Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence
Speaker 1: with Alex Steinehl and Paul Sweeney.
Speaker 2: The real app performance has been in US corporate high yield.
Speaker 3: Are the companies lean enough? Have they trimmed all the fats?
Speaker 2: The semiconductor business is a really cyclical business.
Speaker 1: Breaking market headlines and corporate news from across the globe.
Speaker 3: Do investors like the M and A that we've seen?
Speaker 4: These are two.
Speaker 2: Big time blue chip companies.
Speaker 3: The window between the peak and cut changing super fast.
Speaker 1: Bloomberg Intelligence with Alex Steinehl and Paul Sweeney on Bloomberg Radio.
Speaker 5: I'm Paul Sweeney and I'm Emi Graffeo filling in for
Speaker 5: Alex Steele.
Speaker 2: On today's Bloomberg Intelligence Show. We dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets.
Speaker 5: Each and every week, we provide in depth research and
Speaker 5: data on some of the two thousand companies and one
Speaker 5: hundred and thirty industries our analysts cover worldwide.
Speaker 2: Today, we'll discuss how patients can now get Eli Lilly's
Speaker 2: blockbuster weight loss rug at nearly fifty percent discount plus.
Speaker 5: We'll look at a slew of US retail earnings that
Speaker 5: are painting a mixed picture of the consumer.
Speaker 2: But first we dive into the earning from AI giant
Speaker 2: n Vidia. This week, the chipmaker gave a revenue forecast
Speaker 2: that fell short of some of the most optimistic analyst expectations.
Speaker 5: The outlook threatens to tamp down an AI frenzy that
Speaker 5: has transformed in Vidia into the world's second most valuable company.
Speaker 2: For more, Emily and I were joined by kun John Sobani,
Speaker 2: Bloomberg Intelligence senior semiconductor analysts.
Speaker 5: We first asked Koon John for his take on the
Speaker 5: company's results.
Speaker 4: Look, this not enough negatives.
Speaker 6: Fundamentally, they are a victim of their own recent success
Speaker 6: and strength and really unrealistic expectations.
Speaker 5: I'm wondering, this is a company where a lot of
Speaker 5: their their customers are highly concentrated. Something like forty percent
Speaker 5: of the customer base is just a few big tech companies.
Speaker 5: What are the risks associated with that?
Speaker 6: I mean, the concentration has been a significant risk. It's
Speaker 6: sort of a double eds. You know, by the function
Speaker 6: of spending. These customers are the ones who really spend
Speaker 6: major I app capex dollars, So you do want them
Speaker 6: to be your biggest customers. Because that's who are really
Speaker 6: creating the market. At the same time, we have seen
Speaker 6: signs like over the last two quarters, the cloud players
Speaker 6: make up about forty five percent of its data center revenue,
Speaker 6: which is down from its peak of mid fifty percent
Speaker 6: over last year, so that's a good sign. Over the
Speaker 6: last few quarters, we have seen enterprises and the consumer
Speaker 6: internet and vertical companies growing faster for NVDA data center
Speaker 6: revenues compared to the cloud revenues for NVDA data center,
Speaker 6: so that's again a good sign. Another third sign that
Speaker 6: shows that ditaversification is happening and that risk is easy
Speaker 6: is what we have seen in front of geographical demand perspective.
Speaker 6: So over the last few quarters, we have seen rest
Speaker 6: of the world outside of US continue to sustainably keep
Speaker 6: growing sequentially. In fact, this quarter was the first time
Speaker 6: we ever saw US decline slightly quarter work quarter.
Speaker 2: So Kunjan, can those new types, new verticals of customers,
Speaker 2: can they offset what might be slowing demand from the
Speaker 2: Amazons of the world, the Googles of the world who
Speaker 2: are developing their own chips.
Speaker 6: So we have not seen signs of slowing demand from
Speaker 6: the Amazons and Googles of the world. You know, when
Speaker 6: you look at quarter to quarter things can look lumpy,
Speaker 6: but from a year and perspective, annual perspective, we are
Speaker 6: not seeing slowing demand. In fact, when we look at
Speaker 6: these earning seasons, all of these customers beat their capex
Speaker 6: estimation and guided for more capex spending, most of it
Speaker 6: going to a Yeah, most of it going to in media. Yes,
Speaker 6: the risk is there of these customers using their own chips,
Speaker 6: but that's more of a out year risk. They still
Speaker 6: do are not slowing down or stopping purchasing in media chips.
Speaker 5: What do investors need to know about the Blackwell processor lineup?
Speaker 5: Ian King of Bloomberg News said this is in Nvidia's
Speaker 5: next big cash cow exactly.
Speaker 6: I mean, from our perspective, the biggest question or the
Speaker 6: risk going into the earnings was what's happening with the
Speaker 6: Blackwell delay? Is it going to ramp? And if so?
Speaker 6: When I think the comment that Jensen made about seven
Speaker 6: billion dollars shipment in their fiscal four Q should put
Speaker 6: a lid on these uncertainty around Blackwell. And yes, Blackwell
Speaker 6: is supposed to be the next growth driver. Specifically, most
Speaker 6: of the twenty twenty five growth is hinged on Blackwell's success.
Speaker 2: Layout for US kind of how the competitive environment looks
Speaker 2: at their Kunjan. I'm thinking about advanced micro devices, broad coom,
Speaker 2: maybe to Qualcom to less extent Intel. I guess where
Speaker 2: are all these competitors here? Why can't they do this stuff?
