if you're if you're
Speaker 11: not and you don't want to be there, then go
Speaker 11: someplace else. You know, same thing here, Let's try to
Speaker 11: dial the heat down and focus on what we're trying
Speaker 11: to accomplish, not how we can see who can be
Speaker 11: the most boisterous in the in the market of thrown
Speaker 11: ideas out and that that's on both sides of the
Speaker 11: of the fils Dan.
Speaker 3: One thing that we're trying to figure out is getting
Speaker 3: a good read on the economy, and you guys have
Speaker 3: such a great read on it given that you touch
Speaker 3: so many sectors. I mean, if you're using nuts, bolts, screws, anchors, rivets,
Speaker 3: any kind of fastener, industrial janitorial safety supplies, you guys
Speaker 3: do it. On earnings, you mentioned the broader market conditions
Speaker 3: remained mixed. What exactly did you mean by that when
Speaker 3: you say mixed? What's the good? What's the bad?
Speaker 6: Well mixed?
Speaker 11: From the standpoint, we focus a lot on the Pursing
Speaker 11: Managers Index, okay, published by ISM, and that's been you know,
Speaker 11: sub fifty for thirty six of the last thirty eight months.
Speaker 11: So from the standpoint of the economy has not given
Speaker 11: us any lyft. We are getting good traction in the marketplace,
Speaker 11: and we finished out the last half of twenty twenty
Speaker 11: five with double digit growth. That's really an exercise of
Speaker 11: taking market share more than the wind is to our backs.
Speaker 2: And I know we've talked about this too down with
Speaker 2: you about being in a prolonged downturn in the industrial economy,
Speaker 2: any green shoots that you were seeing or signs of
Speaker 2: an inflection, and if so, I'm just curious what markets
Speaker 2: might you be optimistic and which are maybe running weaker
Speaker 2: than you anticipated and maybe we'll continue to this year.
Speaker 11: Yeah, it's a little bit an anecdotal answer, so I
Speaker 11: apologize for that. We're seeing in some of the published
Speaker 11: data some industrial production numbers improving late in the year.
Speaker 11: We aren't seeing that directly in our business, but for
Speaker 11: us November December is a seasonally weak period, so that
Speaker 11: doesn't surprise me that we won't see it. So don't
Speaker 11: know if there's some green shoots there. I can tell
Speaker 11: you this from my travel if it's a business that's
Speaker 11: linked to certain industries and data center is an example
Speaker 11: from a recent trip I had on the East Coast
Speaker 11: where I was visiting a mechanical contract and their business
Speaker 11: was on fire and seventy percent of their activity was
Speaker 11: around data centers.
Speaker 2: On So that's the good part, right, and that that's
Speaker 2: the good part that story we keep hearing about the
Speaker 2: AI build out, the data center build out. You saw
Speaker 2: it firsthand.
Speaker 6: It's real, it's real, it's real.
Speaker 11: In fact, I had a I spent a big chunk
Speaker 11: of my time having conversations with our district leaders. We
Speaker 11: have about two hundred and forty district managers. They each
Speaker 11: run about a thirty five million dollar business. You had
Speaker 11: them all up, that's an eight billion dollar fastenal So,
Speaker 11: I had a conversation with our team in Atlanta this
Speaker 11: morning one of our district managers, and most of his
Speaker 11: discussion was about business pickup. He's seeing his market because
Speaker 11: of data centers now. Atlanta is unique in that it's
Speaker 11: one of a handful that are really being impacted by
Speaker 11: that build up.
Speaker 3: What is the pricing power, Dan that the company has
Speaker 3: right now? Because historically during periods of inflation you've been
Speaker 3: able to be pretty a great if with price increases.
Speaker 3: I think people would argue you weren't as aggressive as
Speaker 3: you could have been in twenty twenty five. What's the
Speaker 3: barrier to pushing price more aggressively?
Speaker 11: Well, you know, the one barrier is the size of
Speaker 11: the customer, the nature of the products, how much of
Speaker 11: it is production centered versus maintenance centered, and because when
Speaker 11: it's production centered business, you have customers buying a very
Speaker 11: large volume of neuroal band of skews, and their price
Speaker 11: sensitivity is different than if it's MRO and they're buying,
Speaker 11: you know, one hundred dollars of this and one hundred
Speaker 11: dollars of that.
Speaker 4: You know.
Speaker 2: One of the things I want to ask you to
Speaker 2: there was a story on my read in this morning,
Speaker 2: Dan in terms of Volkswagen saying that they're going to
Speaker 2: the head plants for a possible out factory in the
Speaker 2: United States. They're not progressing due to President Donald Trump's
Speaker 2: tariffs and unsuccessful talks for local incentives. So we have
Speaker 2: certainly seen an administration that talks about all the investment
Speaker 2: money coming into the US, and I think we here
Speaker 2: at Bloomberg continue to try and figure out how much
Speaker 2: of this is actually going to play out. You can
Speaker 2: say you're going to invest, and then there's the reality
Speaker 2: of actually building facilities. First of all, tire reffs and
Speaker 2: I know we've talked about this with you in the past,
Speaker 2: and forgive me if I'm repeating, but you're thinking about outsourcing.
Speaker 2: How have tariffs changed that, especially when it comes to fasteners.
Speaker 2: I think primarily sourced from China and Asia. So I'm
Speaker 2: just curious how many of it's been shifting for you.
Speaker 6: Yeah, so you are absolutely correct.
Speaker 11: Most of the fasters in this country, in North America
Speaker 11: in general come from Northern Asia, China primarily obviously huge impacts.
Speaker 11: And for us, what it's meant is over for about
Speaker 11: the last six years, seven years, we've been actively expanding
Speaker 11: our ability to import fasters because there's still not a
Speaker 11: lot of domestic production. And so when I think back
Speaker 11: to twenty eighteen, our primary sourcing entity was based in
Speaker 11: Shanghai with a secondary location in southern Taiwan. Today we
Speaker 11: have personnel in Bangkok, we have personnel in India, and
Speaker 11: that's where all of our growth and movement of sourcing
Speaker 11: personnel has occurred over the last seven eight years to
Speaker 11: just broaden our ability to be a little more agile
Speaker 11: and where you have sourced from depending on the geography
Speaker 11: it's going into.
Speaker 3: So that's on the sourcing side, But what about on
Speaker 3: your customer side and about customers moving manufacturing back to
Speaker 3: the US. Are you seeing that happen or hearing discussions
Speaker 3: of that?
Speaker 11: Yeah, I guess you know anecdotally, Yes, I can't say
Speaker 11: that we've seen a tremendous influx. What I would say
Speaker 11: is I hear less about stuff leaving than maybe I
Speaker 11: would have, you know, ten years ago or five years ago.
