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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: A little bit of an investor meeting over the weekend. Now,

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Speaker 1: who has investor meetings like on a Saturday?

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Speaker 3: The ones that don't want to have them while markets

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Speaker 3: are publicly trading.

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Speaker 1: I think it's brilliant.

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Speaker 3: And if you want to be the center of attention,

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Speaker 3: you know that people are going to pay attention on

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Speaker 3: a Saturday.

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Speaker 1: I think it's great, and some people actually go out

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Speaker 1: the Omaha, Nebraska to attend. One of those people is

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Speaker 1: Matt Palozola. He's a senior insurance analyst for Bloomberg Intelligence.

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Speaker 1: How was Omaha?

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Speaker 4: I was there. It was fine, it was supposed to

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Speaker 4: be warm. It was a little rainy the first day,

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Speaker 4: but I got to stay in downtown Omaha, which had

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Speaker 4: some nice restaurants.

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Speaker 1: No, so let's get disappointed, Paul, So, I mean, do

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Speaker 1: you literally thousands of people go into an arena.

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Speaker 4: Yeah, it's the downtown arena there. They have two days.

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Speaker 4: The first day is essentially a shopping day where all

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Speaker 4: the companies are there, people are buying stuff hand over fist.

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Speaker 4: Did you get to talk to some of the managements

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Speaker 4: of the companies? Which is coal? And then the second

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Speaker 4: day is the actual meeting.

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Speaker 3: I'm sorry, wait at an arena like college orientation?

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Speaker 4: Like, yeah, no, I think it's described. It's the Chi

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Speaker 4: or Chai. Actually don't know the name of the arena

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Speaker 4: in Omaha. And there are sports teams that play there,

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Speaker 4: so it's it's kind of like a smaller version of

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Speaker 4: a sports arena that you might see here.

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Speaker 1: All right, so takeaways here, occidental patrolling, let's start there.

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Speaker 1: What's burshore Hathway saying they're going to do that?

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Speaker 4: So he shot that down. He specifically brought up, we're

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Speaker 4: not going to buy it. We don't want to buy

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Speaker 4: the whole company. We might buy more of the stock,

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Speaker 4: but we're not interested in owning the whole company.

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Speaker 1: And is that anything more than that? Like we feel

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Speaker 1: like we've got enough energy, we've had enough exposure. Why

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Speaker 1: wouldn't they take a control you didn't.

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Speaker 4: Really touch on it. I mean they have a lot

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Speaker 4: of energy, they own a ton of Chevron as well.

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Speaker 4: Those kind of operate in the same space. So and

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Speaker 4: he said, why would we want to do that, I mean,

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Speaker 4: they own the preferreds. Why would they want to lose

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Speaker 4: that yield on those preferreds to own the stock.

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Speaker 1: That's a good point.

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Speaker 3: Well, you are at its core, as I discovered this

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Speaker 3: morning an insurance guy. So give us the give us

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Speaker 3: the highlights from Geico here.

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Speaker 4: So what was interesting is auto insurers have been really

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Speaker 4: taking it on the chin for the pasting year. The

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Speaker 4: first quarter results surprised on the upside because of Geico.

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Speaker 4: So the results were better than I thought they'd be.

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Speaker 5: A G.

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Speaker 4: Jane, who's in charge of the insurance business and vice chairman,

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Speaker 4: pointed out they had favorable reserve development and it was

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Speaker 4: a little bit of seasonality and he kind of talked

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Speaker 4: down the next two years. So it was a kind

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Speaker 4: of earnings beat on that. But the go forward outlook

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Speaker 4: not great.

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Speaker 1: So so like on the auto business, Detroitch making fewer cars,

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Speaker 1: therefore there's fewer insurance policies. Therefore Geico's business growth that

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Speaker 1: is coming down is that kind of the way I

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Speaker 1: think about it.

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Speaker 4: Not necessarily. So what it is is maybe fewer cars

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Speaker 4: being built, prices of those cars going up, those cars

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Speaker 4: becoming more expensive to repair or replace, thus insurance claims

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Speaker 4: going up. Kiko is actually cutting claim cutting policies to

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Speaker 4: combat that. So their policies are going down, but not

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Speaker 4: for the reason that they're being less cars, for the

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Speaker 4: reason that they're just making less money so they want

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Speaker 4: to stop losing.

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Speaker 1: And they still spend a lot on advertising.

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Speaker 4: They certainly do. All of them are cutting across the board,

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Speaker 4: but cutting.

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Speaker 1: From a large starting right, what else, I'm sorry, what

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Speaker 1: else in the insurance business? Like to explain those what else?

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Speaker 1: Berkshire Hathaway has an insurance.

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Speaker 4: Business, so they have a I know, this is your

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Speaker 4: favorite business, reinsurance business, which is insurance for insurance companies.

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Speaker 4: And what was very interesting was there's renewal points at

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Speaker 4: certain points in the year, and one of the big

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Speaker 4: ones is January first, and Berkshire was kind of a

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Speaker 4: non player in that huge player in the space. So

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Speaker 4: there was a question of what are they seeing that

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Speaker 4: we're not seeing, because this is the prices in reinsurance

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Speaker 4: are doing really well. And other reinsurance can be saying

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Speaker 4: this is great. It's a generational market. And Berkshire, known

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Speaker 4: as one of the smartest players, actually didn't participate and

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Speaker 4: we didn't know what happened. A jet actually said at

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Speaker 4: the meeting, you know what, a lot of capacity came

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Speaker 4: on that undercut us in price in January, but in

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Speaker 4: April we saw that capacity come back. So they're jumping

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Speaker 4: back into reinsurance in a big way. Oh my gosh,

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Speaker 4: so who ensures the reinsurance the retro reinsurance. There's another

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Speaker 4: level of it.

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Speaker 3: Actually, wait really yes, oh okay, that was scastic hing

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Speaker 3: every single day. Let's talk a little bit about the

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Speaker 3: cash pile of the Brickshire is sitting on here, so.

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Speaker 4: One hundred and thirty billion ish in cash. What was

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Speaker 4: incredibly interesting is, you know, the takeaway a lot of

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Speaker 4: headlines where Buffett says operating companies going to make less

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Speaker 4: money next year, which he did say, and it was

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Speaker 4: an extraordinary environment in the past couple of years. That

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Speaker 4: demand was through the roof. If people couldn't buy one thing,

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Speaker 4: they bought another, and that is slowing down, it's stopping.

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Speaker 4: But the cash that they're earning or the interest they're

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Speaker 4: earning right, going from fifty million to five billion on

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Speaker 4: their cash and short term securities, which would essentially offset

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Speaker 4: any decline in demand they saw.

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Speaker 1: All right, is succession not the TV show? We're talking

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Speaker 1: about succession?

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Speaker 3: At so excited for just one second there?

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Speaker 1: Yes, exactly, Greg Abel he is the successor. He was

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Speaker 1: named in twenty twenty one. Is that whole succession question

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Speaker 1: kind of off the table?

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Speaker 6: Now?

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Speaker 7: Yeah?

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Speaker 4: I think, I mean, I think Greg Is is clearly

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Speaker 4: the one who's going to do it. They're trying to

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Speaker 4: get him out there a little bit more. He was

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Speaker 4: on the stage for the first half of the meeting.

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Speaker 1: Why I mean, I got Charlie and I got mister

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Speaker 1: Munger there. Why don't I have the guy who's actually

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Speaker 1: running the business.

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Speaker 4: So so he was. Greg and a Jet were in

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Speaker 4: the at the beginning of the meeting for a couple

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Speaker 4: of hours. Greg didn't get a lot of questions. Unfortunately,

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Speaker 4: Ajet actually ended up talking more than Greg, but he

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Speaker 4: talked a lot in another interview. You know, Buffett and

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Speaker 4: Munger will will say that running their business is quote easy.

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Speaker 4: Clearly it's not, but they have a point in that

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Speaker 4: as constructed even just left alone, will generate significant amounts

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Speaker 4: of capital.

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Speaker 1: All right, I'm going to ask you to go little

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Speaker 1: wonky here, because we're coming into the summer, which means

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Speaker 1: we're coming into hurricane season. How does the state of

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Speaker 1: Florida ensure itself against hurricanes?

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Speaker 4: It's barely hanging on by a thread. So what is

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Speaker 4: going on in Florida is if.

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Speaker 1: I go buy a conda down there with like every

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Speaker 1: one of my neighbors who's moving down to Florida, which

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Speaker 1: I'm not doing, by the way, and that'd be the

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Speaker 1: last thing I do. Can I get insurance down there

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Speaker 1: for my little.

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Speaker 4: You can get it. It would be quite expensive. I

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Speaker 4: believe what was happening is it's not just the weather risk,

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Speaker 4: but the litigious environment in Florida was causing claims to

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Speaker 4: be multiples of what they should be. If a claim

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Speaker 4: was ten thousand dollars, you could end up being one

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Speaker 4: hundred thousand with legal costs and all these things. So

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Speaker 4: what happened is our friends, the reinsurers, actually said we're

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Speaker 4: not reinsuring you anymore, and that led to the primary

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Speaker 4: insurance companies losing financial strength ratings and going out of business.

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Speaker 4: So the cost of it went through the roof, and

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Speaker 4: the state actually ensures a lot of that. Berkshire to

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Speaker 4: bring it back to them, actually jumped into Florida in

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Speaker 4: these reinsurance retals. So if there is a hurricane of

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Speaker 4: Florida and you have me back here in a couple

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Speaker 4: of months, Berkshire would actually be pretty exposed.

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Speaker 1: Now why do you think they got back into the

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Speaker 1: Florida market?

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Speaker 4: So g was saying the pricing was probably just too

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Speaker 4: good to resist. And look, they're incredibly smart, so they

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Speaker 4: know the balance of what the capital are putting at

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Speaker 4: risk versus what they can make.

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Speaker 1: So it's not ideal is it to have this state

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Speaker 1: as the insurance backbone of us?

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Speaker 4: It is not at all the insurance industry, I believe

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Speaker 4: it was Evan Greenberg, the CEO of Chubb, said, we

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Speaker 4: don't want the government taking our business, but there's some

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Speaker 4: point where it just it's not economically viable for them.

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Speaker 1: Is there a solution? Is it something on political?

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Speaker 4: So there is, So Florida has been working on it

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Speaker 4: and they have legislation going through. It's a little bit

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Speaker 4: of wait and see, but I think we're cautiously optimistic

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Speaker 4: that they may have helped the problem, maybe not solved,

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Speaker 4: but helped.

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Speaker 1: You think, I mean again, coming into a hurricane season

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Speaker 1: again and our good friends down in Florida seems to

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Speaker 1: get just hammered it. It seems to be getting worse.

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Speaker 1: So I would think if I were a politician, I'd

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Speaker 1: want to get this thing addressed.

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Speaker 4: Yeah, the frequency and severity of hurricanes is definitely getting

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Speaker 4: worse than Florida.

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Speaker 1: All right, we'll see how it plays out and we'll

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Speaker 1: get to it. All right, some good stuff, thank ver

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Speaker 1: Matt Palizoli. He covers all that good stuff for insurance.

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Speaker 1: For Bloomberg Intelligence.

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Speaker 8: You're listening to the teenth Ken's her live program Bloomberg

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Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 8: the iHeartRadio app, and the Bloomberg Business App, or listen

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Speaker 1: I guess earnings still matter. They certainly matter. For Tyson

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Speaker 1: Foods stock is down th firteen percent today, fifty two

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Speaker 1: week low, kind of wiping out most of the year's

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Speaker 1: gains here. I guess they missed some numbers here. People

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Speaker 1: aren't eating chicken and what's going on here. Jen Bartash

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Speaker 1: is senior Industry analysts for Bloomberg Intelligence. She follows the

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Speaker 1: food industry Jen TSN, Tyson Foods. What happened.