Speaker 6: I mean, and Media has almost more than a decade
Speaker 6: of R and D behind them in this arena. Right,
Speaker 6: they are the ones who, for the most part, invented GPUs.
Speaker 6: They have been working on GPUs for like I said,
Speaker 6: investing in it more than a decade. These other companies
Speaker 6: that we talked about I have not been investing in
Speaker 6: this area. So it's not as easy to come in
Speaker 6: and immediately replace someone who has been ahead of you
Speaker 6: by multi years. Second, there's a lot other entries to barrier.
Speaker 6: It's not just about creating comparable chips, their software, system
Speaker 6: their systems. They're not a chip solution provider anymore. They
Speaker 6: are a system solution provider. So you don't need a
Speaker 6: comparable chip. You also need the software, you need the ecosystem,
Speaker 6: you need the vertical integration and the system integration capabilities.
Speaker 6: At the same time, they are not just sitting right,
Speaker 6: they are running much faster than they have in the past.
Speaker 6: So it's not just about catching up to in Media,
Speaker 6: which is already two plus years ahead of its closest competitor.
Speaker 6: It's also trying to catch up when they are even
Speaker 6: running faster. One example of that is they are now
Speaker 6: launching new products at a cadence of twelve months. This
Speaker 6: is unprecedented in the semi conductor world for this complex technology.
Speaker 6: Usually you see eighteen to twenty four months of a
Speaker 6: product lon cycle.
Speaker 2: How about valuation here again, you know, you look at
Speaker 2: it and it's like seventy times trailing forty five times
Speaker 2: this year, is thirty times next year? Is this a
Speaker 2: stock that real, realistically with a straight face you can
Speaker 2: say to clients is earning its way into its multiple.
Speaker 6: Also, we look at forward looking multiples and when you
Speaker 6: still compare it today compared to most of its peers, right,
Speaker 6: it's still growing faster than most of its peers, even
Speaker 6: at this large scale, which is very important that people
Speaker 6: forget when you look at other fundamental metrics, the gross margin,
Speaker 6: the earnings growth, the free cashual generation still top of
Speaker 6: the list. So I mean that does demand a certain
Speaker 6: premium versus its peers, right, And when you look at
Speaker 6: the other air peers. It doesn't seem that expensive on
Speaker 6: a relative basis.
Speaker 5: Give us some final thoughts on is this a market
Speaker 5: that is only going to be powered by in video
Speaker 5: or are we going to see more trading days The tech
Speaker 5: trade is kind of you know, in the green without Invidia.
Speaker 1: I would say both.
Speaker 6: I mean you have to really separate out right. We
Speaker 6: think if if there is fundamental weakness or concern coming
Speaker 6: out of in media, which did not happen, by the way,
Speaker 6: we think there will be a broader impact to the market.
Speaker 6: But in the absence of that, right, there was no
Speaker 6: real concerns, There was no real flag risks that were
Speaker 6: macro risks outlined here that the demand is slowing, the
Speaker 6: spending is slowing. So I believe until and unless we
Speaker 6: don't see those risks come out, the impact should be
Speaker 6: limited to Invidia. But when, if, and when we do
Speaker 6: see those come out, it could spread across.
Speaker 2: Thanks to Kunjhan Sobani, Bloomberg Intelligence senior semiconductor analysts.
Speaker 5: We move now to the media space.
Speaker 2: Pretty sure, David Ellison Skydance Media looks set to become
Speaker 2: the new owner of Paramount Global.
Speaker 5: That's after seacrem air. Edgar Bronform Jr. Dropped his bid
Speaker 5: for Paramount this week. Paramount said it now expects to
Speaker 5: complete a deal with sky Dance in the first half
Speaker 5: of twenty twenty five.
Speaker 2: For More and All This, host Alex Steele and Bailly
Speaker 2: Lipschaltz were joined by Keitha rung Anathan Bloomberg intelligence analyst
Speaker 2: on US media.
Speaker 5: They first asked Etha for her take on the latest news.
Speaker 7: This one's been a tough one, right, It's not over
Speaker 7: until it's over. I think Skydance does seem to be,
Speaker 7: you know, the only bidding party here for Paramount, and
Speaker 7: you know, the Edgar Braffman bid, and you know, we
Speaker 7: were talking about this last week, Alex. It was really
Speaker 7: a little bit of a head scratcher because they made
Speaker 7: that eleventh hour move. He cobbled together something like twenty
Speaker 7: outside investors and then when you know, kind of push
Speaker 7: came to shove, he really couldn't find the equity financing
Speaker 7: required to back his six billion dollar offer.
Speaker 8: Am I reading too much into it to question why
Speaker 8: the eleventh hour offer, Like if if it seemed like
Speaker 8: there wasn't enough time early, enough time, and you're trying
Speaker 8: to find people and get funding. It kind of I.
Speaker 7: Don't know, Yeah, I think, you know, a couple of
Speaker 7: different things. Maybe he had difficulty kind of finding all
Speaker 7: the different parties interested. Obviously he didn't you know, there
Speaker 7: was a ghost shop period that was a forty five
Speaker 7: day period and he literally submitted it on August twentieth.
Speaker 7: Then August twenty first was the end of that forty
Speaker 7: five day go shop period. One could argue that maybe
Speaker 7: he didn't want to, you know, kind of show his
Speaker 7: hand too early so that there, you know, would be
Speaker 7: other parties kind of jumping in. But at the end
Speaker 7: of the day, you know, he obviously does not have
Speaker 7: the financial firepower of the Allison family, and that's something
Speaker 7: I think investors are going to have to come to
Speaker 7: terms with.
