Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Speaker 1: Eastern on Apple car Playing and Broid Auto with the
Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: Hold on.
Speaker 3: We got a Supreme Court ruling. The Supreme Court allows
Speaker 3: emergency abortions in Idaho for now. And this was the
Speaker 3: case that if the woman's life was not in danger
Speaker 3: but was compromised, would it be legal for a doctor
Speaker 3: to wind up performing that abortion. It looks like the
Speaker 3: Supreme Court allows emergency abortions in Idaho for now. June
Speaker 3: Grasso is still sitting with us in the studio, June,
Speaker 3: give me your take.
Speaker 4: So this is a sort of kick the can down
Speaker 4: the road decision, because what they're saying is that the
Speaker 4: case was improvidently granted. So it's dismissed because improvnently granted,
Speaker 4: we call it a dig, and that means that we
Speaker 4: shouldn't have taken the case in the first place. And
Speaker 4: the justices were split three three three, So the three
Speaker 4: liberals thought that the federal law supersedes the Idaho state law.
Speaker 4: The three concurrences, which were the justices in the middle.
Speaker 4: This really shows you the setup of the court. The
Speaker 4: justice in the middle, the Chief Justice, Barrett and Kavanaugh
Speaker 4: said we you know, we shouldn't go forward with this case.
Speaker 4: We should send it back. But they didn't. They didn't
Speaker 4: endorse any particular theory. They said, this case has changed
Speaker 4: since we got it, and the three in dissent Alito
Speaker 4: Thomas van Gorsich said, no, the state should have the
Speaker 4: right to say that you can't have abortions unless it's
Speaker 4: the mother's life is in danger.
Speaker 2: So the setup was really weird.
Speaker 4: Now it goes back to the Ninth Circuit and there's
Speaker 4: more litigation. This could come up again, and the issue
Speaker 4: will come up again, probably because Texas has a similar law,
Speaker 4: and the Fifth Circuit, which is so conservative, has not allowed,
Speaker 4: you know, has not allowed the federal law to supersede
Speaker 4: the state law. So Justice Skatanji Brown Jackson wrote, really,
Speaker 4: I thought compelling concurrence saying that you know, we're not
Speaker 4: making decisions here, we're just kicking. She actually said, we're punting, yeah, punting.
Speaker 4: And meanwhile, the people like doctors and women don't know
Speaker 4: what the rules are because we're not making okay.
Speaker 2: So that was my question.
Speaker 3: So if I'm a doctor in Idaho and I have
Speaker 3: a woman that comes to me in the emergency room
Speaker 3: who is ill that I can help with an abortion,
Speaker 3: but she's not dying, can I do it or not?
Speaker 4: Now you can do it. You couldn't do it yesterday,
Speaker 4: and you can do it today.
Speaker 2: Now you can do it today and maybe not in
Speaker 2: a month.
Speaker 4: And that was one of the things that the Justice
Speaker 4: Kagan wrote about that there has been so much, so
Speaker 4: many problems on the ground. Women have had to be
Speaker 4: flown out because doctors this is criminal penalties for doctors
Speaker 4: five years. So doctors were afraid to make the decision
Speaker 4: is this woman, you know, is there life in.
Speaker 2: Jeopardy or not?
Speaker 3: Or women had to wait until they went into like
Speaker 3: septic shike in order to get the trade.
Speaker 4: Even Justice Barrett, who you know is uh is very
Speaker 4: you know, very conservative on the issue of abortion, talked
Speaker 4: about that what about sepsis and things so and what
Speaker 4: was funny in the in the in the arguments where
Speaker 4: the women on the court were so much in tune,
Speaker 4: which was with what was happening on the ground, And
Speaker 4: you know, here where you have Alito, Well, he's talking
Speaker 4: about the there's a there's two words in the statute
Speaker 4: unborn child, and if you put it in context, it
Speaker 4: doesn't mean the feetus should But he his dissent is
Speaker 4: all about you know, it says unborn child. So it's
Speaker 4: it's more along the lines of what he wrote in
Speaker 4: the Dobbs decision.
Speaker 2: That's all I'll say.
Speaker 5: What's what's the next next thing from the courts on
Speaker 5: this abortion issue is? I mean, there are other cases
Speaker 5: because I mean this one as it kicked the can
Speaker 5: down the road. It's a punting type scenario. So it
Speaker 5: just it feels like we're just gonna be bouncing back
Speaker 5: and forth between the states and the federal And.
Speaker 2: That's why anyone who thought that, you know, what.
Speaker 4: Justice Kavanaugh wrote in the Dobbs decision was, Okay, we're
Speaker 4: done with this now. Abortion the issue is for the
Speaker 4: states and there are that's just too simple and it
Speaker 4: doesn't it doesn't work in real life. So here two
Speaker 4: years after that, we have you know, two cases having
Speaker 4: to dealing with this, and both of them, if you
Speaker 4: think about it, both of them kicked the can down
Speaker 4: the road. Because the myth of pristone case. They went
Speaker 4: off on the procedural issue of standing. So that's coming back.
Speaker 3: To oh yeah, all right, Jude, we really appreciate it.
Speaker 3: Thank you so much. Jene Grasso, no doubt we'll be
Speaker 3: sitting here with me. Will pause at the beach. She'll
Speaker 3: be here with me tomorrow at ten am. I was
Speaker 3: just introducing Nathan Dean as we got this ruling. He's
Speaker 3: senior policy analyst over at Bloomberg Intelligence, and I was
Speaker 3: asking Nathan about the presidential debate tonight. Who sits in
Speaker 3: the White House and who is in the Senate is
Speaker 3: critical for who is on the Supreme Court, for example,
Speaker 3: and these kind of decisions make it all the more
Speaker 3: important on who's going to be sitting in the White House.
Speaker 3: The expectation game is key. How have President Trump and
Speaker 3: President Biden set the expectations going into tonight at nine pm?