Speaker 11: And that in itself is a win from the standpoint
Speaker 11: of production. But you know, a lot of it is
Speaker 11: folks are getting closer to where the end customer is
Speaker 11: for a lot of our customers. And so when I
Speaker 11: see customers expanding production facilities in North America, and I'll
Speaker 11: say more broadly than North America rather than just the
Speaker 11: United States, it's usually the service more efficiently the local market.
Speaker 2: Which makes sense, which we've seen that trend right happening.
Speaker 2: I feel like over time, Hey, Dan, you mentioned about
Speaker 2: maybe less companies leaving the US. Speaking of leaving, you
Speaker 2: are stepping down as CEO come July. You've been CEO
Speaker 2: since twenty sixteen, you were CFO before that, going back
Speaker 2: to two thousand and two. You've been there a long time.
Speaker 2: And I know last time you were on I asked
Speaker 2: you a question about this cycle, and I was not
Speaker 2: very kind. I got yelled at by my team because
Speaker 2: I think I gave you twenty seconds. But I want
Speaker 2: to we do get yelled at you have twenty five
Speaker 2: seconds now. No, no, no, you've got almost two minutes.
Speaker 2: How do you describe this cycle, because it's it feels unusual.
Speaker 11: Well, it's unusual in that, you know, you hear about everything,
Speaker 11: Whereas in years past there was so much of this
Speaker 11: political stuff that went on, but most of it, if
Speaker 11: you weren't in the midst of it, you were oblivious
Speaker 11: to and you just you just you went around about
Speaker 11: your life. Now everybody hears about everything when it happens,
Speaker 11: So that's just a lot more noise.
Speaker 6: On the flip side. What's what's really different is I
Speaker 6: mentioned on that.
Speaker 11: Conversation with the team in Atlanta this morning, we were
Speaker 11: talking about data centers and one of the people on
Speaker 11: the calls, he leads our business in the southern US.
Speaker 11: He said, Hey, Dan, I'm gonna flick your something, and
Speaker 11: he punched in a bunch of questions and he came
Speaker 11: back with a twenty nine page report on the data
Speaker 11: center industry in the United States, and so I read
Speaker 11: through a bunch of it.
Speaker 6: It's it's actually pretty accurate and pretty good.
Speaker 11: I mean, there's stuff in there I can pick apart,
Speaker 11: but it's pretty good.
Speaker 2: Yeah, I know, well, you know, okay, Now.
Speaker 3: Dan still had to do the reading though it didn't
Speaker 3: read the report for him.
Speaker 6: So I probably would have. But I'm old school, I guess.
Speaker 2: Is that just quickly, I know, this is truly like
Speaker 2: thirty seconds. Is that the most transformative change you think
Speaker 2: we'll see over the next decade is just the continued
Speaker 2: impact of AI and things like CHATCHYPT and everything else connected.
Speaker 2: Just your quick thought on.
Speaker 11: That, Yeah, Because I mean, when I think of our business,
Speaker 11: we're selling tens of thousands of different parts to customers
Speaker 11: every day, and the ability to improve the visibility for
Speaker 11: for folks, sources, all that stuff is an incredible efficiency tool.
Speaker 3: That's Daniel Floyes, CEO of Fasteno.
Speaker 2: And that does it for the first hour of Bloomberg
Speaker 2: Business Week Daily. Still ahead, consumers are shifting away from
Speaker 2: credit cards and towards debt or buy now, pay later programs.
Speaker 2: So what does that say about the health of the consumer?
Speaker 2: What kind of activity are we seeing around that?
Speaker 3: Plus a look back to some of the biggest stories
Speaker 3: that came out of the World Economic Forum in Davos.
Speaker 3: One World Leader's Choice in ewear. It was the look
Speaker 3: that everybody was talking about So I promise this is
Speaker 3: a fun one. Okay, we don't usually go there, no,
Speaker 3: but this is a really fun one.
Speaker 2: You're gonna love it. I'm just gonna say that.
Speaker 8: All right.
Speaker 2: You're listening to Bloomberg Business Week. I'm Carol Masser and.
Speaker 3: I'm Tim Stenovic. Stay with us today's top stories and
Speaker 3: global business headlines coming up right now.
Speaker 1: This is Bloomberg Business Week Insight from the reporters and
Speaker 1: editors that bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news as it happens. Bloomberg
Speaker 1: Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: Plenty ahead in our second hour of the weekend edition
Speaker 2: at Bloomberg Business Week, including a read on the consumer
Speaker 2: from the CEO of the buy now pay lead company
Speaker 2: after Pay, plus.
Speaker 3: More from the recent World Economic Forums Annual meeting in Davos,
Speaker 3: the discussions on creating affordable housing and tackling issues in
Speaker 3: the global supply.
Speaker 2: Chain, and the sunglasses at Davos seen around the world
Speaker 2: courtesy of one European leader. All of that to come
Speaker 2: first step, though, as CEOs are trying to navigate geopolitical
Speaker 2: tensions around the globe. We wanted to get a gut
Speaker 2: check on the c suite and what the top business
Speaker 2: leaders are thinking. Someone we always turned to for that
Speaker 2: is Somatis Santanas. He is chairman and chief executive officer
Speaker 2: of Synergy Maritime Holdings. He's also foundered chairman and CEO
Speaker 2: of United Maritime Corporation.
Speaker 3: The two firms together, they're microcaps. They're traded in the US. Together,
Speaker 3: they have a total of twenty five ships. They carry greens, wheat, corn, steel,
Speaker 3: copper oil and more all over the world. We spoke
Speaker 3: to you last over the summer in July, and that
Speaker 3: was a time of geopolitical tension too, but it was
Speaker 3: a different type of geopolitical tension. Are things more or
Speaker 3: less stable in your view than they were then?
Speaker 13: Well, suddenly they're less stable. I mean, you have so
Speaker 13: many things going on around the world. You have disruptions,
Speaker 13: you have like put themselves wars, all these things happening,
Speaker 13: and you'll have all the new military drive that people
Speaker 13: need to start building things again, which is not just
Speaker 13: for real estate, but you needed for strategic visions, defense
Speaker 13: and all that. So you know, shipping and draw materials
Speaker 13: of steel boux heed, I don't ore and coal. They
Speaker 13: become more and more relevant all the time.
Speaker 2: So tell us what you're seeing. Like I remember doing
Speaker 2: a trip to India during the financial crisis and trying
Speaker 2: to understand you know, you've got a great view of
Speaker 2: this being an emerging market and driving somewhere in the
Speaker 2: middle of the night and seeing all the big trucks
Speaker 2: and really understanding the build and the moving of materials around.