Speaker 3: So all right, let's just walk it forward. You get Skuidance,
Speaker 3: gets paramount, et cetera. There were some reports that maybe
Speaker 3: some of the TV networks I'm assuming Local would be
Speaker 3: spun off or sold, etc. What are we expecting of
Speaker 3: that sort to unfold?
Speaker 7: So they right now have three co CEOs and this
Speaker 7: kind of structure, this temporary structure, is going to continue
Speaker 7: till this Guy Dance deal closes, which might happen sometime
Speaker 7: towards the latter half of twenty twenty five. Until then,
Speaker 7: what they're really trying to do is number one is
Speaker 7: make streaming profitable. They already did do that in the
Speaker 7: second quarter. So they're really kind of cutting down on
Speaker 7: marketing spend, they're cutting down on content expenses, They're doing
Speaker 7: everything they can to write the ship. They're also kind
Speaker 7: of trying to undertake cost cuts across the whole enterprise
Speaker 7: and get rid of non core assets. So the news
Speaker 7: that we got about them looking to divest some of
Speaker 7: their low local TV stations exactly kind of goes to
Speaker 7: that strategy. You know, they could potentially end up with
Speaker 7: about five hundred million, I mean about half a billion
Speaker 7: or a billion dollars for those you know, TV stations. Again,
Speaker 7: that's going to help them pay down debt. And debt
Speaker 7: has been a huge problem for Paramount. They have almost
Speaker 7: about fourteen and a half billion dollars in debt, and
Speaker 7: that has really kind of complicated the whole story because
Speaker 7: it you know, they have low ebit, low free cash flow,
Speaker 7: and then very high debt.
Speaker 8: And what does the path forward look like. I'm just
Speaker 8: looking through your latest note kind of looking at strengthening
Speaker 8: the balance sheet. To your point, more than fourteen a
Speaker 8: half billion in debt. Market cap is seven point six
Speaker 8: billion dollars, so you never really want to see numbers
Speaker 8: that stretched. But what does Ellison's d pockets bring to
Speaker 8: the table, Like, how does this potentially revamp Paramount if
Speaker 8: at all?
Speaker 7: Absolutely, that's that's a great point, Bailey. So I think
Speaker 7: the main reason that Ellison has been chasing after Paramount
Speaker 7: for all these months is really his interest in kind
Speaker 7: of getting his hands on the studio. So he does
Speaker 7: have a long history with Paramount. They have, you know,
Speaker 7: the Ellisons have been a co financer on many of
Speaker 7: the Paramount TV and film projects, most notably a lot
Speaker 7: of the Tom Cruise movies. So they do kind of
Speaker 7: know how, you know, that business works. They have a
Speaker 7: lot of expertise, so they are going to kind of
Speaker 7: double down on the Paramount studio business. The theatrical business
Speaker 7: is rebounding nicely, so I think it does make sense
Speaker 7: for them. And historically, if you just look at Paramount,
Speaker 7: this is you know, the studio has always kind of
Speaker 7: been a step child. So it's nice that it's going
Speaker 7: to now come into focus, and then along with that,
Speaker 7: you have almost one thousand person animation team that Skuydance
Speaker 7: is going to bring to Paramount, so really kind of
Speaker 7: doubling down on the animation business. And this is important
Speaker 7: because we see studios kind of going deeper and deeper
Speaker 7: into animation. This is animation is one of the most
Speaker 7: profitable genres across the whole movie space, so it makes
Speaker 7: a lot of sense for them to get into that
Speaker 7: in a bigger way because they can really kind of
Speaker 7: enhance the profitability of the studio business as a whole.
Speaker 2: Our Thanks to Githa Ranganathan, Bloomberg Intelligence analyst on US Media.
Speaker 5: Coming up a conversation with the executive director of the
Speaker 5: Port of Los Angeles on cargo volumes and the shipping industry.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
Speaker 2: Bigo on the terminal.
Speaker 5: I'm Paul Sweeney and I'm Emily Graffeo. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
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Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
Speaker 1: get your podcasts, or watch us live on YouTube.
Speaker 5: I'm Paul Sweeney and I'm Emily Graffeo filling in for
Speaker 5: Alex Steele.
Speaker 2: We move now to the biotech space. This week we
Speaker 2: heard the pharmaceutical company Eli Lilly is selling vials of
Speaker 2: its blockbuster weight loss drug to patients at a fifty
Speaker 2: percent discount to its shots.
Speaker 5: Patients with a prescription for Zetbound can now purchase a
Speaker 5: month's supply of single use vials through Lily's direct to
Speaker 5: consumer site.
Speaker 2: This is being done to help Eli Lily overcomes supply
Speaker 2: shortages of its widely popular shots. For more, hosts Alex
Speaker 2: Stale and Billy Lipschutz were joined by Michael Shaw, Bloomberg
Speaker 2: Intelligence Senior Pharma analyst.
Speaker 5: They first asked Michael why it's easier for Eli Lilly
Speaker 5: to produce vials than actual shots.
Speaker 4: They're providing a valve for relation. It's something that they've
Speaker 4: talked about, you know, for a while now on their calls.
Speaker 9: Now.
Speaker 4: The reason why these are easier to produce is, you know,
Speaker 4: the fill and finished capacity, so the capacity needed to
Speaker 4: actually put the drug in the pens and the capacity
Speaker 4: needed to manufacture at the pens of the subcutaneous ejection.