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Speaker 5: Well with Tyson? It's really a combination of things. One,

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Speaker 5: you've got some structural market issues in the protein market

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Speaker 5: for both beef for beef, pork and chicken, and it's

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Speaker 5: hitting Tyson all simultaneously. And then second, you have some

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Speaker 5: execution issues that are Tyson owned in terms of not

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Speaker 5: running plants at full capacity and weak margins across the board.

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Speaker 5: And so when you put all this together, it turned

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Speaker 5: out to be a really weak quarter for the company.

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Speaker 1: All Right, There's so many cool things on the Bloomberg terminal.

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Speaker 1: PGeo is one of it. It kind of breaks down where

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Speaker 1: companies get their revenue from, and for Tyson it is awesome.

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Speaker 1: Beef thirty eight percent of the revenue, chicken thirty three

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Speaker 1: percent of the revenue, prepared foods nineteen percent of the revenue,

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Speaker 1: and pork ten percent of the revenue. So that's a

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Speaker 1: breakdown for you. So let's just focus on you mentioned

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Speaker 1: one's kind of an industry wide you know, protein issues.

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Speaker 1: What's going on there? I'm meaning my proteins.

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Speaker 5: Well, I think everybody's eating their protein. But but when

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Speaker 5: it comes to the actual cycle of growing animals, there's

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Speaker 5: some structural issues that are happening. So if you remember,

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Speaker 5: not that long ago, we were talking about the beef

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Speaker 5: market and we were talking about how herds were just

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Speaker 5: being we're just being obliterated, and it takes a long

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Speaker 5: time to actually rebuild beef herds, and so what we

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Speaker 5: still haven't really hit the bottom of the beef cycle yet,

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Speaker 5: And so what that means is that there are fewer

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Speaker 5: animals and the prices are higher, so it costs more

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Speaker 5: to get them, and prices at retail have been high,

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Speaker 5: so the demand hasn't been as strong. So there's some

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Speaker 5: some awkwardness going on there. And with Typhoning, everything everybody

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Speaker 5: wants to think about is with the chicken market, and

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Speaker 5: Tyson is underperformed in chicken for a long time. They've

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Speaker 5: made some moves, they've you know, announced to their closing

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Speaker 5: a couple of plants, things like that, but that takes

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Speaker 5: time to actually see the benefit from. And so even

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Speaker 5: though they're you know, they're improving their full rates to customers,

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Speaker 5: there's still there's still a lag in terms of execution

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Speaker 5: versus where the market is.

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Speaker 3: So you guess you can't blame those darn vegetarians at all.

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Speaker 3: Talk to us a little bit about the timeline there

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Speaker 3: when you're talking about Tyson rebuilding that kind of hurt.

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Speaker 3: Is that a story of a quarter or years?

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Speaker 5: Well, you know, beefy By, you know, takes takes the

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Speaker 5: longest in terms of the cycle. We're talking probably twenty

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Speaker 5: twenty late twenty twenty four or early twenty twenty five

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Speaker 5: until we see a real change in that market. You know,

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Speaker 5: for pork that's a slightly shorter time span, but we're

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Speaker 5: talking probably twenty twenty four, and for chicken it's a

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Speaker 5: short time span, but there are a lot of moving

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Speaker 5: parts to it. And that's the area where Tyson's business

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Speaker 5: has had the most execution issues. So although the company

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Speaker 5: is expecting proof performance in the second half of this year,

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Speaker 5: realistically we may be looking at twenty twenty four before

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Speaker 5: things really settle down.

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Speaker 1: You know, I watch Yellowstone, I think I fully understand

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Speaker 1: this whole ranching cattle thing. Where does Tyson where do

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Speaker 1: they get their cattle? Like how many ranches are out there?

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Speaker 1: The Dutton ranch on Montana, mean, like how many ranches

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Speaker 1: are there out there? Like supply beef and all that

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Speaker 1: kind of stuff.

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Speaker 5: Well, there are a large number of ranches out there,

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Speaker 5: and Tyson they have long established relationships with individual ranchers

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Speaker 5: in terms of their supply, so that they are sure

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Speaker 5: that they have kind of that, you know, the supply

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Speaker 5: locked in. But it's been tough times. We've had years

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Speaker 5: of drought. You know, we've had higher costs to feed animals.

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Speaker 5: It is not an easy time to be a rancher

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Speaker 5: right now, and so that makes it there's less incentive

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Speaker 5: to increase herd size when you've got a lot of

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Speaker 5: those kind of macroeconomic and you know pressures, and you know,

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Speaker 5: even interest rates are higher, it's you know, it's hard

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Speaker 5: or to invest in your in your ranch as well.

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Speaker 3: I'm really glad you mentioned just the higher pricing and

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Speaker 3: interest rates as well. Talk to us about the pricing

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Speaker 3: the equation. I felt like a lot of food companies

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Speaker 3: and consumer companies broadly, Uh, we're almost rewarded by the

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Speaker 3: stock market when they were able to say we're going

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Speaker 3: to hike up our prices and still see that demand.

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Speaker 3: Just how sticky are those prices?

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Speaker 5: Well, yeah, the prices so far have been sticky. But

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Speaker 5: what we're seeing when we look at transaction level data

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Speaker 5: from uh, you know, from what's what people are actually buying.

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Speaker 5: What we're seeing is that that that tolerance for the

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Speaker 5: price increases is abating. And so you know, in our perspective,

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Speaker 5: what that really means is that as we get towards

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Speaker 5: the second and a half of the year, there's a

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Speaker 5: real chance that we're going to see an increase in

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Speaker 5: promotions and so you're going to see retailers running more sales. Now,

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Speaker 5: I think everyone's going to try to minimize, you know,

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Speaker 5: the profit impact of those, but the the macro economic

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Speaker 5: environment is really setting these companies up to where they're

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Speaker 5: going to have to be more promotional in nature, and

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Speaker 5: consumers in parder demanding that so that tolerance for price

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Speaker 5: increases is almost gone. Now it's going to be harder

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Speaker 5: and harder for these companies to put more price more

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Speaker 5: price increases through. So it's it's going to be a

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Speaker 5: tricky second half of the year to navigate.

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Speaker 1: So, Jen, the troubles you outlined here for Tyson, are

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Speaker 1: we seeing that with some of their peers like Pilgrim's

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Speaker 1: Pride and some of those others. This is an industry

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Speaker 1: wide type of issue.

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Speaker 5: Well, some of it is industry wide. So some of

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Speaker 5: those structural issues in terms of like animal availability, the

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Speaker 5: cost of feed, those impact everybody relatively equally. You know,

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Speaker 5: when it comes to actual internal challenges in terms of

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Speaker 5: how you're running your plants, are you fully staffed, you know,

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Speaker 5: are you at your maximum capacity? That's where Tyson has

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Speaker 5: has had more challenges than some of their peers.

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Speaker 3: Jen, talk to us a little bit about the You

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Speaker 3: talked about the macroeconomic piece of it. Talk to us

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Speaker 3: about the interest rates specific piece of it. I think

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Speaker 3: you talked about how higher interest rates makes it harder

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Speaker 3: to invest in ranches specifically. Again, walk us to the

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Speaker 3: timeline on it. Is there an extra lag of from

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Speaker 3: one the Federal Reserve hikes interest rates to just how

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Speaker 3: much difficulty some of these kind of ranchers face, or

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Speaker 3: is this something that we kind of look at idiosyncratically.

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Speaker 5: Well, I think that there's there's no there's no easy

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Speaker 5: you know, there's no easy answer to that, to be honest.

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Speaker 5: You know, ranchers, you know, tend to be a conservative

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Speaker 5: bunch by nature, and it's it's not an easy business

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Speaker 5: to be in. And so anytime there in there are

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Speaker 5: factors that impact their ability to grow their business or

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Speaker 5: to invest in their business. That that puts puts them

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Speaker 5: on a more defensive footing, and so there there's definitely

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Speaker 5: a lag. So it will take time once interest rates,

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Speaker 5: if they start to come down a little bit, it

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Speaker 5: will take a little bit of time for confidence to

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Speaker 5: come back that that is the right time to do

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Speaker 5: more investment. And so it's it's it's it's you know,

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Speaker 5: you're talking about people's you know, long term livelihoods, and

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Speaker 5: so it's it's not something that tends to move or

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Speaker 5: pivot very quickly.

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Speaker 1: Jen, you also cover the supermarket side of the supply

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Speaker 1: chain here, the food supply chain. So Entyson, they have

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Speaker 1: higher costs, therefore they raise their prices. Are the supermarkets

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Speaker 1: able to pass along those price increases to consumers?

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Speaker 5: They are passing through selectively, and so you know where

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Speaker 5: they can they do. I think the one advantage that

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Speaker 5: grocers have is because a lot of them offer private

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Speaker 5: label products, they're very in tune with what it costs

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Speaker 5: to manufacture certain products, and so they can have very

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Speaker 5: good negotiations with the packaged food companies and not just

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Speaker 5: accept price increases for the sake of price increases. You know,

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Speaker 5: what what a grocer will do is they will pick

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Speaker 5: certain products where you know, they would have maintained their

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Speaker 5: their value perception in the minds of their customers, and

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Speaker 5: so if prices like hugely, say on a particular product,

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Speaker 5: they may not pass the full price increase through just

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Speaker 5: so that their customers feel like they're still getting a

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Speaker 5: good deal, but they will pass through price on you know,

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Speaker 5: other products. So they kind of focus on key items

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Speaker 5: that drive value perception and manage that what they pass

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Speaker 5: through very carefully on those, and then they take a

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Speaker 5: little bit more they have a little bit more flexibility

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Speaker 5: on the rest of the store in terms of price increases.

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Speaker 3: Jen, very quickly thirty seconds. Do we see buybacks, dividend increases,

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Speaker 3: any of that jazz in Tyson's future.

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Speaker 5: Well, they say that they're going to kind of maintain

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Speaker 5: the same courses they've had in terms of their capital allocation,

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Speaker 5: and so you know, don't don't anticipate any any cuts

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Speaker 5: to that, to that policy, and we'll have to see

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Speaker 5: what their quarter holds.

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Speaker 1: All right, Jen, thank you so much. We appreciate checking

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Speaker 1: in with you. Talking about Tyson Food again. They had

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Speaker 1: some a tough quarter, tough outlook for that business. Jen

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Speaker 1: Bartasha's senior industry antal. She covers all the whole food

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Speaker 1: stuff all the way through to the retail and to

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Speaker 1: the supermarkets. So a great understanding there.

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Speaker 8: You're listening to the tape cans are live program Bloomberg

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Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 8: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

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Speaker 1: All right, let's talk to professional here about these markets,

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Speaker 1: because time and time you just feel like you're in

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Speaker 1: a market with so many cross currents out there. Ecodata,

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Speaker 1: Federal Reserve movement, here, earnings, we're right finishing up the

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Speaker 1: earning season. We've got a little bit of a bank

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Speaker 1: turmoil here, and we put all that together and it's

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Speaker 1: tough to come up with some big conviction buys. Let's

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Speaker 1: check in what somebody who does this for a living.

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Speaker 1: Efan Debit Chief Investment Officer of Manetta Group. Again, cross

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Speaker 1: currents out there. I'll be interested to get your perspective

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Speaker 1: about how you think this market is behaving and where

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Speaker 1: you think it's going to go going forward.

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Speaker 9: It's extremely difficult to give a sense of direction right

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Speaker 9: now because we're seeing such contrary indicators. We even have

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Speaker 9: to look at today's performance and markets versus Friday's performance

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Speaker 9: when we can see that markets really are moving on.

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Speaker 9: The smallest piece of news, most of which is contradictory,

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Speaker 9: was inflation coming into check. It looks like that at

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Speaker 9: some point last week we heard the said we potentially

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Speaker 9: a pause and that all looks very positive. And now

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Speaker 9: we come back with with commodity prices rising and it

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Speaker 9: looks like it could be persisting and saying quite supple again.