Speaker 6: So I think every candidate it goes into a presidential debate,
Speaker 6: going back to the last fifteen years, always tries to
Speaker 6: underperform or at least announce in advance that they're going to,
Speaker 6: you know, keep expectations low, because then if they perform well,
Speaker 6: then it just seems that much greater. But there's really
Speaker 6: two things that we are telling our investors or clients
Speaker 6: to look at to is. The first is just the
Speaker 6: fear of the headline risk. You know, assuming that there
Speaker 6: are policy debates tonight. At the debate, you know, if
Speaker 6: you see something like President Trump double down on his
Speaker 6: statement of a sixty percent tariff on all goods coming
Speaker 6: from China, well that's already been baked into the market,
Speaker 6: But anticipate a headline risk tomorrow. The other thing is
Speaker 6: is that any statement from either President by nor President
Speaker 6: Trump is saying I'm going to do this or I'm
Speaker 6: going to do that, always just remember to put how
Speaker 6: is this going to get through Washington?
Speaker 1: Had on?
Speaker 6: Is it going to be executive order, regulation, legislation? And
Speaker 6: a lot of times that statement just doesn't actually equate
Speaker 6: to the reality of the situation where they can say
Speaker 6: lots of things, but depending on how the Congress plays
Speaker 6: out and how the regulators play out, ultimately the impact
Speaker 6: could be much less.
Speaker 5: What do you think investors should focus on the most
Speaker 5: in this debate here? Policy wise?
Speaker 6: So there's two things. The first is the geopolitical aspect,
Speaker 6: because the power of the presidency is a lot more
Speaker 6: powerful when it comes to geopolitical, national security, and trade.
Speaker 6: So any statement from President Trump or President Biden on Ukraine, Taiwan,
Speaker 6: tariffs and so forth like that certainly should be paid
Speaker 6: attention to and then put in the back of your
Speaker 6: brain as we get closer to the election, because more
Speaker 6: statements will come. The other is tax related because the
Speaker 6: Trump era at tax cuts from twenty seventeen expire for
Speaker 6: individuals at the end of twenty twenty five. So no
Speaker 6: matter who wins as president, the House in Waste Means
Speaker 6: Committee and the presidency is going to be focused on
Speaker 6: tax next year. Now it's going to be individual and
Speaker 6: I think for most individuals their tax rate is not
Speaker 6: going to go up. But if you are exposed to evs,
Speaker 6: like if you have investments in Rivian or Tesla for example,
Speaker 6: that could come up under a Trump presidency. High net
Speaker 6: worth individuals could see higher taxes under a Biden presidency.
Speaker 6: So next year is definitely going to be about tax
Speaker 6: and somebody to pay attention to tonight.
Speaker 3: Which is so interesting because a lot of the argument
Speaker 3: is like, oh, well, what they say on that campaign
Speaker 3: trail is not going to actually materialize, or it'll be
Speaker 3: sort of you know, muted or won't actually wind up happening,
Speaker 3: which makes it so hard for investors to understand how
Speaker 3: to price any of this. What's your best recommendation here?
Speaker 6: So I view it as just an incremental step. So
Speaker 6: if you think of like the you know, if you
Speaker 6: think that President Trump or President Biden comes out at
Speaker 6: a high level and says like I want to do this,
Speaker 6: but over time, expectations lower, and so forth, you'll get
Speaker 6: additional information as they go through the campaign trail. Look,
Speaker 6: tonight's that Maate is not going to set the stone
Speaker 6: in anything in terms of policy. But statement tonight, plus
Speaker 6: a statement tomorrow, plus a statement at the next debate,
Speaker 6: so forth, you'll begin to get a better picture of
Speaker 6: what ultimately could happen. So I'm not gonna say that
Speaker 6: you know you're gonna see massive headlines tomorrow saying the
Speaker 6: markets are moving based off of this. But you know,
Speaker 6: we've told a lot of our clients. If you have
Speaker 6: an associate that wants to stay up late tonight, have
Speaker 6: the association to take a look at it, watch this,
Speaker 6: and then send you a report in the morning.
Speaker 5: All right, I'll get you can send me my report.
Speaker 5: You've got my email address because I'm not understating I'm
Speaker 5: watching this. I don't think the Yankees are on anyway.
Speaker 7: Nathan Dean off tomorrow, you technically can.
Speaker 5: You're right, You're hey, thank you for pointing that I
Speaker 5: want not have to get up at four twenty. Okay,
Speaker 5: very good, Nathan Dean Senior Polo Sanos for Bloomberg Intelligence.
Speaker 5: He's down there in DC for better or worse. That's
Speaker 5: where he's located here. So are you gonna watch the
Speaker 5: debate tonight?
Speaker 1: Yes?
Speaker 3: No, I mean like I don't want to, but like
Speaker 3: I want to, and I feel like I have to.
Speaker 5: Although you know, with the ground rules, no audience, no
Speaker 5: the moot and MIC's, it's not gonna be as much
Speaker 5: drama as it could be, which is why I think
Speaker 5: some people watch it just for the drama.
Speaker 3: Maybe, But I am actually interested, you know, if any
Speaker 3: kind of policy is actually discussed, like if it's gonna
Speaker 3: be barbs thrown back and.
Speaker 1: Forth, I can tell you who the loser is going
Speaker 1: to be intelligent, discourse.
Speaker 3: Intelligent, but like, but you know, I don't know. Yes,
Speaker 3: I'll probably turn it on, okay until we have family
Speaker 3: reading time.
Speaker 5: At around nine thirty.
Speaker 7: Definitely reading.
Speaker 3: I'll give it half an hour. I'll give it half
Speaker 3: an hour, and then we'll circle back before that family reading.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: Say Alexa play Bloomberg eleven thirty.
Speaker 5: Alex Deal Paul Sweeney live here in our Bloomberg Interactive
Speaker 5: Brokers studio, or streaming live on YouTube as well.