Speaker 2: You have such a great vantage point of that. So
Speaker 2: with the stuff that's going on around the globe, whether
Speaker 2: it's from the White House, whether it's from other regions,
Speaker 2: whether it's China, what has shifted in terms of where
Speaker 2: the ships are going and where activity is happening and
Speaker 2: what's being moved around.
Speaker 13: Well, first of all, you have a commodity is raelly, right,
Speaker 13: I mean, you have gold, you have silver, you have thin,
Speaker 13: you have copper. You have all these prices surging to
Speaker 13: these levels. And I strongly believe that you're going to
Speaker 13: see aluminum, you can have steel, and all these things
Speaker 13: coming up a lot because demand is so strong for
Speaker 13: these products.
Speaker 2: So there's more movement of all of this.
Speaker 13: I strongly believe you can have a lot of movement
Speaker 13: for that, because it's not just a good to have
Speaker 13: real estate or house, but it's strategic, it's defense, it's military,
Speaker 13: so you can have a lot of these things going on.
Speaker 13: On top of that, you also have the AI you
Speaker 13: need to upgrade the power grids, you need to create
Speaker 13: all these data centers, and all these things require vast
Speaker 13: amounts of metals you know that we transport, So it's
Speaker 13: pretty much important these days.
Speaker 3: The geopolitical disruptions as far as what's happening out there
Speaker 3: while the ships are out there, have you had to
Speaker 3: make changes to routes as a result of any issues
Speaker 3: as a result of countries military doing operations in certain places.
Speaker 3: We saw the disruptions around Venezuela in that region, just
Speaker 3: the commercial airlines for example, when Nicholas Maduro was brought
Speaker 3: to the United States. Have you been affected by.
Speaker 13: Any of that, Well, of course, I mean Red Sea
Speaker 13: has been out of the question for more than a
Speaker 13: year now. Black Sea is out of the question because
Speaker 13: of missiles going on board ships, So we tend to
Speaker 13: avoid this kind of area. So the more places you avoid,
Speaker 13: the more diversions you have for the ships, the longer
Speaker 13: distances you make and the more ships you need, so
Speaker 13: frederigs go up.
Speaker 2: Unfortunately, what are your biggest costs?
Speaker 6: Is it?
Speaker 2: Give us an idea? I mean, these ships are not cheap.
Speaker 2: Walk us through some of the dynamics or the financials here.
Speaker 13: Well, inflation is everywhere, right, Building ships today has charged
Speaker 13: a lot because you know, of all these raw materials
Speaker 13: you need to build the ships and then have fuel.
Speaker 13: But fuel has been quite stable as yeah. Yeah, but
Speaker 13: building the ship has actually gotten way more expensive. That's
Speaker 13: how it is you and that's also strategic. I mean
Speaker 13: China has been building a lot of ships recently and
Speaker 13: prices keep going up and up all the time. So
Speaker 13: you know, the US at a certain point to start
Speaker 13: building ships?
Speaker 2: Are you building?
Speaker 13: We are building ships, yes, okay, yes, and China ends
Speaker 13: up on you are, yes, okay, but the US is not. No,
Speaker 13: you don't see a lot of superbuilding aclivity here.
Speaker 3: Well, the President hopes there will be some military ship
Speaker 3: building activity here.
Speaker 13: We all hope that there's going to be some superbuilding
Speaker 13: activity here as well, but just going to wait then,
Speaker 13: say when that's going to take place.
Speaker 3: Do you think the US can build the ships that
Speaker 3: the President wants? To see.
Speaker 13: Well, there's nothing that you want to buy. There's nothing
Speaker 13: that the US cannot do. To be honest, it's just
Speaker 13: going to be a matter of course and time. Yeah,
Speaker 13: so we're just going to wait and see. Hey, speaking
Speaker 13: of that.
Speaker 3: In the US, over the last year, we've seen a
Speaker 3: push toward bringing manufacturing back to the United States, the
Speaker 3: tariffs that have gone into effect, the tariffs that have
Speaker 3: been used as a cudgel against countries to get with
Speaker 3: the president wants. In your view, does that eventually lead
Speaker 3: to fewer goods traded between countries, to fewer the less
Speaker 3: of a need for your services.
Speaker 13: It's true, but it doesn't happen. Global trade has been
Speaker 13: going up year after year. You have all these container
Speaker 13: ships actually being ordered and built and everything. So in theory,
Speaker 13: that's a very correct statement. But in practical terms, I
Speaker 13: think global trade this keeps going up every year after year,
Speaker 13: and it's unstoppable.
Speaker 3: Why is it unstoppable because.
Speaker 13: You need infrastructure so in order to create in It's
Speaker 13: not just consumer goods. Consumer goods is only a partner shipping, right.
Speaker 13: All the heavy things, which is oil, oil products, metals,
Speaker 13: I don't or coal box side and all that I
Speaker 13: mean that keeps increasing year after year all the time.
Speaker 2: What's the biggest part of your business in terms of
Speaker 2: the stuff that you move around?
Speaker 13: It's mostly out and ore, and we do a lot
Speaker 13: of box side and coal, So we move around twenty
Speaker 13: million tones so for materials every year, and that's a
Speaker 13: lot lot holes.
Speaker 2: That is long hauls. I am also curious about in
Speaker 2: terms of trade routes. I think you know, with the
Speaker 2: US kind of pushing back and tariffs and so on
Speaker 2: and so forth, are you seeing more trade just in
Speaker 2: general between China and other parts of the world. Where
Speaker 2: are you seeing increase is we're seeing decreases.
Speaker 13: Well, China has been increasing their imports in iron and
Speaker 13: coal here after year. China has been producing fifty six
Speaker 13: percent of the global STEL production. So whatever you need stel,
Speaker 13: you need to get it mostly from China. That's how
Speaker 13: it works. You have about five trillion dollars of committed
Speaker 13: infrastructure projects globally, so that's a huge amount of STELL
Speaker 13: you're going to require in the next few years, excluding
Speaker 13: data centers and everything associated with that. So you're going
Speaker 13: to require a lot of still in the next few years.
Speaker 13: And China has been very well prepared in importing a
Speaker 13: lot of FRAU materials.
Speaker 2: But I think we're also that's fascinating because it's just
Speaker 2: a reminder of supply chains where things are right. But
Speaker 2: what about in terms of the pushback, is there're more
Speaker 2: trade between China and Europe. I think we're trying to
Speaker 2: assess what are the relationships around the world, and the
Speaker 2: US continues. It feels like some say to alienate certainly
Speaker 2: its allies in other parts of the world, But is
Speaker 2: that really happening from what you see in terms of
Speaker 2: the activity.