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Speaker 9: This week you mentioned a little bit of turmoil in

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Speaker 9: the banking sector. That is a story that we think

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Speaker 9: has some way to run sometime, and there are potentially

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Speaker 9: a lot of unknowns unknowns when it comes to regional

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Speaker 9: banks and banks in general. So that's creating a lot

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Speaker 9: of uncertainty. And this is may remember May sell a

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Speaker 9: may and go away. I think traditionally there's not a

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Speaker 9: ton of optimism around the time of year, but a

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Speaker 9: lot going on for sure.

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Speaker 3: Even let's talk a little bit about the bond market.

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Speaker 3: Here Apple coming to the market with a five part

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Speaker 3: bond sale known to be timing the market very well,

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Speaker 3: and every time in the last I want to say,

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Speaker 3: pre COVID, going back to twenty nineteen, they've issued five times,

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Speaker 3: including today, and four not including today, have yielded higher

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Speaker 3: yields after that, essentially making them kind of issuing bonds

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Speaker 3: in the troughs that are yields fall it And for

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Speaker 3: lack of a better term, does that mean we should

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Speaker 3: expect higher yields in our near future as we expect

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Speaker 3: the Federal Reserve to end their tightening cycle.

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Speaker 9: Well, so many bonds have been the after class I say,

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Speaker 9: of the year, and because certainly they behaved so badly

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Speaker 9: last year, we're seeing a lot of people look again

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Speaker 9: at bombs. And that's part of the reason we're seeing

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Speaker 9: this money flow out of bank deposits, because bombs themselves

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Speaker 9: are paying so much. When it comes to looking again

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Speaker 9: at bonds, we can look certainly, we don't have to

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Speaker 9: take as much risk as in the past to get

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Speaker 9: a very decent, healthy yield four five percent for potentially

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Speaker 9: very low risk. So it doesn't surprise me that they're

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Speaker 9: would be strong demand for an Apple issue. It's certainly

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Speaker 9: seen as been the bluest of the blue ships in

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Speaker 9: terms of issuing and issuing debt, and certainly the equity

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Speaker 9: is so well supported that the debt has got to

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Speaker 9: be rock solid there. So in terms of what we

438
00:21:13,359 --> 00:21:15,520
Speaker 9: can expect from I don't see that rate's going that

439
00:21:15,640 --> 00:21:18,480
Speaker 9: much higher, actually, because I think the overwhelming view of

440
00:21:18,520 --> 00:21:20,760
Speaker 9: the market seems to be that we're in for a

441
00:21:20,800 --> 00:21:23,600
Speaker 9: pause or a pivot. It doesn't look like that today,

442
00:21:23,640 --> 00:21:25,560
Speaker 9: but that was certainly the mood that was coursing through

443
00:21:25,560 --> 00:21:26,760
Speaker 9: for the last few weeks.

444
00:21:27,240 --> 00:21:29,040
Speaker 1: And to that end, I guess the Federal Reserve will

445
00:21:29,040 --> 00:21:32,879
Speaker 1: be paying attention obviously Wednesday to the CPI data. I

446
00:21:32,880 --> 00:21:35,639
Speaker 1: guess CPI X Food and Energy looking to be up

447
00:21:35,680 --> 00:21:38,640
Speaker 1: five point five percent. That's smidged down from the prior

448
00:21:38,680 --> 00:21:40,919
Speaker 1: mounth of five point six percent. I mean, when you

449
00:21:40,960 --> 00:21:45,119
Speaker 1: see numbers like that, it feels like higher for longer.

450
00:21:45,160 --> 00:21:48,119
Speaker 1: But Boy, as you mentioned, if in the market, the

451
00:21:48,440 --> 00:21:52,520
Speaker 1: future's market is really pressing in rate cuts later this year,

452
00:21:53,200 --> 00:21:54,440
Speaker 1: how do you guys think about that?

453
00:21:55,440 --> 00:21:58,280
Speaker 9: Yeah, despite the Fed, it's been desperately to my telegraph

454
00:21:58,359 --> 00:22:01,199
Speaker 9: its actions. I'm really regained US and confidence. Just like

455
00:22:01,240 --> 00:22:03,639
Speaker 9: other central banks around the world, they've been doing a

456
00:22:03,640 --> 00:22:06,920
Speaker 9: decent job I think at clawing back some assurance markets

457
00:22:06,920 --> 00:22:09,280
Speaker 9: still are prone to second guessing them over and over,

458
00:22:09,760 --> 00:22:12,000
Speaker 9: and we're certainly seeing that. So as far as the

459
00:22:12,040 --> 00:22:14,520
Speaker 9: inflation numbers, we do think that a lot of what's

460
00:22:14,560 --> 00:22:17,640
Speaker 9: feeding into that core inflation number is going to be

461
00:22:18,080 --> 00:22:21,679
Speaker 9: lagging indicators, say things like employment and the cost of labor.

462
00:22:21,960 --> 00:22:26,240
Speaker 9: Because that lags, we essentially don't necessarily expect it to persist.

463
00:22:27,240 --> 00:22:29,520
Speaker 9: But previous to this week, we did see commodities coming

464
00:22:29,560 --> 00:22:32,399
Speaker 9: down that was going to be again feeding into lower

465
00:22:32,400 --> 00:22:36,400
Speaker 9: inflation overall, and there are still those deflationary sources out there.

466
00:22:36,400 --> 00:22:38,560
Speaker 9: We speak every second day about AI and what that

467
00:22:38,600 --> 00:22:40,840
Speaker 9: means for employment. If that is in fact that a

468
00:22:40,840 --> 00:22:42,760
Speaker 9: long term trend, and of course it is at this point,

469
00:22:42,800 --> 00:22:45,800
Speaker 9: we couldn't deny that will would that be deflationary. So

470
00:22:45,840 --> 00:22:48,600
Speaker 9: I think investors are trying to really parse this inflation

471
00:22:48,760 --> 00:22:51,600
Speaker 9: data and see what is in fact transitory, because some

472
00:22:51,640 --> 00:22:54,159
Speaker 9: of it is, and what's slightly to stick. So a

473
00:22:54,280 --> 00:22:56,960
Speaker 9: very mixed picture. But I'd say a pause is what

474
00:22:56,960 --> 00:22:59,120
Speaker 9: we're looking at at the moment, not a pivot and

475
00:22:59,280 --> 00:23:01,600
Speaker 9: I don't agree with that We're going to see more rate.

476
00:23:01,480 --> 00:23:05,160
Speaker 3: Hikes Ethan, what about the debt ceiling? Do we need

477
00:23:05,200 --> 00:23:10,119
Speaker 3: to worry about this kind of ticking time clock that

478
00:23:10,160 --> 00:23:13,400
Speaker 3: we have going June first? I believe Janet Yellen warning

479
00:23:13,480 --> 00:23:17,159
Speaker 3: about hitting that upper limit. How much of this is

480
00:23:17,240 --> 00:23:19,160
Speaker 3: just kind of a boy crying wolf.

481
00:23:20,800 --> 00:23:22,640
Speaker 9: Very good point. I mean, we are though, if we've

482
00:23:22,680 --> 00:23:25,520
Speaker 9: learned anything from COVID and beyond, we are very adept

483
00:23:25,600 --> 00:23:28,480
Speaker 9: at kicking the can down the road. In every single

484
00:23:28,480 --> 00:23:30,800
Speaker 9: instance there's been pressure and the debt ceiling up to now,

485
00:23:31,040 --> 00:23:33,320
Speaker 9: we will kick it down the road again. Will there

486
00:23:33,359 --> 00:23:36,439
Speaker 9: be political posturing and jostling and saber rattling as we

487
00:23:36,480 --> 00:23:39,400
Speaker 9: get to that point. Absolutely, But just as the inflation

488
00:23:39,560 --> 00:23:42,440
Speaker 9: data has been moving around, the tax receipt data has

489
00:23:42,480 --> 00:23:45,200
Speaker 9: been quite unclear. At the moment. We hear capital gains

490
00:23:45,240 --> 00:23:47,879
Speaker 9: redown last year, but then again we're hearing about the

491
00:23:47,880 --> 00:23:50,919
Speaker 9: employment picture being solid and income tax being solid, So

492
00:23:50,960 --> 00:23:52,840
Speaker 9: for that picture, we really don't know what the picture

493
00:23:52,880 --> 00:23:55,240
Speaker 9: looks like. There probably was a little bit of crying

494
00:23:55,240 --> 00:23:57,440
Speaker 9: wolves just to get people to think about this seriously.

495
00:23:57,840 --> 00:23:59,960
Speaker 9: But again, if we think about how this has impacted

496
00:24:00,080 --> 00:24:03,399
Speaker 9: markets in the past. Just like most other political developments,

497
00:24:03,560 --> 00:24:05,640
Speaker 9: they tend to be pretty short lived. So I think

498
00:24:05,680 --> 00:24:08,760
Speaker 9: there could be just more the sucking out of some

499
00:24:08,840 --> 00:24:11,080
Speaker 9: of that confidence out of the stock market as this

500
00:24:11,160 --> 00:24:14,159
Speaker 9: deadline nears. But I don't see it as being transformational

501
00:24:14,200 --> 00:24:15,160
Speaker 9: in terms of sentiments.

502
00:24:16,000 --> 00:24:19,359
Speaker 3: The only one better Paul than me at procrastinating is

503
00:24:19,359 --> 00:24:23,399
Speaker 3: the US government apparently even let's talk again about the

504
00:24:23,440 --> 00:24:26,040
Speaker 3: trade here in our last thirty seconds or so, let's

505
00:24:26,040 --> 00:24:29,520
Speaker 3: say it's June first, in this last iteration that we've had,

506
00:24:29,520 --> 00:24:33,440
Speaker 3: I think twenty eleven, when the US did have that

507
00:24:33,520 --> 00:24:38,040
Speaker 3: credit rating downgrade, the immediate reaction was by American the

508
00:24:38,080 --> 00:24:40,320
Speaker 3: biggest paradox. Do we see that happen again?

509
00:24:41,440 --> 00:24:43,840
Speaker 9: It's full of paradoxes. Just as we've seen a little

510
00:24:43,840 --> 00:24:46,240
Speaker 9: bit of strengthen the dollar in recent days compared to

511
00:24:46,240 --> 00:24:49,520
Speaker 9: other currencies, we've also seen it come down from its

512
00:24:49,560 --> 00:24:51,959
Speaker 9: twenty year peak that it was at last year, and

513
00:24:52,040 --> 00:24:55,359
Speaker 9: so there's that move into the dollar, that discussion around dedollarization,

514
00:24:55,920 --> 00:24:59,160
Speaker 9: that betting against the US economy versus not betting against

515
00:24:59,160 --> 00:25:01,960
Speaker 9: the US economy because it is essentially so tech driven.

516
00:25:02,480 --> 00:25:06,280
Speaker 9: There is there's been we've heard arguments on both sides there.

517
00:25:06,520 --> 00:25:08,879
Speaker 9: So I'd say, to what will happen with the death seating,

518
00:25:08,920 --> 00:25:12,320
Speaker 9: I think there is definitely a tendency towards needing to

519
00:25:12,400 --> 00:25:14,480
Speaker 9: take some of the strength out of the dollar. It's

520
00:25:14,480 --> 00:25:16,320
Speaker 9: been too long for too it's been too high for

521
00:25:16,400 --> 00:25:18,840
Speaker 9: too long, and as other economies around the world are

522
00:25:18,840 --> 00:25:22,800
Speaker 9: actually perhaps being underestimated, in particular Europe, we are going

523
00:25:22,880 --> 00:25:24,920
Speaker 9: to see some strength return there. So I'd say I

524
00:25:24,920 --> 00:25:27,439
Speaker 9: wouldn't say there'll be a mad rush into the US

525
00:25:27,880 --> 00:25:29,359
Speaker 9: even if this death seating is resolved.

526
00:25:29,400 --> 00:25:30,959
Speaker 1: All right, Ethan, thank you so much for joining us.

527
00:25:30,960 --> 00:25:34,720
Speaker 1: Ethan Deviitchief, investment officer for Monet a Group. We appreciate

528
00:25:34,720 --> 00:25:35,600
Speaker 1: getting some of her time.