Speaker 4: So overall, I think, you know, the move is you
Speaker 4: know positive for Lily clearly broadens access or patients access
Speaker 4: you know, to zet bound and also from you know,
Speaker 4: compounding pharmacy standpoint. The fact that they improved supply means
Speaker 4: it could you know, possibly combat you know, competition from
Speaker 4: you know, companies such as him, Hymns and Hers.
Speaker 8: Yeah, Lily not so subtly saying that they want to
Speaker 8: aim to protect patients from quote counterfeit, fake unsafe for
Speaker 8: untested knockoffs. So how does that impact kind of the
Speaker 8: business and demand If we're seeing a cheaper version being
Speaker 8: sold and maybe trying to court some of those Hymns
Speaker 8: and Hers GLP one users, how does that impact kind
Speaker 8: of the total addressable market and expectations for sales of
Speaker 8: zepp out.
Speaker 4: Well, I think if there's you know, if there's a
Speaker 4: branded vowel formulation out there and there's obviously guarantees around
Speaker 4: kind of purity, et cetera, I think that's going to
Speaker 4: be the preferred choice. The fact that you're introducing these
Speaker 4: valves into the market, would suggest that, you know, some
Speaker 4: of that supply burden and supply shortage which is needed
Speaker 4: for a compounding pharmacy to produce a drug that is
Speaker 4: on pattern, you know, some of that will be alleviated there.
Speaker 4: So that's kind of why we think it's positive for Lily.
Speaker 4: As to whether you know, come to like him and
Speaker 4: hers will continue producing you know, their versions of the
Speaker 4: GEO beyond ones, I mean, that remains to be seen.
Speaker 4: But I imagine if they do, you know, Lily would
Speaker 4: you know, probably challenge.
Speaker 3: It when people then do their own shots, like administer it,
Speaker 3: Like is there a risk in that? Like, well, what
Speaker 3: what kind of uptake are we expecting from that? Because
Speaker 3: I would be scared to do it. But maybe that's
Speaker 3: just me.
Speaker 4: I mean, I think judging by you know, what we
Speaker 4: saw for uptake of these compounded drugs, there's clearly a
Speaker 4: appetite for injectable injections. Now, you know, we look to
Speaker 4: the diabetes market. You know, some of the incidents used
Speaker 4: to be injections, So I mean, I think it's not
Speaker 4: I mean, there's clearly kind of an increased kind of
Speaker 4: dosing burden associated within these injections, so they're probably not
Speaker 4: going to be suitable for all, but you know, I
Speaker 4: think there is going to be an appetite for it.
Speaker 8: What does this mean for the competitive landscape? So you
Speaker 8: have Lily, you have Novo. To your point, you have
Speaker 8: hymns and hers like, is this going to create a
Speaker 8: pricing war? Am I reading too much into that now?
Speaker 4: I mean when we look at the I mean, the
Speaker 4: headlines had fifty percent you know, discount, but we need
Speaker 4: to remember that, you know, on a net price basis,
Speaker 4: so you know, after taking account all the rebates and discounts,
Speaker 4: you know, the pricing is probably you know, fairly similar
Speaker 4: to the current net prices that we're seeing now at
Speaker 4: the moment. You know, it's an underpenetrated market. You know,
Speaker 4: there's massive demand out there, there's tight supply, So I
Speaker 4: don't think it's gonna you know, change too much in
Speaker 4: terms of the dynamics between you know, Novo and Lily.
Speaker 4: I think I think prescribing decisions are you know, less
Speaker 4: about kind of the profiles of the drug at the
Speaker 4: moment and more about you know, what is ensured, what
Speaker 4: can people get their hands on? So near term, I
Speaker 4: don't see you know that that changing from a lily perspective.
Speaker 4: You know, as they ramp up supply over the over
Speaker 4: the midterm of their you know, their pens. You could
Speaker 4: put GC patients switching from the injectable onto the pen
Speaker 4: as in when that supply comes on board.
Speaker 6: All right.
Speaker 2: Thanks to Michael Schap, Bloomberg Intelligence Senior Parma biotech analyst.
Speaker 5: We move next to one of the world's busiest seaports
Speaker 5: and a leading gateway for international trade in North America,
Speaker 5: the Port of Los Angeles.
Speaker 2: This week, co hosts Alex Steele and I were joined
Speaker 2: by Geen Soroka, Executive Director of the Port of Los Angeles.
Speaker 2: We discussed his forecast for cargo volumes, the shipping industry,
Speaker 2: and investing in ports moving forward, and we began by
Speaker 2: asking Gene what the traffic is at the Port of LA.
Speaker 10: We're up eighteen percent year on year off of very
Speaker 10: modest comps, but we just crossed the five hundred thousand
Speaker 10: container unit mark last month and it's only the fourth
Speaker 10: time in our history we've had more than half a
Speaker 10: million imports coming through Los Angeles. Big number for US,
Speaker 10: and it continues the trend that we've seen thus far
Speaker 10: this year. In addition, exports are now up fourteen consecutive
Speaker 10: months year on year, So the volume as a whole
Speaker 10: is really great, based mainly on a strong economy and
Speaker 10: then some geopolitical issues around around the world that I'm
Speaker 10: sure we'll talk about.