Speaker 13: Well, all these stative talk, all these port views and
Speaker 13: everything that has been in discussions for the last year
Speaker 13: or so, that hasn't really slowed down China at all.
Speaker 13: China has been important big quantities of iron ore and
Speaker 13: baux side and all that. So a year after year
Speaker 13: they continue to increase their production of steel and aluminum
Speaker 13: and all these strategic metals that you're going to require
Speaker 13: for the future. So, yes, China is still a very
Speaker 13: vital part of the global commodities and especially the metals.
Speaker 3: We're speaking with. Stomatist santanas is the chairman and CEO
Speaker 3: of Synergy Maritime Holdings and founder chairman and CEO of
Speaker 3: United Maritime Corporation. You transport oil around the.
Speaker 13: World with transport mostly iron ore, coal and boux side, Okay,
Speaker 13: we do, but also but also yeah, we used to
Speaker 13: have a few oil transportationships tankers, but we sold them
Speaker 13: a few years ago.
Speaker 3: To pick, would you get back into.
Speaker 13: It, The answer is yes, at the next part of
Speaker 13: the cycle, we will definitely get back into tis what
Speaker 13: part of the cycle, Well, it's all times high right now,
Speaker 13: so as at values and freight rates are at this
Speaker 13: peak of all picks, So we will wait for the
Speaker 13: right time in the cycle. Maybe it's going to be
Speaker 13: next year or the year after, and we're definitely going
Speaker 13: to get back into that.
Speaker 3: Do you see Venezuela as an opportunity for you to
Speaker 3: ship oil from to other parts of the world.
Speaker 13: Venezuela it's still not a big part of the transportation
Speaker 13: of oil globally. They only do like a few hundred
Speaker 13: thousand battles per day, so that's not really important and
Speaker 13: vital right now. Maybe it's going to get to a
Speaker 13: point in the next few years, and I'm hopeful they will,
Speaker 13: but so far we don't really see them as making
Speaker 13: any material difference in seaborn oil.
Speaker 2: You just back from Davos, Yes, talk to us about
Speaker 2: what you heard on the ground, what you thought was interesting.
Speaker 2: We've just talked with our David Weston of Wall Street
Speaker 2: Week and you know how so much of what the
Speaker 2: conversations evolved once again around President Donald Trump. But I'm
Speaker 2: just curious your take on the ground and what you
Speaker 2: were hearing and seeing.
Speaker 13: Well, it's all about infrastructure, it's all about defense, it's
Speaker 13: all about military spending. It's all about alliances. So people
Speaker 13: don't talk so much about you know, diversion and inclusiveness
Speaker 13: and all these things anymore. They talk about strategic stuff.
Speaker 13: So it's completely different. I mean, the narrative in Davos,
Speaker 13: it's all about the future of alliances, of infrastructure, real estate.
Speaker 13: I was at a dinner with Eric Trump the other
Speaker 13: day and he all talked about, you know, about the
Speaker 13: projects of the family in the Middle East and how
Speaker 13: spectacular that he expects to be in the next few years.
Speaker 13: So you hear a lot about the real estate, infrastructure,
Speaker 13: and of course defense and alliances. That's what you're hear.
Speaker 2: What are you doing like between the you know, with
Speaker 2: the Middle East that you can tell, I mean, it
Speaker 2: just seems like they're certainly looking to diversify their economy,
Speaker 2: investing in sports, investing in lots of different projects, technology
Speaker 2: and so on and so forth. How do you see
Speaker 2: it in terms of what they're doing and the activity.
Speaker 13: The Middle East is a spectacular place, that's all I
Speaker 13: can say. I mean, the amount of development you see there.
Speaker 13: Everything's modern, everything's new, everything's in huge scale. So I'm
Speaker 13: very hopeful that the next few years the Middle East,
Speaker 13: especially the UAE and Saudi Arabia, will continue to be
Speaker 13: investing hundreds of billions of dollars into these beautiful, big
Speaker 13: new buildings.
Speaker 2: Dematas just got thirty seconds left here a word or
Speaker 2: two that you would describe the global economy right now
Speaker 2: or for twenty twenty six as you see.
Speaker 13: It, Well, it will continue to be very, very challenging.
Speaker 13: I think that we're going to see way more these
Speaker 13: important disruptions happening and trading routes being kind of broken down.
Speaker 13: But shipping has always been very agile to adapt in
Speaker 13: whatever geopolitical or what have you changed. This has happened.
Speaker 13: We've did COVID, we did everything, So it's going to
Speaker 13: be fine that was.
Speaker 3: The modest Santana's chairman, CEO of Synergy Maritime Holdings and founder,
Speaker 3: chairman and CEO of United Maritime Corporation.
Speaker 2: Coming up next, consumers are shifting away from credit cards
Speaker 2: at least some are, and towards or really those buy
Speaker 2: now pay leader programs. So what does that say about
Speaker 2: the health of the consumer. What kind of activity are
Speaker 2: we seeing around that? That's next. This is Bloomberg.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Tim
Speaker 1: Stenevak on Bloomberg Radio.
Speaker 2: President Donald Trump is taking aim at the credit card industry,
Speaker 2: demanding a ten percent cap on interest rates for one year.
Speaker 2: It's something he mentioned as well at Davos.
Speaker 12: I'm asking Congress to cap credit card interest rates at
Speaker 12: ten percent for one year, and this will help millions
Speaker 12: of Americans save for a home. They have no idea
Speaker 12: they're paying twenty eight percent. They go out there a
Speaker 12: little late in their payment, and they end up losing
Speaker 12: their house. It's terrible.
Speaker 3: The President also targeting the interchange fees that businesses must
Speaker 3: paid at banks when customers use credit cards at check
Speaker 3: out by endorsing legislation known as the Credit Card Competition Act.
Speaker 2: For some context on credit card fees, and I'll look
Speaker 2: at that buy now, pay later economy. We got up
Speaker 2: with Nick Mulner, he's the co founder and CEO of
Speaker 2: after Pay.
Speaker 3: Hey, I just want to start with your view on
Speaker 3: a couple of different things. We'll we'll pull out and
Speaker 3: talk about the business in a second, but we got
Speaker 3: to start with this idea of ten percent caps on
Speaker 3: credit card companies with the President has been talking about
Speaker 3: our team reporting last week that BAA and City are
Speaker 3: actually exploring options that could satisfy a ten percent cap
Speaker 3: on credit card rates at least for a year. If
Speaker 3: the President were to follow through with this, and you know,
Speaker 3: we've heard the banks really push back. What would that
Speaker 3: mean for after Pay? What would that mean for your business?