Speaker 7: So heent over to YouTube dot.
Speaker 5: Com and search Bloomberg Podcast. I'll get a new guy
Speaker 5: in here today, a new guy. We'll see how he does.
Speaker 3: Jake Silverman, Jordans, Sorry, Jake, it's going to be fine.
Speaker 5: It was an analyst Bloomberg Intelligence. I did not hire them,
Speaker 5: so I can't vouch for him. Hire everybody else. He
Speaker 5: comes to the technology Stace. We got a great, great
Speaker 5: technology team all around the world. Everywhere you need tech
Speaker 5: people to be Silicon Valley, Asia, New York, we got
Speaker 5: them as well. Micron Technologies, the largest US maker of
Speaker 5: computer memory chips is John Talker's just reporting dropped after
Speaker 5: it's forecast disappointed investors.
Speaker 7: Uh so we got an issue there about this chip maker.
Speaker 5: Jake, thanks so much for joining us here in studio.
Speaker 5: Give us the Micron technology story. How were their earnings?
Speaker 5: Why is this TOC trading word is?
Speaker 7: Yeah, thanks so much for having me on. Yeah. So
Speaker 7: three Q was a beat, but the stocks up.
Speaker 8: Over sixty percent or prior to earnings, was up over
Speaker 8: sixty percent a year today. So coming into the quarter,
Speaker 8: expectations were fairly high. And so when we've seen a
Speaker 8: beaten raise beaten rays. As pricing has improved, supply has
Speaker 8: been pretty tight intentionally by all of the memory suppliers
Speaker 8: over the last year or so because there was a
Speaker 8: severe demand reduction back in twenty twenty three, and now
Speaker 8: as we're looking into twenty twenty four, supply is tight,
Speaker 8: demand has stabilized now is beginning to recover quarter to quarter.
Speaker 8: So investors, the market was really expecting another beaten Rays.
Speaker 8: I think coming into three Q with the outlook being
Speaker 8: related to four Q so being a sort of inline
Speaker 8: guide at least on revenue, I think was pretty disappointing.
Speaker 8: And you also have the AI aspect, which I think
Speaker 8: adds to a little bit of that multiple expansion that
Speaker 8: we're seeing, and so I think that that plays a
Speaker 8: part into those expectations.
Speaker 3: So well, if we just separate for a second, if
Speaker 3: we can, like you have the AI growth story, which
Speaker 3: still was delivering on all cylinders from Micron, and then
Speaker 3: there's the actual boring stuff like the things that go
Speaker 3: into your phone and your computer and things like that.
Speaker 3: That market has been has troughed. But the pickup is
Speaker 3: when the question is do we learn anything about when
Speaker 3: we might see a real recovery in that, because my
Speaker 3: front still needs.
Speaker 7: That, right.
Speaker 8: Yeah, So that was actually what was more important about
Speaker 8: the tight supply story from twenty twenty three up until
Speaker 8: now and then continuing through the rest of this year
Speaker 8: and probably in the next year as well. The AI
Speaker 8: part of the story was pretty nascent up until more recently,
Speaker 8: and we're still only now starting to see AI revenue
Speaker 8: actually inflect high bandwidth memory revenue for HBM THREEE, their
Speaker 8: product that's being sold into in Nvidia's H two hundred GPU,
Speaker 8: that's only that was only about a little more than
Speaker 8: one hundred million this quarter, So there's other AI products
Speaker 8: as well, but yeah, we're starting to see demand. I
Speaker 8: think stabilizing for smartphones, PCs, traditional servers, and we're expecting
Speaker 8: some growth throughout the rest of this year, primarily on
Speaker 8: the back of seasonal demand. So yeah, I think that
Speaker 8: those are definitely areas that investors are certainly going to
Speaker 8: be looking for, and if that demand doesn't necessarily materialize,
Speaker 8: then the pricing might not increase at the magnitude at
Speaker 8: which the market is expecting, which would impact revenue and
Speaker 8: margin growth throughout the rest.
Speaker 5: I don't know a lot about the semiconductor business, and
Speaker 5: I want to keep it that way, But what I
Speaker 5: do know is it's a cyclical business. You got to
Speaker 5: get those cycles right.
Speaker 7: Does AI change the cyclicality? Do you think?
Speaker 5: Do we know enough to say that maybe it don't
Speaker 5: make it less cyclical or maybe more so.
Speaker 8: Yeah, it's a very good question. It's difficult to say
Speaker 8: right now. I think because this AI build out for
Speaker 8: AI infrastructure, it's so early, so we don't really know
Speaker 8: what that cycle will look like. But this is certainly
Speaker 8: a secular driver in the near term. AI infrastructure buildouts
Speaker 8: from the hyperscalers are continuing. There's potentially some upward bias
Speaker 8: to those estimates and those expenditures this year, and so
Speaker 8: as long as that continues, that should have like a
Speaker 8: multifold impact on Micron because there's another aspect, which is,
Speaker 8: first of all, there's a couple aspects. First of all,
Speaker 8: HBM is margin acreative, and some of those other products
Speaker 8: that are related to AI are also margin acreative, so
Speaker 8: talking about high capacity DRAM module, solid state drives, but
Speaker 8: HBM more so. But also HBM takes up additional wafer capacity.
Speaker 3: High band with memory, yes.
Speaker 8: High bandwid memory, sorry HBM, but that also takes up
Speaker 8: way it.
Speaker 3: Took me like ten minutes. That will remember that, so
Speaker 3: you don't want to say nice, yes.
Speaker 8: Sorry, I go in and out of h memory.
Speaker 7: No, thank you.