Speaker 3: Yeah, So, Gin, I'm curious how much are your customers
Speaker 3: talking about the geopolitics abroad but also here in the
Speaker 3: US Anecdotally, I keep hearing that certain companies are just
Speaker 3: holding back on investments until we get clarity on who's
Speaker 3: going to be in the White House. Are you seeing
Speaker 3: any of that.
Speaker 10: In just about every conversation, alex It is an election
Speaker 10: year and folks are looking to see and try to
Speaker 10: hedge as to what type of policies will be in
Speaker 10: place after inauguration.
Speaker 11: You've got a protracted labor.
Speaker 10: Negotiation on the East Coast with the Dock Workers and
Speaker 10: Employers Association that's coming up for expiry at the end
Speaker 10: of September. The Panama Canal drought issues have been in
Speaker 10: the news for well over a year and a half,
Speaker 10: and the ongoing security concerns in the Red Sea have
Speaker 10: stymied crossings at the Suez Canal for more than a
Speaker 10: year as well. All of that put together fractionally, you
Speaker 10: see cargo coming to the West coast of the United
Speaker 10: States and specifically Los Angeles in addition to the strength
Speaker 10: of that economy.
Speaker 11: That shows where the numbers are going.
Speaker 2: Heyjean, just last week Bloomberg News published a really in
Speaker 2: depth big Take story. Now look at your world ports
Speaker 2: around seaports around the world and how some governments are
Speaker 2: using them as really strategic tools here because they're becoming
Speaker 2: so important for global trade. Just for the US, do
Speaker 2: you feel like our ports are where they need to
Speaker 2: be in terms of investments capacity or does the US,
Speaker 2: whether it's a public private partnership, need to invest more.
Speaker 10: We absolutely need to invest more. But beginning with the
Speaker 10: Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and
Speaker 10: now applications that are in front of the Environmental Protection Agency,
Speaker 10: we've seen a focus on ports over the last three
Speaker 10: and a half years here in the United States we
Speaker 10: haven't seen in a generation. We'd like to have this
Speaker 10: type of federal investment budgeted annually. And I also know
Speaker 10: that the work here in California under Governor Gavin Newsom
Speaker 10: has the same bent paying attention to these ports, investing
Speaker 10: not only in the infrastructure, but digitalization as well as
Speaker 10: clean and green technologies. This has to continue. But I
Speaker 10: like the trajectory that we're on right now.
Speaker 3: Going back to what you were mentioning about customers talking
Speaker 3: about election uncertainty, what's your best guess as to what
Speaker 3: happens after that. I'm trying to get a handle on, Like, Okay,
Speaker 3: now I know who wins the White House. Are we
Speaker 3: going to see a flood of money coming in like
Speaker 3: a flood of buying or is it just going to
Speaker 3: be incremental?
Speaker 11: Well, Alex take away the politics.
Speaker 10: The presumptive Republican nominee and now Republican nominee has said
Speaker 10: he wants to put a ten percent tariff on all
Speaker 10: three trillion dollars worth of imports that come to the
Speaker 10: United States, sixty percent on those emanating from China, and
Speaker 10: potentially sixty percent on automobiles and other products coming out
Speaker 10: in Mexico. That would change the landscape here at the
Speaker 10: Port of Los Angeles forever, and it would create inflation.
Speaker 11: On the Democratic side.
Speaker 10: What we've seen is a continuation of this teriff regime
Speaker 10: and get tough on China policy, but in very small
Speaker 10: targeted ways. What happens to investment after this has to
Speaker 10: revolve around international and trade policy. What are we going
Speaker 10: to do to stimulate not only the continuation of that
Speaker 10: government investment federal and state level, but how we can
Speaker 10: give confidence to the private sector to invest behind us.
Speaker 2: Gee, nobody has a better view of China than you.
Speaker 2: Guys in the Port of Los Angeles. Are the boats
Speaker 2: still coming? Are they loaded as much? Because there's real
Speaker 2: concern about the Chinese economy.
Speaker 10: Yeah, a couple things, Paul. When we concluded calendar year
Speaker 10: twenty twenty two, fifty seven percent of our business portfolio
Speaker 10: here in Los Angeles was China cargo, imports and exports.
Speaker 10: Right now it's about forty three percent. Yet we're still growing.
Speaker 10: We've been nimble enough here in Los Angeles to attract
Speaker 10: the cargo in Southeast and South Asia. There are more
Speaker 10: NonStop services being put in place by the shipping lines.
Speaker 11: Speed has always been.
Speaker 10: Our selling point with cargo coming from Asia and distributing
Speaker 10: throughout the country. We keep these NonStop services in place,
Speaker 10: that speed variable remains in our favor.
Speaker 3: What's your biggest problem right now, Gene, Like, what keeps
Speaker 3: you up at night?
Speaker 10: Well, looking across the board, making sure we keep our
Speaker 10: costs in place. And we do that with a relatively
Speaker 10: expensive landscape on how we move cargo. But more volume
Speaker 10: means our unit cost becomes much more competitive, and we're
Speaker 10: trending in that direction nicely. We've got a very complex
Speaker 10: labor landscape. Our dock workers have a contract for another
Speaker 10: five years, but it's the trucker's warehouses folks in it
Speaker 10: and manufacturing. We've got to keep trained up and moving
Speaker 10: with this economy. And then lastly along the regulatory environment.
Speaker 10: Got to make sure the clean air is a priority,
Speaker 10: but making sure that we're balanced, because every four containers
Speaker 10: here in Los Angeles creates a job.