Speaker 6: Yeah, I mean, look, it's a really interesting question, and
Speaker 6: it kind of takes me back to when we started
Speaker 6: the business. You know, we started the business because we
Speaker 6: saw a fundamental shift, particularly by millennials at the time
Speaker 6: post two thousand and eight financial crisis. Millennials stop you
Speaker 6: in credit cards. They all moved to debit cards, and
Speaker 6: so the way we wanted to design our product was
Speaker 6: to disable someone's account the moment they're late on one payment,
Speaker 6: which no other credit card naturally does because income's made
Speaker 6: when someone goes late. And secondly, we flip the economics
Speaker 6: on its head where we primarily charge the consumer fee,
Speaker 6: not so the merchant a fee not the consumer, which
Speaker 6: again is kind of the fundamental opposite of how the
Speaker 6: traditional financial services ecosystem works. So I am I'm excited
Speaker 6: to see some of these kind of millennial responsible behaviors
Speaker 6: starting to flow through. But the positives of buy now,
Speaker 6: pay later, I believe are really well understood by the
Speaker 6: US consumer today.
Speaker 3: Well, but maybe they're well understood, in your view by
Speaker 3: some consumers. There are still a lot of skeptics out there,
Speaker 3: and I think you know, everybody gets concerned when they
Speaker 3: understand the credit crises that consumers have faced in the past,
Speaker 3: when they hear this idea of extending credit in untraditional ways,
Speaker 3: and you know, a bank would argue, okay, well, that's
Speaker 3: why we actually do have rate credit card rates that
Speaker 3: are so high because we're the ones taking out the risk. Here,
Speaker 3: where's the risk for you if somebody doesn't pay back?
Speaker 10: Yeah, So if a consumer takes out a transaction and
Speaker 10: they don't pay back, we wear the risk and our
Speaker 10: losses have consistently been below one percent, which is significantly
Speaker 10: lower than the broader financial services industry.
Speaker 6: I mean, even when we look at kind of Black
Speaker 6: Friday Cyber Monday transactions, we're already seeing those transactions being
Speaker 6: paid back. Ninety six percent of our installments we're paid
Speaker 6: back on time, ninety eight percent of our transactions incurred
Speaker 6: zero late fees. And so you're seeing this really responsible
Speaker 6: behavior continue to prevail through our book and when we
Speaker 6: look at our brands being after pay cash app Square,
Speaker 6: we've now LANs over two hundred billion dollars around the world.
Speaker 6: And so to be able to lend differently, to lend responsibly,
Speaker 6: and to continue to see the consumer, you know, engage
Speaker 6: with us in incredibly responsible ways is really great to see.
Speaker 2: How do you, though, determine whether or not to allow
Speaker 2: someone to participate? And I guess because I feel like
Speaker 2: there's buy now, pay later popping up everywhere. You can
Speaker 2: buy so many different things. So where's the aggregator to say, all, right,
Speaker 2: this person, you know credit cards, there's credit reporting agencies, right,
Speaker 2: and so you have an idea of how much debt,
Speaker 2: but we don't I don't think have that yet on
Speaker 2: buy now, pay later. So how do you know whether
Speaker 2: or not to allow someone to do this on your platform?
Speaker 6: Yeah, I mean again from personal experience. When I arrived
Speaker 6: in the US, I didn't anticipate that I had to
Speaker 6: take out a credit card to build a credit score.
Speaker 6: It's a really US orientated situation. There's almost one hundred
Speaker 6: million Americans that don't have access to affordable credit today.
Speaker 6: And you know, our ability to start consumers off with
Speaker 6: small limits. As they pay back on time, we give
Speaker 6: them more flexibility, and if they go late, we disable
Speaker 6: their account and we reduce their limits. You know, it's
Speaker 6: really put us in a great place to engage in
Speaker 6: this next generation consumer. You know, if you think about it,
Speaker 6: this millennial consumer now using a debit card not a
Speaker 6: credit card. They are very much anonymous to the credit bureau.
Speaker 6: But many of them are now approaching some of their
Speaker 6: peak earning years. And so you have really seen this
Speaker 6: fundamental shift away from credit cards to debit cards led
Speaker 6: by the millennial cohort and even more popular in gen Z.
Speaker 6: And you know, these consumers are exercising really responsible behavior.
Speaker 6: They prefer to spend their own money as opposed to
Speaker 6: taking out compounding debt.
Speaker 3: Nick, I want to talk a little bit more about
Speaker 3: the global consumer and where you're seeing customers actually take
Speaker 3: money out. Block recently said it's provide more than two
Speaker 3: hundred billion dollars to customers in global lending across credit products.
Speaker 3: Talk to us about which products are the products where
Speaker 3: you're seeing interest, Borrow, After Pay, Square loans, like, where
Speaker 3: is the actual growth here?
Speaker 6: Yeah, So we're seeing, as you mentioned, we have you know,
Speaker 6: working capital loans for small businesses through Square, we have
Speaker 6: our borrow lending product through cash App, and we have
Speaker 6: our buying our pay later product globally through after Pay,
Speaker 6: And we're seeing really strong growth in our lending businesses.
Speaker 6: As I mentioned before, even though we're seeing you know,
Speaker 6: incredibly strong accelerated lending growth, we're seeing our losses stay
Speaker 6: at some of the lowest levels that we've seen today.
Speaker 6: So really responsible lending behavior, even though the number has
Speaker 6: now exceeded two hundred billion dollars of lending. Each of
Speaker 6: those products in their own right lent differently. We had
Speaker 6: Square lending against a seller's actual sales they're processing through
Speaker 6: the platform. We have cash App lending against money that's
Speaker 6: moving through the cash our ecosystem, and I've spoken extensively
Speaker 6: about how after pay works, which is flipping the economics
Speaker 6: on its head and charging the retailer of small fee
Speaker 6: instead of the consumer. You know, each of those components
Speaker 6: is being why we're seeing such strong engagement with our
Speaker 6: lending products across all of our brands.
Speaker 2: What's the assumption in terms of accounts that will go delinquent?
Speaker 2: What are your kind of general assumptions in the business.
Speaker 6: Yes, so, through our after paid business, as I mentioned before,
Speaker 6: our losses have sustainably sat below one percent, and you
Speaker 6: know traditional financial services platform would see many multiples of that.