Speaker 8: So but also it takes up additional wafer capacity for
Speaker 8: high bandwidth memory, so about three times as much. So
Speaker 8: that actually, as you shift capacity away from standard memory
Speaker 8: towards HBM, that has a specific impact on the actual
Speaker 8: supply allocation. So as that demand continues to increase, that
Speaker 8: actually takes supply away from traditional markets as well. So
Speaker 8: ultimately you have a two fold impact where you have
Speaker 8: margin expansion, but you also have pricing probably increasing even
Speaker 8: if demand is somewhat stable because the supply comes offline
Speaker 8: from traditional end markets and goes towards AI well.
Speaker 3: Also to the cyclical point too. As long as AI
Speaker 3: chips keep getting better and better with each iteration, doesn't
Speaker 3: that take away some of the near term cyclicality, Like
Speaker 3: because by the time you get your old chip, then
Speaker 3: the new chip is like that much more awesome, so
Speaker 3: you have to go buy it, and at some point
Speaker 3: that runs out.
Speaker 8: So I just yeah, it's difficult to determine actually what
Speaker 8: the magnitude of the cyclicality will be up or down.
Speaker 8: I think what this is really going to do right now,
Speaker 8: at least in the near term, will extend the current
Speaker 8: up cycle. So the peak is difficult to determine when
Speaker 8: that will happen. I mean, you can always guess. I
Speaker 8: don't think people are very accurate at guessing peaks and
Speaker 8: troughs at least multiple quarters out. But you know, in
Speaker 8: this case, as long as there's those secular demand drivers,
Speaker 8: we think the cycle can continue its upward trajectory.
Speaker 7: Jake, great stuff. Yeah, we can bring him back right.
Speaker 2: Oh yeah, he was great.
Speaker 7: He was really good.
Speaker 6: Yeah.
Speaker 5: Yeah, another tech voice, which we desperately need because we can't.
Speaker 7: Keep going back from man deep at on a rock.
Speaker 3: I mean, you know, boring, they have other jobs.
Speaker 7: Thank you so much, all right, Jake Silverman semi conduct around.
Speaker 5: Also Bloomberg Intelligence joining us here on our Bloomberg Interactive
Speaker 5: brokers to you talking about the chip business.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Affo, Cardplay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 3: Are joining us sound Kate Richards, founder and CEO of
Speaker 3: Warwick Investment Group. So, Warwick Investment is the largest PE
Speaker 3: firm in the US that's founded and led by a
Speaker 3: woman founder and it focuses on real assets like natural
Speaker 3: resources in real estate. I've known Kate for a long while,
Speaker 3: it feels, but I haven't seen you in forever in
Speaker 3: a day.
Speaker 2: How are you great? Thanks for having me.
Speaker 9: I think that the fact that I haven't seen you
Speaker 9: is probably sort of reflective of what most people haven't seen,
Speaker 9: which is commodities in their portfolio over the past decade.
Speaker 3: Oh way to turn that in.
Speaker 7: I like this.
Speaker 3: So what we're seeing in the trend is a people
Speaker 3: want to own commodities in their portfolio, but like not
Speaker 3: all commodities, but be very specific. But we almos seen
Speaker 3: a ton of m and a big guys with the
Speaker 3: medium guys, medium guys, with medium guys, small guys and
Speaker 3: small guys. How do you think this winds up playing out?
Speaker 3: And what are the opportunities set for you?
Speaker 2: I think two things.
Speaker 9: So number one, we're probably at the beginning of a
Speaker 9: new commodity price super cycle. And the first one was
Speaker 9: two thousand to twenty fifteen driven by urbanization and industrialization
Speaker 9: in China.
Speaker 2: This one's driven by the energy transition.
Speaker 9: And what's ironic is that it's obviously increasing demand for
Speaker 9: battery metals like nickel, lithium, copper, maybe cobalt. And secondly
Speaker 9: that it's actually increasing demand for hydrocarbons because the energy
Speaker 9: transition is hydro carbon intensive. And if you need any
Speaker 9: evidence of that, you can look at what happened with
Speaker 9: China last year, the largest ev market in the world,
Speaker 9: where hydrocarbon demand actually went up. And so the cautionary
Speaker 9: tale is looking at gasoline demand trends, which in China
Speaker 9: went down last year, and equating that to price trajectory
Speaker 9: for oil or demand for oil, So I think that's
Speaker 9: really something that's important. It's a subtlety, but whatever's happening
Speaker 9: with EV's and what what ever's happening with gasoline trends?
Speaker 9: Because of v adoption, you can't relate to the price
Speaker 9: of oil or demand for oil. But even that being said,
Speaker 9: oil and gasoline where at all time highs in terms
Speaker 9: of demand last year.
Speaker 7: Well, Alex as you know, is the energy expert, I
Speaker 7: am not.
Speaker 5: What's your view of this energy transition because it seems
Speaker 5: like just if I just think about evs to kind
Speaker 5: of take it a tick down a little bit over
Speaker 5: the last couple of years.
Speaker 7: How do you guys view that?
Speaker 9: Well, I think that you know, we deal in communities
Speaker 9: that don't want to talk about energy transition at all,
Speaker 9: and then on the mining side of our life, we
Speaker 9: deal in communities that will not talk about hydrocarbons as
Speaker 9: an ongoing source of energy in the world, and both
Speaker 9: of those are unrealistic.
Speaker 2: We talk about energy as kaleidoscopic, and.
Speaker 9: You will have certain jurisdictions like the East Coast, the
Speaker 9: West coast of the US, the OECD, certainly Europe that
Speaker 9: will skew more renewable in terms of power and more
Speaker 9: ev in terms of vehicles, and then you will have
Speaker 9: groups that do not. And I think the problem is
Speaker 9: that in sitting in the OECD and reading all of
Speaker 9: the kind of typical like New York Times, Wall Street Journal,
Speaker 9: FT economists, maybe Bloomberg Axios, you sort of think like, oh,
Speaker 9: the energy transition is happening, and conventional vehicles and conventional.
Speaker 2: Fuels are going out of business.