Speaker 2: Interesting, So, Gin, you mentioned some of your partners there,
Speaker 2: whether that or at the docks, the warehouses, the transportation,
Speaker 2: the rails and trucks. How is that supply chain, how
Speaker 2: is that the logistic chain performing in your area these days?
Speaker 10: I look at the vital statistics every morning, and after
Speaker 10: just checking in with you all, I saw that they're
Speaker 10: at or better than where they were pre COVID, with
Speaker 10: one exception. Are on dock rail cargo sitting a little
Speaker 10: bit longer than I would like. We're working very closely
Speaker 10: with both the Union Pacific Railroad and BNSF to make
Speaker 10: sure we have railcars, engine power, and crewing to match
Speaker 10: this surgeon cargo that we have coming.
Speaker 11: Now.
Speaker 10: Nothing sinister is happening on the ground. Just need to
Speaker 10: keep that velocity going so the next ships, of which
Speaker 10: we have fifty six on the way from Asia, can
Speaker 10: be worked expeditiously by our long shore remembers and they
Speaker 10: gotten off into the American economy. And that's with all
Speaker 10: this data, Paul, we see these micro in many spikes
Speaker 10: or changes in the supply chain data, so we can
Speaker 10: act much quicker than we ever have before.
Speaker 5: Our thanks to Gene Soroka, executive director of the Port
Speaker 5: of Los Angeles. Coming up on the program, we'll discuss
Speaker 5: how the impact of a declining recount in the US
Speaker 5: is impacting oil production.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing indepth
Speaker 2: research and data on two thousand companies and one hundred
Speaker 2: and thirty industries that can access Bloomberg Intelligence via BIGE
Speaker 2: on the terminal. I'm Paul Sweeney and.
Speaker 5: I'm Emily Grafeo.
Speaker 11: This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business App. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 5: I'm Paul Sweeney and I'm Grafo filling in for Alex Steele.
Speaker 2: We move next to retail and the health of the consumer.
Speaker 5: This week, we got earnings from retailers Coles, Abercrombie and
Speaker 5: Fitch and Nordstrom, among others.
Speaker 2: For more, guest hosts Michael Reagan and I were joined
Speaker 2: by Mary Ross Gilbert Bloomberg Intelligence Senior Equity Animals. Covering retail,
Speaker 2: we first asked Mary for her take on the most
Speaker 2: recent results.
Speaker 9: I would say mixed results coming out of retailers. So
Speaker 9: for example, on Coals, they missed on the sales line,
Speaker 9: so the comp sales came in down about five percent
Speaker 9: and analysts were expecting down two and a half percent.
Speaker 9: But the good news was that they beat on the
Speaker 9: bottom line and they raised their earnings guidance for the year,
Speaker 9: so they're now expecting something closer to two dollars whereas
Speaker 9: before they are expecting something less than a dollar eighty previously.
Speaker 9: So while that is good news, they do need to
Speaker 9: get the top line right sided. And with Tom Kingsbury
Speaker 9: as the CEO, and he has an amazing track record.
Speaker 9: He's the one who took Burlington from sort of a
Speaker 9: mall based type discount retailer to an off price, fast
Speaker 9: growing company, so there's a lot of faith in him.
Speaker 9: He's bringing in a new categories that so Fara business
Speaker 9: did well. It was up load teens on a comp
Speaker 9: basis with total beauty sales up forty five percent. But
Speaker 9: now we need conversion and yes there's headwinds from the consumer.
Speaker 9: So then if you take it over to Abercrombie on
Speaker 9: the other side of the picture, their customer base for
Speaker 9: both brands, Hollister and the Abercromby and Pitch brands, their
Speaker 9: household income is one hundred to one hundred and fifty thousand,
Speaker 9: not like Cohal's where you're under seventy five in household income,
Speaker 9: and so you really have to be very discerning. So
Speaker 9: an Abercromby is executing very very well and that explains
Speaker 9: why they had double digit increases in comp sales. The
Speaker 9: Abercrombie brand was up twenty one percent on a comp basis,
Speaker 9: and you had a fifteen percent increase on Hollister and
Speaker 9: that on top of double digit increases a year ago.
Speaker 9: So that's a company that's executing very well with just
Speaker 9: great results. And then Nordstrom is sort of in that
Speaker 9: similar category. The sales were a little lighter than consensus estimated,
Speaker 9: but they had strong full price sales. That's very encouraging
Speaker 9: and the fact that the business is actually generating positive
Speaker 9: sales something that we're not seeing really in department stores.
Speaker 12: You know, Mary, if I listen to everything you're saying
Speaker 12: from sort of a macro economics lens, I wonder if
Speaker 12: there's like a big theme to be taken away here,
Speaker 12: you know, excluding sort of the execution hits and misses
Speaker 12: from each company. But it sounds to me like, you know,
Speaker 12: those lower income consumers are struggling a little bit, the
Speaker 12: higher income consumers are still spending. I mean, is it
Speaker 12: is that simple takeaway? Is that too simplified or is
Speaker 12: that really kind of the story that we're is emerging
Speaker 12: from the earning season for retailers.
Speaker 9: Yeah, I think that's fair. And even you know, as
Speaker 9: we get up in to the higher income. They're also
Speaker 9: trying to save money too. I think that you saw
Speaker 9: that in the news out last week with walmartin Target,
Speaker 9: and so a lot of them are taking advantage of
Speaker 9: the better prices there, but that also keeps them in
Speaker 9: a good position to continue spending elsewhere, you know, so
Speaker 9: for things that are more desirable. So yes, I think
Speaker 9: clearly the lower income, lower middle income consumer and even
Speaker 9: middle income consumer is just having a hard time dealing
Speaker 9: with high food and energy prices and that's showing up
Speaker 9: in their very discerning spending. That's exactly what you're seeing, you.