Speaker 6: The reason why we're able to manage our lending to
Speaker 6: such great rates is because we disabled someone's account their
Speaker 6: moment they're late on one installment payment. You cannot keep shopping,
Speaker 6: you cannot revolve in debt. There's no compounding interest associated
Speaker 6: with our products, and that specific nuance not only sees
Speaker 6: responsible behavior, but you actually see our consumers illustrating a
Speaker 6: stronger desire to use after pay because our consumers say,
Speaker 6: you understand us, You understand that we prefer to use
Speaker 6: a debit card over a credit card, and you you
Speaker 6: know you've got the checks and balances in place to
Speaker 6: make sure that I don't get over my skis, and
Speaker 6: so to be able to see those those loss rates,
Speaker 6: particularly in the present economic environment, is really really encouraging
Speaker 6: to see.
Speaker 3: We're speaking with Nick molnar O, co founder and CEO
Speaker 3: of after Pay. I want to just talk a little
Speaker 3: bit about the macroeconomic environment over the last year and
Speaker 3: tariff announcements and what we heard from the administration. Did
Speaker 3: that affect demand for square loans?
Speaker 6: Yeah, So on the small business side, we've seen a
Speaker 6: really strong strength in demand for our working capital loans.
Speaker 6: And then if I look even just on our consumer
Speaker 6: side as well, our average order value through after pay
Speaker 6: was up ten percent over the Black Friday Cyber Monday
Speaker 6: it as compared to last year. So you are seeing
Speaker 6: you know, demand come through as as consumers navigating higher
Speaker 6: interest rates, inflation, etc. And the fact that consumers are
Speaker 6: moving towards more responsible sources of capital, I really think
Speaker 6: is illustrating two things. One is that buy now, pay
Speaker 6: later is genuinely becoming more mainstream, is continuing to grow.
Speaker 6: But secondly, you know, consumers are getting more nimble and
Speaker 6: agile into how they're looking for sources of capital, which
Speaker 6: is different to you know, what we've historically seen.
Speaker 2: Do you expect there to be more competition? We've just
Speaker 2: got about thirty forty seconds here. Now that the administration
Speaker 2: has become more open to approving bank charters for crypto
Speaker 2: and fintech firms, A firm and Pepal recently showed they're
Speaker 2: applied for similar ILC charters to the one that Block holds.
Speaker 2: So do you anticipate more competition? And again, just got
Speaker 2: about forty seconds.
Speaker 13: Yeah.
Speaker 6: I mean, as you reference, Block has square financial services
Speaker 6: and has had for many years. I do think there's
Speaker 6: going to be a continued push towards bringing innovative, customer
Speaker 6: friendly financial services products across all assets in the banking industry.
Speaker 6: And so I anticipate that, you know, a that would
Speaker 6: just be a fantastic thing for both sellers and consumers.
Speaker 6: But b I do believe that, you know, we'll continue
Speaker 6: to see more excitement in the.
Speaker 2: Space thanks to Nick Molnar, the co founder and CEO
Speaker 2: of after Pay, And I have to say, these buy now,
Speaker 2: pay later programs, man, they are everywhere, and it does
Speaker 2: make me it's something we brought up with him that
Speaker 2: you do wonder the oversight in terms of the aggregate
Speaker 2: of these programs. But he says, people start, you know,
Speaker 2: if they have any problems, they're cut off.
Speaker 3: Yeah, that's that's true. And I think different generations think
Speaker 3: about this stuff differently, Like, you know, I grew up
Speaker 3: with credit cards. You grew up with credit cards.
Speaker 2: I have to say, I remember when my parents got
Speaker 2: like kind of the first like people just didn't do
Speaker 2: My parents paid cash for everything, but there were layaway
Speaker 2: programs where you would put money on things and you
Speaker 2: didn't get the goods though, until you pay off.
Speaker 3: Yeah, a little deep teas for something we're going to
Speaker 3: be talking about in a few weeks. Tom Freston is
Speaker 3: going to be joining us, the founder of MTV, and
Speaker 3: the beginning of his book is all about his travels
Speaker 3: all over the world, and he makes a point of
Speaker 3: talking about when he gets out of business school, he
Speaker 3: gets approved for the first American Express and it's such
Speaker 3: a big deal because he can actually use it around
Speaker 3: the world. It's not something that he ended up using.
Speaker 3: But if you think back to the late sixties early
Speaker 3: nineteen seventies, it wasn't easy to pay for something in
Speaker 3: another country.
Speaker 2: I remember traveling and getting what was it that we
Speaker 2: used to get You'd go to a bed travel travelers check.
Speaker 3: He talks about that too.
Speaker 2: I remember doing that. Like you think about how the
Speaker 2: world has changed dramatically, and so you and I talk
Speaker 2: a lot about fintech and with fintech companies, and you know,
Speaker 2: throw bitcoin of the blockchain into this. I think we're
Speaker 2: trying to figure out how this all fits in and
Speaker 2: what this means in terms of how we pay for things.
Speaker 2: I don't carry cash. We got rid of the penny,
Speaker 2: or we're getting it right. We just I've just you know,
Speaker 2: used my phone and I pay for everything.
Speaker 3: Yeah, it's a friction list, which is what the company
Speaker 3: like to say. But I don't know if the Carol
Speaker 3: Master household loves the idea of it being frictionless.
Speaker 2: I think about this.
Speaker 3: The easier to spart with money, the worse it is.
Speaker 2: Well, think about when you I remember as a kid
Speaker 2: getting you know, you'd go on a class trip and
Speaker 2: you had X amount of dollars and you had to
Speaker 2: think about how you spent it, or going on a
Speaker 2: summer vacation and you were given X amount of dollars
Speaker 2: and like you really thought it through. Whereas here it's like,
Speaker 2: you know, I just I just here's my phone. It's
Speaker 2: digital money.
Speaker 6: Listen.
Speaker 3: I'm old enough to remember when the App Store came
Speaker 3: out for Apple, and a lot of analysts a time
Speaker 3: were like, it's so easy to actually spend money with this,
Speaker 3: that it's going to be great for Apple, not so
Speaker 3: great for consumers because you know, they're just easily separated
Speaker 3: from their cash.
Speaker 2: And I again going back to our conversation with Nick
Speaker 2: Molnor at After Pay, how many things you go to
Speaker 2: buy and they're like, would you like to do this
Speaker 2: in force installments, It's like, I just want to pay
Speaker 2: for it.
Speaker 3: Well, still to come on Bloomberg Business Week. More highlights
Speaker 3: from the recent gathering of world leaders.
Speaker 2: In Davos, and how one world leader changed the sunglass game.
Speaker 2: That's next.
Speaker 14: This is Bloomberg.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Steneveek on Bloomberg Radio.
Speaker 2: President Trump has promised to make it easier for Americans
Speaker 2: to buy homes ahead of the midterm elections as affordability
Speaker 2: issues take center stage.