529
00:25:37,720 --> 00:25:41,560
Speaker 8: You're listening to the Team kenzro Line program Bloomberg Markets

530
00:25:41,600 --> 00:25:44,680
Speaker 8: weekdays at ten am Eastern on Bloomberg dot Com, the

531
00:25:44,800 --> 00:25:47,919
Speaker 8: iHeartRadio app and the Bloomberg Business App, or listening on

532
00:25:47,960 --> 00:25:49,919
Speaker 8: demand wherever you get your podcast.

533
00:25:52,280 --> 00:25:55,960
Speaker 1: Microsoft Activision sixty nine billion dollars. It got your tention

534
00:25:56,080 --> 00:25:58,680
Speaker 1: and that thing hit the tape, but some UK regulators

535
00:25:58,720 --> 00:26:00,920
Speaker 1: are saying that they're not to approve it. I mean,

536
00:26:01,000 --> 00:26:03,880
Speaker 1: so a lot of uncertainty there, even Warren Buffett weighed

537
00:26:03,880 --> 00:26:06,040
Speaker 1: in on over the weekend saying he opposes the UK

538
00:26:06,160 --> 00:26:08,560
Speaker 1: blocking this deal. So let's get some of the experts

539
00:26:08,560 --> 00:26:10,160
Speaker 1: back in the room to kind of talk about where

540
00:26:10,160 --> 00:26:12,000
Speaker 1: we are with this deal. What does it mean for Microsoft,

541
00:26:12,040 --> 00:26:14,639
Speaker 1: what does it mean for Activision? Jenrie, she's a senior

542
00:26:14,680 --> 00:26:18,199
Speaker 1: analyst covering antitrust litigation with Bloomberg Intelligence. She's got that

543
00:26:18,560 --> 00:26:20,560
Speaker 1: part of the game covered and on a rag run

544
00:26:20,640 --> 00:26:23,280
Speaker 1: a senior technology channels with BI he covers Microsoft. He's

545
00:26:23,320 --> 00:26:26,320
Speaker 1: done that for ages for Bloomberg Intelligence. He joins us

546
00:26:26,320 --> 00:26:29,520
Speaker 1: on the phone. Jen is in our studio here in

547
00:26:29,560 --> 00:26:33,160
Speaker 1: New York. So Jen, start with you here. Warren Buffett

548
00:26:33,160 --> 00:26:35,800
Speaker 1: ways in over the weekend. That kind of is interesting. Here,

549
00:26:36,080 --> 00:26:40,440
Speaker 1: just summarize for us why the UK regulators are blocking

550
00:26:40,680 --> 00:26:44,359
Speaker 1: Microsoft's pending act pending acquisition for Activision.

551
00:26:44,760 --> 00:26:46,679
Speaker 10: So what the UK is worried about is what they

552
00:26:46,720 --> 00:26:48,600
Speaker 10: think is going to be the next big thing in gaming,

553
00:26:48,760 --> 00:26:50,880
Speaker 10: not not what's going on today where most people would

554
00:26:50,880 --> 00:26:53,560
Speaker 10: play a first shooter game like Activision's Call of Duty

555
00:26:53,600 --> 00:26:56,320
Speaker 10: on a console or on a PC, but down the road,

556
00:26:56,400 --> 00:26:58,879
Speaker 10: when they believe gamers will be playing through the cloud

557
00:26:58,960 --> 00:27:02,440
Speaker 10: and possibly through sub scription services. So they think Microsoft

558
00:27:02,480 --> 00:27:04,760
Speaker 10: already has a pretty big hole in the cloud market.

559
00:27:05,000 --> 00:27:07,120
Speaker 10: And with this content, I think they think of Call

560
00:27:07,160 --> 00:27:10,359
Speaker 10: of Duty sort of must have content for gamers person

561
00:27:10,440 --> 00:27:13,320
Speaker 10: shooter gamers, they will be able to sort of corner

562
00:27:13,400 --> 00:27:15,800
Speaker 10: this up and coming cloud market. They'll be able to

563
00:27:15,840 --> 00:27:20,320
Speaker 10: somehow damage their rivals, take market share and dominate that area.

564
00:27:20,400 --> 00:27:23,040
Speaker 10: And what they're trying to do is protect that, protect

565
00:27:23,040 --> 00:27:24,840
Speaker 10: what they think is going to be the future of gaming.

566
00:27:25,440 --> 00:27:29,120
Speaker 11: So anra come in here. How much does Microsoft need

567
00:27:29,160 --> 00:27:29,600
Speaker 11: this deal?

568
00:27:30,960 --> 00:27:31,000
Speaker 5: No?

569
00:27:31,119 --> 00:27:34,399
Speaker 12: I don't think they will do fine without the deal. Also,

570
00:27:34,560 --> 00:27:37,320
Speaker 12: and you know, I'm no expert in cloud gaming, but

571
00:27:37,600 --> 00:27:39,840
Speaker 12: you know, people who know a lot more than me

572
00:27:39,920 --> 00:27:43,119
Speaker 12: in this area, including Matt Miller, has told me that

573
00:27:43,160 --> 00:27:47,359
Speaker 12: it's you know, so far away latency issue and stuff.

574
00:27:47,400 --> 00:27:49,360
Speaker 12: And I think, you know, Jen and I have talked

575
00:27:49,359 --> 00:27:51,680
Speaker 12: about it, and she's taught me that, you know, it's

576
00:27:51,720 --> 00:27:54,040
Speaker 12: not so much what's here, but what could happen three

577
00:27:54,040 --> 00:27:56,840
Speaker 12: to five years from now. And I think that's really

578
00:27:56,840 --> 00:27:59,640
Speaker 12: the reason why regulate it is that kind of worded here.

579
00:28:00,040 --> 00:28:03,160
Speaker 1: But Microsoft shareholders they like this deal, don't They don't

580
00:28:03,160 --> 00:28:05,840
Speaker 1: They want Microsoft to get into some more content businesses.

581
00:28:06,560 --> 00:28:08,960
Speaker 12: Yeah, I mean they should, you know when I think

582
00:28:09,160 --> 00:28:11,439
Speaker 12: I was surprised once that they took over. One of

583
00:28:11,440 --> 00:28:13,760
Speaker 12: the first acquisitions was Minecraft, and I said, well, what

584
00:28:13,800 --> 00:28:15,879
Speaker 12: the hell was Minecraft? I They had no clue about it,

585
00:28:15,920 --> 00:28:20,040
Speaker 12: and I don't. I'm sorry, I don't know anything about gaming.

586
00:28:20,080 --> 00:28:22,560
Speaker 12: And you know, they have a console business and they

587
00:28:22,560 --> 00:28:24,719
Speaker 12: are fighting neck to neck with Sony always about it,

588
00:28:24,760 --> 00:28:28,840
Speaker 12: and you know, it's it's expanding their studios, expanding the games,

589
00:28:29,040 --> 00:28:32,520
Speaker 12: the ecosystem, and this is just another way of it.

590
00:28:32,560 --> 00:28:34,359
Speaker 12: So yeah, I mean from a shareholder point of view,

591
00:28:34,440 --> 00:28:36,960
Speaker 12: it's fine if they have it, it's good. If they

592
00:28:37,040 --> 00:28:39,800
Speaker 12: don't have it, it's not their business is going to

593
00:28:39,880 --> 00:28:43,360
Speaker 12: die anytime soon. You know, it's just not as strong

594
00:28:43,440 --> 00:28:44,440
Speaker 12: as it would have been.

595
00:28:45,000 --> 00:28:46,520
Speaker 11: So then what's next for Microsoft.

596
00:28:46,520 --> 00:28:47,240
Speaker 7: They're going to appeal.

597
00:28:47,800 --> 00:28:49,800
Speaker 10: Yeah, well they've talked about appealing, but you know, there

598
00:28:49,800 --> 00:28:51,320
Speaker 10: are a couple things that could stand in the way.

599
00:28:51,400 --> 00:28:53,240
Speaker 10: So they do have a mid July end date to

600
00:28:53,240 --> 00:28:55,640
Speaker 10: the agreement, and at that point in time, unless they

601
00:28:55,640 --> 00:28:58,440
Speaker 10: extend it, Activision could walk away and collect a three

602
00:28:58,480 --> 00:29:01,320
Speaker 10: billion dollars fig. Now, they extend that, and it looks

603
00:29:01,320 --> 00:29:03,360
Speaker 10: like they're pretty serious about going through this appeal. I've

604
00:29:03,360 --> 00:29:05,840
Speaker 10: seen some news about hiring great lawyers in the UK

605
00:29:06,040 --> 00:29:08,120
Speaker 10: and they've talked about it a lot, and they seem

606
00:29:08,160 --> 00:29:10,560
Speaker 10: to want to do this. It is a very high standard,

607
00:29:10,920 --> 00:29:13,320
Speaker 10: so you know, it's a long shot. It doesn't mean

608
00:29:13,320 --> 00:29:15,480
Speaker 10: they couldn't win, but it is a long shot. I

609
00:29:15,560 --> 00:29:17,880
Speaker 10: dug up some statistics for this and I did see

610
00:29:18,120 --> 00:29:20,440
Speaker 10: that in the last ten years or so, the UK's

611
00:29:20,440 --> 00:29:23,239
Speaker 10: one about seventy percent of these merger appeals. So you know,

612
00:29:23,400 --> 00:29:25,240
Speaker 10: just looking at that, you're looking at thirty percent.

613
00:29:25,360 --> 00:29:28,320
Speaker 1: Well, Jen, why doesn't Microsoft just carve out the UK?

614
00:29:28,560 --> 00:29:30,920
Speaker 1: I mean and the fifth and I mean, who cares?

615
00:29:31,040 --> 00:29:32,920
Speaker 10: Well, here's the thing. You know, the UK is a

616
00:29:32,920 --> 00:29:36,040
Speaker 10: big economy and also it's a big gaming economy. This

617
00:29:36,120 --> 00:29:38,200
Speaker 10: is what I understand. I was a little bit surprised,

618
00:29:38,200 --> 00:29:40,920
Speaker 10: but I guess the Brits love gaming, so you know,

619
00:29:41,400 --> 00:29:43,000
Speaker 10: that's a lot of revenue. And what they're going to

620
00:29:43,080 --> 00:29:44,600
Speaker 10: have to do is they're going to have to do

621
00:29:44,800 --> 00:29:47,400
Speaker 10: the economics of that and see is it worth it

622
00:29:47,440 --> 00:29:49,560
Speaker 10: for them to go ahead and close this worldwide? And

623
00:29:49,600 --> 00:29:50,960
Speaker 10: then withdraw out of the UK?

624
00:29:51,600 --> 00:29:53,880
Speaker 11: Does the US follow what the UK does?

625
00:29:54,000 --> 00:29:56,800
Speaker 10: How likely is that well, the US has actually already sued.

626
00:29:56,880 --> 00:29:59,440
Speaker 10: But there's a really big difference because Microsoft here in

627
00:29:59,480 --> 00:30:01,880
Speaker 10: the US, I believe would winning court. I think they

628
00:30:01,920 --> 00:30:04,080
Speaker 10: have a really good shot. This is a vertical deal.

629
00:30:04,280 --> 00:30:07,200
Speaker 10: It's very speculative as to whether there's going to be

630
00:30:07,280 --> 00:30:09,360
Speaker 10: this big cloud gaming in the future and whether this

631
00:30:09,440 --> 00:30:12,120
Speaker 10: deal would actually harm that area. You know, whether call

632
00:30:12,160 --> 00:30:14,640
Speaker 10: of duty is so important that everybody has to have

633
00:30:14,760 --> 00:30:17,600
Speaker 10: it in order to have a successful game subscription business,

634
00:30:18,600 --> 00:30:20,520
Speaker 10: so they have a better chance. Here in the UK

635
00:30:20,600 --> 00:30:24,160
Speaker 10: it's different. The standard's much higher. So what the court

636
00:30:24,240 --> 00:30:27,120
Speaker 10: has to decide that the decision is completely and totally irrational,

637
00:30:27,560 --> 00:30:29,880
Speaker 10: and that's worse than just bad judgment or not a

638
00:30:29,880 --> 00:30:30,440
Speaker 10: good decision.