Speaker 9: The problem is that if we look at the last
Speaker 9: twenty two years, the OECD, which is about four in
Speaker 9: a million people, has taken demand for hidercarbons down two
Speaker 9: million barrels a day, and the nano ACD has taken
Speaker 9: hydercarbon demand up twenty five million barrels a day.
Speaker 2: So it's just a law of large numbers.
Speaker 9: And the fact is that if you wanted to say
Speaker 9: no traditional energy, that's unrealistic.
Speaker 2: We don't have enough copper in the world to supply that.
Speaker 9: But if you wanted to say no renewables, we don't
Speaker 9: have enough oil or energy to supply the world. So
Speaker 9: it has to be kaleidoscopic. And it's really in all
Speaker 9: of the above energy solution, including nuclear, which last year
Speaker 9: came into the conversation as carbon.
Speaker 2: Free, kaleidoscopic. I'm totally stealing this one.
Speaker 3: Yeah, so Kate. When we have this interest though in
Speaker 3: the energy space among energy companies, does that make exit
Speaker 3: strategies more appealing for you?
Speaker 2: Like are you buying more? Are you selling more? Right now?
Speaker 3: Because for a while it felt like assets in private
Speaker 3: equity when related to energy was stuck.
Speaker 2: It was going nowhere fast.
Speaker 9: So in twenty eighteen, we had a number of oiling
Speaker 9: gas companies one could probably argue too many.
Speaker 2: In the US.
Speaker 9: Sixty percent of the oiling gas companies that existed in
Speaker 9: twenty eighteen don't exist today because of M and A.
Speaker 2: So there has been massive consolidation in this space. And
Speaker 2: we're probably not going.
Speaker 9: Back to the seventies where it was like the seven Sisters,
Speaker 9: you know, seven big companies, but we might be going
Speaker 9: back to fifteen companies. So definitely there is consolidation. And
Speaker 9: that consolidation was localized in the Permian basin in West
Speaker 9: Texas until this year. And I would say now the
Speaker 9: Permian's pretty consolidated, and now it's going to other basins
Speaker 9: in the US. So this is sort of a cross
Speaker 9: base in US consolidation story. That's number one. Number two,
Speaker 9: it's definitely cheaper to buy assets. So twenty you know,
Speaker 9: fourteen fifteen, we would pay seven to ten times EBITDA.
Speaker 9: We're buying assets now for one to three times ebit.
Speaker 3: Do it doesn't mean that you're sorry. Sorry, doesn't mean
Speaker 3: that you're selling assets for that too, though.
Speaker 9: It does not mean that because in a lot of cases,
Speaker 9: people need to pay for inventory because the reason, like
Speaker 9: to your point, why are the midcaps buying small caps
Speaker 9: or why are the small.
Speaker 2: Caps trying to buy?
Speaker 9: Like why is this game of pac man happening where
Speaker 9: it's either get consolidated or consolidate?
Speaker 2: It's because people are short inventory.
Speaker 9: So in your private portfolio, if you have inventory, or
Speaker 9: if you're a public company and inventory, you are attractive
Speaker 9: and it's it's a game to get bigger before.
Speaker 2: All of the chips are sort of held by big
Speaker 2: public companies.
Speaker 5: You mentioned nuclear, What is a a what is a
Speaker 5: reasonable nuclear policy from your perspective, because I'm hearing more
Speaker 5: about the technology changing now we don't have to build
Speaker 5: these monster reactors, the little ones.
Speaker 7: Yeah, that seems reason to me.
Speaker 9: So I actually think there's a really interesting fight that's
Speaker 9: sort of like brewing between big tech and LNG exporters frankly,
Speaker 9: because big tech knows that they are massive power consumers
Speaker 9: and they need power quickly, especially if you're depositing that.
Speaker 2: It's like this AI fight nationally, that's a national interest.
Speaker 9: So if you talk to big tech, they'll say, you know,
Speaker 9: AI ushers in a nuclear renaissance, and it's not that
Speaker 9: hard because we have these small modular nuclear reactors.
Speaker 2: This is an existing technology. It's on submarines all over
Speaker 2: the world.
Speaker 9: The fact is you'll probably see some of that, but
Speaker 9: you will also probably see some of it go.
Speaker 2: To natural gas and some more go to renewables.
Speaker 9: I think that big tech is probably going to have
Speaker 9: to embrace many like a kaleidoscopic power outlets.
Speaker 5: We haven't put any nuclear plants in operation like like
Speaker 5: right right, Yeah, So to say I'm going to power
Speaker 5: this data center with a small nuclear plant, that is
Speaker 5: a huge deal.
Speaker 2: Yeah.
Speaker 10: You know.
Speaker 9: There's also probably not the uranium to power a nuclear
Speaker 9: renaissance right now, particularly with the House and Senate now
Speaker 9: restricting twenty percent of the uranium market to be imported
Speaker 9: into the US. And that matters because the US is
Speaker 9: the largest consumer of uranium and we are now like
Speaker 9: as of twenty twenty seven or twenty two eight, not
Speaker 9: allowed to buy uranium from Kazakhstanta, Russia.
Speaker 3: So yeah, but to your point, Paul, they are considering
Speaker 3: restarting a nuclear plant that was closed that's quite big.
Speaker 3: And the SMRs, these small modular reactors, they're just the
Speaker 3: economics are so wide, like you just can't make the
Speaker 3: economics work yet. Okay, But I like that you brought
Speaker 3: the uranium factor because what we are seeing is oil
Speaker 3: companies going to mining, particularly with lithium.
Speaker 2: And I'm wondering if like there's a.
Speaker 3: Way that you are thinking about your oil and your
Speaker 3: like real play, like the hard asset plays, Like is
Speaker 3: there a play?
Speaker 2: Are there plays for you there?
Speaker 5: Yeah?