Speaker 12: Know, Mary, I sent my youngest two kids off to
Speaker 12: the school back to school already, we started early in
Speaker 12: the touch in but it got me thinking about that
Speaker 12: whole that really important back to school shopping season, especially
Speaker 12: for you know, your Abercrombie's of the world. What's the
Speaker 12: outlook there, I mean, if you could put, you know,
Speaker 12: break out your crystal ball and tell us what the
Speaker 12: next quarter numbers are going to look like, do you think,
Speaker 12: you know, is there going to be some weakness because
Speaker 12: of all these shoes you're describing.
Speaker 9: Yeah, so it's a good question, I think, once again, well,
Speaker 9: we'll probably have some mixed results. But Abercromby is seeing
Speaker 9: very good reaction to some of the initial categories that
Speaker 9: they have. So for example, in Hollister, they've got their
Speaker 9: collegiate line that they've launched and it's more extended. It
Speaker 9: covers about thirty two universities. If you look at on
Speaker 9: the Abercrome beside, they have the NFL line by Abercrombie
Speaker 9: and they've had that this is the third year running now,
Speaker 9: but each year they extend it further and further because
Speaker 9: the demand is so strong and that's sort of part
Speaker 9: of their strategy. So we are seeing I think good
Speaker 9: results there now as we start to get more media
Speaker 9: coverage of the election uncertainty we have seen in past
Speaker 9: times around this election cycle where there is that uncertainty,
Speaker 9: it can sometimes have an impact on consumer spending, but generally,
Speaker 9: I think it's really going to come down to those
Speaker 9: that are executing and those that are skewing to more
Speaker 9: of a premium consumer or ones with greater discretionary income.
Speaker 5: Our thanks to Mary Ross Gilbert Bloomberg Intelligence senior equity
Speaker 5: analyst covering retail, we have.
Speaker 2: Something here at Bloomberg called Bloomberg New Energy Finance.
Speaker 5: The idea behind it is to provide data on commodities, power, transport, industries, buildings,
Speaker 5: and agriculture.
Speaker 2: Bn EF also talks about how businesses and governments can
Speaker 2: finance and navigate change as we transition to a green
Speaker 2: energy future.
Speaker 5: This week, we looked at US oil supply. There is
Speaker 5: a falling redcount and the question is whether we'll see
Speaker 5: falling oil production moving forward.
Speaker 2: For more, co host Alex Steele and I were joined
Speaker 2: by thy Lu bn EF global oil supply specialist. We
Speaker 2: first asked Ty to talk to us about the impact
Speaker 2: of a declining recount.
Speaker 13: I think the declining ricont in the US that we've
Speaker 13: seen it's not going to have that much that big
Speaker 13: over for the impact as it seems as much as
Speaker 13: the headline numbers suggests. And part of the reasons is because,
Speaker 13: like if shoot a catch the premium where we have
Speaker 13: like the biggest all production region in the US the
Speaker 13: world completions, it's only done about four and a half
Speaker 13: percent compared to the recount which is done about fifteen percent.
Speaker 13: And so and on top of that you have a
Speaker 13: lot of efficiency gains in the sector, so you are
Speaker 13: able to complete a lot more wells with much fewer
Speaker 13: freight crews across the industry. So I think the recont
Speaker 13: number could be a little bit misceding if you're focusing
Speaker 13: too much on that.
Speaker 2: So I'm SPA just just looking at your report here
Speaker 2: and seeing how production in the US continues to increase,
Speaker 2: but maybe at a slower rate.
Speaker 11: I don't know.
Speaker 2: I got WTI Coroyal seventy seven bucks. Why don't I
Speaker 2: drill some more? I can make money. I mean, it
Speaker 2: only costs those guys forty fifty bucks to get it
Speaker 2: out of the ground, right.
Speaker 13: Yeah, yeah, for sure.
Speaker 4: Yeah.
Speaker 13: So when we look at the bricks evens, especially in
Speaker 13: the Perman it's probably around in the low to mid
Speaker 13: forties for their Miden basin, and then for the Delrow
Speaker 13: basin it's probably even lower than that because they produce
Speaker 13: a lot more gas. But part of the reason is
Speaker 13: because the US all patch has really pivoted and transform
Speaker 13: itself in the past couple of years now. Before the pandemic,
Speaker 13: oil producers were very much focused on production growth. But
Speaker 13: after the pandemic, the industry has changed and now they're
Speaker 13: focusing on financial returns. In order to improve the financial returns,
Speaker 13: they have to become more efficient. So in the past
Speaker 13: few years you have seen a lot of cost cutting initiatives,
Speaker 13: a lot of optimizations on logistics and supply chains, a
Speaker 13: lot of investments in infrastructures. So the entire industry has
Speaker 13: become a lot more efficient in the past couple of years.
Speaker 13: And on top of that, they have also become a
Speaker 13: lot more resilient. And what that means is that nowadays
Speaker 13: the USR industry can produce a lot more oil with
Speaker 13: much lower capital investments compared to like just five years ago.
Speaker 5: Also, what are the.
Speaker 3: Cool things that oil companies are doing to extract more
Speaker 3: oil out of rock at the end of the day.
Speaker 3: I mean, I went to a conference but a year ago,
Speaker 3: and everyone was like, ooh, three mile laterals. And what
Speaker 3: that means is you basically drill pipe down and then
Speaker 3: you drill it across the rock basically lateral, and you
Speaker 3: fracture it. And the longer you go, in theory, the
Speaker 3: more rock you'll be able to access, and then in theory,
Speaker 3: the more oil you'll get out of that rock.
Speaker 11: Wow, is that too nerdy?
Speaker 12: No?
Speaker 3: Okay?
Speaker 7: Cool?
Speaker 2: I wonder that frackening is short for fracturing.
Speaker 4: Yes, I didn't know that good job.
Speaker 3: We learned things here at Boomberg Intelligence. So based on that,
Speaker 3: what are the cool technologies that are coming up that's
Speaker 3: going to enable even more oil to come out of
Speaker 3: the rock.
Speaker 13: Yeah, So during these longerleros is definitely like a big
Speaker 13: part of these efficiency gags because you're reducing a lot
Speaker 13: of the service costs when you're teing longer letros, And
Speaker 13: like you said, Alex, you're making a lot more contact
Speaker 13: with the sauce rock, so you can pull out a
Speaker 13: lot more resources from the same well. Had some of these,
Speaker 13: like I guess better practices would be having a lot
Speaker 13: more building out the water handling infrastructure. Some of them
Speaker 13: will be optimizing your fractic size, some of them would
Speaker 13: be let me see what else I'm optimizing your spacing
Speaker 13: between the wells. So a lot of these, like see
Speaker 13: many small things on individually. When they act together, they
Speaker 13: can have a big impact, especially over time. For example,
Speaker 13: one of the big producers in the perman I was
Speaker 13: looking at the data and they were able to reduce
Speaker 13: them courts per the well cause Perletto foot by about
Speaker 13: thirty percent between twenty yes between twenty nineteen and twenty
Speaker 13: twenty four, So there's a huge gains in terms of percentage.
Speaker 2: All right, So I thought, if you go into like
Speaker 2: you find some shale somewhere, don't you don't you do
Speaker 2: your good wells, your easy wells first, and then shouldn't
Speaker 2: the productivity decline over time?
Speaker 13: Yeah, that's exactly pretty mure. We've seen, like like you said,
Speaker 13: in the US, the OI and gas companies. So what they
Speaker 13: do is they drew the best say which first, because
Speaker 13: they want to realize that that person while you have
Speaker 13: better weals. And when we look at the data for
Speaker 13: the past five years, what we're seeing is that all
Speaker 13: production on a well level basis has been declining every
Speaker 13: year for the past three four years, pretty much across
Speaker 13: the board. But what's interesting is that in twenty twenty four,
Speaker 13: the data that are coming in so far is they're
Speaker 13: looking different. Oil production on a well level basis is
Speaker 13: actually better for the weals the camera line in twenty
Speaker 13: twenty four compared to those last year. So what that
Speaker 13: means is that technology improvements could be turning back to tide.
Speaker 13: For this production declined on a well level basis.
Speaker 3: Which is why it's so cool when we talk about
Speaker 3: laterals now we're talking about three miles. That's a lot,
Speaker 3: and a lot can go wrong in three miles. Now,
Speaker 3: just about five years ago, the talk was like, oh, well,
Speaker 3: if you frag here, then you're gonna hurt the rock
Speaker 3: over here, and then it's gonna mess up the oil
Speaker 3: distribution and all that kind of stuff. What are the
Speaker 3: problems that are emerging the longer out we go in
Speaker 3: these rocks.
Speaker 13: I think one of the biggest risk rere factors, Like,
Speaker 13: like you said, if something goes wrong on alex, you
Speaker 13: lose production from three mileth worths worth of flat or
Speaker 13: so that's going to be a big opertun need opportunity
Speaker 13: costs for you. But at the same time, if things
Speaker 13: go right, you can save potentially save a lot of money.
Speaker 13: I think not only during longer ledterals. Some of these
Speaker 13: companies they're actually making U turns under the ground so
Speaker 13: they can yeah, they can stay within the acreage and
Speaker 13: so they can make more contact with the source rock.
Speaker 3: So if you do that, do they you turn into
Speaker 3: another layer of the rock or do you turn in
Speaker 3: the same layer the.
Speaker 13: You turn in the same layer.
Speaker 3: Oh my god, that feels like a lot can go
Speaker 3: wrong there.
Speaker 13: Yeah, Well, what companies are doing that. I remember Metady
Speaker 13: Resources in the permit is doing our U turns on
Speaker 13: the ledterals, and there are a couple other ones. I
Speaker 13: don't become on top of my head.
Speaker 11: Oh man, or is this nerdy enough for you?
Speaker 6: Yeah?
Speaker 11: That's really cool.
Speaker 2: Well, here's my dumb question today. Never other than shale
Speaker 2: oil oil coming from shale, do we still drill old
Speaker 2: fashioned rigs and produce oil that way?
Speaker 13: We do? We do?
Speaker 3: We do.
Speaker 13: We still do that quite a bit. But if you're
Speaker 13: talking about on shore, the productivities of this world is
Speaker 13: probably like ten percent or maybe twenty percent of these
Speaker 13: horizontal wells, So the impact is probably it's definitely a
Speaker 13: lot smaller than the horizontal ones.
Speaker 5: Our thanks to taylou Bnf, global oil supply Specialist.
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