639
00:30:30,480 --> 00:30:33,760
Speaker 1: It has to be really bad an rac How what's

640
00:30:33,800 --> 00:30:37,240
Speaker 1: what's Microsoft saying in terms of their willingness to and

641
00:30:37,840 --> 00:30:39,720
Speaker 1: how far they will take this? How hard are they

642
00:30:39,760 --> 00:30:40,600
Speaker 1: going to fight for this deal?

643
00:30:40,640 --> 00:30:43,600
Speaker 12: Do you think I think they'll fight now whatever options

644
00:30:43,600 --> 00:30:45,520
Speaker 12: they have they have, I think given all the concessions

645
00:30:45,520 --> 00:30:47,440
Speaker 12: they could from their side, I don't think there's going

646
00:30:47,480 --> 00:30:50,240
Speaker 12: to be any more from here. But you know, from

647
00:30:50,240 --> 00:30:52,720
Speaker 12: my side, if it doesn't go through, I'll be happy

648
00:30:52,760 --> 00:30:53,720
Speaker 12: with some more buybacks.

649
00:30:55,440 --> 00:30:59,719
Speaker 1: So this is just signal we've got a democratic administration

650
00:30:59,760 --> 00:31:01,880
Speaker 1: in the there's a new sheriff in town, and we're

651
00:31:01,920 --> 00:31:03,840
Speaker 1: just gonna take a tougher stance on M and A

652
00:31:04,240 --> 00:31:06,320
Speaker 1: in general. Is that reflective of that or is that

653
00:31:06,560 --> 00:31:08,320
Speaker 1: or is this more specific to this deal?

654
00:31:08,520 --> 00:31:11,200
Speaker 10: Oh no, I think it's absolutely about taking a more

655
00:31:11,240 --> 00:31:15,640
Speaker 10: aggressive stance, particularly in big tech, particularly when it's a

656
00:31:15,720 --> 00:31:19,840
Speaker 10: big incumbent that's buying a smaller company. And I think

657
00:31:19,880 --> 00:31:23,040
Speaker 10: also it's regrets regrets for past deals that the FTC

658
00:31:23,080 --> 00:31:25,160
Speaker 10: and the DJ allowed through like Google Dobble.

659
00:31:25,400 --> 00:31:27,160
Speaker 1: I would say, well Live Nation for sure.

660
00:31:27,760 --> 00:31:30,600
Speaker 10: You know, even Comcast NBCU from way back, there are

661
00:31:30,600 --> 00:31:33,840
Speaker 10: some regrets about that one, absolutely because they're allegations that

662
00:31:33,880 --> 00:31:38,600
Speaker 10: they violated their consent order. You have Facebook with Instagram

663
00:31:38,680 --> 00:31:41,120
Speaker 10: and WhatsApp, so you know, I think that the agencies

664
00:31:41,160 --> 00:31:43,560
Speaker 10: think we were asleep at the wheel too long, especially

665
00:31:43,600 --> 00:31:45,080
Speaker 10: when it comes to big tech, and so we have

666
00:31:45,120 --> 00:31:47,960
Speaker 10: to be really careful. And technology moves fast, so we

667
00:31:48,040 --> 00:31:50,280
Speaker 10: need to be thinking about those future markets instead of

668
00:31:50,320 --> 00:31:52,120
Speaker 10: just looking at the market as it stands today.

669
00:31:52,920 --> 00:31:55,120
Speaker 11: An rag is there an acquisition then that if this

670
00:31:55,240 --> 00:31:57,960
Speaker 11: doesn't go through that you would rather Microsoft be focusing

671
00:31:58,000 --> 00:32:01,440
Speaker 11: on or are to your point, are you just dividends focused?

672
00:32:02,720 --> 00:32:04,080
Speaker 1: Buy back?

673
00:32:03,800 --> 00:32:03,880
Speaker 7: Right?

674
00:32:04,360 --> 00:32:07,719
Speaker 1: He's a tech guy. I like, I'm a dividend guy,

675
00:32:07,720 --> 00:32:11,120
Speaker 1: but I don't know it's strictly a buyback, sool.

676
00:32:10,720 --> 00:32:13,640
Speaker 12: I apologize the way I think about it. As far

677
00:32:13,760 --> 00:32:17,160
Speaker 12: as big tech is concerned, they can't even buy pizza now.

678
00:32:17,040 --> 00:32:17,400
Speaker 8: I mean.

679
00:32:19,000 --> 00:32:21,240
Speaker 1: I would agree, all right, So you know.

680
00:32:22,040 --> 00:32:24,320
Speaker 12: I think they the only thing left is buybacks then.

681
00:32:24,440 --> 00:32:24,760
Speaker 5: All right?

682
00:32:24,800 --> 00:32:27,680
Speaker 1: So I mean so if I'm a Microsoft, I'm looking

683
00:32:27,720 --> 00:32:29,360
Speaker 1: at the P and L. I'm looking at the business model.

684
00:32:30,000 --> 00:32:32,240
Speaker 1: That's it. Now, It's only a question of what do

685
00:32:32,280 --> 00:32:33,560
Speaker 1: I do with the cash?

686
00:32:33,600 --> 00:32:34,040
Speaker 12: Exactly?

687
00:32:34,880 --> 00:32:35,360
Speaker 6: All right?

688
00:32:35,840 --> 00:32:39,200
Speaker 1: All right enough for you then, I mean, so Jen,

689
00:32:39,360 --> 00:32:42,560
Speaker 1: let's go back to you here. I mean, it's interesting

690
00:32:42,600 --> 00:32:46,400
Speaker 1: here if is there a sentiment out there that big

691
00:32:46,440 --> 00:32:49,720
Speaker 1: deals in general are facing a much higher hurdle just

692
00:32:49,760 --> 00:32:51,440
Speaker 1: in general, even if it's not tech. I mean, if

693
00:32:51,440 --> 00:32:54,880
Speaker 1: one consumer product company wants to buy another, it's a

694
00:32:54,880 --> 00:32:56,720
Speaker 1: different world than it was maybe three or four years ago.

695
00:32:56,800 --> 00:32:59,200
Speaker 10: Paul, Absolutely, And it's not just a sentiment. I mean

696
00:32:59,240 --> 00:33:01,840
Speaker 10: the statistics show it. In the last I think, well,

697
00:33:01,880 --> 00:33:04,880
Speaker 10: for sure, this quarter and possibly even in the last year.

698
00:33:05,200 --> 00:33:08,520
Speaker 10: Until this weekend, the DJ had not settled a deal

699
00:33:08,560 --> 00:33:11,480
Speaker 10: with a consent order, so they just settled a lockcase.

700
00:33:11,520 --> 00:33:13,400
Speaker 10: The company asked to Abloyd that was in the middle

701
00:33:13,440 --> 00:33:16,200
Speaker 10: of trial, and they settled with some divestitures. And I

702
00:33:16,200 --> 00:33:18,000
Speaker 10: think it's because they could tell from what the judge

703
00:33:18,040 --> 00:33:20,040
Speaker 10: was saying, things weren't going very well for the DOJ

704
00:33:20,200 --> 00:33:23,320
Speaker 10: in trial. But it used to be that about four

705
00:33:23,360 --> 00:33:25,400
Speaker 10: percent of the deals that got filed would get these

706
00:33:25,400 --> 00:33:28,520
Speaker 10: in depth investigations and most of them would close with settlements.

707
00:33:28,680 --> 00:33:31,880
Speaker 10: Now hardly any of them closed with settlements. So from

708
00:33:31,960 --> 00:33:35,080
Speaker 10: the actions of the agencies, we're seeing that it's really

709
00:33:35,080 --> 00:33:36,760
Speaker 10: any big company, any big deal.

710
00:33:37,720 --> 00:33:40,440
Speaker 11: What does like my mom need to know about this, Like,

711
00:33:40,480 --> 00:33:42,680
Speaker 11: if these deals are less likely to go through, is

712
00:33:42,680 --> 00:33:44,520
Speaker 11: that good for the consumer in the end because it

713
00:33:44,520 --> 00:33:45,440
Speaker 11: means more competition?

714
00:33:45,840 --> 00:33:48,480
Speaker 10: You know, Well, first, is your mom a merger arbitrages

715
00:33:48,600 --> 00:33:50,920
Speaker 10: because she was going to have some serious concerns?

716
00:33:51,760 --> 00:33:51,960
Speaker 8: You know.

717
00:33:52,000 --> 00:33:54,000
Speaker 10: It depends on the deal, you know, And I think

718
00:33:54,040 --> 00:33:55,760
Speaker 10: it depends on your perspective. I think there are a

719
00:33:55,760 --> 00:33:58,360
Speaker 10: lot of people looking right now at Kroger Albertson's and thinking, oh,

720
00:33:58,400 --> 00:34:00,240
Speaker 10: I don't want that deal to close. You know, I

721
00:34:00,240 --> 00:34:03,920
Speaker 10: have a Kroger branded supermarket and announ person supermarket that

722
00:34:03,960 --> 00:34:05,720
Speaker 10: I go to. I don't want that to be owned

723
00:34:05,760 --> 00:34:09,960
Speaker 10: by one company. And that's a very consumer facing area. Pharmaceuticals.

724
00:34:10,239 --> 00:34:13,600
Speaker 10: I think people who you know, getting older, they need

725
00:34:13,640 --> 00:34:16,160
Speaker 10: to have prescription drugs. They're not going to want to

726
00:34:16,160 --> 00:34:18,439
Speaker 10: see these big pharma deals. And actually, you haven't seen

727
00:34:18,480 --> 00:34:20,399
Speaker 10: a big farma deal in a while. You know that's

728
00:34:20,440 --> 00:34:22,160
Speaker 10: going to be a tough deal to close right now.

729
00:34:23,320 --> 00:34:25,160
Speaker 10: So I really think it depends on your perspective. I'm

730
00:34:25,160 --> 00:34:27,280
Speaker 10: guessing your mom probably wouldn't care very much of Microsoft

731
00:34:27,320 --> 00:34:28,040
Speaker 10: blod Activision.

732
00:34:28,600 --> 00:34:30,400
Speaker 11: I have a feeling no one in the Mills family

733
00:34:30,640 --> 00:34:32,720
Speaker 11: is not as.

734
00:34:32,040 --> 00:34:36,240
Speaker 1: Team honrog Ronnie. He covers all the tech stuff along

735
00:34:36,280 --> 00:34:40,640
Speaker 1: with his team at Bloomberg Intelligence and generally follows all

736
00:34:40,640 --> 00:34:43,360
Speaker 1: the anti trust stuff, which is just critical when you

737
00:34:43,400 --> 00:34:45,759
Speaker 1: get a big deal, and then you get a big

738
00:34:45,800 --> 00:34:48,959
Speaker 1: deal that runs into some regulatory issues. We immediately turned

739
00:34:48,960 --> 00:34:51,480
Speaker 1: to Jen and say, what's up, what's going on and

740
00:34:51,600 --> 00:34:53,239
Speaker 1: how's this going to play out? And she's got great

741
00:34:53,239 --> 00:34:54,279
Speaker 1: experience and we appreciate it.

742
00:34:54,760 --> 00:34:57,759
Speaker 8: Getting it here, you're listening to the tape cancer Live

743
00:34:57,840 --> 00:35:02,280
Speaker 8: program Bloomberg Markets week days ten am Eastern on Bloomberg Radio,

744
00:35:02,440 --> 00:35:05,160
Speaker 8: the tune in app, Bloomberg dot Com, and the Bloomberg

745
00:35:05,200 --> 00:35:08,280
Speaker 8: Business App. You can also listen live on Amazon Alexa

746
00:35:08,360 --> 00:35:11,640
Speaker 8: from our flagship New York station. Just say Alexa play

747
00:35:11,760 --> 00:35:13,040
Speaker 8: Bloomberg eleven.