Speaker 9: I think well, for definitely, so oil and gas companies
Speaker 9: are actively looking at lithium because we extract lithium when
Speaker 9: we bring water out of the ground in saltwater brine
Speaker 9: across the US, So that is definitely a play. The
Speaker 9: other thing is that a lot of the mining companies
Speaker 9: don't know how to lease acreage to do mind expansion,
Speaker 9: and that's something that oil and gas companies.
Speaker 2: Are very good at.
Speaker 9: So I actually think you're seeing this like merger of
Speaker 9: the natural resources Brethren in a lot of ways, and
Speaker 9: the similarities are fascinating because like mining and oil and
Speaker 9: gas globally have both decreased capex forty percent since the
Speaker 9: twenty thirteen twenty fourteen timeframe, and mining and oil and
Speaker 9: gas companies also are only spending forty percent of cash
Speaker 9: flow on capex today and they're both essential for the
Speaker 9: energy transition. So I think you're probably going to start
Speaker 9: to see a lot more intersection of conversation around oil
Speaker 9: and gas and mining companies, just as these natural resources
Speaker 9: businesses that haven't really been super relevant for the past
Speaker 9: ten years but are increasingly very relevant.
Speaker 2: Cool, right, super cool?
Speaker 4: Good.
Speaker 3: Kate appreciate it.
Speaker 2: So don't be a stranger.
Speaker 3: You don't have to be here to do this, so
Speaker 3: we can definitely chat remotely as well. Kate Richard, founder
Speaker 3: and CEO of Warwick Investment Group. It's sort of how
Speaker 3: do you make money in the energy transition and how
Speaker 3: that's going to wind up playing out and where the
Speaker 3: supply shortfall is going to be. Paul, What's so interesting
Speaker 3: as we talk about oil reduction use, particularly in developed nations,
Speaker 3: it doesn't mean it's going to zero, and I feel
Speaker 3: like that's a reset, a little bit like it can decline,
Speaker 3: but we're still using it. It's not like we're going
Speaker 3: in nothing.
Speaker 7: Okay, I mean, it's just it's gonna be a kaleidoscopic solution.
Speaker 3: I'm never gonna be able to say that word again. Kaleidoscopic, Tucker,
Speaker 3: did you look it up? Did you have time?
Speaker 1: Sounds too much like kolonoscopy.
Speaker 3: Colona, Scott Colin, Now you're messing me up. I'm never
Speaker 3: gonna it does not sound like kolonoscopy.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Otto with the Bloomberg Business app. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 5: Walgreens Boots disappointing results stock down twenty three percent here
Speaker 5: fifty two week low the LOESSNS nineteen ninety seven, So
Speaker 5: a big move there. Let's bring a Jonathan Palmery follows
Speaker 5: all this stuff for Bloomberg Intelligence. Jonathan, what's going on
Speaker 5: with our our friends at Walgreens Boots?
Speaker 11: Well, I think you can see from the stock reaction
Speaker 11: nothing good is happening these days. I mean, the CEO
Speaker 11: came in last year and there was a little bit
Speaker 11: of a halo effect on his hiring. I think that
Speaker 11: halo has dissipated and investors were expecting more sooner and
Speaker 11: it looks like, you know, this is structurally going to
Speaker 11: be handicapped for at least another year. I mean, they
Speaker 11: talked about seventy five cents of headwinds going into their
Speaker 11: fiscal twenty twenty five. I mean, if you rewind a
Speaker 11: couple years ago, before the pandemic, this was a company
Speaker 11: that was earning six dollars a share. Now it looks
Speaker 11: like next year it's going to be more like two
Speaker 11: dollars a share. So investors are frustrated with waiting for
Speaker 11: the turnaround, and it looks like it's even extended further
Speaker 11: in the future here.
Speaker 3: So what part of this is a Walgreen issue versus
Speaker 3: a macro issue?
Speaker 11: Well, a little bit of both. I mean, they were
Speaker 11: very particular about calling out consumer weakness as one of
Speaker 11: the drivers for the downside this year, but really it's
Speaker 11: I think more of a structural issue in the pharmacy space.
Speaker 11: They've been being pressured by insurers and payers for a
Speaker 11: number of years and that doesn't to dissipate, and so
Speaker 11: they're thinking they and others like CBS are thinking about
Speaker 11: new models for pharmacy reimbursement. But you know, they're just
Speaker 11: in a between a rock and a hard place here.
Speaker 5: Jonathan, how much of this twenty three percent decline in
Speaker 5: Walgreens is a company specific issue or more of an
Speaker 5: industry issue.
Speaker 11: I think it's more a company specific here versus industry wide.
Speaker 11: I mean, CBS has been doing okay in their pharmacy.
Speaker 11: They face the same structural challenges around reimbursement. You know
Speaker 11: what's going on in retail here. It's just you know,
Speaker 11: they glossed over some of those woes during the pandemic.
Speaker 11: They had a big sales leaseback program with their stores,
Speaker 11: which has now come to an end, and so they've
Speaker 11: been looking for ways to grow the company. You know,
Speaker 11: they bought Village End a couple of years ago, and
Speaker 11: it sounds like now they don't really want to be
Speaker 11: involved with that that asset anymore, and so they undertook
Speaker 11: a strategic review. I think investors were anticipating that maybe
Speaker 11: they would sell their boots assets abroad, they would maybe
Speaker 11: do some sort of new deal with Village End and
Speaker 11: none of that's come to pass. So the weight is
Speaker 11: on for the turnaround and there's no real inflection point
Speaker 11: in sight here.
Speaker 3: Okay, So if that's the case, I mean, I'm going
Speaker 3: to ask you how local we go, But like, what
Speaker 3: is then a reasonable valuation for a stock like Walgreens
Speaker 3: where we don't actually know what the trough looks like.