Speaker 3: He's pledged to ban institutional investors from buying single family homes,
Speaker 3: and at Davos directly spoke to the difficulties in tackling
Speaker 3: the problem.
Speaker 15: Every time you make it more and more and more
Speaker 15: affordable for somebody to buy house cheaply, you are actually
Speaker 15: hurting the value of those houses. Now, if I want
Speaker 15: to really crush the housing market, I could do that
Speaker 15: so fast to people good buy houses, but you would
Speaker 15: destroy a lot of people that already have houses.
Speaker 3: That's President Trump earlier today. Jonathan Reckford knows what it
Speaker 3: takes to build affordable housing. You CEO of Habitat for Humanity.
Speaker 3: He joins us from the World Economic Forum in Davos, Switzerland. Jonathan,
Speaker 3: good to have you on the program. Is you know,
Speaker 3: we spoke a lot last week about institutional investors owning
Speaker 3: single family homes in the US, and the data are
Speaker 3: out there. It's actually a small percentage of the homes
Speaker 3: in the US are owned by institutional investors. In your view,
Speaker 3: would banning these folks from owning single family homes? E
Speaker 3: is the housing crisis in the US?
Speaker 16: Well, first, we're just pleased the administration is talking about housing.
Speaker 16: And I think the housing crisis is such a huge
Speaker 16: issue in the US and globally, and I'm glad it's
Speaker 16: on the agenda here at Davos as well, and we
Speaker 16: would say that now that middle class families children cannot
Speaker 16: afford housing, the more invisible housing crisis has become visible.
Speaker 16: You know, we need We haven't taken a stance on
Speaker 16: the issue that you've just raised. We still want to
Speaker 16: look at the details. There are certain markets nationally it's
Speaker 16: a very small percentage. There's small certain markets like Atlanta, Charlotte,
Speaker 16: a few others where it's a meaningful percentage. But that's
Speaker 16: only one small piece of the broader housing issue. We
Speaker 16: really have as a supply problem. We have a massive shortage,
Speaker 16: particularly at the low end of the market, starter homes,
Speaker 16: and so our view is creating a lot more supply
Speaker 16: on the starter home side would not actually damage home
Speaker 16: values in the middle and up er ends because we
Speaker 16: have such a shortage right now. In fact, if we
Speaker 16: work more on the demand side without increasing supply, we'll
Speaker 16: drive house costs up further and it won't really solve
Speaker 16: the housing crisis. So we need really a little bit
Speaker 16: of everything. We do need demand side solutions, but the
Speaker 16: most important thing is to increase the supply of houses
Speaker 16: at the low end of the market.
Speaker 2: You know, I have to I don't always understand. I mean,
Speaker 2: I understand giving developers breaks and tax breaks to build
Speaker 2: in certain areas that maybe need some juice and some help,
Speaker 2: right to get a kind of back and bring back
Speaker 2: a community, bring back a city, bring back a town.
Speaker 2: But I'm amazing like tax abatements that still get given
Speaker 2: in areas where things are good without any maybe provisions
Speaker 2: to make sure that they're is housing for everybody in
Speaker 2: the community, not just the wealthier folks. So how do
Speaker 2: we really fix this? I mean, I just don't understand
Speaker 2: what's the incentive to developers or builders to really help
Speaker 2: out here, and is that what it needs to be.
Speaker 16: I do think it requires incentives, but also requirements. And
Speaker 16: the best model anywhere in the world is mixed income,
Speaker 16: mixed use, where families can be close to where they
Speaker 16: need to go to work and where they have economic opportunity.
Speaker 16: But we haven't planned that way, and I think there's
Speaker 16: no magic bullet. But there are a whole series of
Speaker 16: things that can help. And I agree with you if
Speaker 16: they're incentives that should come with expectations of mixed income
Speaker 16: or that they're because the math is tough. COVID was
Speaker 16: kind of a perfect storm on affordability. So the gap
Speaker 16: between what a cost to build a unit of housing
Speaker 16: for habitat or for a private developer and what a
Speaker 16: family can afford is the widest in history. So we
Speaker 16: do have a real math problem, and I think there
Speaker 16: are different ways to solve it. We've seen at the
Speaker 16: local and state level. First, you can make it faster
Speaker 16: and easier to build. That doesn't cost cities a lot
Speaker 16: of money but can make a big difference for builders
Speaker 16: and developers. You can address zoning at the local level,
Speaker 16: get rid of parking minimums, increased density, get a minimum
Speaker 16: lot size. There's a lot of nineteen eighty strategies that
Speaker 16: aren't relevant today that would increase supply. You can do
Speaker 16: accessory dwelling units. At the federal level, I think incentives,
Speaker 16: but incentives tied to building at the starter home level
Speaker 16: and increasing the supply, so discounted financing. As the Senate
Speaker 16: has a good bill we've supported on the Road to housing.
Speaker 16: The House has a strong bill as well. I think
Speaker 16: there is bipartisan support for doing something on housing, so
Speaker 16: were enthusiastic administration wants to support it. We know it's
Speaker 16: one of the biggest drivers right now. One in three
Speaker 16: families in the world lives in inadequate or substandard housing.
Speaker 16: One in six families in America is spending over half
Speaker 16: their income on housing right now, So the level of
Speaker 16: cost burden families is the highest it's ever been and
Speaker 16: a lot of historically affordable markets have more than doubled
Speaker 16: over the last six years.
Speaker 3: Our thanks to Jonathan Reckford, CEO of Habitat for Humanity.
Speaker 3: Now something a little lighter to end this week. And
Speaker 3: I mentioned it's not something we do all the time,
Speaker 3: but this is a very bloomberg angle on a story
Speaker 3: that everybody was talking about. The blue Aviator sunglasses seen
Speaker 3: from Davos around the globe.
Speaker 2: Yeah, this was really fun to do. Well, the world's
Speaker 2: leader is brought together in Switzerland to solve the toughest problems.
Speaker 2: But I gotta say what caught a lout of attention
Speaker 2: was one luxury pair of shades worn by French President
Speaker 2: Emmanuel Macone, making headlines and becoming a hot item and
Speaker 2: in demand according to the company that makes them.
Speaker 3: For more, we head to Italy Anti Stefano full cheer,
Speaker 3: the CEO of Ivision Tech. It's the parent company of
Speaker 3: the French luxury brand Henry Julienne, which made the glasses. Stefano.
Speaker 3: Good to have you on the program. Take us through
Speaker 3: what happened since President Macrone wore those glasses. What did
Speaker 3: you see in terms of demand? What did you see
Speaker 3: in terms of people buying them? Tell us everything.
Speaker 14: Yeah, good evening and thank you to have invited me.
Speaker 14: So I think the effect is like a one effect.
Speaker 14: It was amazing because from Tuesday our website went in crash.
Speaker 14: Different times. We have received a lot of phone calls
Speaker 14: because everybody wants to buy something like that, you know,
Speaker 14: and so they have realized that the ivory is from
Speaker 14: a Julien and so we are covered full of requests
Speaker 14: and now we have immediately restarted to make power for
Speaker 14: the production of this model because everybody all over the
Speaker 14: world wanted so you know, the sales impact reaction was
Speaker 14: also amazing and we have sold in one day like
Speaker 14: the same quantity of one hour.
Speaker 2: Of production of this model, which is how many can
Speaker 2: you share with us what that number is?
Speaker 16: Yeah?
Speaker 14: Sure, we are not talking about very big numbers because
Speaker 14: we are a luxury brand. So we've produced this iware
Speaker 14: that is in gold lamination, so very particular and now
Speaker 14: we are more than two hundred pieces in only one
Speaker 14: day for this model, and so the demand is we
Speaker 14: receive orders every minute, so we have blocked the PayPal
Speaker 14: three times, so we need every time to make a
Speaker 14: restritoration of the website. So it is amazing what's happening,
Speaker 14: which you.
Speaker 3: Know shares the company up forty percent so far this month.
Speaker 3: Today they're up more than twenty one percent.
Speaker 2: I mean often running listen, did you know that he
Speaker 2: owned a pair? And I'm just curious. Tell us about
Speaker 2: these classes? What are they made of? I mean, how
Speaker 2: much did they go for?
Speaker 14: So everything happens in twenty twenty four because we have
Speaker 14: received a call from the Eliza, from the assistant of
Speaker 14: the president and they want to buy one because they
Speaker 14: want to make a present for a minister in the
Speaker 14: period of g twenty. So I remember that I ever
Speaker 14: received this call. And so when we have received this call,
Speaker 14: we say, wow, this is the president, so we have
Speaker 14: to do something more and we want to make a
Speaker 14: present also to give you something. But the assistant told
Speaker 14: us okay, please, okay, but we want to pay, so
Speaker 14: you know, they try to respect that and they ask
Speaker 14: us to have everything made in France. So they want something,
Speaker 14: you know, every phase because you want to represent a
Speaker 14: product from the history of France. And I have to
Speaker 14: tell to you that, you know, rigially En is an
Speaker 14: historical brand. The company is born in nineteen twenty one,
Speaker 14: and this is a one hundred years company. And so
Speaker 14: when we have sent them, we don't We didn't have
Speaker 14: any news after that, and we recognized between our customers
Speaker 14: because of some customers during Monday, they start to send
Speaker 14: me pictures and they say, is it that an originally En?
Speaker 14: And they say yes, and so on Tuesday everything happens,
Speaker 14: you know.
Speaker 3: So I want to talk a little bit aboutupply chains here,
Speaker 3: because what is notable about these frames is that they
Speaker 3: are made in France. In this day and age, most
Speaker 3: sunglasses are and most classes are actually made at least
Speaker 3: the ones that come to the US are actually made
Speaker 3: in China. And I'm curious about the supply chain here
Speaker 3: in a conversation where we're talking a lot about domestic
Speaker 3: manufacturing in the United States that's been a big focus
Speaker 3: of President Trump. How do you keep manufacturing in France
Speaker 3: and not outsource it to other parts of the world
Speaker 3: where it would be a lot cheaper.
Speaker 14: Yeah, thank you, very much for this question, because I
Speaker 14: would like to start from the beginning, because our company
Speaker 14: was born six years ago, because we have started in
Speaker 14: October twenty twenty, so in the middle of the COVID period,
Speaker 14: because we have both the Sapphilo plant in Udine, so
Speaker 14: one hour from Venice, and the idea is to restart
Speaker 14: the production of the IWA in Friuli, so freely is
Speaker 14: our region where I live. And you know, in that
Speaker 14: period the Saphialo has closed the plant and we restart
Speaker 14: the production inside. And we have a huge capacity here
Speaker 14: in Italy because our main company in Italy is a
Speaker 14: capacity about one million highware per year. So if we
Speaker 14: are talking about our company at lisually end in France
Speaker 14: we produce like one thousand pieces per year, so we
Speaker 14: have a very niche market for this type of production.
Speaker 14: And what we have done the idea when we have
Speaker 14: both at Julien in October twenty twenty three, so after
Speaker 14: our listing in the stock has change, we have decided
Speaker 14: to create like a boutique. So our idea was to
Speaker 14: produce in France only some small pieces, talking about the
Speaker 14: historical process, everything handcraft with a lot of faces, and
Speaker 14: I would like also to say to you that this
Speaker 14: ire is in gold lamination, So what is the particularity
Speaker 14: of that that inside you can find gold? And so
Speaker 14: it's a very precious material. And the final price is
Speaker 14: not too amazing because we are talking about six hundred
Speaker 14: and fifty euros each and talking about gold is a
Speaker 14: very competitive price. But this is something that represents, you know,
Speaker 14: the story of the French production. And finally, I believe
Speaker 14: that we are based in the two most mading important
Speaker 14: all over the world. Because if we're talking about hire
Speaker 14: production made in France is very important.
Speaker 16: Like made in Italy.
Speaker 14: So you know, in France there is the Jura area
Speaker 14: that is very famous, like in Italy that we have
Speaker 14: Cadore and Kadora is very famous for the iware companies.
Speaker 2: You know.
Speaker 14: So we have a lot of knowledge, a lot of people,
Speaker 14: and to create a good iWar you need also to
Speaker 14: have a good stuff, good people. Our people inside is
Speaker 14: twenty five years of experience to create iwors, So I
Speaker 14: were is not really easy to produce something like that.
Speaker 2: That was the final fault, chair the CEO of Ivision Tech.
Speaker 2: And that wraps up the weekend edition of Bloomberg Business
Speaker 2: Week from Bloomberg Radio. Thank you so much for joining us.
Speaker 2: I think Tim is trying to order those sunglasses.
Speaker 3: They're expensive. How much they're in the many hundreds of dollars. Okay,
Speaker 3: you know, made in Europe.
Speaker 2: I love it.
Speaker 3: Yeah, they're pretty he looks pretty good.
Speaker 14: Can I just say that?
Speaker 15: Yeah?
Speaker 3: I do have a pair of aviators, but they don't
Speaker 3: have that blue tent and they're definitely not made in France.
Speaker 2: I gotta say, if you don't have a pair of aviators,
Speaker 2: I mean.
Speaker 3: You are who are you not? Tom Cruse olw are
Speaker 3: you yeah?
Speaker 2: Or Joe Biden?
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