748
00:35:12,760 --> 00:35:17,600
Speaker 1: Thirty Today, time for our c suite conversation. Let's go

749
00:35:17,640 --> 00:35:21,040
Speaker 1: a little tech uh, and we'll do that with Amitt Wallya.

750
00:35:21,120 --> 00:35:24,800
Speaker 1: He's the CEO of Informatica. Informatica is a public traded company.

751
00:35:25,160 --> 00:35:27,680
Speaker 1: I n FA is a ticker to put into your

752
00:35:27,719 --> 00:35:30,920
Speaker 1: Bloomberg Professional Service. You see that stock, it's got a

753
00:35:30,960 --> 00:35:33,040
Speaker 1: market cap at about four point two billion dollars, up

754
00:35:33,040 --> 00:35:35,600
Speaker 1: about four tens a one percent today, stocks off about

755
00:35:35,600 --> 00:35:38,600
Speaker 1: ten percent year to date. Thanks so much for joining us.

756
00:35:39,000 --> 00:35:41,480
Speaker 1: For our listeners, Let's just take a couple of take

757
00:35:41,520 --> 00:35:43,759
Speaker 1: thirty seconds to just give me an overview of what

758
00:35:43,840 --> 00:35:45,600
Speaker 1: you guys do at Informatica.

759
00:35:46,440 --> 00:35:48,759
Speaker 7: Well, thanks for hosting me, Paul and Madison. Great to

760
00:35:48,760 --> 00:35:49,080
Speaker 7: be here.

761
00:35:49,239 --> 00:35:52,160
Speaker 13: Well, I'm actually talking to you from Vegas maybe us

762
00:35:52,440 --> 00:35:57,239
Speaker 13: doing our annual user conference Informatical World. Where's we are

763
00:35:57,239 --> 00:35:58,799
Speaker 13: doing our user conference here?

764
00:35:58,920 --> 00:36:00,560
Speaker 7: Annual user conference in Las Vegas.

765
00:36:00,560 --> 00:36:03,840
Speaker 13: So speaking well, Informatica is the leader in what we

766
00:36:03,920 --> 00:36:07,080
Speaker 13: call data management. You know, it's the only platform out there,

767
00:36:07,080 --> 00:36:09,839
Speaker 13: and we help customers bring data from any source at

768
00:36:09,960 --> 00:36:12,680
Speaker 13: high quality, make sure you can make the most out

769
00:36:12,719 --> 00:36:16,279
Speaker 13: of it. Do analytics, make business decisions and govern it

770
00:36:16,320 --> 00:36:19,279
Speaker 13: for all kinds of regulatory compliance, and provision that data

771
00:36:19,320 --> 00:36:21,759
Speaker 13: for any user across the enterprise. That's what we do

772
00:36:22,080 --> 00:36:25,040
Speaker 13: across pretty much all large enterprise globally.

773
00:36:26,160 --> 00:36:29,000
Speaker 11: So in your description, I'm stealing a Paul joke, but

774
00:36:29,120 --> 00:36:31,719
Speaker 11: you've got cloud in the title. I know you've got

775
00:36:31,719 --> 00:36:33,640
Speaker 11: some AI stuff going on. You've got all the good

776
00:36:33,640 --> 00:36:38,080
Speaker 11: buzzwords that markets are liking these days. How's the business doing,

777
00:36:38,200 --> 00:36:41,720
Speaker 11: especially following some of the market reaction to your earnings report.

778
00:36:42,800 --> 00:36:44,719
Speaker 13: Well, we had a great Q one, so to give

779
00:36:44,719 --> 00:36:47,120
Speaker 13: you some context, we guide it this year. Cloud is

780
00:36:47,120 --> 00:36:49,080
Speaker 13: a big number for us, and we guided this year

781
00:36:49,080 --> 00:36:51,200
Speaker 13: to a thirty five percent growth for our cloud RR

782
00:36:51,520 --> 00:36:54,480
Speaker 13: and we actually grew forty one percent in Q one,

783
00:36:54,480 --> 00:36:55,000
Speaker 13: so we're off to.

784
00:36:55,040 --> 00:36:57,759
Speaker 7: A great start. In fact, we crossed a big milestone

785
00:36:58,320 --> 00:36:59,680
Speaker 7: for subscription.

786
00:36:59,400 --> 00:37:01,239
Speaker 13: RR, which is what Cloud is a part of, and

787
00:37:01,280 --> 00:37:04,239
Speaker 13: that grow twenty percent at a billion dollar round rate.

788
00:37:04,280 --> 00:37:06,040
Speaker 13: In fact, you've guided to a half a billion of

789
00:37:06,040 --> 00:37:07,920
Speaker 13: cloud r R in Q two, so we're feeling great.

790
00:37:08,239 --> 00:37:11,120
Speaker 13: In fact, another good test of that is the usage

791
00:37:11,120 --> 00:37:14,680
Speaker 13: of a cloud platform I DMC and that usage grew

792
00:37:14,840 --> 00:37:15,800
Speaker 13: sixty nine.

793
00:37:15,719 --> 00:37:16,640
Speaker 7: Percent year a year.

794
00:37:17,000 --> 00:37:19,400
Speaker 13: So we feel good about cloud data and II the

795
00:37:19,440 --> 00:37:21,640
Speaker 13: trifactor and we see it in the middle of it.

796
00:37:22,560 --> 00:37:26,680
Speaker 1: So, you know, big data another term that's that's certainly

797
00:37:26,719 --> 00:37:28,759
Speaker 1: in the news. I mean that kind of feels like

798
00:37:28,840 --> 00:37:32,239
Speaker 1: your company is is benefit beneficiary of just kind of

799
00:37:32,280 --> 00:37:34,520
Speaker 1: big data? Is we put more and more stuff in

800
00:37:34,600 --> 00:37:36,520
Speaker 1: the cloud, more and more data in the cloud. How

801
00:37:36,520 --> 00:37:40,319
Speaker 1: did your business kind of evolve, transform, manage its way

802
00:37:40,320 --> 00:37:43,240
Speaker 1: through the pandemic when there's such a you know, increased

803
00:37:43,320 --> 00:37:46,240
Speaker 1: increased importance of data.

804
00:37:46,360 --> 00:37:47,200
Speaker 7: That's a great question.

805
00:37:47,360 --> 00:37:50,520
Speaker 13: I mean, you know digital transformation, which is what's been

806
00:37:50,520 --> 00:37:51,800
Speaker 13: happening for the last many years.

807
00:37:51,800 --> 00:37:53,239
Speaker 7: It's all about cloud and data.

808
00:37:53,280 --> 00:37:55,160
Speaker 13: And to the point you made, it's not only about

809
00:37:55,239 --> 00:37:57,680
Speaker 13: growth of data, it's also about fragmentation of data.

810
00:37:58,000 --> 00:38:01,240
Speaker 7: So that was a tail ring to us, and our.

811
00:38:01,160 --> 00:38:05,120
Speaker 13: Transformation was that, you know, we pivoted more aggressively towards

812
00:38:05,160 --> 00:38:07,520
Speaker 13: the cloud, In fact, walking into this year, we only

813
00:38:07,560 --> 00:38:09,279
Speaker 13: sell cloud and our platform, as I sheard with you,

814
00:38:09,280 --> 00:38:11,520
Speaker 13: blued sixty nine percent year over year. So that has

815
00:38:11,560 --> 00:38:14,000
Speaker 13: been a tailment because the more the data, the more

816
00:38:14,080 --> 00:38:18,000
Speaker 13: the fragmentation, the more the complexity. That's where data management

817
00:38:18,040 --> 00:38:20,840
Speaker 13: becomes very handy. And given our scale, we'll be helping

818
00:38:20,880 --> 00:38:25,359
Speaker 13: that to customers like Kroger, Unilever, American Airlines, you know,

819
00:38:25,440 --> 00:38:28,360
Speaker 13: Banco to Brazil Cell comp you name those, those end

820
00:38:28,480 --> 00:38:28,880
Speaker 13: up being.

821
00:38:28,719 --> 00:38:32,879
Speaker 11: Our customers within your customer base. Are you seeing any

822
00:38:32,960 --> 00:38:35,880
Speaker 11: potential recession signs just yet or are you still seeing

823
00:38:35,880 --> 00:38:36,480
Speaker 11: some strength?

824
00:38:37,680 --> 00:38:41,480
Speaker 13: Billion dollar question right I would say I'm not seeing

825
00:38:41,480 --> 00:38:43,759
Speaker 13: a recession sign for sure. I think what we when

826
00:38:43,760 --> 00:38:48,080
Speaker 13: you walked into this year the macro, what we saw

827
00:38:48,160 --> 00:38:51,360
Speaker 13: in Q four, we saw definitely enterprises as stretched, we

828
00:38:51,440 --> 00:38:55,359
Speaker 13: are being thoughtful deal siles as are obviously elongated. We

829
00:38:55,400 --> 00:38:57,920
Speaker 13: saw the same in Q one. In fact, we guide

830
00:38:57,920 --> 00:39:00,680
Speaker 13: it based on that macro. We assume that will stay

831
00:39:00,760 --> 00:39:03,200
Speaker 13: for the year, and as I said, we guide it

832
00:39:03,200 --> 00:39:05,560
Speaker 13: for like our thirty five percent cloud at our growth number,

833
00:39:05,880 --> 00:39:08,560
Speaker 13: qan ended up being better than that. Right now, I'm

834
00:39:08,560 --> 00:39:11,080
Speaker 13: at in fmat cover I user conference actually it's the

835
00:39:11,200 --> 00:39:15,040
Speaker 13: highest ever attended conference so far, we've exceeded twenty nineteen numbers.

836
00:39:15,320 --> 00:39:18,560
Speaker 13: So I'd say the conversations around digital transformation are high.

837
00:39:18,719 --> 00:39:21,880
Speaker 13: AI powered digital transformation very high. We do see a

838
00:39:21,920 --> 00:39:25,640
Speaker 13: macro that stretched, but no verse or no better than

839
00:39:25,680 --> 00:39:26,360
Speaker 13: three months ago.

840
00:39:27,280 --> 00:39:30,760
Speaker 1: Met talk to us about cloud native AI powered platform.

841
00:39:30,800 --> 00:39:32,759
Speaker 1: I think the kids call it Claire. What does that

842
00:39:32,800 --> 00:39:34,040
Speaker 1: mean for you? What's that business for you?

843
00:39:35,000 --> 00:39:35,239
Speaker 7: Yeah?

844
00:39:35,280 --> 00:39:38,640
Speaker 13: For us, you know, we built out one cloud native platform.

845
00:39:38,960 --> 00:39:41,719
Speaker 13: All of our services are on one platform, so that's

846
00:39:41,800 --> 00:39:42,239
Speaker 13: one thing.

847
00:39:42,520 --> 00:39:45,280
Speaker 7: But the big thing there is that we natively integrated Claire,

848
00:39:45,280 --> 00:39:46,560
Speaker 7: which is our AI engine.

849
00:39:46,760 --> 00:39:49,000
Speaker 13: And the beauty of Claire is that we what we

850
00:39:49,040 --> 00:39:52,160
Speaker 13: all see in the world of consumers. We took all

851
00:39:52,200 --> 00:39:55,200
Speaker 13: of those machine learning algorithms and curated it for enterprises.

852
00:39:55,239 --> 00:39:57,880
Speaker 13: As an example, you do photo tagging on Facebook, we

853
00:39:57,920 --> 00:40:00,960
Speaker 13: do that. Apply that for data taging, you do recommendations

854
00:40:01,000 --> 00:40:03,839
Speaker 13: on Amazon, you apply that for when people want recommendations

855
00:40:03,840 --> 00:40:07,279
Speaker 13: and data sets. NLP becomes data quality. So that's what

856
00:40:07,280 --> 00:40:10,319
Speaker 13: we've been doing. And in fact, to kind of give

857
00:40:10,360 --> 00:40:12,760
Speaker 13: you some sneak preview of tomorrow when we do keynotes

858
00:40:12,840 --> 00:40:15,400
Speaker 13: main stage, we're going to showcase clear in the context

859
00:40:15,400 --> 00:40:18,600
Speaker 13: of generative AI and how we're expanding it. There huge

860
00:40:18,640 --> 00:40:21,719
Speaker 13: amount of intelligence and productivity improved for enterprises and we

861
00:40:21,760 --> 00:40:23,319
Speaker 13: see tremendous interest over there.