Speaker 11: Yeah, I mean I think they're getting to the trough
Speaker 11: in terms of EPs and that multiple. You know, I
Speaker 11: think you can look back and single digit multiples don't
Speaker 11: usually stick around for that long, particularly with where the
Speaker 11: S and P is trading. So, you know, from a
Speaker 11: valuation perspective and an earnings trough perspective, I think we're
Speaker 11: close to the bottom here. You know, maybe not the
Speaker 11: absolute bottom. There might be a little bit more to go,
Speaker 11: but it's it's hard for me to envision given what
Speaker 11: they're doing around these store closures, around monetizing some of
Speaker 11: these assets that they haven't you know, kind of gotten
Speaker 11: to the worst of their earnings power here.
Speaker 7: All right, Jonathan, thank you so much.
Speaker 5: We appreciate that getting the latest on the Walgreens Boots
Speaker 5: situation stock down twenty three percent.
Speaker 7: Jonathan Palmer, he covers.
Speaker 5: All that healthcare stuff and all the pharmacies and all
Speaker 5: that great stuff for Bloomberg Intelligence. Appreciate getting a couple
Speaker 5: of minutes of his time.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecar Play and Android
Speaker 1: Auto with the Bloomberg Business. You can also listen live
Speaker 1: on Amazon Alexa from our flagship New York station, Just
Speaker 1: say Alexa Play. Bloomberg eleven thirty.
Speaker 5: Alex Steel and Paul Sweeney were live here in our
Speaker 5: Bloomberg and Director Berger's studio right in midtown Manhattan.
Speaker 7: We're also streaming live on that internet thing. I think.
Speaker 5: You go to YouTube dot com and search Bloomberg Podcast,
Speaker 5: and that's where you will find us. Joining us right
Speaker 5: now is the Pride of Southwestern Virginia by way of London, England.
Speaker 5: Tim Craik, head Global Chief Content Officer for Bloomberg Intelligence,
Speaker 5: joining us from zoom from our global London headquarters, Queen
Speaker 5: Victoria Street in London, extraordinary building right in the city
Speaker 5: of London. Jim, thanks so much for joining us here.
Speaker 5: I know you guys at BI you put out your
Speaker 5: research here on some ten companies we need to watch
Speaker 5: periodically throughout the year. Here, we've got one you guys
Speaker 5: recently published about the companies.
Speaker 7: To watch in three Q.
Speaker 5: Give us a couple of names that we should be
Speaker 5: really taking a look at here as we approach third
Speaker 5: quarter earnings.
Speaker 10: Yeah, absolutely so. I'll give you a smidge of a
Speaker 10: backdrop on this, if that's okay to put it into context.
Speaker 10: These are all part of what we call our focus ideas,
Speaker 10: which is a list of companies that we have a
Speaker 10: strong point of view on fundamentally that we think is
Speaker 10: different from what the market currently believes, and there's catalysts
Speaker 10: to head to hopefully turn the market towards our view.
Speaker 10: The thing that sets these ten off is that they
Speaker 10: all have catalysts coming up in the third quarter. A
Speaker 10: lot the ten companies to watch for this quarter, and
Speaker 10: I guess the first group that you have to start,
Speaker 10: it seems like with any conversation these days is AI.
Speaker 10: And there's certainly a couple of AI related ideas here.
Speaker 10: Even though Nvidia is not on the list. Corning, Oh,
Speaker 10: interesting fiber optic cable. You can't have AI going through
Speaker 10: all of these data centers if you can't connect the
Speaker 10: data centers together. And interestingly with fiber optic cable, there
Speaker 10: was actually a down cycle over the course of the
Speaker 10: past year where there was excess inventory and this, that,
Speaker 10: and the other with some telco build related to five G.
Speaker 10: That sort of has worked its way through, and we
Speaker 10: expect data center build out to really drive demand for
Speaker 10: fiber optic cables going forward allah the potential for positive surprise.
Speaker 10: There's another one called THHK. My guess is you've never
Speaker 10: heard of this one. It's a machinery company out of Japan,
Speaker 10: and they have a fifty percent share in something called,
Speaker 10: now I'm going to make sure I pronounce it correctly,
Speaker 10: linear motion guide rails. And you're saying, what, Yeah, if
Speaker 10: if you think about how you picture semiconductors being manufactured,
Speaker 10: there's the equipment that buzzes across and etches these patterns
Speaker 10: into silicon. The rails that they run on are these things,
Speaker 10: and they have a fifty percent share.
Speaker 3: So it's it's like the things.
Speaker 10: Yeah, so you know these are things that you can't
Speaker 10: do AI unless you have these things. So we're looking
Speaker 10: for those types of opportunities you could you could draw
Speaker 10: a little bit of a further sort of second or
Speaker 10: third degree connection with Sandvik. This is another machinery company
Speaker 10: based in Scandinavia. Fifty percent of their business is mining related.
Speaker 10: And you're saying, what, Well, the current hot topics these
Speaker 10: days in mining, among others is copper, and we're seeing
Speaker 10: a capex cycle in copper. You can't dig and mine
Speaker 10: copper without Sandi's stuff. So it's another adjunct play on AI.
Speaker 10: So those are a couple of things.
Speaker 7: I like this.
Speaker 5: I mean that that's I like the way you guys
Speaker 5: are thinking about this, you know, kind of by the
Speaker 5: you know, kind of the tools of AI as supposed
Speaker 5: to be, you know, kind of the direct plays here.
Speaker 7: Another one is I think about.
Speaker 5: The Olympics in Paris this summer, and I think it's
Speaker 5: gonna be just just a monster, monster event fingers crossed
Speaker 5: everything goes well, But that's good for all the companies
Speaker 5: associated with the Olympics. You've got one here, Nike.
Speaker 7: Talk to us about that.
Speaker 10: Yeah, So Nike is interesting on a couple of fronts.