862
00:40:23,840 --> 00:40:27,280
Speaker 11: Talk to me about that interest. Then, what specific tools

863
00:40:27,960 --> 00:40:31,759
Speaker 11: regarding generative AI, both on the intelligence and automation side,

864
00:40:31,760 --> 00:40:34,120
Speaker 11: have you found to be most helpful for your customers.

865
00:40:35,200 --> 00:40:39,279
Speaker 13: Well, one is everybody wants more productivity and automation, so

866
00:40:39,440 --> 00:40:41,480
Speaker 13: our tools end up being infrastructure tools.

867
00:40:41,600 --> 00:40:43,200
Speaker 7: So for example, you know, bringing.

868
00:40:43,000 --> 00:40:46,120
Speaker 13: Data together from many places, we're automating that. You know,

869
00:40:46,520 --> 00:40:49,439
Speaker 13: claier can infer what kind of data should go where

870
00:40:49,920 --> 00:40:51,600
Speaker 13: it can bring it to you and you can see

871
00:40:51,640 --> 00:40:53,440
Speaker 13: and if you have to do nothing, it just does it.

872
00:40:53,480 --> 00:40:56,320
Speaker 13: If you want to give it some intelligence towards the

873
00:40:56,360 --> 00:40:58,120
Speaker 13: last minile, you can do that call it you.

874
00:40:58,280 --> 00:40:59,759
Speaker 7: Data. You know we talk about.

875
00:40:59,480 --> 00:41:02,759
Speaker 13: AI EI is as good as the quality of data

876
00:41:02,800 --> 00:41:05,040
Speaker 13: you put in that model. So data quality is becoming

877
00:41:05,160 --> 00:41:08,160
Speaker 13: even more important. Governance of data, you know, in the

878
00:41:08,200 --> 00:41:11,360
Speaker 13: world of AI, ethics compliance become even more important.

879
00:41:11,400 --> 00:41:13,800
Speaker 7: So governance is seeing a big tailwin. So we're seeing

880
00:41:14,200 --> 00:41:14,960
Speaker 7: all of those.

881
00:41:14,920 --> 00:41:19,160
Speaker 13: Natural things bringing data from many places, quality and obserablity

882
00:41:19,200 --> 00:41:23,080
Speaker 13: of data governance of data. See tremendous amount of tailmind

883
00:41:23,120 --> 00:41:24,480
Speaker 13: and interest from our customers.

884
00:41:24,800 --> 00:41:26,880
Speaker 1: Ahmed got about thirty seconds left. I see your stocks

885
00:41:26,880 --> 00:41:29,360
Speaker 1: down about twenty seven percent over the trailing twelve months.

886
00:41:29,560 --> 00:41:32,160
Speaker 1: Is the market getting something wrong or how do you

887
00:41:32,200 --> 00:41:32,520
Speaker 1: view that?

888
00:41:33,440 --> 00:41:33,640
Speaker 7: Well?

889
00:41:33,680 --> 00:41:37,120
Speaker 13: I think we went through a big transformation going from

890
00:41:37,200 --> 00:41:39,799
Speaker 13: on premise to cloud. I do believe that as we

891
00:41:39,840 --> 00:41:41,880
Speaker 13: go through this year and we have a great start,

892
00:41:41,960 --> 00:41:42,920
Speaker 13: I think they'll understand that.

893
00:41:42,960 --> 00:41:45,200
Speaker 7: I believe obviously we are supremely undervalued.

894
00:41:45,360 --> 00:41:48,200
Speaker 13: Our job is to go execute, get our customers to

895
00:41:48,239 --> 00:41:50,680
Speaker 13: get value from our platform, and you know, the rest

896
00:41:50,680 --> 00:41:51,880
Speaker 13: of the things take care of itself.

897
00:41:52,080 --> 00:41:54,560
Speaker 7: There's a pretty fluid macro out there.

898
00:41:54,560 --> 00:41:58,120
Speaker 13: Our job is focus on the customer, keep innovaiting and

899
00:41:58,160 --> 00:42:00,000
Speaker 13: focus on the long term and things take care of itself.

900
00:42:00,320 --> 00:42:00,680
Speaker 8: Well, is it?

901
00:42:00,760 --> 00:42:03,319
Speaker 1: Equity analyst myself? I like one of my management teams

902
00:42:03,360 --> 00:42:05,600
Speaker 1: say that I got nine buys out there, five holes

903
00:42:05,600 --> 00:42:08,120
Speaker 1: and zero cells as per the A n R function

904
00:42:08,160 --> 00:42:11,360
Speaker 1: on the Bloomberg terminal for Informatica. So the street seems

905
00:42:11,360 --> 00:42:13,360
Speaker 1: to be behind this company, this management team. I'm at

906
00:42:13,400 --> 00:42:16,759
Speaker 1: wallya CEO of Informatica, joining us here, giving us the

907
00:42:16,880 --> 00:42:20,400
Speaker 1: latest on another segment of the tech space that is

908
00:42:20,480 --> 00:42:24,080
Speaker 1: influenced greatly by the cloud and the transformation for a

909
00:42:24,080 --> 00:42:26,400
Speaker 1: lot of these tech businesses. In this case, you know,

910
00:42:26,480 --> 00:42:28,920
Speaker 1: kind of big data into the world of the cloud.

911
00:42:28,960 --> 00:42:31,280
Speaker 1: So it's good a couple minutes with mister Wallya.

912
00:42:31,600 --> 00:42:34,719
Speaker 8: You're listening to the tape cans are live program Bloomberg

913
00:42:34,760 --> 00:42:38,360
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the

914
00:42:38,400 --> 00:42:41,640
Speaker 8: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

915
00:42:41,680 --> 00:42:44,480
Speaker 8: You can also listen live on Amazon Alexa from our

916
00:42:44,520 --> 00:42:48,920
Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

917
00:42:50,960 --> 00:42:53,400
Speaker 1: You're a company. Let's say you're a company and you

918
00:42:53,400 --> 00:42:55,319
Speaker 1: look at your balance sheet and you got about one

919
00:42:55,400 --> 00:42:57,640
Speaker 1: hundred and sixty six billion dollars of cash, you got

920
00:42:57,640 --> 00:42:59,640
Speaker 1: some one hundred billion dollars or so of debts. You're

921
00:43:00,120 --> 00:43:03,040
Speaker 1: net cash positive. You're in a business that will somehow

922
00:43:03,040 --> 00:43:05,640
Speaker 1: throw off one hundred billion dollars a free cash flow

923
00:43:05,719 --> 00:43:10,560
Speaker 1: every year. So what do you do? You go issue debt?

924
00:43:10,840 --> 00:43:13,279
Speaker 1: Go figure. They didn't teach that to me in business school.

925
00:43:13,320 --> 00:43:15,439
Speaker 1: But that Rob Shiftman, he knows all this stuff. Rob

926
00:43:15,440 --> 00:43:18,560
Speaker 1: Shiftman he's a tech credit analyso Bloomberg Intelligence he joints

927
00:43:18,600 --> 00:43:22,359
Speaker 1: is here. So Rob, is this just a case of me,

928
00:43:22,400 --> 00:43:24,799
Speaker 1: as a banker being really good at my job saying, Hey,

929
00:43:25,280 --> 00:43:26,960
Speaker 1: you raise it when you can, you don't raise it

930
00:43:26,960 --> 00:43:28,359
Speaker 1: when you need it. Let's go ahead and throw some

931
00:43:28,360 --> 00:43:30,400
Speaker 1: bonds out there. There's demand. Is it as simple as that?

932
00:43:31,160 --> 00:43:31,239
Speaker 5: Not?

933
00:43:31,440 --> 00:43:33,400
Speaker 6: Really? I mean, I think it's more about.

934
00:43:33,520 --> 00:43:34,919
Speaker 1: That was my pitch that for many years.

935
00:43:35,080 --> 00:43:39,000
Speaker 6: Last week it sounded good. I think it's more about

936
00:43:39,239 --> 00:43:43,360
Speaker 6: simple math. I mean, there's a weighted average cost to capital,

937
00:43:43,960 --> 00:43:47,280
Speaker 6: and when you've got nearly three trillion dollars of equity,

938
00:43:47,560 --> 00:43:49,680
Speaker 6: even if you have one hundred billion dollars of debt,

939
00:43:50,080 --> 00:43:53,280
Speaker 6: you're weighted out of average cost of debt for Apple

940
00:43:53,360 --> 00:43:57,120
Speaker 6: is effectively zero. So it's really a cost effective method

941
00:43:57,320 --> 00:44:00,320
Speaker 6: of spending your money. And I think, you know, we

942
00:44:00,400 --> 00:44:02,360
Speaker 6: got a lot of people asking us today, with rates

943
00:44:02,520 --> 00:44:08,000
Speaker 6: so much higher, why today, and why not just wait? Well,

944
00:44:08,320 --> 00:44:11,640
Speaker 6: when you have ten odd billion dollars of debt maturing

945
00:44:12,080 --> 00:44:14,680
Speaker 6: every single year and you don't know where rates are

946
00:44:14,680 --> 00:44:18,239
Speaker 6: going to be in three minutes, let alone three months

947
00:44:18,600 --> 00:44:21,560
Speaker 6: or three years, I think that's when it does come

948
00:44:21,680 --> 00:44:24,359
Speaker 6: to your theory is that you take the money down

949
00:44:24,360 --> 00:44:28,320
Speaker 6: now because it really doesn't cost you anything. The bigger

950
00:44:28,400 --> 00:44:30,480
Speaker 6: question is why aren't they just using their cash for

951
00:44:30,520 --> 00:44:34,319
Speaker 6: something else? Why do they have to borrow more? And

952
00:44:34,680 --> 00:44:37,239
Speaker 6: it really boils down to their target. They want to

953
00:44:37,239 --> 00:44:40,239
Speaker 6: be net cash neutral. So what does that mean. It's

954
00:44:40,239 --> 00:44:43,319
Speaker 6: the same amount of cash as they have debt, and

955
00:44:43,640 --> 00:44:46,560
Speaker 6: there's some fifty seven billion dollars away from that right now.

956
00:44:47,160 --> 00:44:50,640
Speaker 6: If you borrow money, So you borrow ten billion dollars today,

957
00:44:51,040 --> 00:44:55,480
Speaker 6: their net cash position doesn't change at all. It stays

958
00:44:55,520 --> 00:44:56,439
Speaker 6: exactly what it.

959
00:44:56,360 --> 00:44:58,279
Speaker 1: Is because they get all the free cash coming in.

960
00:44:58,360 --> 00:45:00,759
Speaker 6: No, well you borrow ten billion, yep, so it's ten

961
00:45:00,760 --> 00:45:02,880
Speaker 6: billion a debt ten billion of cash.

962
00:45:02,920 --> 00:45:05,640
Speaker 1: That's nice. They need a balance sheet.

963
00:45:05,640 --> 00:45:08,719
Speaker 6: They need to start spending money. And you've asked in

964
00:45:09,120 --> 00:45:11,200
Speaker 6: the past, like why don't some of these companies just

965
00:45:11,280 --> 00:45:14,640
Speaker 6: raise their dividend, Why don't they create a dividend? Well,

966
00:45:14,640 --> 00:45:18,719
Speaker 6: Apple just raised their dividend four percent.

967
00:45:18,880 --> 00:45:23,360
Speaker 1: I could raise my I mean please, So they're just

968
00:45:23,400 --> 00:45:25,719
Speaker 1: trying to placate me. Now, Tim Cook knows I'm looking

969
00:45:25,719 --> 00:45:25,960
Speaker 1: for them.

970
00:45:26,000 --> 00:45:29,480
Speaker 6: They're spending let's say in and around fifteen billion dollars

971
00:45:29,480 --> 00:45:31,920
Speaker 6: a year in their dividend, but they've got one hundred

972
00:45:31,920 --> 00:45:34,640
Speaker 6: billion dollars of free cash well every year. I think

973
00:45:35,080 --> 00:45:37,200
Speaker 6: you know, years ago when we first started talking about Apple,

974
00:45:37,440 --> 00:45:39,360
Speaker 6: I said, for all the drinkers out there, it's like

975
00:45:39,360 --> 00:45:41,680
Speaker 6: you go to a restaurant, you order a bottle of wine,

976
00:45:41,960 --> 00:45:45,000
Speaker 6: you drink half your glass of wine, and a waiter

977
00:45:45,040 --> 00:45:47,560
Speaker 6: walks over and refills your glass. And that's sort of

978
00:45:47,719 --> 00:45:50,000
Speaker 6: what what Apple's balance sheet looks like. As soon as

979
00:45:50,000 --> 00:45:53,399
Speaker 6: they start spending the money, it gets reloaded and there's

980
00:45:53,400 --> 00:45:56,640
Speaker 6: nothing out there that they can really buy. So what

981
00:45:56,640 --> 00:46:00,520
Speaker 6: do they need to do. They need to meaningfully increase

982
00:46:00,920 --> 00:46:04,480
Speaker 6: shareholder returns, and I think they're going to be doing that.

983
00:46:04,520 --> 00:46:07,480
Speaker 6: They added ninety billion to the buyback authorization that gives

984
00:46:07,520 --> 00:46:09,880
Speaker 6: them about one hundred and ten billion of stock they

985
00:46:09,920 --> 00:46:11,200
Speaker 6: can buy back over the next year.

986
00:46:11,719 --> 00:46:13,359
Speaker 1: They did the same ninety billion last year.

987
00:46:13,400 --> 00:46:17,160
Speaker 6: I mean, well, they still had twenty billions sitting there. Okay.

988
00:46:17,320 --> 00:46:20,320
Speaker 6: What it does is it sets them up that over time,

989
00:46:20,760 --> 00:46:24,160
Speaker 6: as they continue to use money for dividends and buybacks,

990
00:46:24,800 --> 00:46:27,360
Speaker 6: they're always going to be sitting on a mountain of cash.

991
00:46:27,560 --> 00:46:29,839
Speaker 6: If your net cash neutral, and they end up would

992
00:46:29,840 --> 00:46:31,719
Speaker 6: say one hundred and twenty five billion dollars a debt.

993
00:46:31,719 --> 00:46:33,000
Speaker 6: You know what that means. The mean you're going to

994
00:46:33,040 --> 00:46:34,719
Speaker 6: have one hundred twenty five billion dollars of cash on

995
00:46:34,719 --> 00:46:37,799
Speaker 6: the books at all times. And don't forget like you know,

996
00:46:38,040 --> 00:46:42,960
Speaker 6: Apple's services business is exploding right now, it's still a

997
00:46:43,000 --> 00:46:48,040
Speaker 6: tiny percentage of their top line. The vast majority of

998
00:46:48,080 --> 00:46:51,120
Speaker 6: what this company is selling is hardware. And when you're

999
00:46:51,120 --> 00:46:54,480
Speaker 6: a hardware business, over the long term, you better have

1000
00:46:54,719 --> 00:46:57,440
Speaker 6: a lot of capital and reserve. In this case, you

1001
00:46:57,520 --> 00:47:00,759
Speaker 6: need to have tons of extra capitally one hundred billion

1002
00:47:00,800 --> 00:47:03,719
Speaker 6: plus of cash sitting there all times. So why borrow now?

1003
00:47:04,080 --> 00:47:08,080
Speaker 6: Because it doesn't cost that much, It actually improves your

1004
00:47:08,480 --> 00:47:12,960
Speaker 6: cost of capital, It gives them tons of flexibility, and

1005
00:47:14,840 --> 00:47:17,120
Speaker 6: it just doesn't It doesn't take away from their long

1006
00:47:17,200 --> 00:47:19,960
Speaker 6: term goals, which is they can do whatever they want,

1007
00:47:20,080 --> 00:47:22,600
Speaker 6: whenever they want, where they're capital and if they find

1008
00:47:22,600 --> 00:47:24,440
Speaker 6: a business they want to buy, they can buy it.

1009
00:47:24,480 --> 00:47:26,080
Speaker 6: If they find a business they want to invest in,

1010
00:47:26,440 --> 00:47:28,279
Speaker 6: they can invest in it. And it looks like the

1011
00:47:28,280 --> 00:47:30,560
Speaker 6: bomb market's always going to be there, because it seems

1012
00:47:30,600 --> 00:47:33,640
Speaker 6: like this company is only one more notch away from

1013
00:47:33,680 --> 00:47:35,160
Speaker 6: being triple A across the board.

1014
00:47:35,680 --> 00:47:38,799
Speaker 11: Is that the same thinking behind why Apple is working

1015
00:47:38,840 --> 00:47:40,719
Speaker 11: with Goldman on the Hygield savings account or do you

1016
00:47:40,760 --> 00:47:44,400
Speaker 11: think that's a different goal for them, No, like become

1017
00:47:44,760 --> 00:47:47,400
Speaker 11: the bank for everyone as well for everyone.

1018
00:47:47,600 --> 00:47:50,799
Speaker 6: So I think you need to you need to diversify

1019
00:47:51,080 --> 00:47:54,200
Speaker 6: your revenue stream over time, and they've done a really

1020
00:47:54,280 --> 00:47:56,919
Speaker 6: good job of that. I mean, you know, a few

1021
00:47:56,960 --> 00:48:00,520
Speaker 6: years ago people laughed at their watch, you know, and

1022
00:48:00,520 --> 00:48:02,759
Speaker 6: you know now they're selling billions worth and I think

1023
00:48:02,800 --> 00:48:04,760
Speaker 6: there's a lot of different things that they can sell,

1024
00:48:05,120 --> 00:48:07,880
Speaker 6: these sort of add ons when it comes to Apple

1025
00:48:07,960 --> 00:48:12,640
Speaker 6: Pay or payment processing or savings account, it's just it's

1026
00:48:12,680 --> 00:48:17,200
Speaker 6: a way to expand their ecosystem and get their products

1027
00:48:17,239 --> 00:48:20,400
Speaker 6: at a little stickier It doesn't really move the needle

1028
00:48:21,239 --> 00:48:21,600
Speaker 6: at all.

1029
00:48:21,600 --> 00:48:21,799
Speaker 8: Though.

1030
00:48:21,880 --> 00:48:24,759
Speaker 6: The way they move their needle is they come up

1031
00:48:24,800 --> 00:48:28,840
Speaker 6: with a really cool new iPhone fifteen and they sell

1032
00:48:29,000 --> 00:48:30,439
Speaker 6: three to four hundred million of those.

1033
00:48:31,160 --> 00:48:35,320
Speaker 1: Rob e colover all of Tech for Bloomberg Intelligence Credit.

1034
00:48:35,719 --> 00:48:37,520
Speaker 1: What's the best thing you're looking at right now, what's

1035
00:48:37,520 --> 00:48:40,240
Speaker 1: the best opportunity, what's the best that you're most excited

1036
00:48:40,239 --> 00:48:41,120
Speaker 1: about out there in tech?

1037
00:48:41,239 --> 00:48:43,720
Speaker 6: Honestly, I think it's really the sector. I mean, people

1038
00:48:44,000 --> 00:48:48,040
Speaker 6: nowadays are looking for safe havens, and I've actually always

1039
00:48:48,080 --> 00:48:51,279
Speaker 6: thought tech is the safe haven. It's not the it's

1040
00:48:51,280 --> 00:48:57,960
Speaker 6: not banks, it's not treasuries. It's buying cash rich, cash

1041
00:48:58,000 --> 00:49:05,919
Speaker 6: flow generating businesses that have long term competitive advantages where

1042
00:49:05,920 --> 00:49:10,160
Speaker 6: there's huge barriers to entry, and whether that's Microsoft or

1043
00:49:10,360 --> 00:49:15,440
Speaker 6: Apple or Alphabet or even names like a Qualcomm or

1044
00:49:15,480 --> 00:49:19,760
Speaker 6: a Broadcom. I think across the spectrum of investment grade tech,

1045
00:49:20,320 --> 00:49:25,840
Speaker 6: there's lots of opportunities not to earn incremental spread, but

1046
00:49:25,960 --> 00:49:29,960
Speaker 6: to park your money when you don't have something better

1047
00:49:30,120 --> 00:49:33,959
Speaker 6: to invest in. I'm wildly bullish still on the tech space,

1048
00:49:34,000 --> 00:49:36,360
Speaker 6: and it doesn't mean excess returns this year are going

1049
00:49:36,440 --> 00:49:38,520
Speaker 6: to be enormous. It just means that the risk of

1050
00:49:38,600 --> 00:49:43,840
Speaker 6: underperforming versus other asset classes I think is really very low.

1051
00:49:45,600 --> 00:49:47,239
Speaker 6: We had a webinar I think I mentioned this with

1052
00:49:47,320 --> 00:49:48,960
Speaker 6: you last week, paulse We had a webinar with S

1053
00:49:49,000 --> 00:49:50,800
Speaker 6: and P and they went through all their low triple

1054
00:49:50,840 --> 00:49:52,960
Speaker 6: B global tech names and they said, not one of

1055
00:49:53,000 --> 00:49:56,239
Speaker 6: them is at risk of being downgraded. So when we've

1056
00:49:56,280 --> 00:50:00,600
Speaker 6: got high quality banks that know if they're going to

1057
00:50:00,600 --> 00:50:03,839
Speaker 6: be out of business tomorrow. You know, buy a name

1058
00:50:04,239 --> 00:50:07,560
Speaker 6: in a ten year part of a treasury curve for

1059
00:50:07,920 --> 00:50:11,040
Speaker 6: a spread of one hundred basis points and getting you know,

1060
00:50:11,120 --> 00:50:13,120
Speaker 6: four and a half percent on your money. Man, I

1061
00:50:13,120 --> 00:50:15,160
Speaker 6: think it's a great trade when you don't have to

1062
00:50:15,200 --> 00:50:17,919
Speaker 6: worry about that cash disappearing. So it's not one particular name,

1063
00:50:18,600 --> 00:50:21,600
Speaker 6: it's really the sector. And I think that volatility and

1064
00:50:21,600 --> 00:50:25,520
Speaker 6: equities has skewed what people's thoughts are about the defensiveness

1065
00:50:25,600 --> 00:50:29,479
Speaker 6: of the credit space. But I think across the board,

1066
00:50:29,520 --> 00:50:31,720
Speaker 6: I think you want to have a barbell strategy from

1067
00:50:33,000 --> 00:50:36,040
Speaker 6: triple a's down to triple b's, all across the curve.

1068
00:50:36,080 --> 00:50:37,640
Speaker 1: All right, Rob, thank you so much. We appreciate it

1069
00:50:37,640 --> 00:50:40,840
Speaker 1: as always. Rob Shiftman technology credit analysts of Bloomberg Intelligence.

1070
00:50:41,080 --> 00:50:43,320
Speaker 1: Before that he was doing that at Credit Swiss.

1071
00:50:46,880 --> 00:50:49,960
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1072
00:50:50,000 --> 00:50:53,800
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1073
00:50:53,880 --> 00:50:57,600
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1074
00:50:57,800 --> 00:50:59,719
Speaker 2: at Matt Miller nineteen seventy three.

1075
00:51:00,200 --> 00:51:02,919
Speaker 1: An I fall Sweeney, I'm on Twitter at Ptsweeney. Before

1076
00:51:02,960 --> 00:51:06,080
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg Radio,