Speaker 10: You've got not only the Olympics coming up, but if
Speaker 10: you're at all into what they call football. Here in
Speaker 10: London we would call soccer. Obviously, the Euros are going
Speaker 10: on right now, which is a massive England Still in
Speaker 10: Euros they are, but they drew two of their first
Speaker 10: three matches, so you know they make it into the
Speaker 10: second round, but we'll see. But Nike not only has
Speaker 10: that to look forward to, but more importantly, they've got
Speaker 10: new product that's going to be displayed there and promoted
Speaker 10: there with all the advertisement and visibility that happens running
Speaker 10: shoes like the new pegasusts. There's other products as well.
Speaker 10: They've lacked two They've lagged for two years in innovation
Speaker 10: and Puma and Adidas have taken share. You might remember
Speaker 10: we've talked about Adidas before where we had a focus
Speaker 10: idea that Puna mcgoyle was behind. She since closed that
Speaker 10: shifted gears towards Nike because she sees market share recovery
Speaker 10: with Nike because they finally got on board with some
Speaker 10: new innovation. So interesting story there, And I would say similarly,
Speaker 10: you could kind of throw into the same bucket. Galaxy,
Speaker 10: which is one of the big casino operators in Macau
Speaker 10: who think about innovation and new product. They opened a
Speaker 10: big new phase of their Co Tai based resort and
Speaker 10: they're starting to gain market share and summer is the
Speaker 10: big season for travel China. Travel is back up, and
Speaker 10: there's a big story there that again revolves around new
Speaker 10: product innovation, right time, right place.
Speaker 3: So what do you also have on the list? Which
Speaker 3: is interesting is our age?
Speaker 2: This is restoration hardware? Is that what this is?
Speaker 1: Yes?
Speaker 3: Okay, because the corner wasn't that good, right, and like
Speaker 3: their stuff is so expensive, but in a downturn that
Speaker 3: feels a little hard to swallow.
Speaker 7: A lot discount. You can't get a sale.
Speaker 3: Okay, even the outlets store at Industry City, which is
Speaker 3: they've outlet stores in Brooklyn, and stuff is just insanely
Speaker 3: expensive for something that's super boring. I've purchased some of
Speaker 3: their stuff, sure, but you get something for good quality
Speaker 3: that's not going to be like eight grand for like
Speaker 3: a table. I don't know.
Speaker 10: Well, so you're playing, you're playing into the idea here,
Speaker 10: Alex and I am going to date myself. I remember
Speaker 10: being an equity research salesperson back at Goldman on the
Speaker 10: date and we were doing the I p O for
Speaker 10: restoration hardware. I remember traveling around with management but that's
Speaker 10: another story. RH is one of our cautious ideas, along
Speaker 10: with HCA, the big US hospital company, as well as
Speaker 10: Nintendo the gaming software electronics company. We do have negative
Speaker 10: focus ideas as well as positive focus ideas. And the
Speaker 10: thing with r H management guidance and still consensus is
Speaker 10: guiding for recovery from what you're just talking about. But now,
Speaker 10: withstanding the resilient US consumer, we still expect the recovery
Speaker 10: that's anticipated disappoint you know, French sales last year. We're disappointing,
Speaker 10: notwithstanding the consumer, and we think a recovery is going
Speaker 10: to be delayed and expectations are going to be cut again.
Speaker 10: So that's that one.
Speaker 7: That's cautious side, right, Yeah, Okay.
Speaker 10: Yes, indeed I would throw out similarly in terms of
Speaker 10: we think overly optimistic expectations. And Nintendo obviously totally different story,
Speaker 10: but we all know game Boy and Switch and things
Speaker 10: like that. Boy yeah yeah, going back in the day.
Speaker 10: But you know their their current console is the Switch
Speaker 10: and there is a new console coming out called Switch too.
Speaker 10: And Paul, you know from your background these console stories
Speaker 10: are big deals, whether it be for Nintendo or Microsoft
Speaker 10: or what have you. This one is sort of like
Speaker 10: waiting for good o. They we thought we we we've
Speaker 10: been thinking they were going to announce a date, but
Speaker 10: it still is to come, and we think it causes
Speaker 10: room for disappointment relative to work and census expectations are
Speaker 10: still setting.
Speaker 7: All right, very good as always.
Speaker 5: You know, so Tim's an American, but he has adapted
Speaker 5: to this whole English bank holiday thing.
Speaker 7: You know, they have a lot of bank holidays in England.
Speaker 5: So they get the days off for seemingly no reason,
Speaker 5: and then the whole month of August forget about it.
Speaker 7: Yeah.
Speaker 5: So again Tim's a good boy from southwestern Virginia, but
Speaker 5: he's all in on this whole European vacation thing.
Speaker 7: Tim Craighead, thanks for joining us.
Speaker 5: Tim Craighead, Global Chief Content Officer, Bloomberg Intelligence, joining us
Speaker 5: from our Queen Victoria Street offices in London.
Speaker 7: So good stuff.
Speaker 5: There's some good ideas coming out of BI kind of
Speaker 5: geared around maybe where they think the street isn't in
Speaker 5: terms of viewing some of these names.
Speaker 3: So my daughter wants a Nintendo switch, Like do we
Speaker 3: like this? Like I know we don't like this, right,
Speaker 3: I stay away.
Speaker 7: From video right as as long as you can. Yeah,
Speaker 7: we did it as long as we could, but we
Speaker 7: we kind of caved.
Speaker 2: You did caave.
Speaker 5: Although that's good now because my to I get two
Speaker 5: boys who communicate primarily via the games and playing games together,
Speaker 5: and so yeah, I talked to them, my brother Jordan yesday,
Speaker 5: We're playing games for an.
Speaker 3: Hour, and I was like, okay, so that kind of counts.
Speaker 7: Yeah, I'll give it a little bit of there soon.
Speaker 7: Now it is stressful.
Speaker 1: This is the Bloomberg Intelligence podcast, available on apples, Spotify,
Speaker 1: and anywhere else you will get your podcasts. Listen live
Speaker 1: each weekday ten am to noon Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal